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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Exchange Act of 1934
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials: |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
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669 River Drive, Center 2 Elmwood Park, New Jersey 07407 | 111 Eighth Avenue New York, New York 10011 |
• | HLTH will merge into WebMD, with WebMD continuing as the surviving company and HLTH will cease to exist as a separate entity; | |
• | each outstanding share of HLTH Common Stock will be converted into 0.4444 shares of WebMD Common Stock; | |
• | the WebMD Class B Common Stock held by HLTH will be canceled; and | |
• | holders of WebMD Class A Common Stock will continue to own their existing shares, which will not be affected by the merger, except that such shares will no longer be referred to as “Class A” and except as otherwise described in this joint proxy statement/prospectus. |
Martin J. Wygod Chairman of the Board and Acting Chief Executive Officer, HLTH Corporation | Wayne T. Gattinella Chief Executive Officer and President, WebMD Health Corp. |
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HLTH Corporation 669 River Drive, Center 2 Elmwood Park, New Jersey 07407 Attention: Investor Relations Telephone Number:(201) 414-2002 | WebMD Health Corp. 111 Eighth Avenue New York, New York 10011 Attention: Investor Relations Telephone Number: (212) 624-3817 |
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111 Eighth Avenue
New York, New York 10011
of WebMD Health Corp.
Executive Vice President,
General Counsel and Secretary
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
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669 River Drive, Center 2
Elmwood Park, New Jersey07407-1361
of HLTH Corporation
Executive Vice President,
General Counsel and Secretary
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
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• | projections, predictions, expectations, estimates or forecasts of the financial or operational performance of HLTH, WebMD or the combined company or of the value of assets or liabilities of HLTH, WebMD or the combined company; | |
• | HLTH’s, WebMD’s or the combined company’s objectives, plans or goals; and | |
• | conditions or events following the completion of the proposed merger of HLTH and WebMD. |
• | expected benefits from the merger; | |
• | HLTH’s and WebMD’s ability to satisfy the conditions and terms of the merger, and to execute the merger in the estimated timeframe, if at all; | |
• | expected governance of WebMD upon completion of the merger; and | |
• | the anticipated tax consequences of the merger. |
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Q: | When and where are the Annual Meetings of Stockholders? |
A: | Both the HLTH Annual Meeting and the WebMD Annual Meeting will take place on October 23, 2009, at 9:30 a.m., at The Ritz-Carlton New York, Battery Park, Two West Street, New York, New York 10004. |
Q: | What will HLTH stockholders receive in the merger? | |
A: | If the merger is completed, each outstanding share of HLTH Common Stock will be converted into 0.4444 shares of WebMD Common Stock. | |
WebMD will not issue any fractional shares of WebMD Common Stock in exchange for shares of HLTH Common Stock. Instead, each holder of a fractional share interest will be paid an amount in cash (without interest) equal to the fractional share interest multiplied by the closing price of a share of WebMD Class A Common Stock on the Nasdaq Global Select Market on the last trading day immediately preceding the effective time of the merger. For more information on the treatment of fractional shares, see “The Merger Agreement — Effect on Capital Stock; Merger Consideration; Exchange of Certificates — Exchange of Certificates.” | ||
Q: | What will happen to shares of WebMD Common Stock in the merger? |
A: | If the merger is completed, the shares of WebMD Class B Common Stock, all of which are held by HLTH, will be canceled. Holders of WebMD Class A Common Stock will continue to own their existing shares, which will not be converted or cancelled in the merger. However, since there will no longer be any WebMD Class B Common Stock outstanding following the effective time of the merger, the merger agreement provides for the certificate of incorporation of WebMD to be amended at the time of the merger to reflect there being only one class of WebMD Common Stock outstanding, all shares of which will have the same rights, and it will no longer be referred to as “Class A” after the merger. Based on 9.7 million shares of WebMD Class A Common Stock and 104.0 million shares of HLTH Common Stock outstanding as of August 31, 2009, there would be approximately 55.9 million shares of WebMD Common Stock outstanding on a pro forma basis, giving effect to the merger as of that date. The only further changes being made to WebMD’s certificate of incorporation merely give effect, at the time of the merger, to provisions of the existing certificate of incorporation that would automatically have become effective whenever HLTH ceased to own a majority of the voting power of WebMD’s outstanding Common Stock. For a description of the changes to be made to the certificate of incorporation of WebMD in connection with the merger, see “Description of WebMD Capital Stock — Amendments to Amended WebMD Charter and Amended and Restated By-laws.” |
Q: | What will happen to HLTH in the merger? | |
A: | Upon effectiveness of the merger, the separate corporate existence of HLTH will cease and WebMD will continue as the surviving company in the merger and will succeed to and assume all the rights and obligations of HLTH. | |
Q: | Why was the merger proposed? | |
A: | The key goals for the merger include allowing HLTH’s stockholders to participate directly in the ownership of WebMD, while eliminating HLTH’s controlling interest in WebMD and the inefficiencies associated with having two separate public companies, increasing the ability of WebMD to raise capital and to obtain financing, and enhancing the liquidity of WebMD Common Stock by significantly increasing the public float. The boards of directors of HLTH and WebMD both believe that, as a result of the negotiations between HLTH and a special committee of the WebMD Board of Directors, which we refer to |
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as the WebMD Special Committee, the merger agreement provides for a transaction that meets these goals and is fair to the holders of WebMD Class A Common Stock. The Board of Directors of HLTH also believes that the terms of the merger are fair to the holders of HLTH Common Stock. A detailed discussion of the background of, and reasons for, the merger are described in “The Merger — Background of the Merger,” “The Merger — HLTH’s Purposes and Reasons for the Merger” and “The Merger — WebMD’s Purposes and Reasons for the Merger.” | ||
Q: | Are there risks I should consider in deciding whether to vote for the merger? | |
A. | Yes. A description of some of the risks that should be considered in connection with the merger are included in this joint proxy statement/prospectus under the heading “Risk Factors.” | |
Q: | Why did the WebMD Board of Directors appoint a Special Committee to negotiate with HLTH? | |
A: | Because of HLTH’s ownership of a controlling interest in WebMD, the Board of Directors of WebMD formed the WebMD Special Committee to consider and negotiate a possible transaction between the two companies to be proposed by HLTH. Each of the members of the WebMD Special Committee is an independent director and none of its members serves as a director of HLTH. The WebMD Special Committee retained its own financial and legal advisors and, with the assistance of those advisors, negotiated the terms and conditions of the merger with HLTH. | |
Q: | Do the boards of directors of HLTH and WebMD recommend voting “FOR” the proposals to adopt the merger agreement and approve the merger at the Annual Meetings? | |
A: | Yes. Based on the recommendation of the WebMD Special Committee, taking into consideration the fairness opinion of the WebMD Special Committee’s financial advisor, a copy of which is attached to this joint proxy statement/prospectus as Annex F, the Board of Directors of WebMD approved the merger agreement and the transactions contemplated thereby and declared the merger agreement advisable, and recommends that holders of WebMD Class A Common Stock vote “FOR” the proposal to adopt the merger agreement and approve the transactions contemplated thereby, including the merger, at the WebMD Annual Meeting. | |
Additionally, taking into consideration the fairness opinion of its financial advisor, a copy of which is attached to this joint proxy statement/prospectus as Annex E, the Board of Directors of HLTH also approved the merger agreement and the transactions contemplated thereby and declared the merger agreement advisable, and recommends that HLTH stockholders vote “FOR” the proposal to adopt the merger agreement and approve the transactions contemplated thereby, including the merger, at the HLTH Annual Meeting. |
Pursuant to an engagement letter dated November 7, 2007 between HLTH and Raymond James, HLTH paid Raymond James a fee of $100,000 upon delivery of its fairness opinion to the HLTH Board of Directors in connection with the merger. The engagement letter also provides that Raymond James will be paid a $1,000,000 fee if the merger is completed. HLTH also previously paid a retainer fee of $50,000 and an opinion fee of $500,000 to Raymond James in connection with the terminated 2008 merger transaction between HLTH and WebMD. HLTH negotiated this fee structure so that it would not have to pay the additional $1,000,000 fee if the merger were not consummated. At the time HLTH’s Board of Directors requested delivery of a fairness opinion from Raymond James in connection with the merger, HLTH’s Board understood the potential incentives to issue a fairness opinion created by the applicable fee structure. However, HLTH’s Board believed that Raymond James would apply appropriate professional judgment in connection with its delivery of such opinion, regardless of the fee structure. |
Q: | How do HLTH’s and WebMD’s directors and executive officers intend to vote on the proposal to adopt the merger agreement and approve the merger at the Annual Meetings? |
A: | As of September 8, 2009, which is the record date for both the HLTH and WebMD Annual Meetings, the directors and executive officers of HLTH held and are entitled to vote, in the aggregate, shares of HLTH Common Stock representing approximately 8.4% of the outstanding shares, and the directors and executive officers of WebMD held and are entitled to vote, in the aggregate, shares of WebMD Class A Common Stock representing approximately 0.4% of the aggregate voting power of the outstanding shares of WebMD Common Stock. HLTH and WebMD each believe that its directors and executive officers intend to vote all of their |
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shares of HLTH Common Stock and WebMD Class A Common Stock “FOR” the proposal to adopt the merger agreement and approve the merger at the respective Annual Meetings. In addition, HLTH has agreed in the merger agreement to vote the WebMD Class B Common Stock it owns, which represents approximately 96% of the combined voting power of all WebMD Common Stock, in favor of the merger. | ||
Q: | When do you expect to complete the merger? |
A: | If HLTH and WebMD receive the required stockholder approvals at their respective Annual Meetings to be held on October 23, 2009, they expect to complete the merger shortly after those meetings. |
Q: | How will the combined company’s business be different? | |
A: | The combined company will consist of WebMD’s business and may also include HLTH’s Porex business, which HLTH is currently in the process of divesting. HLTH currently has no operating businesses other than Porex and WebMD. | |
Q: | What will be the composition of the Board of Directors of WebMD and HLTH following the merger? | |
A: | Immediately following the merger, the directors of HLTH who are not currently directors of WebMD will become directors of WebMD and, together with WebMD’s existing directors, those directors will constitute the Board of Directors of the surviving corporation until their respective successors are duly elected and qualified or until their earlier resignation or removal. | |
Q: | What will happen to HLTH stock options and shares of HLTH restricted stock? | |
A. | In addition to providing for the merger consideration to be paid to HLTH stockholders, the Merger Agreement contains provisions for the treatment of HLTH stock options and HLTH restricted stock. At the time of the merger, HLTH stock options and shares of HLTH restricted stock will be treated as follows: | |
• Stock Options: All outstanding stock options of HLTH will be assumed by WebMD without any further action on the part of HLTH or the option holders. These assumed options will become options to acquire WebMD Common Stock. The new exercise price and number of shares of WebMD Common Stock subject to the assumed options will be determined based on the exchange ratio. For a more detailed description, see “The Merger — Interests of Certain Persons in the Merger — Treatment of Grants Under HLTH and WebMD Equity Plans — HLTH Stock Options.” | ||
• Restricted Stock: Each outstanding share of restricted stock of HLTH will be converted into 0.4444 shares of restricted WebMD Common Stock. For a more detailed description, see “The Merger — Interests of Certain Persons in the Merger — Treatment of Grants Under HLTH and WebMD Equity Plans — HLTH Restricted Stock Awards.” | ||
Q: | What are the U.S. federal income tax consequences of the merger? | |
A: | The merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, so that a U.S. holder (as defined in “The Merger — Material U.S. Federal Income Tax Consequences of the Merger”) whose shares of HLTH Common Stock are exchanged in the merger solely for shares of WebMD Common Stock will not recognize gain or loss, except with respect to cash received in lieu of fractional shares of WebMD Common Stock. The merger is conditioned on the receipt of legal opinions that for U.S. federal income tax purposes the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and that each of WebMD and HLTH will be a party to the reorganization within the meaning of Section 368(b) of the Code. | |
For a more complete discussion of the U.S. federal income tax consequences of the merger, see “The Merger — Material U.S. Federal Income Tax Consequences of the Merger.” Tax matters are complicated and the consequences of the merger to you will depend on your particular facts and circumstances. You are urged to consult with your tax advisor as to the specific tax consequences of the merger to you, including the applicability of U.S. federal, state, local, foreign and other tax laws. |
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Q: | What stockholder vote is required to adopt the merger agreement and approve the merger at the Annual Meetings? | |
A: | To be approved at the HLTH Annual Meeting, the proposal to adopt the merger agreement and approve the transactions contemplated by that agreement, including the merger, must receive the affirmative vote of the holders of a majority of the outstanding HLTH Common Stock entitled to vote thereon. | |
To be approved at the WebMD Annual Meeting, the proposal to adopt the merger agreement and approve the transactions contemplated thereby, including the merger, must receive the affirmative vote of the holders of a majority of the voting power of the outstanding WebMD Common Stock entitled to vote thereon. The terms of the merger agreement do not require that at least a majority of the holders of WebMD Common Stock other than HLTH and the officers and directors of HLTH, WebMD and their respective affiliates (who we refer to as the unaffiliated WebMD stockholders) approve the transactions contemplated by the merger agreement, including the merger. HLTH has agreed, in the merger agreement, to vote in favor of that proposal at the WebMD Annual Meeting. HLTH’s ownership of all of the outstanding shares of WebMD Class B Common Stock represents approximately 96% of the combined voting power of the two classes of WebMD Common Stock. As a result, HLTH is able, acting alone, to cause the approval of the proposal regarding the merger at the WebMD Annual Meeting. | ||
Q: | What if I do not vote my HLTH shares or WebMD shares on the matters relating to the merger? | |
A: | If you are a HLTH stockholder or WebMD stockholder and you fail to respond with a vote or instruct your broker how to vote on the merger proposal, it will have the same effect as a vote “AGAINST” the proposal. If you respond and abstain from voting, your proxy will have the same effect as a vote “AGAINST” the proposal. Unless the shares are held in a brokerage account, if holders of shares of WebMD Class A Common Stock or HLTH Common Stock sign, date and send their proxy and do not indicate how they want to vote, their proxies will be voted “FOR” the adoption of the merger agreement and approval of the merger. If your shares are held in a brokerage account and you do not provide your bank or broker with instructions on how to vote your street name shares, your bank or broker will not be permitted to vote them with respect to the proposal regarding the merger. This results in a “broker non-vote.” A broker non-vote with respect to the proposal regarding the merger will have the same effect as a vote “AGAINST” such proposal. | |
Q: | Should I send in my HLTH share certificates now? | |
A: | No. If the merger is completed, written instructions will be sent to stockholders of HLTH with respect to the exchange of their share certificates for the merger consideration. | |
Q: | Are stockholders entitled to exercise dissenters’ rights? | |
A: | The holders of WebMD Class A Common Stock and of HLTH Common Stock will not be entitled to exercise dissenters’ rights with respect to any matter to be voted upon at the Annual Meetings. |
Q: | What are the proposals to be voted on at the WebMD Annual Meeting, other than the proposal regarding the merger? | |
A: | At the WebMD Annual Meeting, holders of WebMD Common Stock will be asked: | |
• to elect three Class I directors, each to serve a three-year term expiring at the Annual Meeting of Stockholders in 2012 or until his successor is elected and has qualified or his earlier resignation or removal; | ||
• to consider and vote on a proposal to ratify and approve an amendment to WebMD’s Amended and Restated 2005 Long-Term Incentive Plan, which we refer to as the WebMD 2005 Plan, to increase the number of shares of WebMD Common Stock issuable under the WebMD 2005 Plan by 1,100,000 shares, to a total of 15,600,000 shares; and |
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• to consider and vote on a proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as WebMD’s independent auditor for the fiscal year ending December 31, 2009. | ||
Holders of WebMD Common Stock will also be asked to consider and transact such other business as may properly come before the WebMD Annual Meeting or any adjournment or postponement thereof. | ||
Q: | What stockholder vote is required to approve the items to be voted on at the WebMD Annual Meeting, other than the merger? | |
A: | With respect to the WebMD Annual Meeting: | |
• election of directors is by a plurality of the votes cast at the WebMD Annual Meeting with respect to the election; accordingly, the three nominees receiving the greatest number of votes for their election will be elected; | ||
• in order to be approved, the proposal to amend the WebMD 2005 Plan to increase the number of shares of WebMD Common Stock issuable under the WebMD 2005 Plan by 1,100,000 shares, to a total of 15,600,000 shares, must receive the affirmative vote of the holders of a majority of the voting power of the outstanding shares present or represented at the WebMD Annual Meeting and entitled to vote on the matter; and | ||
• in order to be approved, the proposal regarding ratification of the appointment of Ernst & Young LLP must receive the affirmative vote of the holders of a majority of the voting power of the outstanding shares present or represented at the meeting and entitled to vote on the matter. | ||
HLTH’s ownership of all outstanding shares of WebMD Class B Common Stock represents approximately 96% of the combined voting power of the two classes of WebMD Common Stock. As a result, HLTH is able, acting alone, to cause the approval of all proposals submitted for a vote at the WebMD Annual Meeting. HLTH has indicated that it intends to vote in favor of the amendment to the WebMD 2005 Plan and the election of Mark J. Adler, M.D., Neil F. Dimick and James V. Manning and in favor of ratification of the appointment of Ernst & Young LLP. | ||
Q: | How does the WebMD board recommend stockholders vote on the proposals to be voted on at the WebMD Annual Meeting, other than the merger? | |
A: | The WebMD Board of Directors recommends that stockholders vote “FOR” the election of Mark J. Adler, M.D., Neil F. Dimick and James V. Manning as Class I directors and vote “FOR” the proposals to amend the WebMD 2005 Plan and to ratify the appointment of Ernst & Young LLP. |
Q: | What are the proposals to be voted on at the HLTH Annual Meeting, other than the proposal regarding the merger? | |
A: | At the HLTH Annual Meeting, holders of HLTH Common Stock will be asked: | |
• to elect three Class II directors, each to serve a three-year term expiring at the Annual Meeting of Stockholders in 2012 or until his successor is elected and has qualified or his earlier resignation or removal; and | ||
• to consider and vote on a proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as HLTH’s independent auditor for the fiscal year ending December 31, 2009, in the event that the merger is not completed. | ||
Holders of HLTH Common Stock will also be asked to consider and transact such other business as may properly come before the HLTH Annual Meeting or any adjournment or postponement thereof. |
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Q: | What stockholder vote is required to approve the items to be voted on at the HLTH Annual Meeting, other than the merger? | |
A: | With respect to the HLTH Annual Meeting: | |
• election of directors is by a plurality of the votes cast at the HLTH Annual Meeting with respect to the election; accordingly, the three nominees receiving the greatest number of votes for their election will be elected; and | ||
• in order to be approved, the proposal regarding ratification of the appointment of Ernst & Young LLP must receive the affirmative vote of the holders of a majority of the voting power of the shares present or represented at the meeting and entitled to vote on the matter. | ||
Q: | How does the HLTH Board of Directors recommend stockholders vote on the proposals to be voted on at the HLTH Annual Meeting, other than the merger? | |
A: | The HLTH Board of Directors recommends that stockholders vote “FOR” the election of Paul A. Brooke, James V. Manning and Martin J. Wygod as Class II directors and vote “FOR” the proposal to ratify the appointment of Ernst & Young LLP. |
Q: | What do I need to do now? | |
A: | We urge you to read this joint proxy statement/prospectus carefully, including its annexes, as well as the documents incorporated by reference into this joint proxy statement/prospectus. You also may want to review the documents referenced under “Where You Can Find More Information” and consult with your accounting, legal and tax advisors. | |
Q: | How do I vote my shares? | |
A: | Holders of shares of WebMD Class A Common Stock or HLTH Common Stock may indicate how they want to vote on their proxy card and then sign, date and mail their proxy card in the enclosed return envelope as soon as possible so that their shares may be represented at the WebMD Annual Meeting or the HLTH Annual Meeting, as applicable. Please note that if you are a stockholder of both HLTH and WebMD, you will be receiving two separate mailings that contain the same joint proxy statement/prospectus, but two different proxy cards: one for the WebMD Annual Meeting and one for the HLTH Annual Meeting. Please complete, sign, date and return all proxy cards you receive in order to ensure that your shares are voted at the WebMD Annual Meeting or the HLTH Annual Meeting, as applicable. Holders of shares of WebMD Class A Common Stock or HLTH Common Stock may also attend their respective company’s meeting in person instead of submitting a proxy. | |
Unless the shares are held in a brokerage account, if holders of shares of WebMD Class A Common Stock or HLTH Common Stock sign, date and send their proxy and do not indicate how they want to vote, their proxies will be voted “FOR” the adoption of the merger agreement and approval of the merger and “FOR” all other proposals to be voted on at the respective company’s Annual Meeting. If the shares are held in a brokerage account, please see the answer to the next question. | ||
If holders of shares of WebMD Class A Common Stock or HLTH Common Stock either fail to return their proxy card (and do not vote in person at the meeting) or if they “ABSTAIN” with respect to the proposal regarding the merger, the effect will be the same as a vote “AGAINST” such proposal. With respect to the election of directors, failure to return a proxy card or withholding your vote will result in fewer votes being received by the nominees, but will not affect whether the nominees receive a plurality of the votes. With respect to all other proposals to be voted on at the WebMD or HLTH Annual Meeting: | ||
• shares held by holders of shares of WebMD Class A Common Stock or HLTH Common Stock, as applicable, who fail to return their proxy card and do not attend the meeting in person will not be |
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counted as present or represented at the meeting and will have no effect on whether those proposals are approved; | ||
• abstentions will be treated as shares that are present or represented at the meeting, but will not be counted in favor of that proposal and, accordingly, will have the same effect as a vote “AGAINST” those proposals. | ||
Q: | If my WebMD Class A Common Stock or HLTH Common Stock is held in a brokerage account or in “street name,” will my broker vote my shares for me? | |
A: | If you do not provide your bank or broker with instructions on how to vote your street name shares, your bank or broker will not be permitted to vote them with respect to the proposal regarding the merger or with respect to the proposal, at the WebMD Annual Meeting, regarding the amendment of the WebMD 2005 Plan. This results in a “broker non-vote.” | |
These “broker non-votes” will be counted for purposes of establishing a quorum since the bank or broker has the discretion to vote on election of directors and ratification of the appointment of Ernst & Young LLP. A broker non-vote with respect to the proposal regarding the merger will have the same effect as a vote “AGAINST” such proposal since approval of the proposal requires the affirmative vote of a majority of the voting power of the outstanding shares entitled to vote thereon. A broker non-vote with respect to the amendment of the WebMD 2005 Plan will result in the shares not being considered present or represented at the meeting for purposes of that proposal and, accordingly, will have no impact on the outcome of the vote with respect to that proposal. | ||
You should, therefore, provide your bank or broker with instructions on how to vote your shares or arrange to attend the WebMD Annual Meeting or the HLTH Annual Meeting, as the case may be, and vote your shares in person to avoid a broker non-vote. You are urged to utilize telephone or Internet voting if your bank or broker has provided you with the opportunity to do so. See the relevant voting instruction form for instructions. If your bank or broker holds your shares and you attend the Annual Meeting in person, you should bring a letter from your bank or broker identifying you as the beneficial owner of the shares and authorizing you to vote your shares at the meeting. | ||
Q: | What constitutes a quorum? | |
A. | A quorum is present if a majority of the voting power of the outstanding shares of common stock entitled to vote at the meeting is present or represented. Broker non-votes and abstentions will be counted for purposes of determining whether a quorum is present. | |
Q: | Can I attend the WebMD Annual Meeting and vote my shares in person? | |
A. | Yes. All holders WebMD Common Stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the WebMD Annual Meeting. Holders of record of WebMD Common Stock as of the record date can vote in person at the WebMD Annual Meeting. If you are not a stockholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the WebMD Annual Meeting. If you plan to attend the WebMD Annual Meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. WebMD reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. | |
Q: | Can I attend the HLTH Annual Meeting and vote my shares in person? | |
A: | Yes. All holders of HLTH Common Stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the HLTH Annual Meeting. Holders of record of HLTH common stock as of the record date can vote in person at the HLTH Annual Meeting. If you are not a stockholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the HLTH Annual Meeting. If you plan to attend the HLTH Annual Meeting, |
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you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. HLTH reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. | ||
Q: | What do I do if I want to change my vote? | |
A: | You may change your vote at any time before the vote takes place at the WebMD Annual Meeting or the HLTH Annual Meeting, as the case may be. To do so, you may either complete and submit a new proxy card or send a written notice stating that you would like to revoke your proxy. In addition, you may elect to attend the WebMD Annual Meeting or the HLTH Annual Meeting, as the case may be, and vote in person, as described above. | |
Q: | Who can I contact with any additional questions? | |
A: | You may call the Investor Relations departments of WebMD or HLTH at: |
WebMD Health Corp. | HLTH Corporation | |
111 Eighth Avenue | 669 River Drive, Center 2 | |
New York, New York 10011 | Elmwood Park, New Jersey 07407 | |
(212)624-3817 | (201) 414-2002 |
You may also contact HLTH and WebMD’s proxy solicitor at: | ||
Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Stockholders call toll-free: (888)750-5834 Banks and Brokers call collect: (212)750-5833 | ||
Q: | Where can I find more information about the companies? | |
A: | You can find more information about WebMD and HLTH in the documents described under “Where You Can Find More Information.” |
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• | Public Portals. WebMD’s public portals for consumers enable them to obtain health and wellness information (including information on specific diseases or conditions), check symptoms, locate physicians, store individual healthcare information, receive periodice-newsletters on topics of individual interest and participate in online communities with peers and experts. WebMD’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn continuing medical education credit and communicate with peers. WebMD also publishesWebMD the Magazine,a consumer magazine distributed to physician office waiting rooms. WebMD’s public portals generate revenue primarily through the sale of advertising and sponsorship products, as well as continuing medical education services. The sponsors and advertisers include pharmaceutical, biotechnology, medical device and consumer products companies. WebMD also providese-detailing promotion and physician recruitment services for use by pharmaceutical, medical device and healthcare companies. | |
• | Private Portals. WebMD’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, provider and treatment choices. WebMD provides related services for use by such employees and members, including lifestyle education and personalized telephonic health coaching. WebMD generates revenue from its private portals through the licensing of these portals to employers and health plans either directly or through distributors. |
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• | the registration statement that includes this joint proxy statement/prospectus has been declared effective by the SEC; | |
• | the HLTH and WebMD proposals to adopt the merger agreement and approve the merger have been approved by the requisite votes of the HLTH and WebMD stockholders, as applicable; | |
• | the absence of any governmental law or order that would make the merger illegal or would otherwise prohibit the consummation of the merger; | |
• | the shares of WebMD Common Stock to be issued in the merger have been approved for listing on the Nasdaq Global Select Market; | |
• | the representations and warranties of the parties to the merger agreement are true and correct, except for inaccuracies that would not have a material adverse effect; |
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• | the requisite covenants of each of the parties have been performed in all material respects in accordance with the merger agreement; | |
• | the receipt by each of HLTH and WebMD of a legal opinion from its respective counsel with respect to certain U.S. federal income tax consequences of the merger; | |
• | since the date of the merger agreement, there has not been a material adverse effect relating to HLTH, on the one hand, or WebMD, on the other hand. |
• | Special Committee Recommendation. The WebMD Special Committee unanimously recommended to the Board of Directors of WebMD that the adoption of the merger agreement and approval of the merger were advisable and in the best interests of WebMD and the unaffiliated WebMD stockholders, and that the merger agreement and the transactions contemplated thereby, including the merger, should be approved. | |
• | WebMD Board Recommendation. Based on the recommendation of the WebMD Special Committee, taking into consideration the fairness opinion of the WebMD Special Committee’s financial advisor, a copy of which is attached to this joint proxy statement/prospectus as Annex F, the Board of Directors of WebMD unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and recommends that holders of WebMD Class A Common Stock vote “FOR” the proposal to adopt the merger agreement and approve the transactions contemplated thereby, including the merger, at the WebMD Annual Meeting. The WebMD Board of Directors also recommends that, at the Annual Meeting, WebMD stockholders vote: “FOR” the election of Mark J. Adler, M.D., Neil F. Dimick and James V. Manning as Class I directors of WebMD; “FOR” the ratification and approval of the proposed amendment to the Amended and Restated 2005 Long-Term Incentive Plan; and “FOR” the ratification and appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as WebMD’s independent auditor for the fiscal year ending December 31, 2009. |
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• | HLTH Board Recommendation. Taking into consideration the fairness opinion of its financial advisor, a copy of which is attached to this joint proxy statement/prospectus as Annex E, the Board of Directors of HLTH unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and recommends that HLTH stockholders vote “FOR” the proposal to adopt the merger agreement and approve the transactions contemplated thereby, including the merger, at the HLTH Annual Meeting. The HLTH Board of Directors also recommends that, at the HLTH Annual Meeting, HLTH stockholders vote: “FOR” the election of Paul A. Brooke, James V. Manning and Martin J. Wygod as Class II directors of HLTH; and “FOR” the ratification and appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as HLTH’s independent auditor for the fiscal year ending December 31, 2009, in the event that the merger is not completed. |
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Implied Value of | ||||||||||||
One Share of | ||||||||||||
WebMD Class A | HLTH Common | HLTH Common | ||||||||||
Common Stock | Stock | Stock | ||||||||||
June 17, 2009 | $ | 28.21 | $ | 11.76 | $ | 12.54 | ||||||
September 11, 2009 | $ | 32.17 | $ | 14.14 | $ | 14.30 |
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Six Months Ended | ||||||||||||||||||||||||||||
June 30,(1) | Years Ended December 31,(1)(5) | |||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006(2)(3)(4) | 2005 | 2004 | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||||||||
Revenue | $ | 188,895 | $ | 166,614 | $ | 373,462 | $ | 319,232 | $ | 899,585 | $ | 842,660 | $ | 802,444 | ||||||||||||||
Cost of operations | 75,794 | 62,895 | 135,138 | 114,000 | 542,723 | 525,405 | 510,661 | |||||||||||||||||||||
Sales and marketing | 54,358 | 50,047 | 106,080 | 91,035 | 116,258 | 101,939 | 111,834 | |||||||||||||||||||||
General and administrative | 43,851 | 43,627 | 88,053 | 102,661 | 130,056 | 116,589 | 105,042 | |||||||||||||||||||||
Depreciation and amortization | 14,059 | 13,989 | 28,410 | 27,808 | 44,073 | 43,013 | 38,611 | |||||||||||||||||||||
Interest income | 4,220 | 19,998 | 35,300 | 42,035 | 32,339 | 21,527 | 18,708 | |||||||||||||||||||||
Interest expense | 12,317 | 13,110 | 26,428 | 25,887 | 25,472 | 18,442 | 19,249 | |||||||||||||||||||||
Gain on repurchases of convertible notes | 10,120 | — | — | — | — | — | — | |||||||||||||||||||||
Gain on sale of EBS Master LLC | — | 538,024 | 538,024 | — | — | — | — | |||||||||||||||||||||
Impairment of auction rate securities | — | 60,108 | 60,108 | — | — | — | — | |||||||||||||||||||||
Restructuring | — | — | 7,416 | — | — | — | — | |||||||||||||||||||||
Gain on 2006 EBS Sale | — | — | — | 399 | 352,297 | — | — | |||||||||||||||||||||
Other (expense) income, net | (821 | ) | (4,810 | ) | (5,949 | ) | 3,406 | (4,252 | ) | (27,965 | ) | (13,308 | ) | |||||||||||||||
Income (loss) from continuing operations before income tax (benefit) provision | 2,035 | 476,050 | 489,204 | 3,681 | 421,387 | 30,834 | 22,447 | |||||||||||||||||||||
Income tax (benefit) provision | (467 | ) | 26,171 | 26,638 | (9,053 | ) | 50,033 | (2,461 | ) | 3,995 | ||||||||||||||||||
Equity in earnings of EBS Master LLC | — | 4,007 | 4,007 | 28,566 | 763 | — | — | |||||||||||||||||||||
Consolidated income from continuing operations | 2,502 | 453,886 | 466,573 | 41,300 | 372,117 | 33,295 | 18,452 | |||||||||||||||||||||
Consolidated (loss) income from discontinued operations, net of tax | (12,767 | ) | (6 | ) | 94,682 | (18,048 | ) | 393,527 | 34,170 | 18,159 | ||||||||||||||||||
Consolidated net (loss) income inclusive of noncontrolling interest | (10,265 | ) | 453,880 | 561,255 | 23,252 | 765,644 | 67,465 | 36,611 | ||||||||||||||||||||
(Loss) income attributable to noncontrolling interest | (997 | ) | 2,774 | (1,032 | ) | (10,667 | ) | (405 | ) | (775 | ) | — | ||||||||||||||||
Net (loss) income attributable to HLTH stockholders | $ | (11,262 | ) | $ | 456,654 | $ | 560,223 | $ | 12,585 | $ | 765,239 | $ | 66,690 | $ | 36,611 | |||||||||||||
Amounts attributable to HLTH stockholders: | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 509 | $ | 456,711 | $ | 465,725 | $ | 31,845 | $ | 371,844 | $ | 32,725 | $ | 18,452 | ||||||||||||||
(Loss) income from discontinued operations | (11,771 | ) | (57 | ) | 94,498 | (19,260 | ) | 393,395 | 33,965 | 18,159 | ||||||||||||||||||
Net (loss) income attributable to HLTH stockholders | $ | (11,262 | ) | $ | 456,654 | $ | 560,223 | $ | 12,585 | $ | 765,239 | $ | 66,690 | $ | 36,611 | |||||||||||||
Basic (loss) income per common share: | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.00 | $ | 2.50 | $ | 2.66 | $ | 0.18 | $ | 1.33 | $ | 0.10 | $ | 0.06 | ||||||||||||||
(Loss) income from discontinued operations | (0.11 | ) | (0.00 | ) | 0.54 | (0.11 | ) | 1.41 | 0.10 | 0.05 | ||||||||||||||||||
Net (loss) income attributable to HLTH stockholders | $ | (0.11 | ) | $ | 2.50 | $ | 3.20 | $ | 0.07 | $ | 2.74 | $ | 0.20 | $ | 0.11 | |||||||||||||
Diluted (loss) income per common share: | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.00 | $ | 2.04 | $ | 2.19 | $ | 0.16 | $ | 1.20 | $ | 0.09 | $ | 0.06 | ||||||||||||||
(Loss) income from discontinued operations | (0.11 | ) | (0.01 | ) | 0.42 | (0.10 | ) | 1.18 | 0.10 | 0.05 | ||||||||||||||||||
Net (loss) income attributable to HLTH stockholders | $ | (0.11 | ) | $ | 2.03 | $ | 2.61 | $ | 0.06 | $ | 2.38 | $ | 0.19 | $ | 0.11 | |||||||||||||
Weighted-average shares outstanding used in computing net (loss) income per common share: | ||||||||||||||||||||||||||||
Basic | 102,178 | 182,399 | 174,928 | 179,330 | 279,234 | 341,747 | 320,080 | |||||||||||||||||||||
Diluted | 104,514 | 228,209 | 220,127 | 188,763 | 331,642 | 352,852 | 333,343 | |||||||||||||||||||||
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As of | ||||||||||||||||||||||||
June 30, | As of December 31,(1)(5) | |||||||||||||||||||||||
2009(1) | 2008 | 2007 | 2006(2)(3) | 2005 | 2004 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheets Data: | ||||||||||||||||||||||||
Cash, cash equivalents and investments | $ | 828,456 | $ | 918,268 | $ | 830,120 | $ | 651,464 | $ | 427,433 | $ | 617,493 | ||||||||||||
Working capital (excluding assets and liabilities of discontinued operations) | 551,544 | 633,462 | 860,181 | 617,101 | 397,555 | 43,681 | ||||||||||||||||||
Total assets | 1,393,768 | 1,501,734 | 1,651,481 | 1,469,795 | 2,213,558 | 2,309,419 | ||||||||||||||||||
Convertible notes, net of discount | 488,474 | 614,018 | 605,776 | 598,121 | 590,987 | 649,999 | ||||||||||||||||||
Convertible redeemable exchangeable preferred stock | — | — | — | 98,768 | 98,533 | 98,299 | ||||||||||||||||||
Noncontrolling interest in WHC | 149,058 | 134,223 | 131,353 | 101,860 | 43,096 | — | ||||||||||||||||||
HLTH stockholders’ equity | 491,627 | 496,698 | 642,809 | 422,853 | 1,118,237 | 1,214,876 |
(1) | On July 22, 2008, HLTH completed the sale of its ViPS segment and in March 2009 and February 2008 HLTH decided to divest WebMD’s Little Blue Book print directory business and the Porex segment, respectively. Accordingly, the selected consolidated financial data has been reclassified to reflect the historical results for these businesses as discontinued operations for all periods presented. | |
(2) | For the year ended December 31, 2006, the consolidated financial position and results of operations reflect the sale of a 52% interest in HLTH’s Emdeon Business Services segment (which is refer to as EBS), as of November 16, 2006. Accordingly, the consolidated balance sheet as of December 31, 2006 excludes the assets and liabilities of EBS and includes an investment in EBS Master LLC accounted for under the equity method of accounting related to HLTH’s 48% ownership, and the consolidated statement of operations for the year ended December 31, 2006 includes the operations of EBS for the period January 1, 2006 through November 16, 2006 and our 48% equity in earnings of EBS Master LLC from November 17, 2006 through December 31, 2006. | |
(3) | On September 14, 2006, HLTH completed the sale of the Emdeon Practice Services segment. Accordingly, this selected consolidated financial data has been reclassified to reflect the historical results of the Emdeon Practice Services segment as a discontinued operation for this and all prior periods presented. | |
(4) | On January 1, 2006, HLTH adopted Statement of Financial Accounting Standards No. 123 “(Revised 2004): Share Based Payment” that resulted in additional non-cash stock-based compensation expense beginning in 2006 and subsequent periods. | |
(5) | The selected financial data for the years ended December 31, 2005 and 2004, do not reflect the adoption of Financial Accounting Standards Board’s Staff Position No. APB14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” for HLTH’s 31/4% Convertible Notes, which were outstanding during those periods and were fully redeemed or converted to equity during the year ended December 31, 2005. |
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Six Months Ended | ||||||||||||||||||||||||||||
June 30,(1) | Years Ended December 31,(1) | |||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007(2) | 2006(3)(4) | 2005 | 2004 | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||||||||||
Revenue | $ | 188,895 | $ | 166,654 | $ | 373,542 | $ | 319,493 | $ | 239,434 | $ | 154,560 | $ | 120,287 | ||||||||||||||
Cost of operations | 75,794 | 62,895 | 135,138 | 114,000 | 98,692 | 63,077 | 45,123 | |||||||||||||||||||||
Sales and marketing | 54,358 | 50,047 | 106,080 | 91,035 | 73,344 | 49,026 | 44,976 | |||||||||||||||||||||
General and administrative | 29,865 | 27,691 | 56,635 | 59,326 | 50,060 | 27,937 | 20,461 | |||||||||||||||||||||
Depreciation and amortization | 13,741 | 13,759 | 27,921 | 26,785 | 17,154 | 10,113 | 5,094 | |||||||||||||||||||||
Interest income | 1,899 | 5,803 | 10,452 | 12,378 | 5,099 | 1,790 | — | |||||||||||||||||||||
Impairment of auction rate securities | — | 27,406 | 27,406 | — | — | — | — | |||||||||||||||||||||
Restructuring | — | — | 2,910 | — | — | — | — | |||||||||||||||||||||
Income (loss) from continuing operations before income tax provision (benefit) | 17,036 | (9,341 | ) | 27,904 | 40,725 | 5,283 | 6,197 | 4,633 | ||||||||||||||||||||
Income tax provision (benefit) | 6,847 | 7,933 | 2,211 | (17,644 | ) | 3,571 | 1,367 | 970 | ||||||||||||||||||||
Income (loss) from continuing operations | 10,189 | (17,274 | ) | 25,693 | 58,369 | 1,712 | 4,830 | 3,663 | ||||||||||||||||||||
(Loss) income from discontinued operations, net of tax | (5,290 | ) | 291 | 1,009 | 7,515 | 824 | 1,735 | 1,754 | ||||||||||||||||||||
Net income (loss) | $ | 4,899 | $ | (16,983 | ) | $ | 26,702 | $ | 65,884 | $ | 2,536 | $ | 6,565 | $ | 5,417 | |||||||||||||
Basic income (loss) per common share: | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.17 | $ | (0.30 | ) | $ | 0.45 | $ | 1.02 | $ | 0.03 | $ | 0.10 | $ | 0.08 | |||||||||||||
(Loss) income from discontinued operations | (0.09 | ) | 0.01 | 0.01 | 0.13 | 0.02 | 0.03 | 0.03 | ||||||||||||||||||||
Net income (loss) | $ | 0.08 | $ | (0.29 | ) | $ | 0.46 | $ | 1.15 | $ | 0.05 | $ | 0.13 | $ | 0.11 | |||||||||||||
Diluted income (loss) per common share: | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.17 | $ | (0.30 | ) | $ | 0.44 | $ | 0.98 | $ | 0.03 | $ | 0.10 | $ | 0.08 | |||||||||||||
(Loss) income from discontinued operations | (0.09 | ) | 0.01 | 0.01 | 0.12 | 0.01 | 0.03 | 0.03 | ||||||||||||||||||||
Net income (loss) | $ | 0.08 | $ | (0.29 | ) | $ | 0.45 | $ | 1.10 | $ | 0.04 | $ | 0.13 | $ | 0.11 | |||||||||||||
Weighted-average shares outstanding used in computing net income (loss) per common share: | ||||||||||||||||||||||||||||
Basic | 57,625 | 57,664 | 57,717 | 57,184 | 56,145 | 50,132 | 48,100 | |||||||||||||||||||||
Diluted | 58,245 | 57,664 | 58,925 | 59,743 | 58,075 | 50,532 | 48,100 | |||||||||||||||||||||
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As of | ||||||||||||||||||||||||
June 30, | As of December 31,(1) | |||||||||||||||||||||||
2009(1) | 2008 | 2007(2) | 2006(3) | 2005 | 2004 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents and investments | 373,208 | $ | 325,222 | $ | 294,653 | $ | 54,150 | $ | 153,777 | $ | 3,456 | |||||||||||||
Working capital (excluding assets and liabilities of discontinued operations) | 220,429 | 186,571 | 290,614 | 184,966 | 152,337 | 9,011 | ||||||||||||||||||
Total assets | 772,454 | 755,932 | 720,173 | 619,965 | 376,889 | 146,496 | ||||||||||||||||||
Other long-term liabilities | 7,803 | 8,334 | 9,210 | 7,912 | 7,010 | — | ||||||||||||||||||
Stockholders’ equity | 647,589 | 633,718 | 606,755 | 496,109 | 295,955 | 98,560 |
(1) | In March 2009, Board of Directors of WebMD decided to divest the Little Blue Book print directory business. Accordingly, this selected consolidated financial data has been reclassified to reflect the historical results of the Little Blue Book print directory business as discontinued operations for all periods presented. | |
(2) | As of December 31, 2007, WebMD completed the sale of its medical reference publications business. Accordingly, this selected consolidated financial data has been reclassified to reflect historical results of our medical reference publications business as discontinued operations for this and all prior periods presented. | |
(3) | During 2006, WebMD acquired Subimo LLC on December 15, 2006, Medsite Inc. on September 11, 2006, Summex Corporation on June 13, 2006 and eMedicine.com Inc. on January 17, 2006. The results of operations of these acquired companies have been included in our financial statements from the respective acquisition dates. | |
(4) | On January 1, 2006, WebMD adopted Statement of Financial Accounting Standards No. 123 “(Revised 2004): Share-Based Payment” that resulted in additional non-cash stock-based compensation expense beginning in 2006. |
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Pro Forma | ||||||||||||
Historical HLTH | Adjustments | Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 555,247 | $ | — | $ | 555,247 | ||||||
Accounts receivable | 78,674 | — | 78,674 | |||||||||
Prepaid expenses and other current assets | 48,974 | — | 48,974 | |||||||||
Assets of discontinued operations | 124,945 | — | 124,945 | |||||||||
Total current assets | 807,840 | — | 807,840 | |||||||||
Investments | 273,209 | — | 273,209 | |||||||||
Property and equipment, net | 56,864 | — | 56,864 | |||||||||
Goodwill | 202,104 | — | 202,104 | |||||||||
Intangible assets, net | 28,888 | — | 28,888 | |||||||||
Other assets | 24,863 | — | 24,863 | |||||||||
TOTAL ASSETS | $ | 1,393,768 | $ | — | $ | 1,393,768 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accrued expenses | $ | 45,090 | $ | 3,500 | (b) | $ | 48,590 | |||||
Deferred revenue | 86,261 | — | 86,261 | |||||||||
Liabilities of discontinued operations | 113,588 | — | 113,588 | |||||||||
Total current liabilities | 244,939 | 3,500 | 248,439 | |||||||||
1.75% convertible subordinated notes due 2023 | 264,583 | — | 264,583 | |||||||||
31/8% convertible notes due 2025, net of discount of $26,409 | 223,891 | — | 223,891 | |||||||||
Other long-term liabilities | 19,670 | — | 19,670 | |||||||||
Equity: | ||||||||||||
Company stockholders’ equity | 491,627 | 145,558 | (a)(b) | 637,185 | ||||||||
Noncontrolling interest in WebMD | 149,058 | (149,058 | )(a) | — | ||||||||
Total equity | 640,685 | (3,500 | ) | 637,185 | ||||||||
TOTAL LIABILITIES AND EQUITY | $ | 1,393,768 | $ | — | $ | 1,393,768 | ||||||
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Pro Forma | ||||||||||||
Historical HLTH | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 188,895 | $ | — | $ | 188,895 | ||||||
Cost of operations | 75,794 | — | 75,794 | |||||||||
Sales and marketing | 54,358 | — | 54,358 | |||||||||
General and administrative | 43,851 | — | 43,851 | |||||||||
Depreciation and amortization | 14,059 | — | 14,059 | |||||||||
Interest income | 4,220 | — | 4,220 | |||||||||
Interest expense | 12,317 | — | 12,317 | |||||||||
Gain on repurchase of convertible notes | 10,120 | — | 10,120 | |||||||||
Other expense | 821 | — | 821 | |||||||||
Income from continuing operations before income | ||||||||||||
tax benefit | 2,035 | — | 2,035 | |||||||||
Income tax benefit | (467 | ) | — | (467 | ) | |||||||
Consolidated income from continuing operations | 2,502 | — | 2,502 | |||||||||
Consolidated loss from discontinued operations | (12,767 | ) | — | (12,767 | ) | |||||||
Consolidated net loss inclusive of noncontrolling interest | (10,265 | ) | — | (10,265 | ) | |||||||
Loss attributable to noncontrolling interest | (997 | ) | 997 | (c) | — | |||||||
Net loss attributable to Company stockholders | $ | (11,262 | ) | $ | 997 | $ | (10,265 | ) | ||||
Amounts attributable to Company stockholders: | ||||||||||||
Income from continuing operations | $ | 509 | $ | 1,993 | (c) | $ | 2,502 | |||||
Loss from discontinued operations | (11,771 | ) | (996 | )(c) | (12,767 | ) | ||||||
Net loss attributable to Company stockholders | $ | (11,262 | ) | $ | 997 | $ | (10,265 | ) | ||||
Income from continuing operations per common share (Note 3): | ||||||||||||
Basic | $ | 0.00 | $ | 0.05 | ||||||||
Diluted | $ | 0.00 | $ | 0.04 | ||||||||
Weighted-average shares outstanding used in computing income | ||||||||||||
per common share (Note 3): | ||||||||||||
Basic | 102,178 | 54,933 | ||||||||||
Diluted | 104,514 | 56,591 | ||||||||||
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Pro Forma | ||||||||||||
Historical HLTH | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 373,462 | $ | — | $ | 373,462 | ||||||
Cost of operations | 135,138 | — | 135,138 | |||||||||
Sales and marketing | 106,080 | — | 106,080 | |||||||||
General and administrative | 88,053 | — | 88,053 | |||||||||
Depreciation and amortization | 28,410 | — | 28,410 | |||||||||
Interest income | 35,300 | — | 35,300 | |||||||||
Interest expense | 26,428 | — | 26,428 | |||||||||
Gain on sale of EBS Master LLC | 538,024 | — | 538,024 | |||||||||
Impairment of auction rate securities | 60,108 | — | 60,108 | |||||||||
Restructuring | 7,416 | — | 7,416 | |||||||||
Other expense, net | 5,949 | — | 5,949 | |||||||||
Income from continuing operations before income tax provision | 489,204 | — | 489,204 | |||||||||
Income tax provision | 26,638 | — | 26,638 | |||||||||
Equity in earnings of EBS Master LLC | 4,007 | — | 4,007 | |||||||||
Consolidated income from continuing operations | 466,573 | — | 466,573 | |||||||||
Consolidated income from discontinued operations | 94,682 | — | 94,682 | |||||||||
Consolidated net income inclusive of noncontrolling interest | 561,255 | — | 561,255 | |||||||||
Income attributable to noncontrolling interest | (1,032 | ) | 1,032 | (c) | — | |||||||
Net income attributable to Company stockholders | $ | 560,223 | $ | 1,032 | $ | 561,255 | ||||||
Amounts attributable to Company stockholders: | ||||||||||||
Income from continuing operations | $ | 465,725 | $ | 848 | (c) | $ | 466,573 | |||||
Income from discontinued operations | 94,498 | 184 | (c) | 94,682 | ||||||||
Net income attributable to Company stockholders | $ | 560,223 | $ | 1,032 | $ | 561,255 | ||||||
Income from continuing operations per common share (Note 3): | ||||||||||||
Basic | $ | 2.66 | $ | 5.34 | ||||||||
Diluted | $ | 2.19 | $ | 4.44 | ||||||||
Weighted-average shares outstanding used in computing income from continuing operations per common share (Note 3): | ||||||||||||
Basic | 174,928 | 87,355 | ||||||||||
Diluted | 220,127 | 108,649 | ||||||||||
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
1. | Basis of Presentation |
2. | Pro Forma Adjustments |
3. | Pro Forma Income Per Share |
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Six Months | ||||||||
Ended | Year Ended | |||||||
June 30, 2009 | December 31, 2008 | |||||||
Numerator: | ||||||||
Pro forma income from continuing operations — Basic | $ | 2,502 | $ | 466,573 | ||||
Interest expense on convertible notes, net of tax | — | 15,855 | ||||||
Pro forma income from continuing operations — Diluted | $ | 2,502 | $ | 482,428 | ||||
Denominator: | ||||||||
Pro forma weighted average shares — Basic | 54,933 | 87,355 | ||||||
Employee stock options and warrants | 1,658 | 2,622 | ||||||
Convertible notes | — | 18,672 | ||||||
Pro forma weighted average shares — Diluted | 56,591 | 108,649 | ||||||
Pro forma income per share — Basic | $ | 0.05 | $ | 5.34 | ||||
Pro forma income per share — Diluted | $ | 0.04 | $ | 4.44 | ||||
Six Months | ||||||||
Ended | Year Ended | |||||||
June 30, 2009 | December 31, 2008 | |||||||
WebMD common shares | 57,625 | 57,717 | ||||||
WebMD Class B common shares being retired | (48,100 | ) | (48,100 | ) | ||||
HLTH common shares converted (Note d) | 45,408 | 77,738 | ||||||
Pro forma shares outstanding — basic | 54,933 | 87,355 | ||||||
Options and warrants: | ||||||||
WebMD (historical) | 620 | 1,208 | ||||||
HLTH converted (Note d) | 1,038 | 1,414 | ||||||
1,658 | 2,622 | |||||||
Convertible notes (Note d) | — | 18,672 | ||||||
Pro forma shares outstanding — diluted | 56,591 | 108,649 | ||||||
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Historical Weighted Average Number of HLTH Shares Outstanding | Pro Forma Weighted Average Number of WebMD Shares Outstanding | |||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||
June 30, 2009 | December 31, 2008 | Exchange ratio | June 30, 2009 | December 31, 2008 | ||||||||||||||||
Common shares — basic | 102,178 | 174,928 | 0.4444 | 45,408 | 77,738 | |||||||||||||||
Diluted shares — options and warrants | 2,336 | 3,183 | 0.4444 | 1,038 | 1,414 | |||||||||||||||
Diluted shares — convertible notes | — | 42,016 | 0.4444 | — | 18,672 | |||||||||||||||
Total diluted shares | 2,336 | 45,199 | 1,038 | 20,086 | ||||||||||||||||
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WebMD | HLTH | |||||||||||||||
High | Low | High | Low | |||||||||||||
2006 | ||||||||||||||||
First Quarter | $ | 44.27 | $ | 28.55 | $ | 11.18 | $ | 8.32 | ||||||||
Second Quarter | $ | 47.30 | $ | 34.10 | $ | 12.44 | $ | 10.41 | ||||||||
Third Quarter | $ | 46.85 | $ | 34.25 | $ | 12.60 | $ | 11.45 | ||||||||
Fourth Quarter | $ | 41.71 | $ | 33.93 | $ | 12.78 | $ | 11.37 | ||||||||
2007 | ||||||||||||||||
First Quarter | $ | 57.28 | $ | 40.09 | $ | 16.23 | $ | 12.28 | ||||||||
Second Quarter | $ | 58.53 | $ | 46.07 | $ | 16.56 | $ | 13.72 | ||||||||
Third Quarter | $ | 58.65 | $ | 44.16 | $ | 15.25 | $ | 12.56 | ||||||||
Fourth Quarter | $ | 63.49 | $ | 38.73 | $ | 16.39 | $ | 12.93 | ||||||||
2008 | ||||||||||||||||
First Quarter | $ | 41.99 | $ | 23.15 | $ | 13.56 | $ | 9.52 | ||||||||
Second Quarter | $ | 35.40 | $ | 21.86 | $ | 12.62 | $ | 9.52 | ||||||||
Third Quarter | $ | 35.00 | $ | 23.80 | $ | 12.70 | $ | 10.73 | ||||||||
Fourth Quarter | $ | 29.99 | $ | 13.63 | $ | 11.36 | $ | 6.80 | ||||||||
2009 | ||||||||||||||||
First Quarter | $ | 25.20 | $ | 19.37 | $ | 12.00 | $ | 9.65 | ||||||||
Second Quarter | $ | 30.70 | $ | 20.15 | $ | 13.43 | $ | 10.11 | ||||||||
Third Quarter (through September 11, 2009) | $ | 34.43 | $ | 28.73 | $ | 15.20 | $ | 12.70 |
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HLTH | WebMD | Pro Forma | ||||||||||
As of and for the Six Months Ended June 30, 2009 (Unaudited) | ||||||||||||
(Loss) income from continuing operations per common share: | ||||||||||||
Basic | $ | 0.00 | $ | 0.17 | $ | 0.05 | ||||||
Diluted | $ | 0.00 | $ | 0.17 | $ | 0.04 | ||||||
Net book value per common share | $ | 4.76 | $ | 11.22 | $ | 11.49 | ||||||
Shares outstanding as of June 30, 2009 | 103,199,609 | 57,715,851 | 55,477,757 | |||||||||
For the Year Ended December 31, 2008 | ||||||||||||
Income from continuing operations per common share: | ||||||||||||
Basic | $ | 2.66 | $ | 0.45 | $ | 5.34 | ||||||
Diluted | $ | 2.19 | $ | 0.44 | $ | 4.44 |
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• | whether holders of options to purchase HLTH Common Stock exercise those options and the timing of such exercises; and | |
• | whether holders of convertible notes issued by HLTH convert those notes and the timing of any such conversions. |
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• | whether holders of options to purchase HLTH Common Stock exercise those options and the timing of such exercises; and | |
• | whether holders of convertible notes issued by HLTH convert those notes and the timing of any such conversions. |
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If WebMD is unable to provide content and services that attract and retain users to The WebMD Health Network on a consistent basis, its advertising and sponsorship revenue could be reduced
• | its ability to hire and retain qualified authors, journalists and independent writers; | |
• | its ability to license quality content from third parties; and | |
• | its ability to monitor and respond to increases and decreases in user interest in specific topics. |
• | WebMD’s public portals face competition from numerous other companies, both in attracting users and in generating revenue from advertisers and sponsors. WebMD competes for users with online services |
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and Web sites that provide health-related information, including both commercial sites andnot-for-profit sites. WebMD competes for advertisers and sponsors with: health-related Web sites; general purpose consumer Web sites that offer specialized healthsub-channels; other high-traffic Web sites that include both healthcare-related and non-healthcare-related content and services; search engines that provide specialized health search; and advertising networks that aggregate traffic from multiple sites. WebMD’s public portals also face competition from offline publications and information services. |
• | WebMD’s private portals compete with: providers of healthcare decision-support tools and online health management applications, including personal health records; wellness and disease management vendors; and health information services and health management offerings of healthcare benefits companies and their affiliates. |
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• | the timing of FDA approval for new products or for new approved uses for existing products; | |
• | the timing of FDA approval of generic products that compete with existing brand name products; | |
• | the timing of withdrawals of products from the market; | |
• | the timing of rollouts of new or enhanced services on WebMD’s public portals; | |
• | seasonal factors relating to the prevalence of specific health conditions and other seasonal factors that may affect the timing of promotional campaigns for specific products; and | |
• | the scheduling of conferences for physicians and other healthcare professionals. |
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• | difficulties in staffing and managing operations outside of the United States; | |
• | fluctuations in currency exchange rates; | |
• | burdens of complying with a wide variety of legal, regulatory and market requirements; | |
• | variability of economic and political conditions, including the extent of the impact of recent adverse economic conditions in markets outside the United States; | |
• | tariffs or other trade barriers; | |
• | costs of providing and marketing products and services in different markets; | |
• | potentially adverse tax consequences, including restrictions on repatriation of earnings; and | |
• | difficulties in protecting intellectual property. |
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• | damage from fire, power loss and other natural disasters; | |
• | communications failures; | |
• | software and hardware errors, failures and crashes; | |
• | security breaches, computer viruses and similar disruptive problems; and | |
• | other potential service interruptions. |
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• | government regulation or private initiatives that affect the manner in which healthcare providers interact with patients, payers or other healthcare industry participants, including changes in pricing or means of delivery of healthcare products and services; | |
• | consolidation of healthcare industry participants; | |
• | reductions in governmental funding for healthcare; and | |
• | adverse changes in business or economic conditions affecting healthcare payers or providers, pharmaceutical, biotechnology or medical device companies or other healthcare industry participants. |
• | changes in the design of health insurance plans; | |
• | a decrease in the number of new drugs or medical devices coming to market; and | |
• | decreases in marketing expenditures by pharmaceutical or medical device companies, including as a result of governmental regulation or private initiatives that discourage or prohibit advertising or sponsorship activities by pharmaceutical or medical device companies. |
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• | Regulation of Drug and Medical Device Advertising and Promotion. The WebMD Health Network provides services involving advertising and promotion of prescription andover-the-counter drugs and medical devices. If the Food and Drug Administration (FDA) or the Federal Trade Commission (FTC) finds that any information onThe WebMD Health Networkor inWebMD the Magazineviolates FDA or FTC regulations, they may take regulatory or judicial action against WebMDand/or the advertiser or sponsor of that information. State attorneys general may also take similar action based on their state’s consumer protection statutes. Any increase or change in regulation of drug or medical device advertising and promotion could make it more difficult for WebMD to contract for sponsorships and advertising. Members of Congress, physician groups and others have criticized the FDA’s current policies, and have called for restrictions on advertising of prescription drugs to consumers and increased FDA enforcement. We cannot predict what actions the FDA or industry participants may take in response to these criticisms. It is also possible that new laws would be enacted that impose restrictions on such advertising. In addition, recent private industry initiatives have resulted in voluntary restrictions, which advertisers and sponsors have agreed to follow. WebMD’s advertising and sponsorship revenue could be materially reduced by additional restrictions on the advertising of prescription drugs and medical devices to consumers, whether imposed by law or regulation or required under policies adopted by industry members. | |
• | Anti-kickback Laws. There are federal and state laws that govern patient referrals, physician financial relationships and inducements to healthcare providers and patients. The federal healthcare programs’ anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. These laws are applicable to manufacturers and distributors and, therefore, may restrict how WebMD and some of its customers market products to healthcare providers, includinge-details. Any determination by a state or federal regulatory agency that any of WebMD’s practices violate any of these laws could subject it to civil or criminal penalties and require it to change or terminate some portions of its business and could have an adverse effect on its business. Even an unsuccessful challenge by regulatory authorities of WebMD’s practices could result in adverse publicity and be costly for it to respond to. | |
• | Medical Professional Regulation. The practice of most healthcare professions requires licensing under applicable state law. In addition, the laws in some states prohibit business entities from practicing medicine. If a state determines that some portion of WebMD’s business violates these laws, it may seek to have it discontinue those portions or subject it to penalties or licensure requirements. Any determination that WebMD is a healthcare provider and has acted improperly as a healthcare provider may result in liability to WebMD. |
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• | The ACCME stated that due consideration should be given to eliminating commercial support of CME. | |
• | The ACCME proposed that: (a) accredited providers must not receive communications from commercial interests announcing or prescribing any specific content that would be a preferred, or sought-after, topic for commercially supported CME (e.g., therapeutic area, product-line, patho-physiology); and (b) receiving communications from commercial interests regarding a commercial interest’s internal criteria for providing commercial support would also not be permissible. |
• | “Commercial Support-Free” Designation. In order to clarify the distinction between CME that does include relationships with industry from CME that does not include relationships with industry, the ACCME is considering creating a new designation and review process for CME providers that wish to identify their program of CME as one that does not utilize funds donated by commercial interests. The designation would be termed: “Commercial Support-Free.” The ACCME has indicated that a range of standards for “Commercial Support-Free” CME are possible, including for example: (1) the CME provider not accepting any commercial support for any CME activity, or any part of its CME program; and (2) the CME provider not using funds from advertising or promotion, paid by commercial interests, to underwrite the costs of CME. | |
• | Independent CME Funding Entity. The ACCME is considering creating a granting entity that would accept unrestricted donations for the purpose of funding CME. The funds would be distributed to ACCME recognized and accredited organizations for development and presentation of ACCME-compliant CME. The ACCME is proposing for comment that the entity would: (1) be independent of the ACCME; (2) not provide funds to the ACCME; (3) be managed by its own governance structure; (4) establish its own granting criteria reflecting practice gaps established through methods consistent with ACCME’s content validation policies; and (5) fund CME done for U.S. learners. |
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• | may discourage pharmaceutical companies from providing grants for independent educational activities; | |
• | may slow their internal approval for such grants; | |
• | may reduce the volume of sponsored educational programs that Medscape, LLC produces to levels that are lower than in the past, thereby reducing revenue; and | |
• | may require Medscape, LLC to make changes to how it offers or provides educational programs, including CME. |
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• | cash and cash equivalents on hand and marketable securities; | |
• | proceeds from the incurrence of indebtedness; and | |
• | proceeds from the issuance of additional common stock, of preferred stock, of convertible debt or of other securities. |
• | cause substantial dilution of the percentage ownership of WebMD’s stockholders at the time of the issuance; | |
• | cause substantial dilution of WebMD’s earnings per share; | |
• | subject WebMD to the risks associated with increased leverage, including a reduction in WebMD’s ability to obtain financing or an increase in the cost of any financing that it obtains; |
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• | subject WebMD to restrictive covenants that could limit its flexibility in conducting future business activities; and | |
• | adversely affect the prevailing market price for WebMD’s outstanding securities. |
• | WebMD’s ability to maintain relationships with the customers of the acquired business; | |
• | WebMD’s ability to retain or replace key personnel; | |
• | potential conflicts in sponsor or advertising relationships or in relationships with strategic partners; | |
• | WebMD’s ability to coordinate organizations that are geographically diverse and may have different business cultures; and | |
• | compliance with regulatory requirements. |
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• | develop new uses of existing porous plastics technologies and applications; | |
• | innovate and develop new porous plastics technologies and applications; | |
• | commercialize those technologies and applications; | |
• | manufacture at a cost that allows it to price its products competitively; |
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• | manufacture and deliver its products in sufficient volumes and on time; | |
• | accurately anticipate customer needs; and | |
• | differentiate its offerings from those of its competitors. |
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• | changes in foreign currency exchange rates; | |
• | changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets; | |
• | trade protection measures and import or export licensing requirements; | |
• | changes in tax laws; | |
• | differing protection of intellectual property rights in different countries; and | |
• | changes in regulatory requirements. |
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• | Class A Common Stock, which entitles the holder to one vote per share on all matters submitted to stockholders; and | |
• | Class B Common Stock, which entitles the holder to five votes per share on all matters submitted to stockholders. |
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• | a direct merger of HLTH into WebMD, with WebMD being the surviving corporation; | |
• | in the merger, HLTH Common Stock would be converted into WebMD Common Stock based upon a fixed exchange ratio; and | |
• | WebMD stockholders, other than HLTH, would continue to own their shares of WebMD Common Stock following the merger and WebMD’s dual class stock structure would be eliminated. |
• | allowing HLTH stockholders to have direct ownership in WebMD in an amount commensurate with their ownership interest in WebMD prior to the merger through a tax-free transaction; | |
• | eliminating inefficiencies associated with having two separate public companies and managing intercompany affairs; and | |
• | increasing WebMD’s ability to raise capital, to obtain financing and to use its equity securities to make acquisitions; |
• | increasing the public float and liquidity of WebMD shares; and | |
• | eliminating the controlling block of WebMD shares held by HLTH. |
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• | determined that the terms of the merger agreement and the proposed transaction were substantively and procedurally fair to, and in the best interests of, HLTH and the holders of HLTH Common Stock, as well as being substantively and procedurally fair to the holders of WebMD Class A Common Stock; | |
• | declared the merger agreement advisable, approved and adopted the merger agreement and authorized and approved the proposed merger; and | |
• | recommended that holders of HLTH Common Stock approve and adopt the merger agreement and approve the proposed merger. |
• | determined that the terms of the merger agreement and the proposed transaction were substantively and procedurally fair to, and in the best interests of, WebMD and unaffiliated WebMD stockholders; | |
• | approved the merger agreement and the proposed merger; | |
• | recommended that the WebMD Board of Directors approve the merger agreement and the proposed merger; and | |
• | recommended that the stockholders of WebMD adopt the merger agreement and approve the proposed merger. |
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• | determined that the terms of the merger agreement and the proposed transaction were substantively and procedurally fair to, and in the best interests of, WebMD and unaffiliated WebMD stockholders; | |
• | declared the merger agreement advisable, approved and adopted the merger agreement and authorized and approved the proposed merger; and | |
• | recommended that holders of WebMD Class A Common Stock approve and adopt the merger agreement and approve the proposed merger. |
• | As a result of the transaction, HLTH stockholders would have direct ownership of shares of WebMD, with the exchange ratio of 0.4444 resulting in the ownership stake of HLTH stockholders in the combined company being, in the aggregate, substantially the same as HLTH’s ownership interest in WebMD prior to the merger, after taking into consideration dilution from certain outstanding options and shares of restricted stock. | |
• | The expectation that the WebMD Common Stock would be received by the HLTH stockholders on a tax-free basis. | |
• | WebMD Common Stock as the merger consideration enables HLTH stockholders to continue to benefit from future growth in WebMD’s businesses, as well as from any increase in the value of the net assets of HLTH, other than its ownership interest in WebMD, which will be owned by the combined company following the merger. | |
• | The WebMD Common Stock to be received by the HLTH stockholders is expected to have similar liquidity to existing HLTH Common Stock and greater liquidity than WebMD Class A Common Stock has prior to the merger. | |
• | The expectation that the merger would increase WebMD’s ability to raise capital and obtain financing. | |
• | The merger will eliminate inefficiencies associated with: |
• | managing intercompany affairs between HLTH and WebMD; and | |
• | having two separate public companies, with separate shareholder bases; |
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• | In connection with the sale of Porex and the merger, corporate overhead would be reduced to reflect the size required to service the surviving company’s operations and to reflect the elimination of one of the two public companies currently being maintained. | |
• | The high likelihood of closing the proposed transaction. | |
• | The financial presentation of Raymond James to the HLTH Board of Directors on June 17, 2009, including Raymond James’s opinion as to the fairness, from a financial point of view, of the exchange ratio for the proposed merger, subject to the assumptions, qualifications and limitations contained in its written opinion. Raymond James’s opinion is described under the heading “— Opinion of HLTH’s Financial Advisor, Raymond James & Associates, Inc.” |
• | The consummation of the merger would result in the elimination of the opportunity to receive, through a sale to a third party, a control premium on HLTH’s interest in WebMD that would not be shared with the unaffiliated WebMD stockholders. | |
• | The fact that holders of WebMD Class A Common Stock will have the benefit of the combined company receiving the net assets of HLTH, other than its ownership interest in WebMD, the value of which may increase following the merger, a portion of which would then be shared with the holders of WebMD Class A Common Stock. | |
• | While HLTH expects to complete the merger, there can be no assurances that all conditions to the parties’ obligations to complete the merger agreement will be satisfied and, as a result, the merger may not be completed. In addition, if the merger is not completed, HLTH would pay the expenses of both parties. | |
• | The fact that certain of HLTH’s directors and executive officers have interests in connection with the merger that are different from, or in addition to, the interests of HLTH’s stockholders generally (for further information, see “— Interests of Certain Persons in the Merger”). | |
• | The restrictions on the conduct of HLTH’s business prior to completion of the merger, requiring HLTH to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent HLTH from undertaking business opportunities that may arise pending completion of the merger. | |
• | The substantial costs to be incurred in connection with the merger, including the transaction expenses arising from the merger, as well as certain severance payments that may be required to be made to officers and other employees of HLTH. | |
• | Each of the factors described above in “Risk Factors — Risks Related to the Merger for Holders of HLTH Common Stock.” |
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• | By removing HLTH as WebMD’s controlling stockholder, WebMD’s stockholders will be able to participate in any premium from achange-of-control transaction. | |
• | By significantly increasing its public float, the merger should enhance the liquidity of WebMD’s common stock. | |
• | The merger will simplify corporate ownership structure and increase transparency for investors. | |
• | The merger should improve how WebMD is perceived by investors and increase WebMD’s ability to raise capital and obtain financing. | |
• | The merger will eliminate management and board of director inefficiencies associated with managing current intercompany affairs and will allow them to devote their full attention to the growth of WebMD’s business. | |
• | The expectation that the merger will qualify as a reorganization for United States federal income tax purposes. | |
• | The fact that, under the terms of the merger agreement, WebMD (with the approval of the WebMD Special Committee) may terminate the merger agreement if the WebMD Special Committee determines in good faith, after consultation with its legal counsel, that it is required by its fiduciary duties to terminate the merger agreement in order to enter into a definitive agreement with respect to a superior proposal. | |
• | All expenses incurred by either party and the WebMD Special Committee in connection with the merger and any related transactions will be paid by HLTH. |
• | By agreeing to acquire Porex in light of HLTH’s continuing efforts to sell it, WebMD is assuming the divestiture risk with respect to a non-core, slower-growth business and such divestiture will continue to require the attention of management. | |
• | Retaining Porex could cause WebMD to be viewed by securities analysts as no longer being a “pure play” internet company, particularly if WebMD is required to stop treating Porex as a “discontinued |
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operation,” which could have adverse consequences for the valuation multiple at which WebMD’s stock trades. |
• | Following the merger, the ownership of the unaffiliated WebMD stockholders in WebMD will be subject to dilution from the exercise of HLTH’s stock options and convertible notes that will be assumed by WebMD. | |
• | The issuance of a significant amount of WebMD Common Stock into the markets, as would happen in the merger, could cause a decline in its price and the increased size of WebMD’s public float thereafter could adversely affect the price at which it trades, to the extent it has been supported by a “scarcity” premium, as some analysts have speculated. | |
• | Following the merger, the combined company is expected to initially have slightly higher corporate overhead expenses than WebMD currently has, which could affect the trading price of WebMD Common Stock after the merger. | |
• | Delays or difficulties in eliminating certain redundant costs of the two companies could reduce earnings beyond the anticipated slight increase in corporate overhead costs. | |
• | The closing prices of WebMD Class A Common Stock and HLTH Common Stock on June 17, 2009, the date the merger agreement was executed, were $28.21 and $11.76, respectively. The merger consideration had a value on such date of $12.54 per HLTH share, representing a premium of approximately 6.6% over the $11.76 closing price of HLTH Common Stock, which is higher than the premiums in certain other controlling-stockholder transactions. | |
• | WebMD stockholders will be subject to risks related to any litigation pending against HLTH. | |
• | The fact that certain of WebMD’s directors and executive officers have interests in connection with the merger that are different from, or in addition to, the interests of WebMD stockholders generally (for further information, see “— Interests of Certain Persons in the Merger”). | |
• | The restrictions on the conduct of WebMD’s business prior to completion of the merger, requiring WebMD to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent WebMD from undertaking business opportunities that may arise pending completion of the merger. | |
• | The costs to be incurred by WebMD following the merger, including certain severance payments that may be required to be made to officers and other employees of HLTH. | |
• | The risk that anticipated cost savings and other benefits sought in the merger might not be fully realized. | |
• | Each of the factors described above in “Risk Factors — Risks Related to the Merger for Holders of WebMD Class A Common Stock.” |
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• | The unanimous recommendation of the WebMD Special Committee in favor of the merger and related transactions in light of (i) the composition of the two-member non-employee WebMD Special Committee, each of whom the WebMD Board of Directors had previously determined were unaffiliated with HLTH and (ii) the review of HLTH’s business, assets, liabilities and financial condition by the WebMD Special Committee’s financial advisors. | |
• | The WebMD Special Committee retained its own nationally recognized legal advisor, Cahill, which the WebMD Special Committee determined had no relationship creating a potential conflict. | |
• | The WebMD Special Committee retained its own nationally recognized financial advisor, Morgan Joseph, which the WebMD Special Committee determined had no relationships that would compromise its independence. | |
• | The financial presentation of Morgan Joseph to the WebMD Special Committee on June 17, 2009 and its opinion addressed to the WebMD Special Committee that the merger consideration to be paid by WebMD to HLTH stockholders in the merger was fair, from a financial point of view, to the unaffiliated WebMD stockholders. Morgan Joseph’s opinion is described in detail under the heading “— Opinion of Financial Advisor to the WebMD Special Committee, Morgan Joseph & Co. Inc.” | |
• | The merger consideration and other terms and conditions of the merger agreement were the result of negotiations between HLTH and the WebMD Special Committee and their respective financial and legal advisors following thorough due diligence. | |
• | The WebMD Special Committee had the exclusive authority to negotiate the terms of the merger on behalf of WebMD. | |
• | The WebMD Special Committee had the power to reject the proposed transaction and the resolutions establishing the WebMD Special Committee provided that the WebMD Board of Directors would not approve any strategic transaction with HLTH without the prior, favorable recommendation of the WebMD Special Committee. | |
• | WebMD’s business, financial strength and prospects made it viable as a stand-alone entity. | |
• | The HLTH Board of Directors did not participate in or have any influence over the conclusion reached by the WebMD Special Committee or the negotiating positions of the WebMD Special Committee. |
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• | reviewed the financial terms and conditions of the merger as described in a draft of the merger agreement dated June 17, 2009; | |
• | reviewed the audited financial statements for each of HLTH and WebMD as of and for the fiscal year ended December 31, 2008 and the unaudited financial statements for the three month period ended March 31, 2009; | |
• | reviewed for each of HLTH and WebMD the annual reports filed onForm 10-K for the fiscal year ended December 31, 2008 and the quarterly reports filed onForm 10-Q for the quarter ended March 31, 2009; | |
• | reviewed certain other publicly available information on HLTH and WebMD; | |
• | reviewed certain other financial data and forecasts, balance sheet estimates, and other operating information requested from and provided by HLTH and WebMD; |
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• | reviewed the historical stock price and trading activity for the shares of HLTH Common Stock and WebMD Class A Common Stock; | |
• | discussed their respective businesses, operations, historical financial results, and future prospects with certain management team members of HLTH and WebMD; |
• | discussed with senior management of HLTH and WebMD certain information related to the aforementioned; and |
• | considered such other quantitative and qualitative factors that it deemed to be relevant to its evaluation. |
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• | June 17, 2009: 0.4169 (at market exchange ratio one day prior to announcing the Agreement) | |
• | October 20, 2008: 0.4168 (the day of announcing termination of the previous merger between HLTH and WebMD) | |
• | February 20, 2008: 0.3468 (one day prior to announcing the previous merger between HLTH and WebMD) |
• | Bankrate Inc., | |
• | Dice Holdings, Inc., | |
• | Google Inc., | |
• | IAC/InterActive Corp., | |
• | Internet Brands, Inc., | |
• | The Knot, Inc., | |
• | Monster Worldwide, Inc., and | |
• | Yahoo! Inc. |
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Multiple | WebMD | Mean | Median | Low | High | |||||||||||||||
Enterprise Value/Revenue: | ||||||||||||||||||||
CY2008 | 3.5 | x | 2.3 | x | 2.3 | x | 0.4 | x | 5.2 | x | ||||||||||
CY2009 | 3.2 | x | 2.6 | x | 2.6 | x | 0.5 | x | 5.2 | x | ||||||||||
CY2010 | 2.8 | x | 2.5 | x | 2.2 | x | 0.4 | x | 4.6 | x | ||||||||||
Enterprise Value/EBITDA: | ||||||||||||||||||||
CY2008 | 15.1 | x | 9.3 | x | 8.8 | x | 4.4 | x | 14.0 | x | ||||||||||
CY2009 | 11.9 | x | 10.0 | x | 9.5 | x | 5.2 | x | 15.2 | x | ||||||||||
CY2010 | 9.8 | x | 8.5 | x | 9.5 | x | 3.6 | x | 11.2 | x |
Equity Value per share based on | ||||||||
Revenue | EBITDA | |||||||
Mean | $ | 23.83 | $ | 23.60 | ||||
Median | $ | 23.19 | $ | 23.83 | ||||
WebMD (June 17, 2009) | $ | 28.21 | $ | 28.21 |
• | CBS Corporation’s acquisition of CNet Networks Inc., announced in May 2008; | |
• | The Bankrate, Inc. acquisition of InsureMe, Inc., announced in February 2008; | |
• | The Liberty Media Corp. acquisition of IAC/InterActive Corp., announced in January 2008; | |
• | The Tech Target, Inc. acquisition of KnowledgeStorm, Inc., announced in November 2007; | |
• | The R.H. Donnelley Corp. acquisition of Business.com, Inc., announced in July 2007; and | |
• | The ValueClick Inc. acquisition of MezMedia, Inc., announced in July 2007. | |
• | The Knot, Inc. acquisition of WeddingChannel.com, Inc., announced in June 2006 | |
• | NBC Universal, Inc. acquisition of iVillage Inc., announced in March 2006 | |
• | Google Inc. acquisition of AOL LLC (5% stake), announced in December 2005 | |
• | PRIMEDIA Inc. acquisition of Automotive.com, Inc., announced in November 2005 | |
• | News Corp. acquisition of IGN Entertainment, Inc., announced in September 2005 | |
• | News Corp. acquisition of Intermix Media Inc., announced in July 2005 | |
• | IAC/Interactive Corp. acquisition of Ask Jeeves Inc., announced in March 2005 | |
• | The New York Times Company acquisition of About.com, Inc., announced in February 2005 |
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Enterprise Value to Trailing Twelve Months | ||||||||
Revenue | EBITDA | |||||||
Mean | 5.6 | x | 20.3 | x | ||||
Median | 5.1 | x | 18.5 | x | ||||
Low | 0.9 | x | 8.4 | x | ||||
High | 13.0 | x | 35.0 | x |
Equity | ||||
Value | ||||
per Share | ||||
Mean | $ | 38.82 | ||
Median | $ | 36.13 | ||
WebMD (June 17, 2009) | $ | 28.21 |
Enterprise Value to Trailing | ||||||||
Twelve Months | ||||||||
Revenue | EBITDA | |||||||
Mean | 4.2 | x | 16.9 | x | ||||
Median | 4.6 | x | 17.9 | x | ||||
Low | 0.9 | x | 8.4 | x | ||||
High | 6.9 | x | 23.6 | x |
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Equity | ||||
Value | ||||
per Share | ||||
Low | $ | 26.13 | ||
High | $ | 37.85 | ||
WebMD (June 17, 2009) | $ | 28.21 |
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• | the June 11, 2009 draft of the merger agreement which WebMD represented to Morgan Joseph was, with respect to all of the material terms and conditions thereof, substantially in the form of the definitive agreement executed and delivered by the parties thereto promptly after the receipt of the Morgan Joseph Opinion; | |
• | the Annual Report onForm 10-K filed by WebMD with the SEC for its fiscal year ended December 31, 2008, the Quarterly Report onForm 10-Q filed by WebMD with the SEC for its fiscal quarter ended March 31, 2009, and certain other Exchange Act filings made by WebMD with the SEC; | |
• | the Annual Report onForm 10-K filed by HLTH with the SEC for its fiscal year ended December 31, 2008, the Quarterly Report onForm 10-Q filed by HLTH with the SEC for its fiscal quarter ended March 31, 2009, and certain other Exchange Act filings made by HLTH with the SEC; |
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• | certain other publicly available business and financial information concerning HLTH and its subsidiaries, including WebMD, and the industries in which they operate, which Morgan Joseph believed to be relevant to their analyses; | |
• | with respect to the valuation of the net operating losses of HLTH, certain information prepared internally by HLTH; | |
• | with respect to HLTH and its subsidiaries other than WebMD, certain information prepared internally by HLTH and other data relating to their respective businesses and prospects, including certain budgets, forecasts and presentations prepared by HLTH and WebMD, which were provided to Morgan Joseph by HLTH’s senior management; | |
• | with respect to WebMD, certain information prepared internally by WebMD and certain other data relating to its business and prospects, including certain budgets and presentations prepared by WebMD, which were provided to Morgan Joseph by WebMD’s senior management; | |
• | the reported prices and trading activity of WebMD Class A Common Stock and HLTH Common Stock; | |
• | certain publicly available information concerning certain other companies which Morgan Joseph believed to be relevant and the trading markets for certain of such other companies’ securities; and | |
• | the financial terms of certain recent business combinations which Morgan Joseph believes to be relevant. |
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• | Millipore Corporation | |
• | Pentair, Inc. | |
• | Pall Corporation | |
• | Donaldson Company, Inc. | |
• | Bemis Company, Inc. | |
• | CLARCOR Inc. | |
• | Polypore International, Inc. | |
• | Sartorius Group | |
• | Filtrona plc | |
• | Rogers Corporation | |
• | Porvair plc |
• | Enterprise Value, which Morgan Joseph defined as market capitalization plus the par value of total debt includingout-of-the-money convertible debt, capitalized leases and preferred stock (on an as converted basis, if applicable) minus cash, cash equivalents and marketable securities, divided by EBITDA, which excludes one-time charges and includes stock-based compensation. |
Mean | Median | High | Low | |||||
Enterprise Value/2009 Projected EBITDA | 9.0x | 8.8x | 12.7x | 4.4x |
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Date Announced | Target Company | Acquiror Company | ||
October 16, 2008 | Western Filter Corporation | Donaldson Company Inc. | ||
February 4, 2008 | Whatman plc | General Electric Company (GE Healthcare) | ||
October 17, 2007 | Perry Equipment Corporation | CLARCOR Inc. | ||
March 6, 2007 | Porous Media Corporation | Pentair Inc. | ||
August 2, 2005 | domnick hunter group plc | Parker Hannifin Corporation | ||
May 12, 2005 | CUNO Incorporated | 3M Company | ||
June 1, 2004 | BHA Group Holdings, Inc. | General Electric Company | ||
March 17, 2004 | Apogent Technologies Inc. | Fisher Scientific International Inc. | ||
February 3, 2004 | Polypore, Inc. | Warburg Pincus LLC | ||
February 2, 2004 | Waterlink (UK) Limited | Calgon Carbon Corp | ||
November 18, 2003 | Everpure, Inc. | Pentair, Inc. | ||
March 6, 2002 | Filtrations & Separations Group | Pall Corp. |
Mean | Median | High | Low | |||||
Transaction Value/LTM EBITDA | 11.7x | 11.4x | 20.5x | 6.7x |
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• | Stryker Corporation | |
• | Synthes, Inc. | |
• | Zimmer Holdings, Inc. | |
• | Smith & Nephew plc | |
• | Orthofix International N.V. | |
• | Wright Medical Group, Inc. | |
• | Symmetry Medical Inc. | |
• | Kensey Nash Corporation | |
• | Exactech, Inc. |
• | Enterprise Value, which Morgan Joseph defined as market capitalization plus the par value of total debt includingout-of-the-money convertible debt, capitalized leases and preferred stock (on an as converted basis, if applicable) minus cash, cash equivalents and marketable securities, divided by EBITDA, which excludes one-time charges and includes stock-based compensation. |
Mean | Median | High | Low | |||||||||||||
Enterprise Value/2009 Projected EBITDA | 7.3x | 7.1x | 8.6x | 6.3x |
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Date Announced | Target Company | Acquiror Company | ||
December 1, 2008 | Mentor Corporation | ETHICON, INC. | ||
January 15, 2008 | Lifecore Biomedical, Inc. | Warburg Pincus LLC | ||
July 16, 2007 | DJO Incorporated | ReABLE Therapeutics, Inc. | ||
March 12, 2007 | Plus Orthopedics AG | Smith & Nephew plc | ||
November 14, 2006 | Newdeal Technologies, SA | Integra Lifesciences Holdings Corporation | ||
February 27, 2006 | Aircast Incorporated | dj Orthopedics LLC | ||
August 9, 2004 | Empi, Inc. | Encore Medical Corporation | ||
April 28, 2004 | MedSource Technologies Inc. | Accellent, Inc. (Medical Device Manufacturing, Inc.) |
Mean | Median | High | Low | |||||||||||||
Transaction Value/LTM EBITDA | 12.8x | 14.0x | 15.7x | 7.3x |
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Name | Options Outstanding | Weighted Average Exercise Price | ||||||
Kevin M. Cameron | 4,002,168 | $ | 10.22 | |||||
Nan-Kristen Forte | 556,853 | $ | 23.45 | |||||
Mark D. Funston | 360,000 | $ | 10.53 | |||||
Wayne T. Gattinella | 454,881 | $ | 6.89 | |||||
Charles A. Mele | 2,070,000 | $ | 12.29 | |||||
William Midgette | 410,000 | $ | 8.41 | |||||
Anthony Vuolo | 1,540,000 | $ | 13.23 | |||||
Martin J. Wygod | 4,955,000 | $ | 11.86 | |||||
Steven Zatz, M.D. | 750,000 | $ | 11.89 | |||||
Mark J. Adler | 296,000 | $ | 10.36 | |||||
Paul A. Brooke | 270,000 | $ | 8.71 | |||||
Neil F. Dimick | 117,916 | $ | 10.47 | |||||
James W. Manning | 308,000 | $ | 9.32 | |||||
Herman Sarkowsky | 420,000 | $ | 11.34 | |||||
Joseph E. Smith | 226,000 | $ | 11.47 |
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• | As a result of his serving as Chief Executive Officer for over three years, he would be entitled to continuation of his base salary for three years from his termination date at the rate in effect on his termination date; this rate is currently $660,000 per year (an aggregate of $1.98 million); provided that the first six months of severance shall be delayed for six months and will be paid in a lump sum after such six month period in accordance with Section 409A of the Code. |
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• | He would generally be entitled to continue to participate for three years, on the same terms and conditions that would have applied had he remained employed by HLTH during such period, in all health, medical, dental, life, and disability plans provided to him at the time of such termination and which are provided to employees generally following the date of termination (or comparable plans). | |
• | His HLTH stock options and restricted stock granted on or before October 1, 2004, would remain outstanding and continue to vest, and would otherwise be treated as if he remained in the employ of HLTH through the three-year period he is receiving continuation of base salary. The only such equity that currently has an unvested portion is (i) the option granted on October 1, 2004 at a per share exercise price of $6.99, with 345,000 shares scheduled to vest on October 1, 2009 and (ii) the restricted stock granted on that same date with 63,250 shares scheduled to vest on October 1, 2009. | |
• | The portion of the WebMD stock option granted to him on September 28, 2005 at a per share price of $17.50, that would have vested on the next vesting date following the termination date would vest on his termination date and would remain exercisable for the90-day post-termination exercise period specified in such option plus an extension to the later of (i) the fifteenth day of the third month following such exercise period or (ii) December 31 of the calendar year in which such post-termination exercise period would terminate, but in no event beyond the expiration of the option’s original ten-year term. The last vesting of this grant (with respect to 13,750 shares) is scheduled to occur on September 28, 2009. | |
• | The HLTH stock option granted to him on October 23, 2006, would remain outstanding and continue to vest until the next vesting date, and the next vesting date of the HLTH restricted stock grant made on the same date would accelerate to the date of termination. The last vesting of this grant, (in the case of the option, with respect to 360,000 shares and in the case of the restricted stock, 120,000 shares) is scheduled to occur on October 23, 2009. |
• | He would be entitled to continuation of his base salary for three years from his termination date at the rate in effect on his termination date; this rate is currently $450,000 per year. |
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• | He would be entitled to an amount for each of the three years from his termination date equal to the greater of (i) the average of the annual bonuses (excluding the special bonuses he received in connection with the sales of EBS and EPS) he received in the three years prior to his termination and (ii) the amount of the bonus he received in the last of those years. Mr. Mele’s annual bonus for 2006, 2007 and 2008 was $350,000, $233,000 and $350,000, respectively. | |
• | He would be entitled to continue to participate for three years, on the same terms and conditions that would have applied had he remained employed by HLTH during such period, in all health, medical, dental, and life insurance plans provided to him at the time of such termination and which are provided to employees generally following the date of termination. In addition, in lieu of participation in a comparable disability plan, WebMD would pay an amount equal to the greater of (i) two times the company cost of such insurance and (ii) $10,000 per year for three years. | |
• | All HLTH stock options granted to him prior to March 17, 2004, which are all currently vested, would remain exercisable until they would otherwise expire under the terms of the option agreement pursuant to which they were granted. | |
• | The HLTH stock options granted on March 17, 2004, which are all currently vested, would remain exercisable for the90-day post-termination exercise period specified in such options plus an extension to the later of (i) the fifteenth day of the third month following such exercise period or (ii) December 31 of the calendar year in which such post-termination exercise period would terminate, but in no event beyond the expiration of the options’ original ten year term. | |
• | The portion of the WebMD stock options granted to him on September 28, 2005 at a price per share exercise price of $17.50, that would have vested on the next vesting date following the date of termination would be deemed vested on the termination date and remain exercisable for the90-day post-termination exercise period specified in such options plus an extension to the later of (i) the fifteenth day of the third month following such exercise period or (ii) December 31 of the calendar year in which such post-termination exercise period would terminate, but in no event beyond the expiration of the options’ original ten year term. The last vesting of this grant (with respect to 11,000 shares) is scheduled to occur on September 28, 2009. | |
• | The HLTH stock options granted to Mr. Mele on October 23, 2006 at a per share exercise price of $11.86, would remain outstanding and continue to vest until the next vesting date, and the next vesting date of the HLTH restricted stock grant made on the same date would accelerate to the date of termination. The last vesting date of this grant (in the case of the option, with respect to 120,000 shares and in the case of the restricted stock, 40,000 shares) is scheduled to occur on October 23, 2009. | |
• | The HLTH option to purchase 300,000 shares granted to him on December 10, 2008 at a per share exercise price of $9.46, would remain outstanding and continue to vest until the next vesting date. These options vest in equal annual installments of 25% commencing on December 10, 2009. |
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• | a U.S. holder whose shares of HLTH Common Stock are exchanged in the merger solely for shares of WebMD Common Stock will not recognize gain or loss, except with respect to cash received in lieu of fractional shares of WebMD Common Stock (as discussed below); | |
• | a U.S. holder’s aggregate tax basis in shares of WebMD Common Stock received in the merger (including any fractional shares deemed received and exchanged for cash) will equal the aggregate tax basis of the HLTH Common Stock surrendered in the merger; and | |
• | a U.S. holder’s holding period for shares of WebMD Common Stock received in the merger will include the holding period for the shares of HLTH Common Stock surrendered in the merger. |
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• | Public Portals. WebMD’s public portals for consumers enable them to obtain health and wellness information (including information on specific diseases or conditions), check symptoms, locate physicians, store individual healthcare information, receive periodice-newsletters on topics of individual interest and participate in online communities with peers and experts. WebMD’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn continuing medical education credit and communicate with peers. WebMD also publishesWebMD the Magazine,a consumer magazine distributed to physician office waiting rooms. WebMD’s public portals generate revenue primarily through the sale of advertising and sponsorship products, as well as continuing medical education services. The sponsors and advertisers include pharmaceutical, biotechnology, medical device and consumer products companies. WebMD also providese-detailing promotion and physician recruitment services for use by pharmaceutical, medical device and healthcare companies. | |
• | Private Portals. WebMD’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, provider and treatment choices. WebMD provides related services for use by such employees and members, including lifestyle education and personalized telephonic health coaching. WebMD generates revenue from its private portals through the licensing of these portals to employers and health plans either directly or through distributors. |
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• | Effect on WebMD Capital Stock. Each share of WebMD stock not owned by HLTH or any HLTH subsidiary issued and outstanding immediately prior to the merger will remain issued and outstanding after the merger, and each share of WebMD stock owned by HLTH or any HLTH subsidiary will be canceled. | |
• | Conversion of HLTH Common Stock. Each share of HLTH Common Stock (other than any shares to be cancelled as described below) will be cancelled and converted automatically into 0.4444 shares of WebMD Common Stock. | |
• | Cancellation of Treasury Stock and WebMD-Owned Stock. Each share of HLTH Common Stock held in the treasury of HLTH, and each share of HLTH Common Stock owned by WebMD or any wholly-owned subsidiary of WebMD or HLTH, will be cancelled without any conversion thereof and no payment or distribution will be made with respect thereto. |
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• | Corporate Organization | |
• | Capitalization | |
• | Authority | |
• | No Conflict; Required Filings and Consents | |
• | SEC Filings; Financial Statements | |
• | Compliance with Laws | |
• | Absence of HLTH Material Adverse Effect | |
• | Absence of Litigation | |
• | Employee Benefit Plans | |
• | Taxes | |
• | Board Approval; Vote Required | |
• | Opinion of Financial Advisor | |
• | Joint Proxy Statement/Prospectus | |
• | Brokers | |
• | Labor | |
• | Environmental Laws | |
• | Intellectual Property |
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• | Corporate Organization | |
• | Capitalization | |
• | Authority | |
• | No Conflict; Required Filings and Consents | |
• | SEC Filings; Financial Statements | |
• | Absence of WebMD Material Adverse Effect | |
• | Absence of Litigation | |
• | Board Approval; Vote Required | |
• | Ownership of HLTH Capital Stock | |
• | Opinion of Financial Advisor | |
• | Joint Proxy Statement/Prospectus | |
• | Brokers |
• | changes in general economic conditions or changes in the financial or securities markets in general which do not affect HLTH disproportionately (relative to other industry participants); | |
• | the public announcement or the pendency of the merger and the other transactions related to the merger; | |
• | any action taken by HLTH with the consent of the WebMD Special Committee; | |
• | any agreement for, the public announcement or pendency of, or the consummation of, the divestiture of Porex; or | |
• | any event, circumstance, change or effect relating to WebMD. |
• | changes in general economic conditions or changes in the financial or securities markets in general which do not affect WebMD disproportionately (relative to other industry participants); |
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• | general changes in the industries in which WebMD and its subsidiaries operate which do not affect WebMD disproportionately (relative to other industry participants); | |
• | the public announcement or the pendency of the transactions related to the merger; | |
• | any action taken by WebMD with the consent of HLTH; or | |
• | any agreement for, the public announcement or pendency of, or the consummation of, the divestiture of the Little Blue Book print directory business. |
• | amending organizational documents; | |
• | issuing or redeeming any capital stock or other ownership interests (provided, however, that WebMD may make grants of stock options or restricted stock under WebMD’s Amended and Restated 2005 Long-Term Incentive Plan); | |
• | declaring or paying any dividend or other distribution; | |
• | reclassifying, redeeming, splitting, purchasing or otherwise acquiring any of its capital stock; | |
• | acquiring any entity or business; | |
• | making any material loan; | |
• | creating or permitting any material encumbrance on any asset or property; | |
• | incurring any material indebtedness; | |
• | as to HLTH (but not WebMD), modifying compensation payable to directors or certain employees; | |
• | as to HLTH (but not WebMD), granting any severance or termination pay to, or entering into an employment or severance agreement with, directors or certain employees; | |
• | making any material tax election or settling any material tax liability; | |
• | changing independent accountants or accounting methods; | |
• | failing to pay a material liability when due; | |
• | permitting any material insurance policy to be cancelled or terminated; and | |
• | adopting a plan of liquidation relating to HLTH. |
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• | obtain all permits, consents, approvals and orders necessary for the consummation of the transactions; and | |
• | fulfill the conditions to the merger. |
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• | the Registration Statement onForm S-4 having been declared effective; | |
• | adoption of the merger agreement and approval of the merger by the stockholders of HLTH; |
• | adoption of the merger agreement, including the issuance of shares of WebMD Common Stock in connection with the merger, and approval of the merger by the stockholders of WebMD; |
• | absence of any governmental law or order that would make the merger illegal or would otherwise prohibit the consummation of the merger; and | |
• | authorization for quotation on the Nasdaq Global Select Market of the WebMD shares to be issued in the merger. |
• | accuracy of representations and warranties of HLTH; | |
• | performance by HLTH of its covenants in all material respects; | |
• | receipt of tax opinion from counsel as to the treatment of the merger as a reorganization for U.S. federal income tax purposes; and | |
• | absence of Material Adverse Effect on HLTH. |
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• | accuracy of representations and warranties of WebMD; | |
• | performance by WebMD of its covenants in all material respects; | |
• | receipt of tax opinion from counsel as to the treatment of the merger as a reorganization for U.S. federal income tax purposes; and | |
• | absence of Material Adverse Effect on WebMD. |
• | by mutual written consent duly authorized by the WebMD Board of Directors (with the approval of the WebMD Special Committee) and the Board of Directors of HLTH; or | |
• | by either WebMD (upon the approval of the WebMD Special Committee) or HLTH if the merger has not occurred by December 31, 2009; provided, however, that a party will not have the right to terminate if its failure to fulfill any obligation under the merger agreement has caused the failure of the merger to occur on or before that date; or | |
• | by either WebMD (upon the approval of the WebMD Special Committee) or HLTH if any law or governmental order has the effect of making the merger illegal or preventing or prohibiting the merger; or | |
• | by either WebMD (upon the approval of the WebMD Special Committee) or HLTH if: (i) the other party’s board of directors recommends a “Competing Transaction” (defined below) to its stockholders or enters into an agreement with respect to a Competing Transaction, (ii) a tender offer or exchange offer for 15% or more of the outstanding shares of capital stock of the other party is made and the other party’s board of directors fails to recommend against it, or (iii) the other party’s board of directors withdraws or changes its recommendation of the merger agreement or the merger in a manner adverse to the terminating party; or | |
• | by either WebMD (upon the approval of the WebMD Special Committee) or HLTH if HLTH stockholders fail to adopt the merger agreement and approve the merger at the HLTH stockholders’ meeting; or |
• | by either WebMD (upon the approval of the WebMD Special Committee) or HLTH if WebMD stockholders fail to adopt the merger agreement, including the issuance of shares of WebMD Common Stock in connection with the merger, and approve the merger; or |
• | by WebMD (upon the approval of the WebMD Special Committee) upon HLTH’s breach of any representation, warranty, covenant or agreement, or if any representation or warranty of HLTH has become untrue, such that the condition to closing regarding HLTH’s representations and warranties and covenants would not be satisfied. However, if the breach or inaccuracy is curable, WebMD may not terminate for so long as HLTH exercises its best efforts to cure such breach, unless such breach is not cured within 15 business days after receipt of written notice of such breach; or | |
• | by HLTH upon WebMD’s breach of any representation, warranty, covenant or agreement, or if any representation or warranty of WebMD has become untrue, such that the condition to closing regarding WebMD’s representations and warranties and covenants would not be satisfied. However, if the breach or inaccuracy is curable, HLTH may not terminate for so long as WebMD exercises its best efforts to |
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cure such breach, unless such breach is not cured within 15 business days after receipt of written notice of such breach; or |
• | by HLTH, (upon the approval of the HLTH Board of Directors) if the HLTH Board of Directors determines in good faith after consultation with counsel that it is required by its fiduciary duties under law to terminate the merger agreement in order to enter into a definitive agreement with respect to a “Superior Proposal” (defined below); or |
• | by WebMD, upon the approval of the WebMD Special Committee, if the Special Committee determines in good faith after consultation with counsel that it is required by its fiduciary duties under law to terminate the merger agreement in order to enter into a definitive agreement with respect to a “Superior Proposal” (defined below). |
• | with respect to any party (other than any divestitures of the Porex business or the Little Blue Book print directory business), (a) a merger transaction resulting in that party’s stockholders owning less than 90% of the voting power of the resulting entity; (b) a sale of more than 10% of the aggregate fair market value of that party’s consolidated assets; (c) a sale of more than 10% of any class of that party’s equity securities; (d) a tender offer or exchange offer that would result in any person beneficially owning more than 10% of any class of that party’s equity securities; or (e) a transaction which would reasonably be expected to impede, interfere with, prevent or materially delay any of the transactions under the merger agreement; | |
• | with respect to HLTH, any solicitation opposing the HLTH stockholders’ adoption of the merger agreement and approval of the merger; or | |
• | with respect to WebMD, any solicitation opposing the WebMD stockholders’ adoption of the merger agreement and approval of the merger or approval of the issuance of WebMD shares in the merger. |
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WebMD | WebMD | |||||||||||||||
Class A | Class A | |||||||||||||||
HLTH | Common | Common | ||||||||||||||
HLTH | Stockholders | Stockholders | Stockholders | |||||||||||||
Immediately | Immediately | Immediately | Immediately | |||||||||||||
Before the | After the | Before the | After the | |||||||||||||
Merger(1) | Merger(2) | Merger(1) | Merger(2) | |||||||||||||
Ownership Percentage | 83.2 | % | 82.6 | % | 16.8 | % | 17.4 | % | ||||||||
Share of WebMD Net Income for the Six Months Ended June 30, 2009 (in thousands) | $ | 4,076 | $ | 4,047 | $ | 823 | $ | 852 | ||||||||
Share of WebMD Net Book Value as of June 30, 2009 (in thousands) | $ | 538,794 | $ | 534,909 | $ | 108,795 | $ | 112,680 |
(1) | Calculated as of August 31, 2009, based on HLTH ownership of all 48,100,000 shares of WebMD Class B Common Stock and 9,712,421 shares outstanding of WebMD Class A Common Stock. |
(2) | Calculated assuming that, following the merger: HLTH stockholders will own 46,210,263 shares of the outstanding common stock of the surviving corporation which represents 103,983,490 of HLTH Common Stock (based on shares outstanding as of August 31, 2009) multiplied by the exchange ratio of 0.4444; and WebMD Class A Common stockholders will own 9,712,421 shares, based on shares outstanding as of August 31, 2009. |
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Existing Authorized Capital Stock | ||||
50,000,000 | Preferred Stock | |||
500,000,000 | Class A Common Stock | |||
150,000,000 | Class B Common Stock | |||
700,000,000 | Total |
Proposed Authorized Capital Stock | ||||
50,000,000 | Preferred Stock | |||
650,000,000 | Common Stock | |||
700,000,000 | Total |
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WebMD | HLTH | |
Authorized Capital Stock | ||
The Amended WebMD Charter authorizes WebMD to issue 700,000,000 shares of stock divided into two classes: 50,000,000 shares of Preferred Stock, par value $.01 per share; and 650,000,000 shares of Common Stock, par value of $.01 per share. | HLTH’s Eleventh Amended and Restated Certificate of Incorporation authorizes HLTH to issue 905,000,000 shares of stock including: 900,000,000 shares of Common Stock, par value $0.0001 per share; 10,000 shares of Preferred Stock, par value $0.0001 per share; and 4,990,000 shares of new Preferred Stock, par value $0.0001 per share. | |
Special Meetings of Stockholders | ||
Special meetings of stockholders of WebMD may be called for any purpose or purposes at any time by a majority of the members of the WebMD Board of Directors, and any power of stockholders to call special meetings is specifically denied. | Special meetings of the stockholders of HLTH may be called for any purpose or purposes at any time by a majority of the members of the HLTH Board of Directors or by the Chairman of the Board or Chief Executive Officer. Special meetings of the stockholders of HLTH may not be called by any other person or persons. The place of said meetings and the business transacted shall be limited to the purpose or purposes specified in the notice of the meeting. | |
Stockholder Action Without a Meeting | ||
Any action required or permitted to be taken by the stockholders must be taken only upon the vote of the stockholders at an annual or special meeting duly announced and called and may not be taken by a written consent of the stockholders without a meeting. | Any action required or permitted to be taken at any annual or special meeting of stockholders must be taken only upon the vote of the stockholders at an annual or special meeting duly announced and called and may not be taken by a written consent of the stockholders without a meeting. |
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WebMD | HLTH | |
Stockholder Proposals and Nominations of Candidates for Election | ||
The WebMD Amended and Restated By-Laws allow stockholders to propose business to be brought before an annual meeting, subject to timely notice of such business in accordance with the requirements set forth in such bylaws. In addition, stockholders who are entitled to vote in the election of directors may nominate candidates for election to the WebMD Board of Directors at an annual meeting or a special meeting called for the purpose of electing directors, provided such stockholder gives timely notice in writing to the Secretary of WebMD prior to the meeting and such notice complies with all other applicable requirements of such bylaws. | HLTH’s Amended and Restated Bylaws allow stockholders to propose business to be brought before an annual meeting, subject to timely notice of such business in accordance with the requirements set forth in such bylaws. In addition, stockholders who are entitled to vote in the election of directors may nominate candidates for election to the HLTH Board of Directors, provided such stockholder gives timely notice in writing to the Secretary of HLTH prior to the meeting, and such notice complies with all other applicable requirements of such bylaws. | |
To be timely, a stockholder’s notice must be delivered to WebMD’s principal executive offices not less than 90 nor more than 120 days prior to the anniversary date of the immediately preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice must be delivered no earlier than the close of business on the 120th day prior to such annual meeting and no later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day public announcement is first made by WebMD. | To be timely, a stockholder’s notice must be delivered to HLTH’s principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the date of the date of the annual meeting is more than 30 days before or more than 30 days after such anniversary date, notice must be delivered no earlier than the close of business on the 10th day following the earlier of (i) the day on which notice of the annual meeting is mailed to stockholders and (ii) the day on which public announcement of the date of the annual meeting is first made by HLTH. | |
Size of the Board of Directors; Classification of Board | ||
Under the Amended WebMD Charter subject to the rights of holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors which constitute the WebMD Board of Directors shall be fixed from time to time by the Board of Directors. The WebMD Amended and Restated By-laws currently provide that the WebMD Board of Directors shall consist of 1 or more members. | Under HLTH’s Eleventh Amended and Restated Certificate of Incorporation, as amended, the number of directors which constitute the Board of Directors of HLTH shall be fixed exclusively from time to time by the Board of Directors. HLTH’s Amended and Restated Bylaws currently provide that the Board of Directors of WebMD shall consist of 9 members, unless such number is changed exclusively by a resolution of a majority of the Board of Directors of HLTH. | |
WebMD currently has 8 directors. | HLTH currently has 8 directors. | |
The WebMD Board of Directors is divided into three classes, two of which currently have three directors and one of which currently has two directors. At each Annual Meeting, the term of one of the classes of directors expires and WebMD stockholders vote to elect nominees for the directorships in that class for a new three-year term. | The HLTH Board of Directors is divided into three classes, two of which currently have three directors and one of which currently has two directors. At each Annual Meeting, the term of one of the classes of directors expires and HLTH stockholders vote to elect nominees for the directorships in that class for a new three-year term. | |
For more information regarding the effect of the merger on the WebMD Board of Directors following the merger, see “The Merger Agreement — The Merger — Directors and Officers.” |
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WebMD | HLTH | |
Removal of Directors | ||
Subject to the rights of any Preferred Stock to elect directors under specified circumstances, any WebMD director may be removed from office at any time only with cause by the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding voting stock, voting together as a single class. | Unless otherwise restricted by statute, any HLTH director may be removed from office at any time only with cause by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors. | |
Filling Director Vacancies | ||
Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances and unless otherwise restricted by statute, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause, and newly created directorships resulting from any increase in the authorized number of directors, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the whole Board of Directors shall shorten the term of any incumbent director. | Unless otherwise restricted by statute, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other causes, and newly created directorships resulting from any increase in the authorized number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the whole Board of Directors shall shorten the term of any incumbent director. | |
During any period when the holders of any series of Preferred Stock have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues, the then otherwise total authorized number of directors shall automatically be increased by such specified number of directors and the holders of such Preferred Stock shall be entitled to elect these additional directors, to serve until each such director’s successor shall have been duly elected and qualified or until such director’s right to hold such office terminates, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. | ||
Limitation on Liability of Directors | ||
Under the Amended WebMD Charter, a director of WebMD shall not be liable to WebMD or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law. | Under HLTH’s Eleventh Amended and Restated Certificate of Incorporation, as amended, a director of HLTH shall not be personally liable to HLTH or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the General Corporation Law. |
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WebMD | HLTH | |
Indemnification | ||
Pursuant to the WebMD Amended and Restated By-laws, WebMD shall, to the maximum extent and in the manner permitted by the General Corporation Law, indemnify and hold harmless any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of WebMD or, while a director or officer of WebMD, is or was serving at the request of WebMD as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred. | Pursuant to HLTH’s Amended and Restated Bylaws, HLTH shall, to the maximum extent and in the manner permitted by the General Corporation Law, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of HLTH, including any person (i) who is or was a director or officer of HLTH or any subsidiary of HLTH, (ii) who is or was serving at the request of HLTH as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of HLTH or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary. | |
WebMD shall, to the fullest extent not prohibited by law, pay the expenses (including attorneys’ fees) incurred by any such person in defending any proceeding in advance of its final disposition, provided that, if required by law, such person has provided an undertaking to repay all amounts advanced if it should be ultimately determined that such person is not entitled to be indemnified. | In addition, HLTH shall have the power, to the extent and in the manner permitted by the General Corporation Law, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation, including any person (i) who is or was an employee or agent of the Corporation or any subsidiary of the Corporation, (ii) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the Corporation or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary. | |
Dissolution | ||
In the event of any voluntary or involuntary liquidation, dissolution, or winding up of WebMD, all holders of Common Stock are entitled to receive all of the remaining assets of WebMD available for distribution to its stockholders, ratably in proportion to the number of shares held by them, subject to any rights, powers, and preferences of any outstanding Preferred Stock. | In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, before any payment or distribution of the Company’s assets (whether capital or surplus) shall be made to or set apart for the holders of Common Stock, holders of Preferred Stock shall be entitled to receive $10,000 per share of preferred stock and shall not be entitled to any further payment. Thereafter, holders of shares of HLTH Common Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed. |
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WebMD | HLTH | |
Amendment of Certificate of Incorporation | ||
Any of the provisions of the Amended WebMD Charter may be amended, altered or repealed in accordance with the laws of the State of Delaware at the time in force, and all rights conferred upon WebMD’s stockholders are granted subject to such reservation; provided, however, that the affirmative vote of the holders of at least 80% of the voting power of the then outstanding voting stock, voting together as a single class, shall be required to amend, repeal or adopt certain provisions of the Amended WebMD Charter. | Any of the provisions of the HLTH Eleventh Amended and Restated Certificate of Incorporation, as amended, may be amended, altered or repealed in accordance with the laws of the State of Delaware at the time in force, and all rights conferred upon HLTH’s stockholders are granted subject to such reservation. | |
Amendment of Bylaws | ||
The WebMD Amended and Restated By-laws may be amended or repealed at any time by the WebMD Board of Directors; provided, however, that, notwithstanding any other provision of the Amended WebMD Charter or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the stock required by law or the Amended WebMD Charter, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding voting stock, voting together as a single class, shall be required in order for the stockholders of WebMD to alter, amend or repeal any provision of the WebMD Amended and Restated By-laws or to adopt additional bylaws. | HLTH’s Amended and Restated Bylaws may be altered, amended or repealed, and new bylaws made either (a) by the affirmative vote of the holders of a majority of the total voting power of all classes of outstanding capital stock voting thereon as a single class or (b) by the HLTH Board of Directors. |
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• | Proposal 1: A proposal to consider and vote on the adoption of the merger agreement and approval of the transactions contemplated by that agreement, including the merger of HLTH into WebMD, with WebMD continuing as the surviving company. | |
• | Proposal 2: Election of three Class II directors of HLTH, each to serve a three-year term expiring at the Annual Meeting of Stockholders in 2012 or until his successor is elected and has qualified or his earlier resignation or removal. The three nominees are: |
James V. Manning
Martin J. Wygod
• | Proposal 3: A proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as HLTH’s independent auditor for the fiscal year ending December 31, 2009 in the event that the merger is not completed. |
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• | delivering to the Secretary of HLTH, at the address set forth above, prior to the vote at the HLTH Annual Meeting, a written notice, bearing a date later than the date of the proxy, stating that the proxy is revoked; | |
• | signing and so delivering a proxy relating to the same shares and bearing a later date prior to the vote at the HLTH Annual Meeting; or | |
• | attending the HLTH Annual Meeting and voting in person, although attendance at the meeting will not, by itself, revoke a proxy. |
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Name | Age | Positions | ||||
Mark J. Adler, M.D.(3)(4) | 53 | Director; Chairman of the Compensation Committee | ||||
Paul A. Brooke(1)(2)(5)(6) | 63 | Director | ||||
Kevin M. Cameron | 43 | Director | ||||
Neil F. Dimick(4)(5) | 60 | Director; Chairman of the Nominating Committee; Chairman of the Governance & Compliance Committee | ||||
James V. Manning(1)(2)(4) | 62 | Director; Chairman of the Audit Committee | ||||
Herman Sarkowsky(3)(5)(6) | 84 | Director | ||||
Joseph E. Smith(1)(2)(3)(6) | 70 | Director | ||||
Martin J. Wygod(1) | 69 | Chairman of the Board; Acting Chief Executive Officer |
(1) | Member of the Executive Committee | |
(2) | Member of the Audit Committee | |
(3) | Member of the Compensation Committee | |
(4) | Member of the Governance & Compliance Committee | |
(5) | Member of the Nominating Committee | |
(6) | Member of the Related Parties Committee |
Name | Age | Positions | ||||
Martin J. Wygod | 69 | Chairman of the Board and Acting Chief Executive Officer | ||||
Mark D. Funston | 49 | Executive Vice President and Chief Financial Officer | ||||
Wayne T. Gattinella | 57 | CEO and President of WebMD | ||||
Charles A. Mele | 53 | Executive Vice President, General Counsel and Secretary | ||||
William G. Midgette | 53 | CEO and President of Porex |
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OWNERS AND HLTH MANAGEMENT
WebMD | ||||||||||||||||||||||||
HLTH | Total | Percent of | Class A | |||||||||||||||||||||
Common | HLTH | HLTH | HLTH Shares | Common | WebMD | |||||||||||||||||||
Name and Address of Beneficial Owner | Stock(1) | Other(2) | Shares | Outstanding(2) | Stock(3) | Other(2) | ||||||||||||||||||
FMR LLC(4) | 11,212,021 | — | 11,212,021 | 10.7 | % | 1,038,354 | — | |||||||||||||||||
82 Devonshire Street Boston, MA 02109 | ||||||||||||||||||||||||
CalPERS/PCG Corporate Partners, LLC(5) | 10,638,297 | — | 10,638,297 | 10.1 | % | n/a | n/a | |||||||||||||||||
1200 Prospect Street, Suite 200 | ||||||||||||||||||||||||
La Jolla, CA 92037 | ||||||||||||||||||||||||
Samana Capital, L.P., Morton Holdings, Inc. and Philip B. Korsant(6) | 8,147,807 | — | 8,147,807 | 7.8 | % | n/a | n/a | |||||||||||||||||
283 Greenwich Avenue Greenwich, CT 06830 | ||||||||||||||||||||||||
Kensico Capital Management Corporation, Michael Lowenstein and Thomas J. Coleman(7) | 7,777,350 | — | 7,777,350 | 7.4 | % | n/a | n/a | |||||||||||||||||
55 Railroad Avenue, 2nd Floor Greenwich, CT 06830 | ||||||||||||||||||||||||
Morgan Stanley(8) | 6,824,858 | — | 6,824,858 | 6.5 | % | n/a | n/a | |||||||||||||||||
1585 Broadway | ||||||||||||||||||||||||
New York, NY 10036 | ||||||||||||||||||||||||
Mark J. Adler, M.D. | 600 | (9) | 237,250 | 237,850 | * | 13,853 | 33,000 | |||||||||||||||||
Paul A. Brooke | 271,667 | (10) | 211,250 | 482,917 | * | 41,808 | — | |||||||||||||||||
Kevin M. Cameron | 501,184 | (11) | 3,962,168 | 4,463,352 | 4.1 | % | — | 20,500 | ||||||||||||||||
Neil F. Dimick | — | 59,166 | 59,166 | * | 19,350 | 33,000 | ||||||||||||||||||
Mark D. Funston | 72,500 | (12) | 90,000 | 162,500 | * | — | — | |||||||||||||||||
Wayne T. Gattinella | 8,630 | 454,881 | 463,511 | * | 129,453 | 220,000 | ||||||||||||||||||
James V. Manning | 507,572 | (13) | 249,250 | 756,822 | * | 58,039 | 33,000 | |||||||||||||||||
Charles A. Mele | 129,404 | (14) | 1,770,000 | 1,899,404 | 1.8 | % | 12,400 | 44,000 | ||||||||||||||||
William Midgette | 10,011 | (15) | 310,000 | 320,011 | * | 2,400 | — | |||||||||||||||||
Herman Sarkowsky | 316,970 | 361,250 | 678,220 | * | 85,808 | — | ||||||||||||||||||
Joseph E. Smith | 29,250 | 167,250 | 196,500 | * | 20,700 | — | ||||||||||||||||||
Martin J. Wygod | 6,988,271 | (16) | 4,325,000 | 11,313,271 | 10.3 | % | 496,207 | 220,000 | ||||||||||||||||
All executive officers and directors as a group (12 persons) | 8,832,888 | 12,197,465 | 21,030,353 | 17.9 | % | 880,018 | 603,500 |
* | Less than 1%. | |
(1) | The amounts set forth in this column include 156, 1,855 and 236 shares of HLTH Common Stock held in the respective accounts of each of Messrs. Cameron, Mele and Wygod in the HLTH 401(k) Plan (which we refer to in this table as 401(k) Plan Shares), all of which are vested in accordance with terms of the Plan. The amount set forth in this column for “All executive officers and directors as a group” includes 2,247 401(k) Plan Shares, all of which are vested in accordance with the terms of the HLTH 401(k) Plan. | |
Messrs. Cameron, Funston, Mele, Midgette and Wygod are beneficial owners of shares of HLTH restricted stock in the respective amounts stated in the footnotes below. Holders of HLTH restricted stock have voting power, but not dispositive power, with respect to unvested shares of HLTH restricted stock. For information regarding the vesting schedules of the HLTH restricted stock, see “HLTH Executive Compensation — Executive Compensation Tables — Outstanding Equity Awards at End of 2008” below. | ||
(2) | Beneficial ownership is determined under the rules and regulations of the SEC, which provide that shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing the total number of shares beneficially owned by that person and the percentage ownership of that person. However, those shares are not |
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deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Accordingly, we have set forth, (a) in the column entitled “HLTH Other,” where applicable, the number of shares of HLTH Common Stock that the person has the right to acquire pursuant to options that are currently exercisable or that will be exercisable within 60 days of August 31, 2009 and (b) in the column entitled “WebMD Other,” where applicable, the number of shares of WebMD Class A Common Stock that the person has the right to acquire pursuant to options that are currently exercisable or that will be exercisable within 60 days of August 31, 2009. HLTH has calculated the percentages set forth in the column entitled “Percent of HLTH Shares Outstanding” based on the number of shares outstanding as of August 31, 2009 (which was 105,105,340, including unvested shares of HLTH restricted stock) plus, for each listed person or group, the number of additional shares deemed outstanding, as set forth in the column entitled “HLTH Other.” |
(3) | Includes beneficial ownership of shares of unvested restricted WebMD Class A Common Stock in the following amounts: for Dr. Adler, 1,100 shares; for Mr. Dimick, 1,100 shares; for Mr. Gattinella, 73,750 shares; for Mr. Manning, 1,100 shares; and for Mr. Wygod, 73,750 shares. Holders of unvested restricted WebMD Class A Common Stock have voting power, but not dispositive power, with respect to those shares. Additional information regarding beneficial ownership of shares of WebMD Class A Common Stock by the following persons is contained in the footnotes to the table entitled “Security Ownership of Certain WebMD Beneficial Owners and WebMD Management”: for Dr. Adler, see footnote 7; for Mr. Dimick, see footnote 8; for Mr. Gattinella, see footnote 9; for Mr. Manning, see footnote 11; and for Mr. Wygod, see footnote 16. | |
(4) | The information shown with respect to HLTH Common Stock is as of March 9, 2009 and is based upon information disclosed by FMR LLC, Fidelity Management & Research Company and Edward C. Johnson, 3d in a Schedule 13G filed with the SEC. Such persons reported that FMR LLC and the other members of the filing group had, as of March 9, 2009, sole power to dispose of or to direct the disposition of 11,212,021 shares of HLTH Common Stock and sole power to vote or direct the vote of 1,016 shares of HLTH Common Stock. Sole power to vote the other shares of HLTH Common Stock beneficially owned by the filing group resides in the respective boards of trustees of the funds that have invested in the shares. The information shown with respect to WebMD Class A Common Stock is as of May 8, 2009 and is based on a Schedule 13G filed with the SEC. For additional information, see footnote 6 to the table entitled Security Ownership of Certain WebMD Beneficial Owners and WebMD Management.” | |
(5) | The information shown is as of December 3, 2008 and is based upon information disclosed byCalPERS/PCG Corporate Partners, LLC in a Form 3 filed with the SEC. | |
(6) | The information shown is as of December 31, 2008 and is based upon information disclosed by Samana Capital, L.P., Morton Holdings, Inc. and Philip B. Korsant in a Schedule 13G filed with the SEC. Such persons reported that Morton Holdings, Inc. and Philip B. Korsant had, as of December 31, 2008, shared power to dispose of or to direct the disposition of 8,147,807 shares of HLTH Common Stock and shared power to vote or to direct the voting of those shares of HLTH Common Stock, with Samana Capital, L.P. also having shared voting power and shared dispositive power with respect to 6,820,839 of those shares. | |
(7) | The information shown is as of June 18, 2009 and is based upon information disclosed by Kensico Capital Management Corporation, Michael Lowenstein and Thomas J. Coleman in a Schedule 13G filed with the SEC. Such persons reported that they had, as of June 18, 2009, sole power to dispose of or to direct the disposition of 7,777,350 shares of HLTH Common Stock and sole power to vote or to direct the vote of 7,777,350 shares of HLTH Common Stock. No Schedule 13G or 13D was filed by these persons or entities with respect to WebMD Class A Common Stock. | |
(8) | The information shown is as of December 3, 2008 and is based upon information disclosed by Morgan Stanley and Morgan Stanley Capital Services Inc. in a Schedule 13G filed with the SEC. Such persons reported that Morgan Stanley had, as of December 3, 2008, sole power to vote or direct the voting of 6,800,988 shares of HLTH Common Stock and shared power to vote or direct the voting of 23,870 shares of HLTH Common Stock, and sole power to dispose of or to direct the disposition of all such shares, with Morgan Stanley Capital Services Inc. having sole voting power and sole dispositive power with respect to. 6,366,077 of those shares. | |
(9) | Represents 600 shares held by Dr. Adler’s son. | |
(10) | Represents 70,000 shares held by Mr. Brooke and 201,667 shares held by PMSV Holdings LLC, of which Mr. Brooke is the managing member. | |
(11) | Represents 317,778 shares held by Mr. Cameron, 156 401(k) Plan Shares and 183,250 unvested shares of HLTH Restricted Stock. | |
(12) | Represents 30,000 shares held by Mr. Funston and 42,500 unvested shares of HLTH Restricted Stock. | |
(13) | Represents 503,018 shares held by Mr. Manning (including 12,500 through an IRA), 3,000 shares held by Mr. Manning’s wife through an IRA, and 1,554 shares held by the WebMD Health Foundation, Inc., a charitable foundation of which Messrs. Manning and Wygod are trustees and share voting and dispositive power. | |
(14) | Represents 53,432 shares held by Mr. Mele, 1,855 401(k) Plan Shares, 72,500 unvested shares of HLTH Restricted Stock and 1,617 shares held by the Rose Foundation, a private charitable foundation of which Messrs. Mele and Wygod are trustees and share voting and dispositive power. | |
(15) | Represents 11 shares held by Mr. Midgette and 10,000 unvested shares of HLTH Restricted Stock. | |
(16) | Represents 6,458,532 shares held by Mr. Wygod, 236 401(k) Plan Shares, 360,000 shares of unvested HLTH Restricted Stock, 5,000 shares held by Mr. Wygod’s spouse through an IRA, 161,332 shares held by SYNC, Inc., which is controlled by Mr. Wygod, 1,554 shares held by the WebMD Health Foundation, Inc., a charitable foundation of which Messrs. Wygod and Manning are trustees and share voting and dispositive power, and 1,617 shares held by the Rose Foundation, a private charitable foundation of which Messrs. Wygod and Mele are trustees and share voting and dispositive power. |
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• | forwarded to the addressees or distributed at the next scheduled HLTH Board meeting; or | |
• | if they relate to financial or accounting matters, forwarded to the HLTH Audit Committee or discussed at the next scheduled HLTH Audit Committee meeting; or | |
• | if they relate to the recommendation of the nomination of an individual, forwarded to the HLTH Nominating Committee or discussed at the next scheduled HLTH Nominating Committee meeting; or | |
• | if they relate to the operations of HLTH, forwarded to the appropriate officers of HLTH, and the response or other handling reported to the Board at the next scheduled Board meeting. |
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• | oversight of HLTH’s executive compensation program and its incentive and equity compensation plans; | |
• | determination of compensation levels for and grants of incentive and equity-based awards to HLTH’s executive officers and the terms of any employment agreements with them; | |
• | determination of compensation levels for non-employee directors; and |
• | review of and making recommendations regarding other matters relating to HLTH’s compensation practices. |
• | identifying individuals qualified to become members of the HLTH Board of Directors; | |
• | recommending to the HLTH Board the director nominees for each Annual Meeting; and |
• | recommending to the HLTH Board candidates for filling vacancies that may occur between Annual Meetings. |
• | the amount and type of the potential nominee’s managerial and policy-making experience in complex organizations and whether any such experience is particularly relevant to HLTH; | |
• | any specialized skills or experience that the potential nominee has and whether such skills or experience are particularly relevant to HLTH; | |
• | in the case of non-employee directors, whether the potential nominee has sufficient time to devote to service on the HLTH Board and the nature of any conflicts of interest or potential conflicts of interest arising from the nominee’s existing relationships; | |
• | in the case of non-employee directors, whether the nominee would be an independent director and would be considered a “financial expert” or to have “financial sophistication” under applicable SEC rules and the listing standards of The Nasdaq Global Select Market; | |
• | in the case of potential new members, whether the nominee assists in achieving a mix of Board members that represents a diversity of background and experience, including with respect to age, gender, race, areas of expertise and skills; and | |
• | in the case of existing members, the nominee’s contributions as a member of the HLTH Board during his or her prior service. |
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• | evaluating and making recommendations to the HLTH Board regarding matters relating to the governance of HLTH; | |
• | assisting the HLTH Board in coordinating the activities of the Board’s other standing committees, including with respect to HLTH’s compliance programs and providing additional oversight of those compliance programs; and | |
• | providing oversight of senior executive recruitment and management development. |
• | oversight of transactions between HLTH and WebMD; and | |
• | oversight of other matters in which the interests of HLTH and WebMD conflict or may potentially conflict. |
• | Special Committee. Messrs. Brooke, Manning, Sarkowsky and Smith and Dr. Adler are members of a special committee of the Board to oversee matters relating to the investigations described in “Commitments and Contingencies — Legal Proceedings — Investigations by United States Attorney for |
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the District of South Carolina and the SEC” in Note 14 to the HLTH Consolidated Financial Statements included asAnnex B-1 to this joint proxy statement/prospectus; and |
• | Stock Repurchase Committee. Messrs. Wygod, Manning and Smith are members of a committee of the HLTH Board authorized to make determinations relating to repurchases of HLTH Common Stock. |
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(a) | (b) | (c) | (d) | |||||||||
Fees Earned or | ||||||||||||
Paid in Cash | Option Awards | Total | ||||||||||
Name | ($) | ($)(1)(2) | ($) | |||||||||
Mark J. Adler, M.D.(3) | 62,500 | 61,686 | 124,186 | |||||||||
Paul A. Brooke | 75,000 | 61,686 | 136,686 | |||||||||
Neil F. Dimick(3) | 57,500 | 61,686 | 119,186 | |||||||||
James V. Manning(3) | 80,000 | 61,686 | 141,686 | |||||||||
Herman Sarkowsky | 65,000 | 61,686 | 126,686 | |||||||||
Joseph E. Smith | 75,000 | 61,686 | 136,686 |
(1) | The amounts reported in Column (c) above reflect the aggregate dollar amounts recognized by HLTH in 2008 for stock option awards for income statement reporting purposes under SFAS No. 123R,Share-based Payments(which we refer to as SFAS 123R) (disregarding any estimate of forfeitures related to service-based vesting conditions). See Note 15 (Stock-Based Compensation) to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock option awards granted. The amounts reported in Column (c) reflect HLTH’s accounting expense for these stock option awards, not amounts realized by HLTH Non-Employee Directors. The actual amounts, if any, ultimately realized by HLTH Non-Employee Directors from options to purchase HLTH Common Stock will depend on the price of HLTH Common Stock at the time they exercise vested stock options. | |
(2) | Under HLTH’s Amended and Restated 2000 Long-Term Incentive Plan (which we refer to as the HLTH 2000 Plan), each HLTH Non-Employee Director automatically receives a non-qualified option to purchase 20,000 shares of HLTH Common Stock on each January 1, with an exercise price equal to the closing price on the last trading date of the prior year and a vesting schedule as follows: 1/4 of the grant on the first anniversary of the date of grant and 1/48 of the grant on a monthly basis over the next three years (full vesting on the fourth anniversary of the date of grant). In addition, each HLTH Non-Employee Director received, pursuant to a discretionary grant made on December 10, 2008, a non-qualified option to purchase 20,000 shares of HLTH Common Stock and with the same vesting schedule as the automatic grant. The grants made on January 1, 2008 each had an exercise price of $13.40 per share and a total grant date fair value equal to $78,398 and the grants made on December 10, 2008 each had an exercise price of $9.46 per share and a total grant date fair value equal to $56,872 (the fair value, in each case, being based on the methodology and assumptions referred to in Footnote 1 above). The following lists the total number of shares of HLTH Common Stock subject to outstanding unexercised option awards held by each of the HLTH Non-Employee Directors as of December 31, 2008 and the weighted average exercise price of those options: |
Number of Shares Subject | Weighted Average | |||||||
Name | to Outstanding Options | Exercise Price | ||||||
Mark J. Adler, M.D. | 276,000 | $ | 10.35 | |||||
Paul A. Brooke | 250,000 | $ | 8.57 | |||||
Neil F. Dimick | 97,916 | $ | 10.48 | |||||
James V. Manning | 288,000 | $ | 9.24 | |||||
Herman Sarkowsky | 425,000 | $ | 11.04 | |||||
Joseph E. Smith | 206,000 | $ | 11.57 |
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See “— Option Grants” below for additional information. | ||
(3) | These three HLTH Non-Employee Directors are also non-employee directors of WebMD, for which they received compensation from WebMD. For information regarding the compensation they received from WebMD, see below under “— Option Grants — Compensation for Service on WebMD Board.” |
• | an annual retainer for service on the HLTH Board; | |
• | annual fees for service on standing Committees of the HLTH Board; | |
• | annual fees, if any, for serving as Chairperson of standing Committees of the HLTH Board; and | |
• | fees, if any, for service on other Committees of the HLTH Board. |
Type of Service | Annual Fee | |||
Membership on Audit Committee(Messrs. Brooke, Manning and Smith) | $ | 15,000 | ||
Membership on Compensation Committee(Dr. Adler and Messrs. Sarkowsky and Smith)or Nominating Committee(Messrs. Brooke, Dimick and Sarkowsky) | $ | 5,000 | ||
Membership on Governance & Compliance Committee(Dr. Adler and Messrs. Dimick and Manning)or Related Parties Committee(Messrs. Brooke, Sarkowsky and Smith) | $ | 10,000 | ||
Chairperson of Compensation Committee(Dr. Adler)or Nominating Committee(Mr. Dimick) | $ | 2,500 | ||
Chairperson of Audit Committee(Mr. Manning)or Governance & Compliance Committee(Mr. Dimick) | $ | 10,000 |
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(a) | (b) | (c) | (d) | (e) | ||||||||||||
Cash Fees for | ||||||||||||||||
Strategic Planning | ||||||||||||||||
Stock Awards | Option Awards | Committee Service | Total | |||||||||||||
Name | ($)(1) | ($)(2)(3) | ($) | ($) | ||||||||||||
Mark J. Adler, M.D. | 57,089 | 168,184 | 3,750 | 229,023 | ||||||||||||
Neil F. Dimick | 82,089 | 168,184 | 3,750 | 254,023 | ||||||||||||
James V. Manning | 74,589 | 168,184 | 3,750 | 246,523 |
(1) | Shares of WebMD Class A Common Stock were issued by WebMD on September 28, 2008 (the anniversary of WebMD’s initial public offering) in payment for annual fees for service on the WebMD Board and its standing committees. These shares are not subject to vesting requirements or forfeiture. The amounts (expressed in dollars) of the fees are the same as those applicable to the HLTH Board and its standing Committees, as described above. For each individual listed in Column (a) of this table, the number of shares to be issued was determined by dividing the aggregate dollar amount of the fees by $32.75 (the closing price of WebMD Class A Common Stock on the Nasdaq Global Select Market on September 26, 2008, the last trading day prior to the anniversary of WebMD’s 2005 initial public offering on September 28, 2008, which fell on a Sunday), with cash paid in lieu of issuing fractional shares. Dr. Adler received 1,450 shares of WebMD Class A Common Stock; Mr. Dimick received 2,213 shares; and Mr. Manning received 1,984 shares. In addition, this column includes $9,589 for each individual, which reflects the aggregate dollar amounts recognized by WebMD in 2008, for income statement reporting purposes under SFAS 123R (based on the methodology and assumptions referred to in Footnote 2 below), for grants of WebMD Restricted Stock made to these directors at the time of WebMD’s initial public offering. That amount reflects WebMD’s accounting expense for these WebMD Restricted Stock awards, not amounts realized by HLTH Non-Employee Directors. The actual amounts, if any, ultimately realized by HLTH Non-Employee Directors from WebMD Restricted Stock will depend on the price of WebMD Class A Common Stock at the time the WebMD Restricted Stock vests. | |
(2) | The amounts reported in Column (c) above reflect the aggregate dollar amounts recognized by WebMD in 2008 for stock option awards for income statement reporting purposes under SFAS 123R (disregarding any estimate of forfeitures related to service-based vesting conditions). See “Stock Based Compensation — WebMD Plans” in Note 15 (Stock-Based Compensation) to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock option awards granted. The amounts reported in Column (c) reflect WebMD’s accounting expense for these stock option awards, not amounts realized by the individuals listed in the table. The actual amounts, if any, ultimately realized by these individuals from WebMD equity compensation will depend on the price of WebMD Class A Common Stock at the time they exercise vested stock options or at the time of vesting of WebMD Restricted Stock. | |
(3) | Under the WebMD 2005 Plan, each non-employee director of WebMD automatically receives a non-qualified option to purchase 13,200 shares of WebMD Class A Common Stock on each January 1, with an exercise price equal to the closing price on the last trading date of the prior year. In addition, each non-employee director of WebMD received, pursuant to a discretionary grant made on December 10, 2008, a non-qualified option to purchase 13,200 shares of WebMD Class A Common Stock. The grants made on January 1, 2008 each had an exercise price of $41.07 per share and a total grant date fair value equal to $183,939 and the grants made on December 10, 2008 each had an exercise price of $23.61 and a total grant date fair value equal to $133,440 (the fair value, in each case, being based on the methodology and assumptions referred to in Footnote 2 above). The vesting schedule for all such grants is 25% of the original amount granted on each of the first, second, third and fourth anniversaries of the date of grant. The following lists the total number of shares of WebMD Class A Common Stock subject to outstanding unexercised option awards held by the listed individuals as of December 31, 2008 and the weighted average exercise price of those options: |
Number of Shares Subject | Weighted Average | |||||||
Name | to Outstanding WebMD Options | Exercise Price | ||||||
Mark J. Adler, M.D. | 66,000 | $ | 30.25 | |||||
Neil F. Dimick | 66,000 | $ | 30.25 | |||||
James V. Manning | 66,000 | $ | 30.25 |
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• | 2008 Report of the HLTH Compensation Committee. This section contains a report of the HLTH Compensation Committee regarding the “Compensation Discussion and Analysis” section described below. The material in the 2008 Report of the HLTH Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this joint proxy statement/prospectus into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that HLTH specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. | |
• | Compensation Committee Interlocks and Insider Participation. This section contains information regarding certain types of relationships involving the HLTH Compensation Committee members. | |
• | Compensation Discussion and Analysis. This section contains a description of the specific types of compensation HLTH pays, a discussion of HLTH’s compensation policies, information regarding how those policies were applied to the compensation of the HLTH Named Executive Officers for 2008 and other information that HLTH believes may be useful to investors regarding compensation of the HLTH Named Executive Officers and other employees. | |
• | Executive Compensation Tables. This section provides information, in tabular formats specified in applicable SEC rules, regarding the amounts or value of various types of compensation paid to the HLTH Named Executive Officers and related information. | |
• | Potential Payments and Other Benefits Upon Termination or Change in Control. This section provides information regarding amounts that could or have become payable to the HLTH Named Executive Officers following specified events. | |
• | Employment Agreements with the HLTH Named Executive Officers. This section contains summaries of the employment agreements between HLTH (or its subsidiaries) and the HLTH Named Executive Officers. We refer to these summaries in various other places in this Executive Compensation section. |
Joseph E. Smith
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• | cash salary; | |
• | an annual cash bonus, the amount of which was determined, for 2008, by the HLTH Compensation Committee in its discretion (or, with respect to Mr. Gattinella, by the WebMD Compensation Committee); | |
• | special bonuses to provide recognition for specific accomplishments or at the time of a promotion, if determined by the HLTH Compensation Committee to be appropriate and in amounts determined by the HLTH Compensation Committee in its discretion; | |
• | grants of non-qualified options to purchase shares of HLTH Common Stock, subject to vesting based on continued employment, with an exercise price that is equal to the fair market value of HLTH Common Stock on the grant date (and, in the case of certain of the HLTH Named Executive Officers, options to purchase shares of WebMD Class A Common Stock, with an exercise price that is equal to the fair market value of WebMD Class A Common Stock on the grant date); and | |
• | grants of shares of restricted HLTH Common Stock (which we refer to as HLTH Restricted Stock), subject to vesting based on continued employment and, in the case of Messrs. Gattinella and Wygod only, shares of restricted WebMD Class A Common Stock (which we refer to as WebMD Restricted Stock), subject to vesting based on continued employment. |
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• | Competitive with the market in order to help attract, motivate and retain highly qualified managers and executives. HLTH seeks to attract and retain talent by offering competitive base salaries, annual incentive opportunities, and the potential for long-term rewards through equity-based awards, such as stock options and restricted stock. HLTH has, in the past, granted and may continue to grant equity-based awards to a large portion of HLTH’s employees, not just its executives. Those awards have been primarily in the form of non-qualified options to purchase HLTH Common Stock. | |
• | Performance-based to link executive pay to company performance over the short term and long term and to facilitate shareholder value creation. It is HLTH’s practice to provide compensation opportunities in addition to base salary that are linked to HLTH’s performance and the individual’s performance. Achievement of short-term goals is rewarded through annual cash bonuses, while achievement of long-term objectives is encouraged through nonqualified stock option grants and restricted stock awards that are subject to vesting over periods generally ranging from three to four years. Through annual and long-term incentives, a major portion of the total potential compensation of HLTH’s executive officers (and other members of senior management) is placed at risk in order to motivate them to improve the performance of HLTH’s businesses and to increase the value of the company. | |
• | Designed to foster a long-term commitment by management. The HLTH Compensation Committee believes that there is great value to HLTH in having a team of long-tenured, seasoned executives and managers. HLTH’s compensation practices are designed to foster a long-term commitment to HLTH by its management team. The vesting schedules attributable to equity grants are typically 3 to 4 years with, in some cases (particularly for more senior executives), scheduled vestings that are smaller in the early vesting periods and greater in the later vesting periods. |
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• | the amounts of the annual bonuses for 2008 (and, with respect to Mr. Gattinella, the amount contributed to the Supplemental Bonus Plan) that were approved by the Compensation Committees in February 2009, as more fully described below under “— Use of Specific Types of Compensation in 2008 — Bonuses”; |
• | the size and terms of the equity grants that were approved by the Compensation Committees in December 2008, as more fully described below under “— Use of Specific Types of Compensation in 2008 — Equity Compensation”; and |
• | the amounts paid to Mr. Lehrer in connection with the sale of ViPS, as more fully described below under “— Compensation Following Termination of Employment or Change in Control — Application in 2008 — Mr. Lehrer”. |
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• | 2008 EBSCo Sale. On November 16, 2006, HLTH sold a 52% interest in the business that constituted its Emdeon Business Services segment, excluding its ViPS business unit (which we refer to as EBS) to an affiliate of General Atlantic LLC (which we refer to as GA). In this joint proxy statement/prospectus, we refer to this transaction as the 2006 EBS Sale. HLTH received cash proceeds of approximately $1.2 billion from the 2006 EBS Sale. From the closing of the 2006 EBS Sale to the closing of the 2008 EBSCo Sale (described below), we owned 48% of EBS Master LLC (which we refer to as EBSCo), the entity that acquired EBS in the 2006 EBS Sale. In this joint proxy statement/prospectus, we use the names Emdeon Business Services and EBS to refer to the business owned by EBSCo and, with respect to periods prior to the consummation of the 2006 EBS Sale, to the reporting segment of HLTH. In February 2008, HLTH completed the sale of its 48% minority ownership interest in EBSCo (which we refer to as the 2008 EBSCo Sale) to an affiliate of GA and affiliates of Hellman & Friedman, LLC. HLTH received cash proceeds of approximately $575 million from the 2008 EBSCo Sale. |
• | ViPS Sale. In February 2008, HLTH announced its intention to divest its ViPS segment. On July 22, 2008, HLTH completed the sale of its ViPS segment to an affiliate of General Dynamics Corporation. In this joint proxy statement/prospectus, we refer to this transaction as the ViPS Sale. Through ViPS, HLTH had provided healthcare data management, analytics, decision-support and process automation solutions and related information technology services to governmental, Blue Cross Blue Shield and commercial healthcare payers. In the ViPS Sale, HLTH received cash proceeds of approximately $223 million, net of a working capital adjustment, professional fees and other expenses. | |
• | Terminated WebMD Merger. In February 2008, HLTH and WebMD entered into an Agreement and Plan of Merger (which we refer to as the 2008 Merger Agreement), pursuant to which HLTH would merge into WebMD (which we refer to as the Proposed 2008 Merger), with WebMD continuing as the surviving corporation. The 2008 Merger Agreement resulted from negotiations between HLTH and a special committee of the Board of Directors of WebMD during late 2007 and early 2008. The HLTH Board of Directors had initiated the process leading to the entry into the 2008 Merger Agreement with WebMD because it believed that the primary reason of many of the holders of HLTH Common Stock for owning those shares was HLTH’s controlling interest in WebMD and that the value of HLTH’s other businesses was not adequately reflected in the trading price of HLTH Common Stock. In connection with the entry by HLTH and WebMD into the 2008 Merger Agreement, the HLTH Board made a determination to divest Porex and ViPS (which divestitures were not, however, dependent on the Proposed 2008 Merger occurring). Pursuant to the terms of a Termination Agreement entered into on October 19, 2008 (which we refer to as the Termination Agreement), HLTH and WebMD mutually agreed, in light of the turmoil in financial markets, to terminate the 2008 Merger Agreement. The termination of the 2008 Merger Agreement was by mutual agreement of the companies and was unanimously approved by the Board of Directors of each of the companies and by the special committee of independent directors of WebMD. The Boards determined that both HLTH, as controlling stockholder of WebMD, and the public stockholders of WebMD would benefit from WebMD continuing as a publicly-traded subsidiary with no long-term debt and approximately $340 million in cash and investments. The Boards concluded that, by terminating the merger, HLTH and WebMD would retain financial flexibility and be in a position to pursue potential acquisition opportunities expected to be available to companies with significant cash resources in a period of financial market uncertainty. | |
• | 2008 Tender Offer. Following the termination of the Proposed 2008 Merger, the HLTH Board of Directors determined that repurchasing HLTH Common Stock through a tender offer would be an efficient means to provide value to HLTH stockholders. In deciding to make the offer, the HLTH Board of Directors considered that, following the termination of the Proposed 2008 Merger, some holders of HLTH Common Stock might wish to have the opportunity to sell some or all of their holdings for cash. On October 27, 2008, HLTH commenced a tender offer to purchase up to 80,000,000 shares of HLTH Common Stock at a price of $8.80 per share. In this joint proxy statement/prospectus, we refer to this |
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tender offer as the 2008 Tender Offer. The 2008 Tender Offer represented an opportunity for HLTH to return capital to stockholders who elected to tender their shares of HLTH Common Stock, while stockholders who chose not to participate in the 2008 Tender Offer automatically increased their relative percentage interest in HLTH at no additional cost to them. Prior to the closing of the 2008 Tender Offer, HLTH exercised its right to purchase an additional 2% of its outstanding shares without extending the tender offer. On November 25, 2008, the 2008 Tender Offer was completed and, as a result, HLTH repurchased 83,699,922 shares of HLTH Common Stock at a price of $8.80 per share. The shares purchased in the 2008 Tender Offer represented approximately 45% of the outstanding shares of HLTH Common Stock immediately prior to the tender offer. As a result of the 2008 Tender Offer, a prior tender offer in 2006 and additional repurchases of HLTH Common Stock under repurchase programs, the number of shares of HLTH Common Stock outstanding declined from 278,327,825 on December 31, 2005 to 101,374,536 on December 31, 2008 (in each case, excluding unvested shares of HLTH Restricted Stock granted under HLTH’s equity plans). |
• | Planned Porex Sale. In February 2008, HLTH announced its intention to divest its Porex segment. The divestiture process for Porex remains ongoing. |
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• | goals of any type set by the HLTH Board and communicated to senior management at any point in the year; | |
• | the effects of acquisitions and dispositions of businesses made during the year; and | |
• | the effects of unexpected events and changes in HLTH’s businesses during the year. |
Target Annual | ||||||||||||||
Target Annual | Bonus Amount | |||||||||||||
Annual | Bonus | as a Percent | ||||||||||||
Named Executive Officer | Title | Salary | Opportunity | of Salary | ||||||||||
Martin J. Wygod | Chairman of the Board and Acting CEO | $ | 975,000 | $ | 975,000 | 100 | % | |||||||
Mark D. Funston | Executive Vice President and Chief Financial Officer | $ | 375,000 | $ | 187,000 | 50 | % | |||||||
Wayne T. Gattinella | CEO of WebMD | $ | 560,000 | $ | 560,000 | 100 | % | |||||||
Charles A. Mele | Executive Vice President, General Counsel & Secretary | $ | 450,000 | $ | 225,000 | 50 | % | |||||||
William Midgette | CEO of Porex | $ | 280,000 | $ | 140,000 | 50 | % |
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2008 Annual Bonus | 2007 Annual Bonus | |||||||||||||||||
Named Executive Officer | Title | Amount | % of Target | Amount | % of Target | |||||||||||||
Martin J. Wygod | Chairman of the Board and Acting CEO | $ | 1,500,000 | 154 | % | $ | 520,000 | 53 | % | |||||||||
Mark D. Funston | Executive Vice President and Chief Financial Officer | $ | 130,000 | 70 | % | $ | 100,000 | 53 | % | |||||||||
Wayne T. Gattinella | CEO of WebMD | $ | 270,000 | (1) | 48 | % | $ | 270,000 | (1) | 48 | % | |||||||
Charles A. Mele | Executive Vice President, General Counsel & Secretary | $ | 350,000 | 156 | % | $ | 233,000 | 104 | % | |||||||||
William Midgette | CEO of Porex | $ | 91,000 | 65 | % | $ | 108,500 | 78 | % |
(1) | Includes $135,000 contributed to the Supplemental Bonus Trust described under “— Supplemental Bonus Plan (SBP)” below. |
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• | continuation of cash compensation (including salary and, in some cases, an amount based on past bonuses) for a period following termination; | |
• | continuation of vestingand/or exercisability of some or all options or restricted stock; and | |
• | continued participation in certain of HLTH’s health and welfare insurance plans or payment of COBRA premiums. |
• | Mr. Wygod’s employment agreement includes terms providing that if there is a change in control of HLTH, all of his outstanding options and other equity compensation (including WebMD equity) would become immediately vested and, if his employment terminates for any reason other than cause, the options would remain exercisable for the remainder of the originally scheduled term. The employment agreement also contains provisions providing that he may resign and receive severance payments. | |
• | With respect to Messrs. Cameron and Mele, their employment agreements include terms providing that: |
— | they would be able to resign following a change in control, after the completion of a transition period with the successor, and receive the same benefits that they would be entitled to upon a termination without cause following the change in control (as set forth in the tables below and the descriptions of their respective employment agreements that follow); and | |
— | they would receive accelerated vesting of the options to purchase shares of WebMD Class A Common Stock granted to them on September 28, 2005 in the event of a change in control of WebMD or if WebMD is no longer an affiliate of HLTH since, as a result of such a transaction, they would no longer have a direct involvement with WebMD’s business. |
• | In the case of Mr. Gattinella, his employment agreement provides that, so long as he remains employed for one year following a change in control of WebMD, his options to purchase WebMD Class A Common Stock granted on December 10, 2008 would continue to vest until the second anniversary of the change in control, even if he resigns from the employ of WebMD prior to such vesting date. In addition, that portion of the restricted stock grant made on December 10, 2008 that would have vested through the second anniversary of the change in control will accelerate to the date of his resignation. |
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• | Mr. Wygod. The amendment to Mr. Wygod’s employment agreement in December 2008 included certain changes to HLTH’s obligations in the event of certain terminations of employment, including: (i) setting the severance period at three years (the prior agreement provided for a severance period equal to the remainder of the term, or if longer, two years); and (ii) including bonus as a component of the 3 year severance payment calculation (based on the average of the bonuses received over the prior three years) in recognition of the fact that bonuses have been a significant portion of the compensation paid to Mr. Wygod. See “— Employment Agreements with the HLTH Named Executive Officers — Martin J. Wygod” below for additional description of the December 2008 amendment, as well as an additional amendment made in July 2009 in connection with the merger of HLTH and WebMD. The remaining provisions related to post-termination compensation (including the Section 280Ggross-up provision described above) in that employment agreement were carried forward from the existing employment agreement with Mr. Wygod. The HLTH Compensation Committee believed that it was appropriate to maintain those provisions in the employment agreement in connection with extending the term of the agreement and that the rights provided to Mr. Wygod under those provisions, taken together with the changes made to the employment agreement, were reasonable in order to retain the services of Mr. Wygod and in light of the other provisions of the employment agreement. The merger of HLTH and WebMD is not a change in control under Mr. Wygod’s employment agreement. For additional information regarding the amendment to Mr. Wygod’s employment agreement in July 2009 and the effect of the completion of the merger on his compensation, see “The Merger — Interests of Certain Persons in the Merger — Employment Arrangements — Martin J. Wygod.” | |
• | Mr. Midgette. Mr. Midgette’s employment agreement was amended in March 2008, in connection with the Porex divestiture process, to provide enhanced severance benefits and acceleration of equity upon a change in control of Porex. His employment agreement, as amended, provides that if, within 15 months following a change in control of Porex, he is terminated without cause or required to take a salary reduction or to relocate beyond a specified distance, he would be entitled to continuation of his base salary, as severance, for a period of two years (rather than the one year of severance payable if the termination did not follow a change in control of Porex) and payment of his COBRA premiums for up to 18 months. With respect to the options to purchase HLTH Common Stock and HLTH Restricted Stock granted to him on December 10, 2008, if there is a change in control of Porex prior to the first vesting date (December 10, 2009), he would receive the first vesting of such grants, accelerated to the closing date of the change in control transaction. The HLTH Compensation Committee also approved an aggregate of $100,000 in potential retention bonuses, which would generally be payable to Mr. Midgette if he remains employed for 60 days following a sale of Porexand/or Porex Surgical (or if he is terminated without cause or resigns for good reason on or after the closing date but before such 60th day). The HLTH Compensation Committee believed that the terms and conditions described above |
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are appropriate incentives for Mr. Midgette to remain with Porex during the divestiture process and to assist HLTH in that process. For additional information, see “— Employment Agreements with the HLTH Named Executive Officers — William Midgette” below. |
• | Mr. Lehrer. Mr. Lehrer’s employment agreement was amended in March 2008, in connection with the ViPS divestiture process, to provide enhanced severance benefits and acceleration of equity upon a change in control of ViPS. Mr. Lehrer left HLTH in July 2008 in connection with the consummation of the ViPS Sale. As contemplated by the March 2008 amendment, Mr. Lehrer’s post-termination compensation included: (a) a retention bonus of $100,000 payable 60 days after closing of the ViPS Sale; (b) a success bonus of $150,000, the amount of which was determined by the HLTH Compensation Committee, in its discretion, following the completion of the ViPS Sale, based on its evaluation that Mr. Lehrer made significant efforts in connection with the divestiture process and the successful completion of that process; (c) accelerated vesting, on the closing date of the ViPS Sale, of 13,334 shares of HLTH Restricted Stock that were scheduled to vest between the closing date and June 6, 2009 (with an aggregate value of $152,140 on the closing date); and (d) accelerated vesting, on the closing date of the ViPS Sale, of options to purchase 78,750 shares of HLTH Common Stock that were scheduled to vest between the closing date and June 6, 2009 (with an aggregated realized value on the date of exercise of $156,250). The HLTH Compensation Committee believed that the terms and conditions described above were appropriate incentives for Mr. Lehrer to remain with ViPS during the divestiture process and to assist HLTH in that process. |
• | Summary Compensation Table, which presents information regarding each individual’s total compensation and the types and value of its components; and | |
• | three tables providing additional information regarding HLTH’s equity compensation, entitled: Grants of Plan-Based Awards in 2008; Outstanding Equity Awards at End of 2008; and Option Exercises and Stock Vested in 2008. |
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(e) | (f) | (g) | ||||||||||||||||||||||||||
(a) | (c) | (d) | Stock | Option | All Other | (h) | ||||||||||||||||||||||
Name and | (b) | Salary | Bonus | Awards | Awards | Compensation | Total | |||||||||||||||||||||
Principal Position | Year | ($) | ($)(1) | ($)(2) | ($)(2) | ($) | ($) | |||||||||||||||||||||
Kevin M. Cameron | 2008 | 101,538 | 250,000 | 1,354,078 | H | 1,834,261 | H | 235,888 | (5) | 3,848,974 | ||||||||||||||||||
Chief Executive Officer (on medical | 73,209 | W | ||||||||||||||||||||||||||
leave)(3)(4) | 1,907,470 | |||||||||||||||||||||||||||
2007 | 660,000 | 520,000 | 1,478,740 | H | 2,227,811 | H | 17,627 | (5) | 5,038,119 | |||||||||||||||||||
133,941 | W | |||||||||||||||||||||||||||
2,361,752 | ||||||||||||||||||||||||||||
2006 | 660,000 | 3,530,000 | 714,830 | H | 1,682,494 | H | 17,552 | (5) | 6,843,998 | |||||||||||||||||||
239,122 | W | |||||||||||||||||||||||||||
1,921,616 | ||||||||||||||||||||||||||||
Martin J. Wygod | 2008 | 975,000 | 1,500,000 | 1,669,304 | H | 1,843,880 | H | 10,847 | (6) | 6,464,420 | ||||||||||||||||||
Chairman of the Board and Acting | 138,791 | W | 326,598 | W | ||||||||||||||||||||||||
Chief Executive Officer(3) | 1,808,095 | 2,170,478 | ||||||||||||||||||||||||||
2007 | 975,000 | 520,000 | 1,623,018 | H | 1,813,757 | H | 10,847 | (6) | 5,710,783 | |||||||||||||||||||
229,931 | W | 538,230 | W | |||||||||||||||||||||||||
1,852,949 | 2,351,987 | |||||||||||||||||||||||||||
2006 | 975,000 | 3,530,000 | 629,691 | H | 709,598 | H | 10,847 | (6) | 7,255,798 | |||||||||||||||||||
439,809 | W | 960,853 | W | |||||||||||||||||||||||||
1,069,500 | 1,670,451 | |||||||||||||||||||||||||||
Mark D. Funston | 2008 | 375,000 | 130,000 | 176,625 | H | 190,360 | H | 7,930 | (7) | 888,018 | ||||||||||||||||||
Executive VP and Chief | 8,103 | W | ||||||||||||||||||||||||||
Financial Officer | 198,463 | |||||||||||||||||||||||||||
2007 | 375,000 | 100,000 | 173,881 | H | 182,503 | H | 169,948 | (7) | 1,001,332 | |||||||||||||||||||
2006 | (8) | 46,875 | 35,000 | 22,867 | H | 24,000 | H | 526 | (7) | 129,268 | ||||||||||||||||||
Wayne T. Gattinella | 2008 | 560,000 | 135,000 | (9) | 138,791 | W | 326,598 | W | 9,758 | (10) | 1,170,147 | |||||||||||||||||
Chief Executive Officer and President of WebMD | 2007 | 560,000 | 135,000 | (9) | 7,457 | H | 84,850 | H | 9,214 | (10) | 1,564,682 | |||||||||||||||||
229,931 | W | 538,230 | W | |||||||||||||||||||||||||
237,388 | 623,080 | |||||||||||||||||||||||||||
2006 | 560,000 | 340,000 | 46,977 | H | 229,800 | H | 8,313 | (10) | 2,585,752 | |||||||||||||||||||
439,809 | W | 960,853 | W | |||||||||||||||||||||||||
486,786 | 1,190,653 |
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(e) | (f) | (g) | ||||||||||||||||||||||||||
(a) | (c) | (d) | Stock | Option | All Other | (h) | ||||||||||||||||||||||
Name and | (b) | Salary | Bonus | Awards | Awards | Compensation | Total | |||||||||||||||||||||
Principal Position | Year | ($) | ($)(1) | ($)(2) | ($)(2) | ($) | ($) | |||||||||||||||||||||
Arthur Lehrer | 2008 | 173,077 | (11) | 250,000 | (11) | 200,115 | H | 287,862 | H | 7,587 | (12) | 918,641 | ||||||||||||||||
Formerly CEO of ViPS | ||||||||||||||||||||||||||||
Charles A. Mele | 2008 | 450,000 | 350,000 | 401,951 | H | 452,183 | H | 16,663 | (13) | 1,729,365 | ||||||||||||||||||
Executive VP, General Counsel and | 58,568 | W | ||||||||||||||||||||||||||
Secretary | 510,751 | |||||||||||||||||||||||||||
2007 | 450,000 | 233,000 | 402,430 | H | 523,569 | H | 16,663 | (13) | 1,732,815 | |||||||||||||||||||
107,153 | W | |||||||||||||||||||||||||||
630,722 | ||||||||||||||||||||||||||||
2006 | 450,000 | 1,350,000 | 121,643 | H | 312,736 | H | 16,663 | (13) | 2,442,339 | |||||||||||||||||||
191,297 | W | |||||||||||||||||||||||||||
504,033 | ||||||||||||||||||||||||||||
William Midgette | 2008 | 280,000 | 91,000 | 1,814 | H | 4,087 | H | 25,333 | (14) | 402,234 | ||||||||||||||||||
CEO of Porex |
(1) | The amounts reported in Column (d) above for Messrs. Cameron, Mele and Wygod in 2006 reflect both regular annual bonuses for that year, as well as special bonuses that were made in recognition of the contributions of those individuals to the completion of the EPS Sale and the 2006 EBS Sale and the related repositioning of the company. The amounts of the special bonuses, which were determined by the HLTH Compensation Committee in its discretion, were as follows: Mr. Cameron — $2,750,000; Mr. Mele — $1,000,000; and Mr. Wygod — $2,750,000. | |
(2) | The amounts reported in Columns (e) and (f) above reflect the aggregate dollar amounts recognized by HLTH for stock awards and option awards for income statement reporting purposes under SFAS 123R (disregarding any estimate of forfeitures related to service-based vesting conditions). See Note 15 (Stock-Based Compensation) to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock and stock option awards granted. The amounts reported in Columns (e) and (f) reflect the accounting expense for these equity awards, not amounts realized by the HLTH Named Executive Officers. The actual amounts, if any, ultimately realized by the HLTH Named Executive Officers from equity compensation will depend on the price of HLTH Common Stock (or the price of WebMD Class A Common Stock in the case of WebMD equity awards) at the time they exercise vested stock options or at the time of vesting of restricted stock. Holders of shares of HLTH Restricted Stock and WebMD Restricted Stock have voting power and the right to receive dividends, if any, that are declared on those shares, but their ability to sell those shares is subject to vesting requirements based on continued employment. | |
(3) | In February 2008, Mr. Cameron went on medical leave and Mr. Wygod began serving as HLTH’s Acting Chief Executive Officer, while also continuing as Chairman of the Board. | |
(4) | Mr. Cameron’s salary and bonus for 2008 reflect compensation for service prior to the medical leave that began in February 2008. Mr. Cameron has continued to serve as a member of the Board of Directors of HLTH and, in his capacity as a director, received a grant of options to purchase HLTH Common Stock in December 2008. See “— Grant of Plan Based Awards in 2008 — Table” below for additional information, including the grant date fair value of these option awards under SFAS 123R. | |
(5) | For 2008, consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) $285 for company-paid supplemental disability insurance; (c) $360 for company-paid group term life insurance; (d) an automobile allowance of $8,308; (e) a $100 gift card (an incentive for employees who completed a WebMD Health Manager online questionnaire); and (f) $223,385 paid to him under HLTH’s short-term disability plan. For 2007, consists of: (a) $3,375 in company matching contributions under the HLTH 401(k) Plan; (b) $1,712 for company-paid supplemental disability insurance; (c) $540 for company-paid group term life insurance; and (d) an automobile allowance of $12,000. For 2006 consists of: (a) $3,300 in company matching contributions under the HLTH 401(k) Plan; (b) $1,712 for company-paid supplemental disability insurance; (c) $540 for company-paid group term life insurance; and (d) an automobile allowance of $12,000. | |
(6) | For each of 2008, 2007 and 2006, consists of: (a) $3,989 for company-paid supplemental disability insurance; and (b) $6,858 for company-paid group term life insurance. | |
(7) | For 2008, consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) $3,570 for company-paid supplemental disability insurance; (c) a $100 gift card (an incentive for employees who completed a WebMD Health Manager online questionnaire); and (d) $810 for company-paid group term life insurance. For 2007, consists of: (a) $3,338 in company matching contributions under the HLTH 401(k) Plan; (b) $3,570 for company-paid supplemental disability insurance; (c) $810 for company-paid group term life insurance; and (d) $88,545 for reimbursement of relocation costs plus $73,685 for reimbursement of amounts required to pay income taxes resulting from the payment for such relocation costs. For 2006, consists of: (a) $433 in company matching contributions under the HLTH 401(k) Plan; and (b) $93 for company-paid group term life insurance. |
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(8) | The information for 2006 reflects compensation beginning in mid-November 2006, when Mr. Funston joined HLTH. | |
(9) | See “— Background Information Regarding the Summary Compensation Table — WebMD Supplemental Bonus Plan (SBP)” below for a description of contributions made to a Supplemental Bonus Trust on behalf of Mr. Gattinella for each of 2007 and 2008, but not reflected in this table since such contributions are subject to forfeiture during the periods covered by this table. | |
(10) | For 2008, consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $2,322 for company-paid group term life insurance. For 2007, consists of: (a) $2,906 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $2,322 for company-paid group term life insurance. For 2006, consists of: (a) $3,085 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $1,242 for company-paid group term life insurance. | |
(11) | Mr. Lehrer left HLTH in July 2008 in connection with the consummation of the ViPS Sale. Mr. Lehrer’s salary and bonus for 2008 reflect compensation for service prior to his leaving HLTH. The amount reported for bonus in Column (d) consisted of (a) a retention bonus of $100,000, approved by the HLTH Compensation Committee near the beginning of the sale process relating to ViPS and payable 60 days after closing of a sale transaction; and (b) a success bonus of $150,000, determined at the discretion of the HLTH Compensation Committee following the completion of the ViPS Sale. For additional information, see “— Compensation Discussion and Analysis — Compensation Following Termination of Employment or a Change in Control — Application in 2008 — Mr. Lehrer” above and “— Potential Payments and Other Benefits Upon Termination of Employment or a Change in Control — Background and Assumptions” below. | |
(12) | Consists of: (a) $5,227 in company matching contributions under the ViPS 401(k) Plan; (b) $972 for company-paid supplemental disability insurance; (c) a $100 gift card (an incentive for employees who completed a WebMD Health Manager online questionnaire); and (d) $1,288 for company-paid group term life insurance. | |
(13) | For each of 2008, 2007 and 2006, consists of: (a) $3,421 for company-paid supplemental disability insurance; (b) $1,242 for company-paid group term life insurance; and (c) an automobile allowance of $12,000. | |
(14) | Consists of: (a) $5,161 in company matching contributions under the Porex 401(k) Plan; (b) $2,536 for company-paid group term life insurance; (c) an automobile allowance of $14,400; and (d) $3,236 for country club dues. |
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(d) | (f) | |||||||||||||||||||||||
All Stock | (e) | Exercise or | ||||||||||||||||||||||
Awards: | All Option Awards: | Base Price of | (g) | |||||||||||||||||||||
(b) | (c) | Number of | Number of Securities | Option | Grant Date Fair Value of | |||||||||||||||||||
(a) | Approval | Grant | Shares of Stock | Underlying Options | Awards | Stock and Option Awards | ||||||||||||||||||
Name | Date | Date | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||
Kevin M. Cameron | 12/10/08 | 12/10/08 | — | 40,000 | (H) | 9.46 | 113,744 | |||||||||||||||||
Martin J. Wygod | 12/01/08 | 12/01/08 | 240,000 | (H) | 480,000 | (H) | 8.49 | 3,262,560 | ||||||||||||||||
12/10/08 | 12/10/08 | 60,000 | (W) | 240,000 | (W) | 23.61 | 3,842,784 | |||||||||||||||||
Mark D. Funston | 12/10/08 | 12/10/08 | 12,500 | (H) | 180,000 | (H) | 9.46 | 630,098 | ||||||||||||||||
12/10/08 | 12/10/08 | — | 60,000 | (W) | 23.61 | 606,546 | ||||||||||||||||||
Wayne T. Gattinella | 12/10/08 | 12/10/08 | 60,000 | (W) | 240,000 | (W) | 23.61 | 3,842,784 | ||||||||||||||||
Arthur Lehrer | — | — | — | — | — | — | ||||||||||||||||||
Charles A. Mele | 12/10/08 | 12/10/08 | 32,500 | (H) | 300,000 | (H) | 9.46 | 1,160,530 | ||||||||||||||||
William Midgette | 12/10/08 | 12/10/08 | 10,000 | (H) | 100,000 | (H) | 9.46 | 378,960 |
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||||
Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||
Number of | Number of | Market | ||||||||||||||||||||||||||||||||||
Securities | Securities | Number of | Value of | |||||||||||||||||||||||||||||||||
Underlying | Underlying | Shares of | Shares of | |||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Option | Stock That | Stock | Stock | |||||||||||||||||||||||||||||||
Options | Options | Exercise | Option | Option | Have Not | Award | That Have | |||||||||||||||||||||||||||||
(#) | (#) | Price | Grant | Expiration | Vested | Grant | Not Vested | |||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | Date | (#) | Date | ($)(3) | ||||||||||||||||||||||||||||
Kevin M. Cameron | (H | ) | — | 40,000 | (8) | 9.46 | 12/10/08 | 12/10/18 | — | — | — | |||||||||||||||||||||||||
(H | ) | 540,000 | 360,000 | (4) | 11.86 | 10/23/06 | 10/23/16 | 120,000 | (4) | 10/23/06 | 1,255,200 | |||||||||||||||||||||||||
(W | ) | 6,750 | 13,750 | (6) | 17.50 | 9/28/05 | 9/28/15 | — | — | — | ||||||||||||||||||||||||||
(H | ) | 1,155,000 | 345,000 | (5) | 6.99 | 10/01/04 | 10/01/14 | 63,250 | (5) | 10/01/04 | 661,595 | |||||||||||||||||||||||||
(H | ) | 200,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 87,168 | — | 3.43 | 9/20/01 | 9/20/11 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 200,000 | — | 12.75 | 8/21/00 | 8/21/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 125,000 | — | 11.55 | 6/05/00 | 6/05/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 325,000 | — | 17.55 | 4/04/00 | 4/04/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 625,000 | — | 12.21 | 4/04/00 | 4/04/10 | — | — | — | |||||||||||||||||||||||||||
Martin J. Wygod | (W | ) | — | 240,000 | (9) | 23.61 | 12/10/08 | 12/10/18 | 60,000 | (9) | 12/10/08 | 1,415,400 | ||||||||||||||||||||||||
(H | ) | — | 480,000 | (6) | 8.49 | 12/01/08 | 12/01/18 | 240,000 | (6) | 12/01/08 | 2,510,400 | |||||||||||||||||||||||||
(H | ) | 540,000 | 360,000 | (4) | 11.86 | 10/23/06 | 10/23/16 | 120,000 | (4) | 10/23/06 | 1,255,200 | |||||||||||||||||||||||||
(H | ) | 175,000 | 300,000 | (6) | 8.77 | 1/27/06 | 1/27/16 | 50,000 | (7) | 1/27/06 | 523,000 | |||||||||||||||||||||||||
(W | ) | 165,000 | 55,000 | (6) | 17.50 | 9/28/05 | 9/28/15 | 13,750 | (6) | 9/28/05 | 324,363 | |||||||||||||||||||||||||
(H | ) | 3,000,000 | — | 12.75 | 8/21/00 | 8/21/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 585,000 | — | 13.85 | 6/15/99 | 6/15/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 22.90 | 7/01/98 | 7/01/13 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 15.50 | 7/01/97 | 7/01/12 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 14.80 | 7/01/96 | 7/01/11 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 10.00 | 7/03/95 | 7/03/10 | — | — | — | |||||||||||||||||||||||||||
Mark D. Funston | (H | ) | — | 180,000 | (6) | 9.46 | 12/10/08 | 12/10/18 | 12,500 | (7) | 12/10/08 | 130,750 | ||||||||||||||||||||||||
(W | ) | — | 60,000 | (9) | 23.61 | 12/10/08 | 12/10/18 | — | — | — | ||||||||||||||||||||||||||
(H | ) | 90,000 | 90,000 | (6) | 11.60 | 11/13/06 | 11/13/16 | 30,000 | (6) | 11/13/06 | 313,800 | |||||||||||||||||||||||||
Wayne T. Gattinella | (W | ) | — | 240,000 | (9) | 23.61 | 12/10/08 | 12/10/18 | 60,000 | (9) | 12/10/08 | 1,415,400 | ||||||||||||||||||||||||
(W | ) | 165,000 | 55,000 | (6) | 17.50 | 9/28/05 | 9/28/15 | 13,750 | (6) | 9/28/05 | 324,363 | |||||||||||||||||||||||||
(H | ) | 250,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 204,881 | — | 4.81 | 8/20/01 | 8/20/11 | — | — | — | |||||||||||||||||||||||||||
Arthur Lehrer | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Charles A. Mele | (H | ) | — | 300,000 | (6) | 9.46 | 12/10/08 | 12/10/18 | 32,500 | (7) | 12/10/08 | 339,950 | ||||||||||||||||||||||||
(H | ) | 180,000 | 120,000 | (4) | 11.86 | 10/23/06 | 10/23/16 | 40,000 | (4) | 10/23/06 | 418,400 | |||||||||||||||||||||||||
(W | ) | 33,000 | 11,000 | (6) | 17.50 | 9/28/05 | 9/28/15 | — | — | — | ||||||||||||||||||||||||||
(H | ) | 250,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 110,000 | — | 3.43 | 9/20/01 | 9/20/11 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 200,000 | — | 12.75 | 8/21/00 | 8/21/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 625,000 | — | 11.55 | 6/05/00 | 6/05/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 97,500 | — | 34.23 | 10/04/99 | 10/04/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 187,500 | — | 18.20 | 10/04/99 | 10/04/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 208,000 | — | 13.85 | 6/15/99 | 6/15/09 | — | — | — | |||||||||||||||||||||||||||
William Midgette | (H | ) | — | 100,000 | (6) | 9.46 | 12/10/08 | 12/10/18 | 10,000 | (7) | 12/10/08 | 104,600 | ||||||||||||||||||||||||
(H | ) | 250,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 60,000 | — | 5.92 | 8/19/02 | 8/19/12 | — | — | — |
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(1) | Each stock option grant reported in the table above was granted under, and is subject to, the HLTH 2000 Plan, the HLTH 1996 Stock Plan, the WebMD 2005 Plan or another plan or agreement that contains substantially the same terms. The option expiration date shown in Column (f) above is the normal expiration date, and the last date that the options may be exercised. For each of the HLTH Named Executive Officers, the unexercisable options shown in Column (c) above are also unvested. Unvested options are generally forfeited if the HLTH Named Executive Officer’s employment terminates, except to the extent otherwise provided in an employment agreement. For information regarding the effect on vesting of options on the death, disability or termination of employment of one of the HLTH Named Executive Officers or a change in control of HLTH, see “— Potential Payments and Other Benefits Upon Termination of Employment or a Change in Control” below. If the employment of one of the HLTH Named Executive Officers is terminated by HLTH for cause, options (including the vested portion) granted to such person are generally forfeited. The exercisable options shown in Column (b) above, and any unexercisable options shown in Column (c) above that subsequently become exercisable, will generally expire earlier than the normal expiration date if the HLTH Named Executive Officer’s employment terminates, except as otherwise specifically provided in the Named Executive Officer’s employment agreement. For a description of the material terms of the employment agreements of each of the HLTH Named Executive Officers, see “— Employment Agreements with the HLTH Named Executive Officers” below. | |
(2) | Unvested shares of restricted stock are generally forfeited if the HLTH Named Executive Officer’s employment terminates, except to the extent otherwise provided in an employment agreement. The stock awards held by some of the HLTH Named Executive Officers are subject to accelerated or continued vesting in connection with a change in control of HLTH or WebMD, as the case may be, and upon certain terminations of employment, as described below in more detail under “— Employment Agreements with the HLTH Named Executive Officers” and “— Potential Payments and Other Benefits Upon Termination of Employment or a Change in Control.” Except as otherwise indicated in those sections, unvested stock awards will generally be forfeited if the HLTH Named Executive Officer’s employment terminates. | |
(3) | The market or payout value of stock awards reported in Column (i) is computed by multiplying the number of shares of stock reported in Column (g) by (A) $10.46, the closing market price of HLTH Common Stock on December 31, 2008 (the last trading day of 2008), for HLTH Restricted Stock, or (B) $23.59, the closing market price of WebMD Class A Common Stock on that date, for WebMD Restricted Stock. | |
(4) | Vesting schedule is: 27% of the original amount granted on first anniversary of the date of the grant, 33% on second anniversary and 40% on third anniversary. | |
(5) | Vesting schedule is: 17% of the original amount granted on first anniversary of the date of the grant, 18.5% on second anniversary, 20% on third anniversary; 21.5% on fourth anniversary; and 23% on fifth anniversary. | |
(6) | Vesting schedule is: 25% of the original amount granted on each of first, second, third and fourth anniversaries of the date of the grant. | |
(7) | Vesting schedule is: 1/3 of the original amount granted on each of the first, second and third anniversaries of the date of grant. | |
(8) | Vesting schedule is: 1/4 of the original amount granted on first anniversary of the grant and 1/48 of the original amount granted on a monthly basis over the next three years (full vesting on the fourth anniversary of the date of grant). | |
(9) | Vesting schedule is: 25% of the original amount granted on March 31 of each of 2010, 2011, 2012 and 2013. |
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(a) | (b) | (c) | (d) | (e) | ||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized | |||||||||||||
Acquired on Exercise | �� | on Exercise | Acquired on Vesting | on Vesting | ||||||||||||
Name | (#) | ($)(1) | (#) | ($)(2) | ||||||||||||
Kevin M. Cameron | 34,500 | W | 419,676 | W | 158,125 | H | 1,477,369 | H | ||||||||
Martin J. Wygod | — | — | 149,000 | H | 1,379,760 | H | ||||||||||
13,750 | W | 450,313 | W | |||||||||||||
1,830,073 | ||||||||||||||||
Mark D. Funston | — | — | 15,000 | H | 127,950 | H | ||||||||||
Wayne T. Gattinella | 35,000 | H | 125,526 | H | 13,750 | W | 450,313 | W | ||||||||
Arthur Lehrer | 212,500 | H | 625,006 | H | 26,667 | H | 316,404 | H | ||||||||
Charles A. Mele | — | — | 33,000 | H | 271,920 | H | ||||||||||
William Midgette | — | — | — | — |
(1) | The dollar amounts shown in Column (c) above for option awards are determined by multiplying (i) the number of shares of HLTH Common Stock or WebMD Class A Common Stock to which the exercise of the option related, by (ii) the difference between (1) the per-share closing price of HLTH Common Stock or WebMD Class A Common Stock on the date of exercise (or, for any shares sold on the date of exercise, the actual sale price received) and (2) the exercise price of the options. | |
(2) | The dollar amounts shown in Column (e) above for stock awards are determined by multiplying the number of shares that vested by the per-share closing price of HLTH Common Stock or WebMD Class A Common Stock on the vesting date. |
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• | In the column entitled “Permanent Disability or Death,” the amounts reflect both provisions in those employment agreements and the fact that HLTH’s and WebMD’s equity plans generally provide for acceleration of vesting of awards in the event of a termination of employment as a result of death or disability. | |
• | Under their employment agreements, Messrs. Cameron, Mele and Wygod are eligible to continue to participate in certain of HLTH’s health and welfare plans (or comparable plans) for a specified period and Messrs. Funston, Gattinella and Midgette are eligible to receive payment for their COBRA premiums for a specified period. In the row entitled “Health and Welfare Benefits Continuation,” the amounts are based upon the current average cost to HLTH of these benefits per employee and are net of amounts that the executives would continue to be responsible for. We have not made any reduction in the amounts in this row to reflect the fact that the obligation to continue benefits ceases in the event the executive becomes eligible for comparable coverage with a subsequent employer. |
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Termination of | ||||||||||||||||||||||||||||
Voluntary | Employment | |||||||||||||||||||||||||||
Termination | without “Cause” or | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | for “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | ‘‘Change in | Voluntary | Disability or | Termination | without | ‘‘Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control”(1) | Termination | Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance | 2,500,000 | (2) | 4,060,000 | 520,000 | (3) | 2,500,000 | (2) | -0- | 2,500,000 | (2) | 4,060,000 | |||||||||||||||||
Stock Options | 1,281,000 | 1,321,000 | (4) | -0- | 1,321,000 | -0- | 1,281,000 | 1,321,000 | (4) | |||||||||||||||||||
Restricted Stock | 1,917,000 | 1,917,000 | -0- | 1,917,000 | -0- | 1,917,000 | 1,917,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 38,000 | 38,000 | -0- | 38,000 | -0- | 38,000 | 38,000 | |||||||||||||||||||||
280G TaxGross-Up(5) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 5,736,000 | 7,336,000 | 520,000 | 5,776,000 | -0- | 5,736,000 | 7,336,000 |
(1) | Mr. Cameron may resign from his employment upon 30 days notice after 11 months following a Change in Control of HLTH and receive the benefits as if he was terminated without Cause or for Good Reason following a Change in Control (3 years of salary and bonus, plus the bonus for the year of termination). He may not unilaterally resign without Good Reason prior to such date and receive these benefits. However, for purposes of calculating the amounts included in the column for “Voluntary Termination in Connection with Change in Control” we treat such resignation as occurring on December 31, 2008 and assume that the requirement for the transition period has been met. | |
(2) | Represents 3 years of salary and an annual bonus for 2008. We have assumed, solely for purposes of preparing this table, that the amount of such annual bonus is $520,000 (based on what was actually paid for 2007, the year prior to the year of the assumed termination). Mr. Cameron’s actual bonus for 2008 was $250,000. See Note 4 to the Summary Compensation Table, above. | |
(3) | Mr. Cameron is entitled to receive his annual bonus (if any) so long as he remains employed through December 31 of the applicable year. Solely for purposes of preparing this table, we have assumed that the amount of such bonus is $520,000, the actual amount of the annual bonus paid to him for 2007 (the year prior to the year of the assumed termination). | |
(4) | The option to purchase HLTH Common Stock granted to Mr. Cameron on December 10, 2008 is governed by the same terms as the grants made to HLTH’s Non-Employee Directors. Accordingly, the vesting of this grant will automatically accelerate upon a Change in Control. | |
(5) | We have assumed, solely for purposes of preparing this table, that 50% of the salary continuation portion of the severance (for up to 2 years) constitutes “reasonable compensation” for the restrictive covenants to which the executive is bound following the termination of employment. In addition, the portion of the cash severance attributable to his bonus for 2008 is excluded from the calculation as “reasonable compensation” for services rendered during such year. Accordingly, we have not treated that portion of the salary continuation or the 2008 bonus amount as a parachute payment for purposes of Section 280G. Such assumption may change at the time of an actual change in control. |
Termination of | ||||||||||||||||||||||||||||
Employment | ||||||||||||||||||||||||||||
Voluntary | without ‘‘Cause” | |||||||||||||||||||||||||||
Termination | or for | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
Executive Benefits and | for “Good | “Change in | Voluntary | Disability | Termination | without | “Change in | |||||||||||||||||||||
Payments(2) | Reason” | Control” | Termination | or Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(3) | 5,258,000 | 5,258,000 | -0- | 5,258,000 | -0- | 5,258,000 | 5,258,000 | |||||||||||||||||||||
Stock Options | 1,788,000 | 1,788,000 | -0- | 1,788,000 | -0- | 1,788,000 | 1,788,000 | |||||||||||||||||||||
Restricted Stock | 6,028,000 | 6,028,000 | -0- | 6,028,000 | -0- | 6,028,000 | 6,028,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 38,000 | 38,000 | -0- | 38,000 | -0- | 38,000 | 38,000 | |||||||||||||||||||||
280G TaxGross-Up(4) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 13,112,000 | 13,112,000 | -0- | 13,112,000 | -0- | 13,112,000 | 13,112,000 |
(1) | This table assumes a termination on December 31, 2008 and does not reflect the 2009 Amendment to Mr. Wygod’s employment agreement. For additional information regarding the amendment to Mr. Wygod’s employment agreement in July 2009 and the effect of the completion of the merger on his compensation, see “The Merger — Interests of Certain Persons in the Merger — Employment Arrangements — Martin J. Wygod.” |
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(2) | If there is a Change in Control of WebMD only (and not HLTH) or if Mr. Wygod resigns as a result of a material reduction in his title or responsibilities by WebMD, WebMD’s only obligation relates to vesting and exercisability of the WebMD equity grants made to him. If either of such events occurred on December 31, 2008, he would have received an aggregate value of $1,740,000 representing WebMD accelerated restricted stock and $335,000 representing WebMD accelerated options. | |
(3) | Represents salary and bonus for three years as well as a bonus for the year of termination (the bonus is determined by averaging bonus amounts for the prior three years). Prior to the 2009 Amendment, Mr. Wygod would have been required to provide certain consulting services during the period he is receiving severance payments, but at no more than 20% of the level he provided in the three year period prior to the date of termination. | |
(4) | We have assumed, solely for purposes of preparing this table, that the salary continuation portion of the severance and the bonus for the year of termination are the only portion of the benefits that constitutes “reasonable compensation” for the consulting services required of Mr. Wygod, the restrictive covenants to which the executive is bound following the termination of employment and the services rendered for 2008. Accordingly, we have not treated the salary continuation portion and such bonus as a parachute payment for purposes of Section 280G. Such assumption may change at the time of an actual change in control. Pursuant to the 2009 Amendment, Mr. Wygod’s salary will be reduced to $120,000 per annum upon consummation of the merger and he will no longer be required to provide consulting services following the termination of his employment in order to receive the benefits of his employment agreement. |
Voluntary | Termination of | |||||||||||||||||||||||||||
Termination | Employment | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | without “Cause” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | “Change in | Voluntary | Disability | Termination | without | “Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control” | Termination | or Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(1) | -0- | -0- | -0- | 750,000 | -0- | 750,000 | 750,000 | |||||||||||||||||||||
Stock Options | -0- | -0- | -0- | 180,000 | -0- | -0- | -0- | |||||||||||||||||||||
Restricted Stock | -0- | -0- | -0- | 445,000 | -0- | 314,000 | 314,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | -0- | -0- | -0- | 21,000 | -0- | 21,000 | 21,000 | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | -0- | -0- | -0- | 1,396,000 | -0- | 1,085,000 | 1,085,000 |
(1) | $750,000 represents two years of salary. |
Termination of | ||||||||||||||||||||||||||||
Voluntary | Employment | |||||||||||||||||||||||||||
Termination | without “Cause” or | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | for “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | ‘‘Change in | Voluntary | Disability | Termination | without | ‘‘Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control”(1) | Termination | or Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(2) | 830,000 | -0- | -0- | 135,000 | (3) | -0- | 830,000 | 830,000 | ||||||||||||||||||||
Stock Options | 335,000 | 335,000 | -0- | 335,000 | -0- | 335,000 | 335,000 | |||||||||||||||||||||
Restricted Stock | -0- | 708,000 | -0- | 1,740,000 | -0- | -0- | 708,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 18,000 | -0- | -0- | -0- | -0- | 18,000 | 18,000 | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 1,183,000 | 1,043,000 | -0- | 2,210,000 | -0- | 1,183,000 | 1,891,000 |
(1) | In the event of a Change in Control of WebMD, the unvested portion of the options granted to Mr. Gattinella at the time of WebMD’s initial public offering would continue to vest until the next vesting date following the Change in Control, so long as he remains employed for 6 months following the Change in Control. In addition, in the event of a Change in Control of either WebMD or HLTH, the December 2008 option and restricted stock awards will continue to vest through the second anniversary of the Change in Control so long as he remains employed for one year following the Change in Control. However, for purposes of calculating the amounts included in the column entitled “Voluntary Termination in Connection with Change in Control” we treat such resignation as occurring on December 31, 2008 and assume that the requirement for the applicable transition period has been met. | |
(2) | Represents one year of salary and an annual bonus for 2008. We have assumed, solely for purposes of this table, that the amount of the annual bonus used for calculating the amounts in this line of the table, is $270,000, the amount of Mr. Gattinella’s actual cash bonus for 2007 (the year prior to the year of the assumed termination) together with the amount contributed on his behalf to the |
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WebMD Supplemental Bonus Trust (for additional information, see “— Executive Compensation Tables — Background Information Regarding the Summary Compensation Table — WebMD Supplemental Bonus Plan (SBP)” above). | ||
(3) | Represents the amount contributed on Mr. Gattinella’s behalf to the WebMD Supplemental Bonus Trust, which would be paid to him in the event of a termination of his employment as a result of death or disability. |
Termination of | ||||||||||||||||||||||||||||
Employment | ||||||||||||||||||||||||||||
Voluntary | without “Cause” | |||||||||||||||||||||||||||
Termination | or for | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | ‘‘Change in | Voluntary | Disability or | Termination | without | ‘‘Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control”(1) | Termination | Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance | 2,491,000 | (2) | 2,491,000 | (2) | -0- | 2,491,000 | (2) | -0- | 2,491,000 | (2) | 2,491,000 | |||||||||||||||||
Stock Options | 142,000 | 367,000 | -0- | 367,000 | -0- | 142,000 | 367,000 | |||||||||||||||||||||
Restricted Stock | 418,000 | 758,000 | -0- | 758,000 | -0- | 418,000 | 758,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 72,000 | 72,000 | -0- | 72,000 | -0- | 72,000 | 72,000 | |||||||||||||||||||||
280G TaxGross-Up(3) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 3,123,000 | 3,688,000 | -0- | 3,688,000 | -0- | 3,123,000 | 3,688,000 |
(1) | Mr. Mele may resign from his employment after 6 months following a Change in Control of HLTH and receive the same benefits as if he was terminated without Cause or for Good Reason following a Change in Control (salary and bonus for three years and full vesting of then outstanding equity grants, including grants from WebMD). He may not unilaterally resign without Good Reason prior to such date and receive these benefits. However, for purposes of calculating the amounts included in the column for “Voluntary Termination in Connection with a Change in Control” we treat such resignation as occurring on December 31, 2008 and assume that the 6 month transition period requirement has been met. | |
(2) | Represents 3 years of salary and 3 years of annual bonuses, plus an annual bonus for 2008. We have assumed, solely for purposes of preparing this table, that the amount of such annual bonus is $233,000 (based on what was actually paid for 2007, the year prior to the year of the assumed termination). | |
(3) | We have assumed, solely for purposes of preparing this table, that 50% of the salary continuation portion of the severance (for up to 2 years) constitutes “reasonable compensation” for the restrictive covenants to which the executive is bound following the termination of employment. In addition, the portion of the cash severance attributable to his bonus for 2008 is excluded from the calculation as “reasonable compensation” for services rendered during such year. Accordingly, we have not treated that portion of the salary continuation or the 2008 bonus amount as a parachute payment for purposes of Section 280G. Such assumption may change at the time of an actual change in control. |
Voluntary | Termination of | |||||||||||||||||||||||||||
Termination | Employment | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | without “Cause” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | ‘‘Change in | Voluntary | Disability | Termination | without | ‘‘Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control” | Termination | or Death | for “Cause” | “Cause” | Control”(1) | |||||||||||||||||||||
Cash Severance | 300,000 | -0- | -0- | -0- | -0- | 300,000 | 700,000 | (2) | ||||||||||||||||||||
Stock Options | -0- | -0- | -0- | 100,000 | -0- | -0- | 25,000 | (3) | ||||||||||||||||||||
Restricted Stock | -0- | -0- | -0- | 105,000 | -0- | -0- | 35,000 | (3) | ||||||||||||||||||||
Health and Welfare Benefits Continuation | -0- | -0- | -0- | -0- | -0- | -0- | 20,000 | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 300,000 | -0- | -0- | 205,000 | -0- | 300,000 | 780,000 |
(1) | As discussed in Note 3 to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus, HLTH is involved in a divestiture process relating to Porex. Mr. Midgette’s employment agreement contains certain provisions in contemplation of that divestiture. Accordingly, for purposes of this column, “Change in Control” is treated as being a change in control at the Porex level, rather than of HLTH. Mr. Midgette is not entitled to any additional payments or benefits in connection with a change in control of HLTH. | |
(2) | Represents two years of base salary plus retention bonuses of $100,000, to the extent not previously paid. | |
(3) | Represents the first vesting of the HLTH equity grant to Mr. Midgette on December 10, 2008. |
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• | The agreement provides for an employment period through September 23, 2009, provided that a notice of non-renewal by HLTH will be treated as a termination without cause and have the consequences described below. | |
• | The agreement provides for an annual base salary of $660,000 and an annual bonus of up to 100% of base salary. For the portion of 2008 prior to Mr. Cameron’s medical leave (which began in mid-February), Mr. Cameron received a bonus of $250,000, an amount that was determined by the HLTH Compensation Committee in its discretion. Mr. Cameron is eligible for a bonus so long as he is employed on December 31 of the applicable year. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Application of Compensation Policies to Individual Named Executive Officers” above. For information regarding Mr. Cameron’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Cameron’s employment by HLTH without “Cause” or by Mr. Cameron for “Good Reason,” prior to a “Change in Control” (as those terms are described below), he would be entitled to: |
— | continue to receive his base salary at the rate in effect at the time of termination for a period of three years; and | |
— | continue to participate in HLTH’s benefit plans (or comparable plans) during the severance period (or if earlier, until he is eligible for comparable benefits). |
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• | For purposes of the employment agreement: (a) “Cause” includes (i) any willful misconduct relating, directly or indirectly, to HLTH or any of its affiliates, that remains uncured, if susceptible to cure, after 30 days following written notice from HLTH detailing such misconduct; (ii) any breach of any material provision contained in the employment agreement or any material policy, which breach remains uncured, if susceptible to cure, after 30 days following written notice from HLTH detailing such breach, or (iii) conviction of a felony or crime involving moral turpitude; and (b) “Good Reason” includes any of the following which remains uncured 30 days after written notice is provided to HLTH: (i) HLTH’s material breach of the employment agreement, (ii) a material demotion of his position, and (iii) required relocation from his present residence or a requirement that he commute, on a regular basis, to HLTH’s headquarters and such headquarters is outside of the New York City metropolitan area. | |
• | For purposes of the employment agreement: |
— | a “Change in Control” of HLTH includes (i) a change in the majority of the Board of Directors of HLTH without the consent of the incumbent directors, (ii) any person or entity becoming the beneficial owner of 25% or more of the voting shares of HLTH and the Compensation Committee determining that such transaction constitutes a change in control, taking into consideration all relevant facts, (iii) consummation of a reorganization, merger or similar transaction as a result of which HLTH’s stockholders prior to the consummation of the transaction no longer represent 50% of the voting power, and (iv) consummation of a sale of all or substantially all of HLTH’s assets; and | |
— | a “Change in Control” of WebMD includes (i) a change in the majority of the Board of Directors of WebMD without the consent of the incumbent directors, (ii) any person or entity becoming the beneficial owner of 50% or more of the voting shares of WebMD, (iii) consummation of a reorganization, merger or similar transaction as a result of which WebMD’s stockholders prior to the consummation of the transaction no longer represent 50% of the voting power, (iv) consummation of a sale of all or substantially all of WebMD’s assets, and (v) adoption of a plan of liquidation by WebMD; |
• | Mr. Cameron may terminate his employment upon 30 days’ notice after 11 months following a Change in Control of HLTH and, if this occurs he would be entitled to the same benefits as if terminated without Cause, but with the following additional payments: |
— | Mr. Cameron would be entitled to annual bonus payments for the three year period of salary continuance, each in an amount equal to the amount of his bonus for the year prior to the termination or, if higher, the bonus paid for the year immediately prior to the Change in Control; | |
— | all options to purchase HLTH Common Stock and HLTH Restricted Stock granted to Mr. Cameron at or prior to October 1, 2004 that have not vested prior to the date of termination would be vested as of the date of termination and all such options would remain exercisable as if he remained in HLTH’s employ through the expiration date specified in the respective stock option plans and agreements; | |
— | any remaining unvested portion of the option to purchase WebMD Class A Common Stock would be vested as of the date of termination and all such options would remain exercisable through the 90 day post-termination exercise period plus the Section 409A Extension Period; | |
— | pursuant to the applicable award agreement, Mr. Cameron would vest in the remaining unvested portion of the grants to him made on October 23, 2006; and |
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— | the option granted on December 10, 2008 will automatically accelerate upon the Change in Control as it was treated in the same manner as the grants made to HLTH’s Non-Employee Directors given his medical leave. |
• | In the event of a Change in Control of WebMD or if WebMD is no longer an affiliate of HLTH, the options granted to Mr. Cameron by WebMD on September 28, 2005 that have not vested prior to such event would be vested as of the date of such event and would remain exercisable for 90 days plus the Permitted 409A Extension Period. | |
• | If Mr. Cameron’s employment is terminated by HLTH for Cause or by him without Good Reason, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to his stock options following the date of termination. | |
• | In the event of the termination of Mr. Cameron’s employment as a result of his death or permanent disability, he (or his estate) would be entitled to three years of salary continuation, three years of benefits continuation and three years of vesting of the equity granted on or prior to October 1, 2004 and three years of continued exercisability of such options to purchase HLTH Common Stock. For grants made after October 1, 2004, the 2000 Plan provided for full acceleration of vesting upon a termination of employment as a result of death or permanent disability. In accordance with the WebMD 2005 Plan, the options to purchase WebMD Class A Common Stock would vest on the date of termination as a result of death or disability and remain outstanding for one year. | |
• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the second anniversary of the date of cessation of Mr. Cameron’s employment. The severance payments and other post-employment benefits due to Mr. Cameron under the employment agreement are subject to Mr. Cameron’s continued compliance with these covenants. | |
• | The employment agreement contains a taxgross-up provision relating to any excise tax that Mr. Cameron incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G. Any excess parachute payments and related taxgross-up payments made to Mr. Cameron will not be deductible by HLTH for federal income tax purposes. | |
• | The December 2008 amendment made changes to the agreement that were intended to bring its terms into compliance with Section 409A by, among other things, clarifying the timing of certain payments. | |
• | The employment agreement is governed by the laws of New Jersey. |
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• | The 2008 Amendment extended the employment period, under the employment agreement, through December 31, 2012, provided that a non-renewal by HLTH will be treated as a termination without “Cause” (as that term is described below) and have the consequences described below. | |
• | Under the employment agreement, Mr. Wygod received an annual base salary of $1.26 million until the completion of WebMD’s initial public offering; when the initial public offering was completed in September 2005, Mr. Wygod’s base salary was reduced to $975,000 per year. Upon the closing date of the merger, Mr. Wygod’s salary will be reduced to $120,000. The amount of any bonus is in the discretion of the HLTH Compensation Committee. For 2008, Mr. Wygod received an annual bonus of $1,500,000. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” above. For information regarding Mr. Wygod’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Wygod’s employment by HLTH without “Cause” or by Mr. Wygod for “Good Reason” (as those terms are described below), Mr. Wygod would be entitled to receive: (i) continuation of his salary, at the higher of his salary on December 1, 2008 or his salary on the date of his termination, and continuation of benefits until the third anniversary of the date of such termination; and (ii) for the year of such termination (and, if termination is after the end of a fiscal year for which bonuses have not yet been paid, for such fiscal year) and for each of the two years following such termination, an amount equal to the average of the annual bonuses received by Mr. Wygod for the three years prior to such termination (with any special or supplemental bonuses excluded for the purposes of such calculation). In addition, all options, or other forms of equity compensation, granted to Mr. Wygod by HLTH or any of its affiliates (which would include WebMD) that have not vested prior to the date of termination would become vested as of the date of termination and, assuming there has not been a Change in Control of HLTH or of WebMD, would continue to be exercisable for such three year period. In the event that Mr. Wygod’s employment is terminated due to death or disability, he or his estate would receive the same benefits as described above. | |
• | The employment agreement provides that in the event there is a Change in Control of HLTH, all outstanding options and other forms of equity compensation (including equity compensation granted by WebMD) would become immediately vested on the date of the Change in Control and, if following the Change in Control, Mr. Wygod’s employment terminates for any reason other than Cause, they would continue to be exercisable until expiration of its original term. A Change in Control of HLTH is also an event that constitutes Good Reason for purposes of a termination by Mr. Wygod. In the event there is a Change in Control of WebMD, any portion of Mr. Wygod’s equity that relates to WebMD will fully vest and become exercisable on the date of such event, and if following such event, Mr. Wygod’s engagement with WebMD is terminated for any reason other than Cause, such equity will remain outstanding until the expiration of its original term. In addition, in the event of a Change of Control of HLTH, amounts payable under the employment agreement would be required to be placed in a rabbi trust for the benefit of Mr. Wygod. | |
• | For purposes of the employment agreement: (a) “Cause” includes a final court adjudication that Mr. Wygod (i) committed fraud or a felony directed against HLTH or an affiliate relating to his employment, or (ii) materially breached any of the material terms of the employment agreement; and (b) the definition of “Good Reason” includes the following conditions or events: (i) a material reduction in title or responsibility that remains in effect for 30 days after written notice, (ii) a final court adjudication that we materially breached any material provisions of the employment agreement, |
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(iii) failure to serve on the HLTH Board or the HLTH Executive Committee, or (iv) the occurrence of a Change in Control of HLTH. |
• | In the event Mr. Wygod terminates his engagement with WebMD for “Good Reason” (as described in the following sentence), any portion of equity that relates to WebMD will fully vest and become exercisable on the date his engagement terminates and will remain exercisable for the three year severance period. For the purposes of a termination of Mr. Wygod’s engagement with WebMD by him, “Good Reason” means a material reduction in Mr. Wygod’s title or responsibilities as Chairman of the Board of WebMD. | |
• | Pursuant to the 2008 Amendment, in the event of a transaction between HLTH and WebMD that does not constitute a Change in Control but in which the two entities combine, Mr. Wygod would have served as a non-employee, non-executive Chairman with no salary and (i) he would have received the cash severance and benefit continuation provided in the employment agreement and (ii) provisions contained in the employment agreement applicable to equity awards would have remained in effect and would apply in the event that Mr. Wygod were to cease serving as Chairman of the Board for certain reasons. Pursuant to the 2009 Amendment, however, Mr. Wygod will continue to serve as the Executive Chairman of the Board of WebMD and will continue to be an employee and executive officer of WebMD following the closing date of the merger. The terms of Mr. Wygod’s employment agreement (as amended in December 2008) will generally remain in effect as described above; however (i) his base salary will be reduced to $120,000 and (ii) if his employment terminates for any reason or for no reason following the merger, Mr. Wygod will be entitled to the cash severance and continued benefit participation he would have received if his employment terminated upon the consummation of the merger as had been contemplated, calculated as if such termination occurred immediately prior to the closing date of the merger. Mr. Wygod will not be required to provide any consulting services following his termination of employment in order to receive these payments. Mr Wygod may not resign without “Good Reason” and receive the acceleration of vesting of his equity. | |
• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that continue until the third anniversary of the date his employment has ceased. The post-employment payments and benefits due to Mr. Wygod under the employment agreement are subject to his continued compliance with these covenants. | |
• | The employment agreement contains a taxgross-up provision relating to any excise tax that Mr. Wygod incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G. Any excess parachute payments and related taxgross-up payments made to Mr. Wygod will not be deductible by HLTH for federal income tax purposes. |
• | The agreement provides for an employment period for five years from November 13, 2006. | |
• | Under the agreement, Mr. Funston’s annual base salary is $375,000 and Mr. Funston is eligible to receive an annual bonus of up to 50% of his annual base salary. The amount of any bonus is in the discretion of the HLTH Compensation Committee. For 2008, Mr. Funston received a bonus of $130,000. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” above. For information regarding Mr. Funston’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Funston’s employment by HLTH without “cause” (as described below), he would be entitled to: (i) continuation of his base salary, as severance, for one year for each year of completed service with a minimum of one year and a maximum of three years (provided that if |
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the termination occurs following a Change in Control (as defined in the HLTH 2000 Plan), the minimum severance pay period will be two years); (ii) payment of COBRA premiums as if he were an active employee with similar coverage for 18 months (or if earlier, until he is eligible for comparable coverage); (iii) the restricted stock granted in November 2006, at the inception of his employment, will vest and the restrictions thereon will lapse on the date of termination for that portion of the award that would have vested on the next two vesting dates (to the extent not previously vested); and (iv) the option granted in November 2006, at the inception of his employment, will continue to vest and remain outstanding through the next two vesting dates (to the extent not previously vested). If his employment is terminated as a result of his becoming disabled or his death, he (or his estate) will be entitled to the payments and benefits as if his employment had been terminated by HLTH without cause. The purposes of the December 2008 amendment were to (i) bring the terms of the employment agreement into compliance with Section 409A by, among other things, clarifying the timing of certain payments and (ii) clarify that if Mr. Funston is solely serving as the Chief Financial Officer of WebMD and not of HLTH, the severance obligations will not be triggered. If, however, a transaction occurs that would result in the forfeiture of the HLTH equity granted to Mr. Funston in November 2006, the vesting of such equity will be treated, under the employment agreement, as if his employment was terminated without cause. |
• | If Mr. Funston’s employment is terminated by HLTH for “cause” or by him, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to the restricted stock or the stock options following the date of termination. | |
• | For purposes of Mr. Funston’s employment agreement, “cause” generally includes: (i) his bad faith in connection with the performance of his duties or his willful failure to follow the lawful instructions of the Chief Executive Officer, the Board or the Audit Committee, following written notice and a 20 day period of time to remedy such failure; (ii) his engaging in any willful misconduct that is, or is reasonably likely to be, injurious to HLTH (or any of its affiliates) or which could reasonably be expected to reflect negatively upon HLTH or otherwise impair or impede its operations; (iii) his material breach of a policy of HLTH, which breach is not remedied (if susceptible to remedy) following written notice and a 20 day period of time to remedy such breach; (iv) his material breach of the employment agreement, which breach is not remedied (if susceptible to remedy) following written notice and a 20 day period of time to remedy such breach; or (v) his commission of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude. | |
• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the second anniversary of the date employment has ceased for any reason. The severance payments and other post-employment benefits due to Mr. Funston under the employment agreement are subject to Mr. Funston’s continued compliance with these covenants. | |
• | The employment agreement is governed by the laws of the State of New Jersey. |
• | Mr. Gattinella currently receives an annual base salary of $560,000 and is eligible to earn a bonus of up to 100% of his base salary, the actual amount to be determined by the WebMD Compensation Committee in its discretion. For 2008, Mr. Gattinella received an annual bonus of $135,000, determined by the WebMD Compensation Committee in its discretion (and ratified by HLTH’s Compensation Committee). In addition, WebMD’s Compensation Committee approved an SBP Award of $135,000 with respect to Mr. Gattinella. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” and “— Supplemental Bonus Program (SBP)” above. For information regarding Mr. Gattinella’s equity compensation, see “— Executive Compensation Tables” above. |
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• | In the event of the termination of Mr. Gattinella’s employment, prior to April 30, 2009, by WebMD without “Cause” or by Mr. Gattinella for “Good Reason” (as those terms are described below), he would be entitled to continue to receive his base salary for one year from the date of termination, to receive any unpaid bonus for the year preceding the year in which the termination occurs, and to receive payment of COBRA premiums for one year following his termination (or if earlier, until he is eligible for comparable coverage). Amounts with respect to Mr. Gattinella’s SBP Award are payable only in accordance with the terms of the Supplemental Bonus Program Trust (see “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” and “— Supplemental Bonus Program (SBP)” above). In addition, in the event that a termination of Mr. Gattinella’s employment by WebMD without Cause or by Mr. Gattinella for Good Reason occurs before the fourth anniversary of the grant of the options to purchase WebMD Class A Common Stock made in connection with WebMD’s initial public offering, 25% of such options would continue to vest on the next vesting date following the date of termination. | |
• | The December 2008 amendment described the material terms of the December 2008 equity awards to Mr. Gattinella. Specifically, Mr. Gattinella may resign one year after the occurrence of a Change in Control of WebMD (as defined in the WebMD 2005 Plan) or of HLTH (as defined in the HLTH 2000 Plan) and (i) he would continue to vest in the option granted on December 10, 2008 through the second anniversary of the Change in Control and (ii) that portion of the restricted stock award made on the same date that would have vested over the two year period following the Change in Control will accelerate to the date of resignation. The grant made at the time of WebMD’s initial public offering had a similar provision (with a 6 month transition requirement), but given that the last vesting of such grant is September 28, 2009, such provision has no further effect. | |
• | For purposes of the employment agreement: (a) “Cause” includes (i) a continued willful failure to perform duties after 30 days’ written notice, (ii) willful misconduct or violence or threat of violence that would harm WebMD, (iii) a breach of a material WebMD policy or a material breach of the employment agreement or the Trade Secret and Proprietary Information Agreement (as described below), that remains unremedied after 30 days’ written notice, or (iv) conviction of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude; and (b) “Good Reason” means Mr. Gattinella’s resignation within one year of any of the following conditions or events remaining in effect after applicable notice periods: (i) a material reduction in base salary, (ii) a material reduction in authority, or (iii) any material breach of the employment agreement by WebMD. | |
• | The December 2008 amendment also made changes to the agreement that were intended to bring its terms into compliance with Section 409A by, among other things, clarifying the timing of certain payments. | |
• | The employment agreement and the related agreement described below are governed by the laws of the State of New York. |
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• | The agreement provides for an employment period through February 1, 2011, provided that a non-renewal by HLTH will be treated as a termination without “Cause” (as that term is described below) and have the consequences described below. | |
• | Mr. Mele receives an annual base salary of $450,000. The amount of any bonus is in the discretion of the HLTH Compensation Committee. For 2008, Mr. Mele received an annual bonus of $350,000. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” above. For information regarding Mr. Mele’s equity compensation, see “— Executive Compensation Tables” above. | |
• | If Mr. Mele’s employment is terminated due to his death or disability, by HLTH without “Cause” or by Mr. Mele for “Good Reason” (as those terms are described below), he would be entitled to: (a) continuation of his base salary, at the rate then in effect, for three years; (b) an amount for each of the three years equal to the greater of the average annual bonus he received in the three years prior to termination or the amount of the bonus he received in the last of those years; and (c) continued participation in HLTH’s benefit plans (or comparable plans) for three years (or if earlier, until he is eligible for comparable benefits); provided that, pursuant to the December 2008 amendment, he will no longer be entitled to participate in HLTH’s disability plans and will instead be entitled to a payment equal to the greater of $10,000 and 200% of HLTH’s cost of his coverage for up to three years. If such termination occurs after the end of a fiscal year but before payment of the bonus for that year, he would also be entitled to receive the bonus, if any, earned for that fiscal year. In addition: |
— | All options to purchase HLTH Common Stock and HLTH Restricted Stock granted to Mr. Mele by HLTH prior to February 1, 2006 that have not vested prior to the date of termination would be vested as of the date of termination and the options would remain exercisable as if he remained in HLTH’s employ through the expiration date specified in each applicable stock option agreement, except that the options granted to Mr. Mele on March 17, 2004 would remain exercisable only for 90 days plus the Permitted 409A Extension Period; | |
— | The portion of the options to purchase WebMD Class A Common Stock granted to Mr. Mele by WebMD on September 28, 2005 that would have vested on the next vesting date following the date of termination will vest on the date of termination and the vested portion of those options will remain exercisable for 90 days plus the Permitted 409A Extension Period; provided, however, that, if termination is for Good Reason or without Cause following a Change in Control of HLTH, all of the options that have not vested prior to the date of termination would be vested as of the date of termination; and | |
— | Pursuant to the applicable award agreement, the option to purchase HLTH Common Stock granted to Mr. Mele on October 23, 2006 would remain outstanding and continue to vest until the next vesting date and the next vesting of the HLTH Restricted Stock grant made on the same date would accelerate to the date of termination (provided, however, that if his employment is terminated without Cause or for Good Reason following a Change in Control, then such awards are deemed fully vested on the date of termination). Pursuant to the February 2009 amendment, (i) the option to purchase HLTH Common Stock granted to Mr. Mele on December 10, 2008 will be treated in |
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the same manner as the option granted on October 23, 2006 except that, in the case where there is a Change in Control of HLTH, the option will continue to vest (rather than accelerate) and remain exercisable for the remainder of its term as if Mr. Mele remained in HLTH’s employ through the expiration date and (ii) in the case of a termination without Cause or for Good Reason following a Change in Control, the HLTH Restricted Stock granted to Mr. Mele on December 10, 2008 will be deemed fully vested on the date of termination. |
• | In the event of a Change in Control of WebMD or if WebMD is no longer an affiliate of HLTH, the options granted to Mr. Mele by WebMD on September 28, 2005 that have not vested prior to such event would be vested as of the date of such event and would remain exercisable for 90 days plus the Permitted 409A Extension Period. |
• | If Mr. Mele’s employment is terminated by HLTH for Cause or by him without Good Reason, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to the stock options or restricted stock following the date of termination. |
• | For purposes of Mr. Mele’s employment agreement: (a) “Cause” includes (i) a material breach of the employment agreement that remains unremedied after 30 days’ written notice, or (ii) conviction of a felony; and (b) “Good Reason” includes (i) a material reduction in title or responsibilities, (ii) a requirement that Mr. Mele report to anyone other than the Chief Executive Officer of HLTH, (iii) a reduction in base salary or material fringe benefits, (iv) a material breach of the employment agreement, (v) a requirement that Mr. Mele relocate to a location that is more than 25 miles from his current residence, or (vi) a Change in Control of HLTH occurs and he remains in the employ of HLTH for six months after the Change in Control. | |
• | Mr. Mele is subject to confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that survive for two years or, if applicable, for the three year period in which severance is payable under the agreement. The severance payments and other post-employment benefits due to Mr. Mele under the employment agreement are subject to Mr. Mele’s continued compliance with these covenants. | |
• | There is a taxgross-up provision relating to any excise tax that Mr. Mele incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G. Any excess parachute payments and related taxgross-up payments made to Mr. Mele will not be deductible by HLTH for federal income tax purposes. |
• | The initial term of the agreement was 5 years, which expired on September 1, 2007; however, the agreement automatically renews on a monthly basis, unless notice of termination is given prior to the end of any renewal period. | |
• | Under the agreement, Mr. Midgette’s annual base salary is $300,000 and he is eligible for an annual bonus of up to 50% of his base salary. The amount of any bonus is in the discretion of the HLTH Compensation Committee. For 2008, Mr. Midgette received a bonus of $91,000. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses” above. For information regarding Mr. Midgette’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Midgette’s employment by Porex without “Cause” or by Mr. Midgette for “Good Reason” (as those terms are described below) absent a Change in Control of Porex (as described below), he would be entitled to continuation of his base salary, as severance, for a period of one year. |
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• | In the event of a Change in Control of Porex: |
— | If Mr. Midgette’s employment is terminated by Porex without “Cause” or by him for “Change of Control Good Reason” (as such terms are described below) within 15 months following a Change in Control of Porex, Mr. Midgette would be entitled to continuation of his base salary, as severance, for a period of two years and payment of COBRA premiums for 18 months (or if earlier, until he is eligible for comparable coverage); | |
— | If there is a Change in Control of Porex on or before December 31, 2009 (or such later date to which Porex’s change in control retention plan may be extended), Mr. Midgette would be entitled to a retention bonus of $66,667 (or a greater amount as may be determined by the Board of Directors of HLTH). Mr. Midgette would be entitled to an additional retention bonus of $33,333 if there is a Change in Control of Porex and a Sale of Porex Surgical (as defined below) on or before December 31, 2009 (or such later date, if extended) and Mr. Midgette remains employed with Porex or its successor for the later of (i) 60 days following the Change in Control of Porex or (ii) the sale of Porex Surgical. If Mr. Midgette’s employment is terminated by Porex or its successor without Cause or by Mr. Midgette for Change of Control Good Reason following a Change in Control of Porex, but before the 60 day retention date, he is still entitled to receive the applicable retention bonuses. If there is only a Sale of Porex Surgical, Mr. Midgette is not entitled to either piece of the retention bonus. | |
— | The first vesting date of the stock option and restricted stock grants made to him on December 10, 2008 will be accelerated to the closing date of the Change in Control of Porex. |
• | If Mr. Midgette’s employment is terminated by Porex for “Cause,” he (i) would not be entitled to any further compensation or benefits and (ii) would not be entitled to any additional rights or vesting with respect to the restricted stock or the stock options following the date of termination. |
• | For purposes of Mr. Midgette’s employment agreement: |
— | “Cause” includes (i) continued failure to satisfactorily perform his duties in any material respect following written notice and a reasonable period of time (but not in excess of 30 days) to correct such failure, (ii) misconduct, negligence, act of dishonesty, violence or threat of violence that is demonstrably injurious to Porex, (iii) a material breach of Porex’s policies or the employment agreement, that remains unremedied after notice and a reasonable period of time to correct (but not in excess of 30 days), (iv) failure to adhere to the lawful instructions of the Chairman of the HLTH Board of Directors, or (v) conviction of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude involving Porex, or which could otherwise reflect negatively on Porex or otherwise impair or impede its operations. | |
— | “Good Reason” includes any of the following conditions or events remaining in effect after 30 days written notice: (i) a reduction in base salary, (ii) a material breach of the employment agreement by Porex, or (iii) the relocation of his place of work more than 50 miles from his work location, so long as his place of relocation is also a further distance from his residence. | |
— | “Change of Control Good Reason” includes any of the following conditions or events remaining in effect after 30 days written notice: (i) a reduction in base salary, or (ii) the relocation of his place of work more than 50 miles from his work location, so long as his place of relocation is also a further distance from his residence. | |
— | A “Change in Control of Porex” includes (i) HLTH ceasing to own 50% or more of the voting power of Porex or (ii) the sale of all or substantially all of the assets of Porex, provided that a Change in Control in Porex does not occur if the successor is HLTH or an affiliate of HLTH. | |
— | A “Porex Surgical Sale” includes (i) HLTH ceasing to own 50% or more of the voting power of Porex Surgical, Inc. or (ii) the sale of all or substantially all of the assets of Porex Surgical, Inc., provided that a Porex Surgical Sale does not occur if the successor is HLTH or an affiliate of HLTH. |
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• | Mr. Midgette is subject to certain restrictive covenants contained in his employment agreement and a restrictive covenant agreement. The restrictive covenants in those agreements include: (i) trade secret obligations that survive in perpetuity, so long as they remain trade secrets, (ii) confidentiality obligations that survive for 5 years after the termination of his employment; (iii) non-solicitation provisions that prohibit Mr. Midgette from soliciting employees of Porex or from soliciting any of Porex’s clients or customers with whom he had material contact during the 12 month period prior to the termination of his employment, and (iv) non-competition provisions that prohibit Mr. Midgette from being involved in a business that competes with Porex’s business. The non-solicitation and non-competition obligations end on the second anniversary of the date his employment has ceased. The severance payments and other post-employment benefits due to Mr. Midgette under the employment agreement are subject to Mr. Midgette’s continued compliance with his restrictive covenant obligations. | |
• | The employment agreement is governed by the laws of the state of Georgia. |
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(a) | (b) | (c) | ||||||||||
Number of Securities | ||||||||||||
Number of | Weighted-Average | Remaining Available for | ||||||||||
Securities to be | Exercise Price of | Future Issuance under Equity | ||||||||||
Issued upon Exercise of | Outstanding | Compensation Plans | ||||||||||
Outstanding Options, Warrants | Options, Warrants | (Excluding Securities | ||||||||||
Plan Category(1) | and Rights | and Rights | Reflected in Column (a)) | |||||||||
Equity compensation plans approved by security holders | 23,109,043 | $ | 12.40 | 2,562,834 | ||||||||
Equity compensation plans not approved by security holders(2) | 1,377,085 | $ | 8.47 | 280,841 | (3) | |||||||
Total | 24,486,128 | $ | 12.18 | 2,843,675 | (3)(4) | |||||||
(1) | This table does not include outstanding options to acquire 20,017,962 shares of HLTH Common Stock at a weighted-average exercise price of $17.15 per share that were assumed by HLTH in mergers or acquisitions. HLTH cannot grant additional awards under these assumed plans. For additional information regarding the assumed options, see Note 15 to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus. In addition, this table does not include equity plans of WebMD providing for options to purchase shares of WebMD Class A Common Stock and shares of WebMD Restricted Stock. For information regarding those equity compensation plans, see Note 15 to the HLTH Consolidated Financial Statements included in Annex B-1 to this joint proxy statement/prospectus. | |
(2) | The plans included in this category did not require approval of HLTH’s stockholders under applicable law and Nasdaq rules at the time such plans were adopted. See “— Description of Plans Not Approved by Stockholders” below for descriptions of the equity compensation plans in this category. In accordance with the rules and regulations of the SEC, “equity compensation plans” also includes, for purposes of this table, warrants issued to third parties. Accordingly, this category includes warrants to acquire 22,466 shares of HLTH Common Stock at a weighted-average exercise price of $30.00 per share that were outstanding on December 31, 2008. None of these warrants are held by HLTH employees. HLTH cannot grant additional awards under the relevant agreements pursuant to which those warrants were issued. For additional information regarding these warrants, see Note 17 to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus. | |
(3) | Includes 262,508 shares of HLTH Common Stock available, as of December 31, 2008, for grant of restricted stock awards under HLTH’s 2002 Restricted Stock Plan. |
(4) | Under HLTH’s equity compensation plans, if any outstanding stock option expires or is terminated before being fully exercised or any restricted stock or other share-based award is forfeited, then the shares allocable to the unexercised or forfeited portion would again become available for issuance under the applicable plan (other than plans under which no further grants are being made). Optionholders may exercise options granted under HLTH’s equity plans by net settlement, pursuant to which the optionholder is not required to pay the exercise price in cash and HLTH reduces the amount of shares to be issued upon exercise to reflect the amount of the exercise price and the amount of the required tax withholding for the exercise. In addition, with respect to stock options granted during or after December 2008, HLTH may require optionholders to exercise those stock options by net settlement. Shares that are not issued or delivered as a result of the net settlement of a stock option and shares used to pay the withholding taxes related to a stock award do not become available again for future grants under HLTH’s equity plans; instead, the full number of shares underlying options exercised by net settlement are deemed to have already been used for purposes of determining the number of shares remaining available for future grants. |
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• | the operations of WebMD’s business; | |
• | any material untrue statements or omissions in the prospectus included in the registration statement for WebMD’s initial public offering (the “WebMD IPO Prospectus”), other than material untrue statements or omissions contained in or pertaining to information relating solely to HLTH; and | |
• | guarantees or undertakings made by HLTH to third parties in respect of WebMD’s liabilities or obligations or those of WebMD’s subsidiaries. |
• | the operations of HLTH’s business; | |
• | any material untrue statements or omissions in the WebMD IPO Prospectus, other than material untrue statements or omissions contained in or pertaining to information relating solely to WebMD; and | |
• | certain pre-existing legal proceedings. |
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• | retaining and overseeing the registered public accounting firm that serves as HLTH’s independent auditor and evaluating their performance and independence; | |
• | reviewing the annual audit plan with HLTH’s management and registered public accounting firm; | |
• | pre-approving any permitted non-audit services provided by HLTH’s registered public accounting firm; | |
• | approving the fees to be paid to HLTH’s registered public accounting firm; | |
• | reviewing the adequacy and effectiveness of HLTH’s internal controls with HLTH’s management, internal auditors and registered public accounting firm; | |
• | reviewing and discussing the annual audited financial statements and the interim unaudited financial statements with HLTH’s management and registered public accounting firm; | |
• | approving HLTH’s internal audit plan and reviewing reports of HLTH’s internal auditors; | |
• | determining whether to approve certain related party transactions; and | |
• | overseeing the administration of HLTH’s Code of Business Conduct. |
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James V. Manning
Joseph E. Smith
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THE APPROVAL OF PROPOSAL 3.
Type of Fees | 2008 | 2007 | ||||||
Audit Fees | $ | 1,507,981 | $ | 1,903,198 | ||||
Audit-Related Fees | 1,217,026 | 162,775 | ||||||
Tax Fees | 298,600 | 353,561 | ||||||
All Other Fees | 1,500 | 1,500 | ||||||
Total Fees | $ | 3,025,107 | $ | 2,421,034 | ||||
• | “audit fees” include: (a) fees for professional services (i) for the audit of consolidated financial statements of HLTH and WebMD for that fiscal year, (ii) for review of the consolidated financial statements included in HLTH’s and WebMD’s Quarterly Reports on Form10-Q filed during that fiscal year, and (iii) for the audits of internal control over financial reporting for that fiscal year with respect to HLTH and WebMD; and (b) fees for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for that year; | |
• | “audit-related fees” are fees in the year for assurance and related services that are reasonably related to the performance of the audit or review of HLTH’s financial statements, and consisted of fees related to audits of HLTH’s employee benefit plans and fees for services related to the terminated WebMD Merger, the ViPS Sale, the 2008 EBSCo Sale and the proposed Porex Sale; |
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• | “tax fees” are fees in the year for professional services for tax compliance, tax advice, and tax planning and analysis, a portion of which related to the Proposed 2008 Merger; and | |
• | “all other fees” are fees in the year for any products and services not included in the first three categories and consisted of a subscription to Ernst & Young LLP’s online research tool. |
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• | Proposal 1: A proposal to adopt the agreement and plan of merger, dated as of June 17, 2009, between HLTH and WebMD, and to approve the transactions contemplated by that agreement, including the merger. | |
• | Proposal 2: Election of three Class I directors, each to serve a three-year term expiring at the Annual Meeting of Stockholders in 2012 or until his successor is elected and has qualified or his earlier resignation or removal. The three nominees are: |
Neil F. Dimick
James V. Manning
• | Proposal 3: A proposal to ratify and approve an amendment to the WebMD 2005 Plan to increase the number of shares of WebMD Common Stock issuable under the Plan by 1,100,000 shares, to a total of 15,600,000 shares. | |
• | Proposal 4: A proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as WebMD’s independent auditor for the fiscal year ending December 31, 2009. |
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• | the holders of Class A Common Stock and the holders of Class B Common Stock vote together as a single class and their votes are counted and totaled together; | |
• | each share of Class A Common Stock is entitled to one vote per share; and | |
• | each share of Class B Common Stock is entitled to five votes per share. |
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• | FOR the adoption of the merger agreement and approval of the merger, as described in Proposal 1; | |
• | FOR the election of each of the nominees for director listed below in Proposal 2; | |
• | FOR the ratification and approval of the amendment of WebMD’s Amended and Restated 2005 Long-Term Incentive Plan to increase the number of shares of WebMD Common Stock issuable under that Plan by 1,100,000 shares, to a total of 15,600,000 shares; and | |
• | FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as WebMD’s independent auditor for the fiscal year ending December 31, 2009. |
• | delivering to the Secretary of WebMD, at the address set forth above, prior to the vote at the WebMD Annual Meeting, a written notice, bearing a date later than the date of the proxy, stating that the proxy is revoked; | |
• | signing and so delivering a proxy relating to the same shares and bearing a later date prior to the vote at the WebMD Annual Meeting; or | |
• | attending the WebMD Annual Meeting and voting in person, although attendance at the meeting will not, by itself, revoke a proxy. |
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Name | Age | Positions | ||||
Mark J. Adler, M.D.(3)(4) | 53 | Director; Chairman of the Compensation Committee | ||||
Neil F. Dimick(1)(2)(4)(5) | 60 | Director; Chairman of the Nominating Committee; Chairman of the Governance & Compliance Committee | ||||
Wayne T. Gattinella(1) | 57 | Director; Chief Executive Officer and President | ||||
Jerome C. Keller | 67 | Director | ||||
James V. Manning(1)(2)(4) | 62 | Director; Chairman of the Audit Committee | ||||
Abdool Rahim Moossa, M.D.(3)(5)(6) | 69 | Director | ||||
Stanley S. Trotman, Jr.(2)(3)(5)(6) | 66 | Director; Chairman of the Related Parties Committee | ||||
Martin J. Wygod(1) | 69 | Chairman of the Board |
Name | Age | Positions | ||||
Wayne T. Gattinella | 57 | Chief Executive Officer and President | ||||
Anthony Vuolo | 51 | Chief Operating Officer | ||||
Mark D. Funston | 49 | Executive Vice President and Chief Financial Officer | ||||
Nan-Kirsten Forte | 47 | Executive Vice President — Consumer Services | ||||
Craig Froude | 42 | Executive Vice President — WebMD Health Services | ||||
William Pence | 46 | Executive Vice President and Chief Technology Officer | ||||
Douglas W. Wamsley | 50 | Executive Vice President, General Counsel and Secretary | ||||
Martin J. Wygod | 69 | Chairman of the Board | ||||
Steven Zatz, M.D. | 52 | Executive Vice President — Professional Services |
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AND WEBMD MANAGEMENT
Percent of | ||||||||||||||||||||||||
WebMD | Percent of | WebMD | Total WebMD | |||||||||||||||||||||
Class A | WebMD | Class B | Total | Class A and | HLTH | |||||||||||||||||||
Name and Address | Common | Class A | Common | WebMD | Class B | Common | ||||||||||||||||||
of Beneficial Owner | Stock(1) | Outstanding(2) | Stock(3) | Shares | Outstanding(2) | Stock(4) | ||||||||||||||||||
HLTH Corporation | 48,100,000 | (2) | 82.2 | % | 48,100,000 | 48,100,000 | 82.2 | % | n/a | |||||||||||||||
669 River Drive, Center 2 | ||||||||||||||||||||||||
Elmwood Park, NJ 07407 | ||||||||||||||||||||||||
Baron Capital Group(5) | 1,244,887 | 12.0 | % | — | 1,244,887 | 2.1 | % | n/a | ||||||||||||||||
767 Fifth Avenue | ||||||||||||||||||||||||
New York, NY 10153 | ||||||||||||||||||||||||
FMR LLC(6) | 1,038,354 | 10.0 | % | — | 1,038,354 | 1.8 | % | 11,212,021 | ||||||||||||||||
82 Devonshire Street Boston, MA 02109 | ||||||||||||||||||||||||
Mark J. Adler, M.D. | 46,853 | (7) | * | — | 46,853 | * | 237,850 | |||||||||||||||||
Neil F. Dimick | 52,350 | (8) | * | — | 52,350 | * | 59,166 | |||||||||||||||||
Mark D. Funston | — | * | — | — | * | 162,500 | ||||||||||||||||||
Wayne T. Gattinella | 349,453 | (9) | 3.3 | % | — | 349,453 | * | 463,511 | ||||||||||||||||
Jerome C. Keller | 51,775 | (10) | * | — | 51,775 | * | 157 | |||||||||||||||||
James V. Manning | 91,039 | (11) | * | — | 91,039 | * | 756,822 | |||||||||||||||||
Abdool Rahim Moossa, M.D. | 47,793 | (12) | * | — | 47,793 | * | — | |||||||||||||||||
William Pence | 72,888 | (13) | * | — | 72,888 | * | — | |||||||||||||||||
Stanley S. Trotman, Jr. | 73,391 | (14) | * | — | 73,391 | * | 35,000 | |||||||||||||||||
Anthony Vuolo | 281,900 | (15) | 2.7 | % | — | 281,900 | * | 1,372,500 | ||||||||||||||||
Martin J. Wygod | 716,207 | (16) | 6.7 | % | — | 716,207 | 1.2 | % | 11,313,271 | |||||||||||||||
All executive officers and directors as a group (15 persons) | 2,237,264 | 19.4 | % | — | 2,237,264 | 3.8 | % | 15,713,055 |
* | Less than 1%. |
(1) | Beneficial ownership is determined under the rules and regulations of the SEC, which provide that shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing the total number of shares beneficially owned by that person and the percentage ownership of that person. However, those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Accordingly, the amounts set forth below include shares of WebMD Class A Common Stock that such person has the right to acquire pursuant to options that are currently exercisable or that will become exercisable within 60 days of August 31, 2009 (which we refer to in this table as Option Shares). The amount of Option Shares, if any, held by each person is indicated in the footnotes below. In addition, the amounts set forth below include shares of WebMD Restricted Stock, which are subject to vesting requirements based on continued employment, in the respective amounts stated in the footnotes below. Holders of WebMD Restricted Stock have voting power, but not dispositive power, with respect to unvested shares of WebMD Restricted Stock. For information regarding the vesting schedules of the WebMD Restricted Stock, see “WebMD Executive Compensation — Executive Compensation Tables — Summary Compensation Table” and “WebMD Non-Employee Director Compensation” below. |
(2) | Shares of Class B Common Stock are convertible, at the option of the holder, on a one-for-one basis for Class A Common Stock. Accordingly, under the rules and regulations of the SEC, which provide that shares of common stock that a person has the right to |
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acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing the total number of shares beneficially owned by that person and the percentage ownership of that person, HLTH is the beneficial owner of 48,100,000 shares of Class A Common Stock, which would represent 82.2% of the outstanding Class A Common Stock on that basis. However, those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person, each of which is based on the total number of shares of our outstanding Class A Common Stock which, as of August 31, 2009, was 10,415,559 (including unvested shares of WebMD Restricted Stock). The column entitled “Percent of Total Class A and Class B Outstanding” provides information on each listed holder’s percentage ownership of the total number of shares of our outstanding common stock which, as of August 31, 2009, was 58,515,559 (including all outstanding unvested shares of WebMD Restricted Stock). |
(3) | Since each share of Class B Common Stock is entitled to five votes per share and each share of Class A Common Stock is entitled to one vote per share, HLTH controls, through its ownership of Class B Common Stock, approximately 96% of the combined voting power of the outstanding Common Stock of WebMD. |
(4) | Includes beneficial ownership of shares of restricted HLTH Common Stock, which are subject to vesting requirements based on continued employment, in the following amounts: for Mr. Funston, 42,500 shares; and for Mr. Wygod, 360,000 shares. Holders of restricted HLTH Common Stock have voting power, but not dispositive power, with respect to unvested shares of restricted HLTH Common Stock. Also includes beneficial ownership of shares of HLTH Common Stock that the following persons have the right to acquire pursuant to options that are currently exercisable or that will become exercisable within 60 days of August 31, 2009: for Dr. Adler, 237,250 shares; Mr. Dimick, 59,166 shares; Mr. Funston, 90,000 shares; Mr. Gattinella, 454,881 shares; Mr. Manning, 249,250 shares; Mr. Vuolo, 1,360,000 shares; and Mr. Wygod, 4,325,000 shares. Additional information regarding beneficial ownership of shares of HLTH Common Stock by the following persons is contained in the footnotes to the table entitled “Security Ownership of Certain HLTH Beneficial Owners and HLTH Management”: for Dr. Adler, see footnote 9; for Mr. Funston, see footnote 12; for Mr. Manning, see footnote 13; and for Mr. Wygod, see footnote 16. |
(5) | The information shown is as of February 28, 2009 and is based upon information disclosed by Baron Capital Group, Inc. (which we refer to as BCG), BAMCO, Inc., Baron Capital Management, Inc. (which we refer to as BCM), Baron Growth Fund (which we refer to as BGF) and Ronald Baron in a Schedule 13G filed with the SEC. Such persons reported that: BCG and Ronald Baron had shared power to dispose or direct the disposition of 1,244,887 shares of WebMD Class A Common Stock, with BAMCO having shared dispositive power with respect to 1,200,697 of those shares, BGF having shared dispositive power with respect to 928,953 of those shares and BCM having shared dispositive power with respect to 44,190 of those shares; and that BCG and Ronald Baron had shared power to vote or direct the voting of 1,115,833 shares of WebMD Class A Common Stock, with BAMCO having shared voting power with respect to 1,071,643 of those shares, BGF having shared voting power with respect to 928,953 of those shares and BCM having shared voting power with respect to 44,190 of those shares. | |
(6) | The information shown with respect to WebMD Class A Common Stock is as of April 30, 2009 and is based upon information disclosed by FMR LLC, Fidelity Management and Research Company and Edward C. Johnson, 3d in a Schedule 13G filed with the SEC. Such persons reported that the members of the filing group, had, as of April 30, 2009, sole power to dispose of or to direct the disposition of 982,524 shares of WebMD Class A Common Stock. Such persons also reported that the members of the filing group, other than Fidelity Management and Research Company, had, as of April 30, 2009, sole power to dispose of or to direct the disposition of and sole power to vote 55,830 shares of WebMD Class A Common Stock through Pyramis Global Advisors, LLC. The information shown with respect to HLTH Common Stock is as of March 9, 2009 and is based on a Schedule 13G filed with the SEC. For additional information, see footnote 4 to the table entitled “Security Ownership of Certain HLTH Beneficial Owners and HLTH Management.” | |
(7) | Represents 12,753 shares of Class A Common Stock and 33,000 Option Shares held by Dr. Adler and 1,100 unvested shares of WebMD Restricted Stock granted to Dr. Adler. | |
(8) | Represents 18,250 shares of Class A Common Stock and 33,000 Option Shares held by Mr. Dimick and 1,100 unvested shares of WebMD Restricted Stock granted to Mr. Dimick. | |
(9) | Represents 55,703 shares of Class A Common Stock and 220,000 Option Shares held by Mr. Gattinella and 73,750 unvested shares of WebMD Restricted Stock granted to Mr. Gattinella. | |
(10) | Represents 17,675 shares of Class A Common Stock and 33,000 Option Shares held by Mr. Keller and 1,100 unvested shares of WebMD Restricted Stock granted to Mr. Keller. | |
(11) | Represents 56,939 shares of Class A Common Stock and 33,000 Option Shares held by Mr. Manning and 1,100 unvested shares of WebMD Restricted Stock granted to Mr. Manning. | |
(12) | Represents 13,693 shares of Class A Common Stock and 33,000 Option Shares held by Dr. Moossa and 1,100 unvested shares of WebMD Restricted Stock granted to Dr. Moossa. | |
(13) | Represents 4,138 shares of Class A Common Stock and 37,500 Option Shares held by Dr. Pence and 31,250 unvested shares of WebMD Restricted Stock granted to Dr. Pence. | |
(14) | Represents 23,791 shares of Class A Common Stock and 33,000 Option Shares held by Mr. Trotman, 15,500 shares of Class A Common Stock held by the Stanley S. Trotman, Jr. Irrevocable Trust and 1,100 unvested shares of WebMD Restricted Stock granted to Mr. Trotman. | |
(15) | Represents 45,900 shares of Class A Common Stock and 176,000 Option Shares held by Mr. Vuolo and 60,000 unvested shares of WebMD Restricted Stock granted to Mr. Vuolo. | |
(16) | Represents 414,936 shares of Class A Common Stock and 220,000 Option Shares held by Mr. Wygod, 4,000 shares of Class A Common Stock held by The Emily Wygod Trust u/t/a/d12-31-1987 (as to which shares, Mr. Wygod disclaims beneficial ownership), 3,521 shares of Class A Common Stock held by The Max Wygod Trust u/t/a/d12-31-1987 (as to which shares, Mr. Wygod disclaims beneficial ownership), and 73,750 unvested shares of WebMD Restricted Stock granted to Mr. Wygod. |
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• | forwarded to the addressees or distributed at the next scheduled Board meeting; or | |
• | if they relate to financial or accounting matters, forwarded to the Audit Committee or discussed at the next scheduled Audit Committee meeting; or | |
• | if they relate to the recommendation of the nomination of an individual, forwarded to the Nominating Committee or discussed at the next scheduled Nominating Committee meeting; or | |
• | if they relate to the operations of WebMD, forwarded to the appropriate officers of WebMD, and the response or other handling reported to the Board at the next scheduled Board meeting. |
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• | oversight of WebMD’s executive compensation program and WebMD’s incentive and equity compensation plans; | |
• | determination of compensation levels for and grants of incentive and equity-based awards to WebMD’s executive officers and the terms of any employment agreements with them; | |
• | determination of compensation levels for non-employee directors; and | |
• | review of and making recommendations regarding other matters relating to WebMD’s compensation practices. |
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• | identifying individuals qualified to become WebMD Board members; | |
• | recommending to the WebMD Board the director nominees for each Annual Meeting of Stockholders; and | |
• | recommending to the WebMD Board candidates for filling vacancies that may occur between Annual Meetings. |
• | the amount and type of the potential nominee’s managerial and policy-making experience in complex organizations and whether any such experience is particularly relevant to WebMD; | |
• | any specialized skills or experience that the potential nominee has and whether such skills or experience are particularly relevant to WebMD; | |
• | in the case of non-employee directors, whether the potential nominee has sufficient time to devote to service on the WebMD Board and the nature of any conflicts of interest or potential conflicts of interest arising from the nominee’s existing relationships; | |
• | in the case of non-employee directors, whether the nominee would be an independent director and would be considered a “financial expert” or to have “financial sophistication” under applicable SEC rules and the listing standards of The Nasdaq Global Select Market; | |
• | in the case of potential new members, whether the nominee assists in achieving a mix of WebMD Board members that represents a diversity of background and experience, including with respect to age, gender, race, areas of expertise and skills; and | |
• | in the case of existing members, the nominee’s contributions as a member of the WebMD Board during his or her prior service. |
• | evaluating and making recommendations to the WebMD Board regarding matters relating to the governance of WebMD; | |
• | assisting the WebMD Board in coordinating the activities of the WebMD Board’s other standing committees, including with respect to WebMD’s compliance programs and providing additional oversight of those compliance programs; and | |
• | providing oversight of senior executive recruitment and management development. |
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• | oversight of transactions between WebMD and HLTH; and | |
• | oversight of other matters in which the interests of WebMD and HLTH conflict or may potentially conflict. |
• | Special Committee with Respect to Proposed 2008 Merger. Messrs. Stanley S. Trotman, Jr. and Jerome C. Keller (two non-management members of the WebMD Board who do not serve on HLTH’s Board of Directors) were members of the 2008 Special Committee formed in October 2007 to evaluate the HLTH Merger and negotiate with HLTH regarding its terms. Following the termination of the HLTH Merger in October 2008, the 2008 Special Committee was disbanded. | |
• | 2009 Special Committee. Messrs. Stanley S. Trotman, Jr. and Jerome C. Keller were members of a special committee formed in May 2009 to evaluate the merger of HLTH and WebMD that is the subject of WebMD Proposal 1 above and to negotiate with HLTH regarding its terms. | |
• | Strategic Planning Committee. Dr. Adler and Messrs. Dimick, Keller, Manning Trotman and Wygod are members of a Strategic Planning Committee of the Board, which was formed in May 2008 and meets informally between regularly scheduled Board meetings regarding strategic planning and related matters. | |
• | Stock Repurchase Committee. Messrs. Keller and Trotman are members of a committee of the Board, formed in December 2008, that is authorized to make determinations relating to repurchases of WebMD Class A Common Stock. |
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• | annual fees for service on the WebMD Board and its standing committees, paid in the form of shares of WebMD Class A Common Stock; | |
• | grants of non-qualified options to purchase WebMD Class A Common Stock; and | |
• | cash fees for service on the Strategic Planning Committee of the WebMD Board. |
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Cash Fees for | ||||||||||||||||
Strategic Planning | ||||||||||||||||
Stock Awards | Option Awards | Committee Service | Total | |||||||||||||
Name | ($)(1) | ($)(2)(3) | ($)(4) | ($) | ||||||||||||
Mark J. Adler, M.D.(5) | 57,089 | 168,184 | 3,750 | 229,023 | ||||||||||||
Neil F. Dimick(5) | 82,089 | 168,184 | 3,750 | 254,023 | ||||||||||||
Jerry C. Keller | 39,589 | 168,184 | 3,750 | 211,523 | ||||||||||||
James V. Manning(5) | 74,589 | 168,184 | 3,750 | 246,523 | ||||||||||||
A. R. Moossa, M.D. | 59,589 | 168,184 | — | 227,773 | ||||||||||||
Stanley S. Trotman, Jr. | 84,589 | 168,184 | 3,750 | 256,523 |
(1) | On September 28, 2008 (the anniversary of WebMD’s 2005 initial public offering), WebMD issued shares of WebMD Class A Common Stock to the WebMD Non-Employee Directors in payment of annual fees for service on the WebMD Board and its standing committees. These shares are not subject to vesting requirements or forfeiture. For each WebMD Non-Employee Director, the number of shares to be issued was determined by dividing the aggregate dollar amount of the fees payable to such WebMD Non-Employee Director (see “— Annual Fees” below) by $32.75 (the closing price of WebMD Class A Common Stock on the Nasdaq Global Select Market on September 26, 2008, the last trading day prior to the anniversary of WebMD’s initial public offering on September 28, 2008, which fell on a Sunday), with cash paid in lieu of issuing fractional shares. Dr. Adler received 1,450 shares of WebMD Class A Common Stock; Mr. Dimick received 2,213 shares; Mr. Keller received 916 shares; Mr. Manning received 1,984 shares; Dr. Moossa received 1,526 shares; and Mr. Trotman received 2,290 shares. In addition, this column includes $9,589 for each individual, which reflects the aggregate dollar amounts recognized by WebMD in 2008 for income statement reporting purposes under SFAS 123R (based on the methodology and assumptions referred to in Footnote 2 below), for grants of WebMD Restricted Stock made to these directors at the time of WebMD’s initial public offering. That amount reflects WebMD’s accounting expense for these WebMD Restricted Stock awards, not amounts realized by the WebMD Non-Employee Directors. The actual amounts, if any, ultimately realized by the WebMD Non-Employee Directors from WebMD Restricted Stock will depend on the price of WebMD Class A Common Stock at the time the WebMD Restricted Stock vests. | |
(2) | The amounts reported in Column (c) above reflect the aggregate dollar amounts recognized by WebMD in 2008 for stock option awards for income statement reporting purposes under SFAS 123R, (disregarding any estimate of forfeitures related to service-based vesting conditions). See Note 13 (Stock-Based Compensation Plans) to the WebMD Consolidated Financial Statements included inAnnex C-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock option awards granted. The amounts reported in Column (c) reflect WebMD’s accounting expense for these stock option awards, not amounts realized by WebMD Non-Employee Directors. The actual amounts, if any, ultimately realized by WebMD Non-Employee Directors from WebMD stock options will depend on the price of WebMD Class A Common Stock at the time they exercise vested stock options. |
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(3) | Under WebMD’s Amended and Restated 2005 Long-Term Incentive Plan (which we refer to as the WebMD 2005 Plan), each WebMD Non-Employee Director automatically receives a non-qualified option to purchase 13,200 shares of WebMD Class A Common Stock on each January 1, with an exercise price equal to the closing price on the last trading date of the prior year. In addition, each WebMD Non-Employee Director received, pursuant to a discretionary grant made on December 10, 2008, a non-qualified option to purchase 13,200 shares of WebMD Class A Common Stock. The grants made on January 1, 2008 each had an exercise price of $41.07 per share and a total grant date fair value equal to $183,939 and the grants made on December 10, 2008 each had an exercise price of $23.61 and a total grant date fair value equal to $133,440 (the fair value, in each case, being based on the methodology and assumptions referred to in Footnote 2 above). The vesting schedule for all such grants is 25% of the original amount granted on each of the first, second, third and fourth anniversaries of the date of grant. The following lists the total number of shares of WebMD Class A Common Stock subject to outstanding unexercised option awards held by each WebMD Non-Employee Director as of December 31, 2008 and the weighted average exercise price of those options: |
Number of Shares Subject | Weighted Average | |||||||
Name | to Outstanding Options | Exercise Price | ||||||
Mark J. Adler, M.D. | 66,000 | $ | 30.25 | |||||
Neil F. Dimick | 66,000 | $ | 30.25 | |||||
Jerry C. Keller | 66,000 | $ | 30.25 | |||||
James V. Manning | 66,000 | $ | 30.25 | |||||
A.R. Moossa, M.D. | 66,000 | $ | 30.25 | |||||
Stanley S. Trotman, Jr. | 66,000 | $ | 30.25 |
See “— Option Grants” below for additional information. In addition, each of WebMD’s Non-Employee Directors held 1,100 shares of unvested WebMD Restricted Stock that were granted in September 2005 at the time of WebMD’s initial public offering. | ||
(4) | The amounts in Column (d) reflect fees for service on the Strategic Planning Committee. See “WebMD Corporate Governance — Committees of the WebMD Board of Directors — Other Committees — Strategic Planning Committee” above. In addition, each WebMD Non-Employee Directors held 1,100 shares of unvested WebMD Restricted Stock that were granted in September 2005 at the time of WebMD’s initial public offering. | |
(5) | These three WebMD Non-Employee Directors are also non-employee directors of HLTH, for which they received compensation from HLTH. For information regarding the compensation they received from HLTH, see below under “— Compensation for Service on HLTH Board.” |
• | an annual retainer for service on the WebMD Board; | |
• | annual fees for service on standing Committees of the WebMD Board; and | |
• | annual fees, if any, for serving as Chairperson of standing Committees of the WebMD Board. |
Type of Service | Annual Fee | |||
Membership on Audit Committee(Messrs. Dimick, Manning and Trotman) | $ | 15,000 | ||
Membership on Compensation Committee(Dr. Adler, Dr. Moossa and Mr. Trotman)or Nominating Committee(Messrs. Dimick and Trotman and Dr. Moossa) | $ | 5,000 | ||
Membership on Governance & Compliance Committee(Dr. Adler and Messrs. Dimick and Manning)or Related Parties Committee(Dr. Moossa and Messrs. Keller and Trotman) | $ | 10,000 | ||
Chairperson of Compensation Committee(Dr. Adler)or Nominating Committee(Mr. Dimick) | $ | 2,500 | ||
Chairperson of Audit Committee(Mr. Manning), Governance & Compliance Committee(Mr. Dimick)or Related Parties Committee(Mr. Trotman) | $ | 10,000 |
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(a) | (b) | (c) | (d) | |||||||||
Fees Earned or | Option | |||||||||||
Paid in Cash | Awards | Total | ||||||||||
Name | ($)(1) | ($)(2)(3) | ($) | |||||||||
Mark J. Adler, M.D. | 62,500 | 61,686 | 124,186 | |||||||||
Neil F. Dimick | 57,500 | 61,686 | 119,186 | |||||||||
James V. Manning | 80,000 | 61,686 | 141,686 |
(1) | The dollar amounts of the fees payable for HLTH Board service and for service on standing Committees of the HLTH Board are the same as those applicable to the WebMD Board and its standing Committees (expressed in dollars), as described above. The amounts in Column (b) also include, with respect to Dr. Adler and Mr. Manning, $15,000 for their service in 2008 as members of a special committee of the HLTH Board to oversee matters relating to the investigations described in “Commitments and Contingencies — Legal Proceedings — Department of Justice and SEC Investigations of HLTH” in Note 11 to the WebMD Consolidated Financial Statements included inAnnex C-1 to this joint proxy statement/prospectus. | |
(2) | The amounts reported in Column (c) above reflect the aggregate dollar amounts recognized by HLTH in 2008 for stock option awards for income statement reporting purposes under SFAS 123R (disregarding any estimate of forfeitures related to service-based vesting conditions). See Note 15 (Stock-Based Compensation Plans) to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock option awards granted. The amounts reported in Column (c) reflect HLTH’s accounting expense for these stock option awards, not amounts realized by the individuals listed in the table. The actual amounts, if any, ultimately realized by these individuals from HLTH stock options will depend on the price of HLTH Common Stock at the time they exercise vested stock options. | |
(3) | Under HLTH’s 2000 Long-Term Incentive Plan (which we refer to as the HLTH 2000 Plan), each non-employee director of HLTH automatically receives, on each January 1, a non-qualified option to purchase 20,000 shares of HLTH Common Stock with an exercise price equal to the closing price on the last trading date of the prior year. In addition, each non-employee director of HLTH received, pursuant to a discretionary grant made on December 10, 2008, a non-qualified option to purchase 20,000 shares of HLTH Common Stock. The grants made on January 1, 2008 each had an exercise price of $13.40 per share and a total grant date fair value equal to $78,398 and the grants made on December 10, 2008 each had an exercise price of $9.46 per share and a total grant date fair value equal to $56,872 (the fair value, in each case, being based on the methodology and assumptions referred to in Footnote 2 above). The vesting schedule for all such grants is as follows: 1/4 of the grant on the first anniversary of the date of grant and 1/48 of the grant on a monthly basis over the next three years (full vesting on the fourth anniversary of the date of grant). The following lists the total number of shares of HLTH Common Stock subject to outstanding unexercised option awards held by the listed individuals as of December 31, 2008 and the weighted average exercise price of those options: |
Number of Shares Subject | Weighted Average | |||||||
Name | to Outstanding Options | Exercise Price | ||||||
Mark J. Adler, M.D. | 276,000 | $ | 10.35 | |||||
Neil F. Dimick | 97,916 | $ | 10.48 | |||||
James V. Manning | 288,000 | $ | 9.24 |
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• | 2008 Report of the WebMD Compensation Committee. This section contains a report of the Compensation Committee of the WebMD Board of Directors regarding the “— Compensation Discussion and Analysis” section described below. The material in the 2008 Report of the WebMD Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this joint proxy statement/prospectus into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that WebMD specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. | |
• | Compensation Committee Interlocks and Insider Participation. This section contains information regarding certain types of relationships involving members of the WebMD Compensation Committee. | |
• | Compensation Discussion and Analysis. This section contains a description of the specific types of compensation that WebMD pays, a discussion of WebMD’s compensation policies, information regarding how those policies were applied to the compensation of the WebMD Named Executive Officers for 2008 and other information that we believe may be useful to investors regarding compensation of the WebMD Named Executive Officers and other employees. | |
• | Executive Compensation Tables. This section provides information, in tabular formats specified in applicable SEC rules, regarding the amounts or value of various types of compensation paid to the WebMD Named Executive Officers and related information. | |
• | Potential Payments and Other Benefits Upon Termination or Change in Control. This section provides information regarding amounts that could become payable to the WebMD Named Executive Officers following specified events. | |
• | Employment Agreements with the WebMD Named Executive Officers. This section contains summaries of the employment agreements between the WebMD Named Executive Officers and WebMD, HLTH or their subsidiaries. We refer to these summaries in various other places in this WebMD Executive Compensation section. |
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A. R. Moossa, M.D.
Stanley S. Trotman, Jr.
• | cash salary; | |
• | an annual cash bonus, the amount of which was determined, for 2008, by the WebMD Compensation Committee in its discretion (or, with respect to Messrs. Wygod and Funston, by the HLTH Compensation Committee); | |
• | grants of options to purchase shares of WebMD Class A Common Stock, subject to vesting based on continued employment, with an exercise price that is equal to the fair market value of WebMD Class A Common Stock on the grant date (and, in some cases, options to purchase shares of HLTH Common Stock, with an exercise price that is equal to the fair market value of HLTH Common Stock on the grant date); and | |
• | grants of shares of WebMD Restricted Stock, subject to vesting based on continued employment (and, in some cases, grants of shares of HLTH Restricted Stock, subject to vesting based on continued employment). |
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• | Competitive with the market in order to help attract, motivate and retain highly qualified managers and executives. WebMD seeks to attract and retain talent by offering competitive base salaries, annual incentive opportunities, and the potential for long-term rewards through equity-based awards, such as stock options and restricted stock. WebMD has, in the past, granted and may continue to grant equity-based awards to a large portion of WebMD’s employees, not just its executives. Those awards have been primarily in the form of non-qualified options to purchase WebMD Class A Common Stock. | |
• | Performance-based to link executive pay to company performance over the short term and long term and to facilitate shareholder value creation. It is WebMD’s practice to provide compensation opportunities in addition to base salary that are linked to WebMD’s performance and the individual’s performance. Achievement of short-term goals is rewarded through annual cash bonuses, while achievement of long-term objectives is encouraged through nonqualified stock option grants and restricted stock awards that are subject to vesting over periods generally ranging from three to four years. Through annual and long-term incentives, a major portion of the total potential compensation of WebMD’s executive officers (and other members of senior management) is placed at risk in order to motivate them to improve the performance of WebMD’s businesses and to increase the value of the company. | |
• | Designed to foster a long-term commitment by management. The WebMD Compensation Committee believes that there is great value to WebMD in having a team of long-tenured, seasoned executives and managers. WebMD’s compensation practices are designed to foster a long-term commitment to WebMD by its management team. The vesting schedules attributable to equity grants are typically 3 to 4 years. |
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• | the amounts of the annual bonuses for 2008 (and, with respect to Messrs. Gattinella and Vuolo and Dr. Pence, the amounts contributed to the Supplemental Bonus Plan) that were approved by the Compensation Committees in February 2009, as more fully described below under “— Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “— Supplemental Bonus Plan (SBP)” and “— Bonus Paid by HLTH to the WebMD Named Executive Officers”; and |
• | the size and terms of the equity grants that were approved by the Compensation Committees in December 2008, as more fully described below under “— Use of Specific Types of Compensation in 2008 — Equity Compensation”. |
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• | goals of any type set by the WebMD Board and communicated to senior management at any point in the year; | |
• | the effects of acquisitions and dispositions of businesses made during the year; and | |
• | the effects of unexpected events and changes in WebMD’s businesses during the year. |
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Target Annual | Target Annual | |||||||||||||
Annual | Bonus | Bonus Amount as | ||||||||||||
Named Executive Officer | Title | Salary | Opportunity | a Percent of Salary | ||||||||||
Wayne T. Gattinella | Chief Executive Officer and President | $ | 560,000 | $ | 560,000 | 100 | % | |||||||
Anthony Vuolo | Chief Operating Officer | $ | 450,000 | $ | 450,000 | 100 | % | |||||||
William Pence | Executive Vice President & Chief Technology Officer | $ | 375,000 | $ | 131,300 | 35 | % |
Sum of 2008 Annual | Sum of 2007 Annual | |||||||||||||||||
Bonus and SBP Award | Bonus and SBP Award | |||||||||||||||||
Named Executive Officer | Title | Amount | % of Target | Amount | % of Target | |||||||||||||
Wayne T. Gattinella | Chief Executive Officer and President | $ | 270,000 | 48 | % | $ | 270,000 | 48 | % | |||||||||
Anthony Vuolo | Chief Operating Officer | $ | 250,000 | 56 | % | $ | 250,000 | 56 | % | |||||||||
William Pence | Executive Vice | $ | 110,000 | 84 | % | $ | 75,000 | n/a | ||||||||||
President & Chief | ||||||||||||||||||
Technology Officer |
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Target Annual | Target Annual | |||||||||||||
Annual | Bonus | Bonus Amount as | ||||||||||||
Named Executive Officer | Title | Salary | Opportunity | a Percent of Salary | ||||||||||
Martin J. Wygod | Chairman of the Board and Acting CEO of HLTH and Chairman of the Board of WebMD | $ | 975,000 | $ | 975,000 | 100 | % | |||||||
Mark D. Funston | Executive Vice President and Chief Financial Officer of HLTH and of WebMD | $ | 375,000 | $ | 187,000 | 50 | % |
2008 Annual Bonus | 2007 Annual Bonus | |||||||||||||||||
Named Executive Officer | Title | Amount | % of Target | Amount | % of Target | |||||||||||||
Martin J. Wygod | Chairman of the Board and Acting CEO of HLTH and Chairman of the Board of WebMD | $ | 1,500,000 | 154 | % | $ | 520,000 | 53 | % | |||||||||
Mark D. Funston | Executive Vice President and Chief Financial Officer of HLTH and of WebMD | $ | 130,000 | 70 | % | $ | 100,000 | 53 | % | |||||||||
Anthony Vuolo | Chief Operating Officer of WebMD | $ | 250,000 | n/a | n/a | n/a |
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• | HLTH’s sales of its ViPS business for approximately $223 million (net of expenses and a working capital adjustment) and its 48% ownership interest in Emdeon Business Services for approximately $575 million (net of expenses); | |
• | the ongoing sale process with respect to HLTH’s Porex business; | |
• | the terminated merger between HLTH and WebMD (see “Certain Relationships and Related Transactions of WebMD — Transactions with HLTH — Termination Agreement” below); and | |
• | a cash tender offer completed by HLTH in late November 2008, pursuant to which HLTH repurchased 83,699,922 shares of its Common Stock at a price of $8.80 per share (which represented approximately 45% of the outstanding shares of HLTH Common Stock immediately prior to the tender offer). |
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• | continuation of cash compensation (including salary and, in some cases, an amount based on past bonuses) for a period following termination; | |
• | continuation of vestingand/or exercisability of some or all options or restricted stock; and | |
• | continued participation in certain of WebMD’s health and welfare insurance plans or payment of COBRA premiums. |
• | In the case of Mr. Gattinella, his employment agreement provides that, so long as he remains employed for one year following a change in control of WebMD, his options to purchase WebMD Class A Common Stock granted on December 10, 2008 would continue to vest until the second anniversary of the change in control, even if he resigns from the employ of WebMD prior to such vesting date. In addition, that portion of the restricted stock grant made on December 10, 2008 that would have vested through the second anniversary of the change in control would become vested on the date of his resignation. | |
• | With respect to Mr. Vuolo, his employment agreement includes terms providing that he would be able to resign following a change in control, (a) after the completion of a six month transition period with the successor, and receive the same benefits that he would be entitled to upon a termination without cause following the change in control (as set forth in the tables below and the description of his employment agreement that follows) or (b) in the case of the December 2008 equity grants from HLTH and WebMD, after the completion of a one year transition period, in which event (i) the options granted in December 2008 would continue to vest until the second anniversary of the change in control and (ii) that portion of the WebMD Restricted Stock granted in December 2008 that would have vested through the second anniversary of the change in control would become vested on the date of his resignation. | |
• | Mr. Wygod’s employment agreement includes terms providing that if there is a change in control of HLTH, all of his outstanding options and other equity compensation (including WebMD equity) would become immediately vested and, if his employment terminates for any reason other than cause, the options would remain exercisable for the remainder of the originally scheduled term. If there is a |
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change in control of WebMD only, WebMD equity granted to him will accelerate on that date. The employment agreement also contains provisions providing that he may resign after a change in control of HLTH only and receive severance payments. |
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• | Summary Compensation Table, which presents information regarding each individual’s total compensation and the types and value of its components; and | |
• | three tables providing additional information regarding equity compensation, entitled: Grants of Plan-Based Awards in 2008; Outstanding Equity Awards at End of 2008; and Option Exercises and Stock Vested in 2008. |
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
Stock | Option | All Other | ||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Total | |||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($)(1) | ($)(2) | ($)(2) | ($) | ($) | |||||||||||||||||||||
Wayne T. Gattinella | 2008 | 560,000 | 135,000 | 138,791 | W | 326,598 | W | 9,758 | (3) | 1,170,147 | ||||||||||||||||||
Chief Executive Officer and President | ||||||||||||||||||||||||||||
2007 | 560,000 | 135,000 | 7,457 | H | 84,850 | H | 9,214 | (3) | 1,564,682 | |||||||||||||||||||
229,931 | W | 538,230 | W | |||||||||||||||||||||||||
237,388 | 623,080 | |||||||||||||||||||||||||||
2006 | 560,000 | 340,000 | 46,977 | H | 229,800 | H | 8,313 | (3) | 2,585,752 | |||||||||||||||||||
439,809 | W | 960,853 | W | |||||||||||||||||||||||||
486,786 | 1,190,653 | |||||||||||||||||||||||||||
Anthony Vuolo | 2008 | 450,000 | 375,000 | (4) | 111,349 | W | 7,191 | H | 17,704 | (5) | 1,223,063 | |||||||||||||||||
Chief Operating Officer | 261,819 | W | ||||||||||||||||||||||||||
269,010 | ||||||||||||||||||||||||||||
2007 | 450,000 | 125,000 | 7,457 | H | 84,850 | H | 16,610 | (5) | 1,298,445 | |||||||||||||||||||
183,944 | W | 430,584 | W | |||||||||||||||||||||||||
191,401 | 515,434 | |||||||||||||||||||||||||||
2006 | 450,000 | 700,000 | (6) | 46,977 | H | 229,800 | H | 16,079 | (5) | 2,563,385 | ||||||||||||||||||
351,847 | W | 768,682 | W | |||||||||||||||||||||||||
398,824 | 998,482 | |||||||||||||||||||||||||||
Mark D. Funston | 2008 | 375,000 | 130,000 | 176,625 | H | 190,360 | H | 7,930 | (7) | 888,018 | ||||||||||||||||||
Executive VP and Chief Financial Officer | 8,103 | W | ||||||||||||||||||||||||||
198,463 | ||||||||||||||||||||||||||||
2007 | 375,000 | 100,000 | 173,881 | H | 182,503 | H | 169,948 | (7) | 1,001,332 | |||||||||||||||||||
2006 | (8) | 46,875 | 35,000 | 22,867 | H | 24,000 | H | 526 | (7) | 129,268 | ||||||||||||||||||
William Pence | 2008 | 375,000 | 55,000 | 287,210 | W | 660,723 | W | 4,360 | (9) | 1,382,293 | ||||||||||||||||||
Executive VP and Chief Technology Officer | ||||||||||||||||||||||||||||
Martin J. Wygod | 2008 | 975,000 | 1,500,000 | 1,669,304 | H | 1,843,880 | H | 10,847 | (10) | 6,464,420 | ||||||||||||||||||
Chairman of the Board | 138,791 | W | 326,598 | W | ||||||||||||||||||||||||
1,808,095 | 2,170,478 | |||||||||||||||||||||||||||
2007 | 975,000 | 520,000 | 1,623,018 | H | 1,813,757 | H | 10,847 | (10) | 5,710,783 | |||||||||||||||||||
229,931 | W | 538,230 | W | |||||||||||||||||||||||||
1,852,949 | 2,351,987 | |||||||||||||||||||||||||||
2006 | 975,000 | 3,530,000 | (11) | 629,691 | H | 709,598 | H | 10,847 | (10) | 7,255,798 | ||||||||||||||||||
439,809 | W | 960,853 | W | |||||||||||||||||||||||||
1,069,500 | 1,670,451 |
(1) | See “— Background Information Regarding the Summary Compensation Table — Supplemental Bonus Plan (SBP)” below for a description of contributions made to a Supplemental Bonus Trust on behalf of Mr. Gattinella and Vuolo and Dr. Pence, but not reflected in this table since such contributions are subject to forfeiture during the periods covered by this table. | |
(2) | The amounts reported in Columns (e) and (f) above reflect the aggregate dollar amounts recognized by WebMD or HLTH for stock awards and option awards for income statement reporting purposes under SFAS 123R (disregarding any estimate of forfeitures |
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related to service-based vesting conditions). See Note 13 (Stock-Based Compensation) to the WebMD Consolidated Financial Statements included inAnnex C-1 to this joint proxy statement/prospectus and Note 15 (Stock-Based Compensation) to the HLTH Consolidated Financial Statements included inAnnex B-1 to this joint proxy statement/prospectus for an explanation of the methodology and assumptions used in determining the fair value of stock and stock option awards granted. The amounts reported in Columns (e) and (f) reflect the accounting expense for these equity awards, not amounts realized by the WebMD Named Executive Officers. The actual amounts, if any, ultimately realized by the WebMD Named Executive Officers from equity compensation will depend on the price of WebMD Class A Common Stock (or the price of HLTH Common Stock in the case of HLTH equity awards) at the time they exercise vested stock options or at the time of vesting of restricted stock. Holders of shares of WebMD Restricted Stock and HLTH Restricted Stock have voting power and the right to receive dividends, if any, that are declared on those shares, but their ability to sell those shares is subject to vesting requirements based on continued employment. | ||
(3) | For 2008, consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $2,322 for company-paid group term life insurance. For 2007, consists of: (a) $2,906 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $2,322 for company-paid group term life insurance. For 2006, consists of: (a) $3,085 in company matching contributions under the HLTH 401(k) Plan; (b) $3,986 for company-paid supplemental disability insurance; and (c) $1,242 for company-paid group term life insurance. | |
(4) | Includes an annual bonus for 2008 of $125,000 paid by WebMD and a bonus of $250,000 paid by HLTH for services he provided to HLTH during 2008 outside his responsibilities as an officer of WebMD, including services in connection with HLTH’s divestitures and tender offer during 2008. | |
(5) | For 2008, consists of: (a) $4,462 for company-paid supplemental disability insurance; (b) $1,242 for company-paid group term life insurance; and (c) an automobile allowance of $12,000. For 2007, consists of: (a) $3,368 for company-paid supplemental disability insurance; (b) $1,242 for company-paid group term life insurance; and (c) an automobile allowance of $12,000. For 2006, consists of: (a) $3,269 for company-paid supplemental disability insurance; (b) $810 for company-paid group term life insurance; and (c) an automobile allowance of $12,000. | |
(6) | Includes an annual bonus for 2006 of $250,000 paid by WebMD and special bonus of $450,000 paid by HLTH for services during 2006 to HLTH outside his responsibilities as an officer of WebMD, including in connection with HLTH’s sales, in 2006, of Emdeon Practice Services and of a 52% interest in Emdeon Business Services. | |
(7) | For 2008, consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) $3,570 for company-paid supplemental disability insurance; (c) a $100 gift card (an incentive for employees who completed a WebMD Health Manager online questionnaire); and (d) $810 for company-paid group term life insurance. For 2007, consists of: (a) $3,338 in company matching contributions under the HLTH 401(k) Plan; (b) $3,570 for company-paid supplemental disability insurance; (c) $810 for company-paid group term life insurance; and (d) $88,545 for reimbursement of relocation costs plus $73,685 for reimbursement of amounts required to pay income taxes resulting from the payment for such relocation costs. For 2006, consists of: (a) $433 in company matching contributions under the HLTH 401(k) Plan; and (b) $93 for company-paid group term life insurance. | |
(8) | The information for 2006 reflects compensation beginning in mid-November 2006, when Mr. Funston joined HLTH. | |
(9) | Consists of: (a) $3,450 in company matching contributions under the HLTH 401(k) Plan; (b) a $100 gift card (an incentive for employees who completed a WebMD Health Manager online questionnaire); and (c) $810 for company-paid group term life insurance. | |
(10) | For each of 2008, 2007 and 2006, consists of: (a) $3,989 for company-paid supplemental disability insurance; and (b) $6,858 for company-paid group term life insurance. | |
(11) | Includes 2006 annual bonus of $780,000 paid by HLTH and a special bonus of $2,750,000 paid by HLTH in recognition of the completion of the sales of Emdeon Practice Services and of a 52% interest in Emdeon Business Services in 2006 and the related repositioning of HLTH. |
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||
All Option Awards: | ||||||||||||||||||||||||
All Stock Awards: | Number of | Exercise or Base | Grant Date Fair | |||||||||||||||||||||
Number of Shares of | Securities | Price of Option | Value of Stock and | |||||||||||||||||||||
Approval | Grant | Stock | Underlying Options | Awards | Option Awards | |||||||||||||||||||
Name | Date | Date | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||
Wayne T. Gattinella | 12/10/08 | 12/10/08 | 60,000 | (W) | 240,000 | (W) | 23.61 | 3,842,784 | ||||||||||||||||
Anthony Vuolo | 12/10/08 | 12/10/08 | — | 180,000 | (H) | 9.46 | 500,310 | |||||||||||||||||
12/10/08 | 12/10/08 | 49,000 | (W) | 196,000 | (W) | 23.61 | 3,138,274 | |||||||||||||||||
Mark D. Funston | 12/10/08 | 12/10/08 | 12,500 | (H) | 180,000 | (H) | 9.46 | 630,098 | ||||||||||||||||
12/10/08 | 12/10/08 | — | 60,000 | (W) | 23.61 | 606,546 | ||||||||||||||||||
William Pence | 12/10/08 | 12/10/08 | 12,500 | (W) | 150,000 | (W) | 23.61 | 1,811,490 | ||||||||||||||||
Martin J. Wygod | 12/01/08 | 12/01/08 | 240,000 | (H) | 480,000 | (H) | 8.49 | 3,262,560 | ||||||||||||||||
12/10/08 | 12/10/08 | 60,000 | (W) | 240,000 | (W) | 23.61 | 3,842,784 |
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||||
Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||
Number of | Market | |||||||||||||||||||||||||||||||||||
Number of | Securities | Number of | Value of | |||||||||||||||||||||||||||||||||
Securities | Underlying | Shares of | Shares of | |||||||||||||||||||||||||||||||||
Underlying Unexercised | Unexercised | Option | Stock That | Stock | Stock That | |||||||||||||||||||||||||||||||
Options | Options | Exercise | Option | Option | Have Not | Award | Have Not | |||||||||||||||||||||||||||||
(#) | (#) | Price | Grant | Expiration | Vested | Grant | Vested | |||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | Date | (#) | Date | ($)(3) | ||||||||||||||||||||||||||||
Wayne T. Gattinella | (W | ) | — | 240,000 | (7) | 23.61 | 12/10/08 | 12/10/18 | 60,000 | (7) | 12/10/08 | 1,415,400 | ||||||||||||||||||||||||
(W | ) | 165,000 | 55,000 | (4) | 17.50 | 9/28/05 | 9/28/15 | 13,750 | (4) | 9/28/05 | 324,363 | |||||||||||||||||||||||||
(H | ) | 250,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 204,881 | — | 4.81 | 8/20/01 | 8/20/11 | — | — | — | |||||||||||||||||||||||||||
Anthony Vuolo | (W | ) | — | 196,000 | (7) | 23.61 | 12/10/08 | 12/10/18 | 49,000 | (7) | 12/10/08 | 1,155,910 | ||||||||||||||||||||||||
(H | ) | — | 180,000 | (4) | 9.46 | 12/10/08 | 12/10/18 | — | — | — | ||||||||||||||||||||||||||
(W | ) | 132,000 | 44,000 | (4) | 17.50 | 9/28/05 | 9/28/15 | 11,000 | (4) | 9/28/05 | 259,490 | |||||||||||||||||||||||||
(H | ) | 250,000 | — | 8.59 | 3/17/04 | 3/17/14 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 200,000 | — | 12.75 | 8/21/00 | 8/21/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 625,000 | — | 11.55 | 6/05/00 | 6/05/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 97,500 | — | 34.23 | 10/04/99 | 10/04/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 187,500 | — | 18.20 | 10/04/99 | 10/04/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 97,500 | — | 13.85 | 6/15/99 | 6/15/09 | — | — | — | |||||||||||||||||||||||||||
Mark D. Funston | (H | ) | — | 180,000 | (4) | 9.46 | 12/10/08 | 12/10/18 | 12,500 | (6) | 12/10/08 | 130,750 | ||||||||||||||||||||||||
(W | ) | — | 60,000 | (7) | 23.61 | 12/10/08 | 12/10/18 | — | — | — | ||||||||||||||||||||||||||
(H | ) | 90,000 | 90,000 | (4) | 11.60 | 11/13/06 | 11/13/16 | 30,000 | (4) | 11/13/06 | 313,800 | |||||||||||||||||||||||||
William Pence | (W | ) | — | 150,000 | (7) | 23.61 | 12/10/08 | 12/10/18 | 12,500 | (7) | 12/10/08 | 294,875 | ||||||||||||||||||||||||
(W | ) | 37,500 | 112,500 | (4) | 45.23 | 11/1/07 | 11/1/17 | 18,750 | (4) | 11/1/07 | 442,313 | |||||||||||||||||||||||||
Martin J. Wygod | (W | ) | — | 240,000 | (7) | 23.61 | 12/10/08 | 12/10/18 | 60,000 | (7) | 12/10/08 | 1,415,400 | ||||||||||||||||||||||||
(H | ) | — | 480,000 | (4) | 8.49 | 12/01/08 | 12/01/18 | 240,000 | (4) | 12/01/08 | 2,510,400 | |||||||||||||||||||||||||
(H | ) | 540,000 | 360,000 | (5) | 11.86 | 10/23/06 | 10/23/16 | 120,000 | (5) | 10/23/06 | 1,255,200 | |||||||||||||||||||||||||
(H | ) | 175,000 | 300,000 | (4) | 8.77 | 1/27/06 | 1/27/16 | 50,000 | (6) | 1/27/06 | 523,000 | |||||||||||||||||||||||||
(W | ) | 165,000 | 55,000 | (4) | 17.50 | 9/28/05 | 9/28/15 | 13,750 | (4) | 9/28/05 | 324,363 | |||||||||||||||||||||||||
(H | ) | 3,000,000 | — | 12.75 | 8/21/00 | 8/21/10 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 585,000 | — | 13.85 | 6/15/99 | 6/15/09 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 22.90 | 7/01/98 | 7/01/13 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 15.50 | 7/01/97 | 7/01/12 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 14.80 | 7/01/96 | 7/01/11 | — | — | — | |||||||||||||||||||||||||||
(H | ) | 25,000 | — | 10.00 | 7/03/95 | 7/03/10 | — | — | — |
(1) | Each stock option grant reported in the table above was granted under, and is subject to, the WebMD 2005 Plan, the HLTH 2000 Plan, the HLTH 1996 Stock Plan or another plan or agreement that contains substantially the same terms. The option expiration date shown in Column (f) above is the normal expiration date, and the last date that the options may be exercised. For each WebMD Named Executive Officer, the unexercisable options shown in Column (c) above are also unvested. Unvested options are generally forfeited if the WebMD Named Executive Officer’s employment terminates, except to the extent otherwise provided in an employment agreement. For information regarding the effect on vesting of options of the death, disability or termination of employment of a WebMD Named Executive Officer or a change in control of HLTH or WebMD, see “— Potential Payments and Other Benefits Upon Termination of Employment or a Change in Control” below. The exercisable options shown in Column (b) above, and any unexercisable options shown in Column (c) above that subsequently become exercisable, will generally expire earlier than the normal |
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expiration date if the Named Executive Officer’s employment terminates, except as otherwise specifically provided in the WebMD Named Executive Officer’s employment agreement. For a description of the material terms of the WebMD Named Executive Officer’s employment agreements, see “— Employment Agreements with WebMD Named Executive Officers” below. | ||
(2) | Unvested shares of restricted stock are generally forfeited if the WebMD Named Executive Officer’s employment terminates, except to the extent otherwise provided in an employment agreement. The stock awards held by the WebMD Named Executive Officers are subject to accelerated or continued vesting in connection with a change in control of WebMD or HLTH, as the case may be, and upon certain terminations of employment, as described below in more detail under “— Employment Agreements with the WebMD Named Executive Officers” and “— Potential Payments and Other Benefits Upon Termination of Employment or a Change in Control.” Except as otherwise indicated in those sections, unvested stock awards will generally be forfeited if a WebMD Named Executive Officer’s employment terminates. | |
(3) | The market or payout value of stock awards reported in Column (i) is computed by multiplying the number of shares of stock reported in Column (g) by (A) $10.46, the closing market price of HLTH Common Stock on December 31, 2008 (the last trading day of 2008), for HLTH Restricted Stock, or (B) $23.59, the closing market price of WebMD Class A Common Stock on that date, for WebMD Restricted Stock. | |
(4) | Vesting schedule is: 25% of the original amount granted on each of first, second, third and fourth anniversaries of the date of the grant. | |
(5) | Vesting schedule is: 27% of the original amount granted on first anniversary of the date of the grant, 33% on second anniversary and 40% on third anniversary. | |
(6) | Vesting schedule is: 1/3 of the original amount granted on each of first, second and third anniversaries of the date of the grant. | |
(7) | Vesting schedule is: 25% of the original amount granted on March 31 of each of 2010, 2011, 2012 and 2013. |
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Value Realized on | Number of Shares | Value Realized on | |||||||||||||
Name | Acquired on Exercise (#) | Exercise ($)(1) | Acquired on Vesting (#) | Vesting ($)(2) | ||||||||||||
Wayne T. Gattinella | 35,000H | 125,526H | 13,750W | 450,313W | ||||||||||||
Anthony Vuolo | 160,000H | 1,340,389H | 11,000W | 360,250W | ||||||||||||
Mark D. Funston | — | — | 15,000H | 127,950H | ||||||||||||
William Pence | — | — | 6,250W | 144,438W | ||||||||||||
Martin J. Wygod | — | — | 149,000H | 1,379,760H | ||||||||||||
13,750W | 450,313W | |||||||||||||||
1,830,073 |
(1) | The dollar amounts shown in Column (c) above for option awards are determined by multiplying (i) the number of shares of HLTH Common Stock to which the exercise of the option related, by (ii) the difference between (1) the per-share closing price of HLTH Common Stock on the date of exercise (or, for any shares sold on the date of exercise, the actual sale price received) and (2) the exercise price of the options. | |
(2) | The dollar amounts shown in Column (e) above for stock awards are determined by multiplying the number of shares that vested by the per-share closing price of WebMD Class A Common Stock or HLTH Common Stock on the vesting date. |
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• | In the column entitled “Permanent Disability or Death,” the amounts reflect both provisions in those employment agreements and the fact that WebMD’s and HLTH’s equity plans generally provide for acceleration of vesting of awards in the event of a termination of employment as a result of death or disability. | |
• | Under their employment agreements, Messrs. Vuolo and Wygod are eligible to continue to participate in WebMD’s health and welfare plans (or comparable plans) for a specified period and Messrs. Funston and Gattinella and Dr. Pence are eligible to receive payment for their COBRA premiums for a specified period. In the row entitled “Health and Welfare Benefits Continuation,” the amounts are based upon the current average cost to WebMD of these benefits per employee and are net of amounts that the executives would continue to be responsible for. We have not made any reduction in the amounts in this row to reflect the fact that the obligation to continue benefits ceases in the event the executive becomes eligible for comparable coverage with a subsequent employer. |
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Termination of | ||||||||||||||||||||||||||||
Voluntary | Employment | |||||||||||||||||||||||||||
Termination | without “Cause” or | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | for “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | “Change in | Voluntary | Disability | Termination | without | “Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control”(1) | Termination | or Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(2) | 830,000 | -0- | -0- | 135,000 | (3) | -0- | 830,000 | 830,000 | ||||||||||||||||||||
Stock Options | 335,000 | 335,000 | -0- | 335,000 | -0- | 335,000 | 335,000 | |||||||||||||||||||||
Restricted Stock | -0- | 708,000 | -0- | 1,740,000 | -0- | -0- | 708,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 18,000 | -0- | -0- | -0- | -0- | 18,000 | 18,000 | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 1,183,000 | 1,043,000 | -0- | 2,210,000 | -0- | 1,183,000 | 1,891,000 |
(1) | In the event of a Change in Control of WebMD, the unvested portion of the options granted to Mr. Gattinella at the time of WebMD’s initial public offering would continue to vest until the next vesting date following the Change in Control, so long as he remains employed for 6 months following the Change in Control. In addition, in the event of a Change in Control of either WebMD or HLTH, the December 2008 option and restricted stock awards will continue to vest through the second anniversary of the Change in Control so long as he remains employed for one year following the Change in Control. However, for purposes of calculating the amounts included in the column entitled “Voluntary Termination in Connection with Change in Control” we treat such resignation as occurring on December 31, 2008 and assume that the requirement for the applicable transition period has been met. | |
(2) | Represents one year of salary and an annual bonus for 2008. We have assumed, solely for purposes of this table, that the amount of the annual bonus used for calculating the amounts in this line of the table, is $270,000, the amount of Mr. Gattinella’s actual cash bonus for 2007 (the year prior to the year of the assumed termination) together with the amount contributed on his behalf to the Supplemental Bonus Trust (for additional information, see “— Executive Compensation Tables — Background Information Regarding the Summary Compensation Table — Supplemental Bonus Plan (SBP)” above). | |
(3) | Represents the amount contributed in March 2008 on Mr. Gattinella’s behalf to the Supplemental Bonus Trust, which would be paid to him in the event of a termination of his employment, as of December 31, 2008, as a result of death or disability. |
Termination of | ||||||||||||||||||||||||||||
Voluntary | Employment | |||||||||||||||||||||||||||
Termination | without “Cause” or | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | for “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for “Good | “Change in | Voluntary | Disability | Termination | without | “Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control”(1) | Termination | or Death(2) | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(3) | 1,300,000 | 1,300,000 | -0- | 1,425,000 | -0- | 1,300,000 | 1,300,000 | |||||||||||||||||||||
Stock Options | 268,000 | 358,000 | -0- | 448,000 | -0- | 268,000 | 358,000 | |||||||||||||||||||||
Restricted Stock | -0- | 578,000 | -0- | 1,415,000 | -0- | -0- | 578,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 68,000 | 68,000 | -0- | 68,000 | -0- | 68,000 | 68,000 | |||||||||||||||||||||
280G TaxGross-Up(4) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 1,636,000 | 2,304,000 | -0- | 3,356,000 | -0- | 1,636,000 | 2,304,000 |
(1) | Mr. Vuolo may resign from his employment after 6 months following a Change in Control of WebMD or HLTH (subject to certain exceptions) and receive the same benefits as if he was terminated without Cause or for Good Reason following a Change in Control (other than with respect to the option and restricted stock awards granted to him in December 2008). He may not unilaterally resign without Good Reason prior to such date and receive these benefits. The December 2008 option and restricted stock awards will continue to vest through the second anniversary of the Change in Control so long as he remains employed for one year following the Change in Control. However, for purposes of calculating the amounts included in the column entitled “Voluntary Termination in Connection with Change in Control” we treat such resignation as occurring on December 31, 2008 and assume that the requirement for the applicable transition period has been met. | |
(2) | Includes the $125,000 contributed in March 2008 on Mr. Vuolo’s behalf to the Supplemental Bonus Trust, which would be paid to him in the event of a termination of his employment, as of December 31, 2008, as a result of death or disability (for additional information, see “— Executive Compensation Tables — Background Information Regarding the Summary Compensation Table — Supplemental Bonus Plan (SBP)” above). |
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(3) | The amounts in this row, other than the columns that are zero, consist of 18 months of salary and annual bonuses, plus an annual bonus for 2008. We have assumed, solely for purposes of this table, that the amount of the annual bonus used for calculating the amounts in this line of the table, is $250,000, the amount of Mr. Vuolo’s actual cash bonus for 2007 (the year prior to the year of the assumed termination) together with the amount contributed on his behalf to the Supplemental Bonus Trust. | |
(4) | For purposes of preparing this table, we have assumed that the bonus for the year of termination is reasonable compensation for services performed. In addition, we have assumed, solely for purposes of preparing this table, that 50% of the salary continuation portion of the severance constitutes “reasonable compensation” for the restrictive covenants to which the executive is bound following the termination of employment. Accordingly, we have not treated that portion of the salary continuation as a parachute payment for purposes of Section 280G. Such assumption may change at the time of an actual change in control. |
Termination of | ||||||||||||||||||||||||||||
Voluntary | Employment | |||||||||||||||||||||||||||
Termination | without | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | ‘‘Cause” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
Executive Benefits and | for ‘‘Good | ‘‘Change in | Voluntary | Disability | Termination | without | ‘‘Change in | |||||||||||||||||||||
Payments | Reason” | Control” | Termination | or Death | for ‘‘Cause” | “Cause” | Control”(2) | |||||||||||||||||||||
Cash Severance(1) | -0- | -0- | -0- | 750,000 | -0- | 750,000 | 750,000 | |||||||||||||||||||||
Stock Options | -0- | -0- | -0- | 180,000 | -0- | -0- | -0- | |||||||||||||||||||||
Restricted Stock | -0- | -0- | -0- | 445,000 | -0- | 314,000 | 314,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | -0- | -0- | -0- | 21,000 | -0- | 21,000 | 21,000 | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | -0- | -0- | -0- | 1,396,000 | -0- | 1,085,000 | 1,085,000 |
(1) | $750,000 represents two years of salary. | |
(2) | “Change in Control” refers, for purposes of this column, to a “Change in Control” of HLTH. Mr. Funston is not entitled to any additional payments or benefits in the event of a change in control of WebMD. |
Termination of | ||||||||||||||||||||||||||||
Employment | ||||||||||||||||||||||||||||
without | ||||||||||||||||||||||||||||
Voluntary | “Cause” or | |||||||||||||||||||||||||||
Termination | for “Good | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
for ‘‘Good | ‘‘Change in | Voluntary | Disability | Termination | without | “Change in | ||||||||||||||||||||||
Executive Benefits and Payments | Reason” | Control” | Termination | or Death | for ‘‘Cause” | ‘‘Cause” | Control” | |||||||||||||||||||||
Cash Severance(1) | 485,000 | -0- | -0- | -0- | -0- | 485,000 | 485,000 | |||||||||||||||||||||
Stock Options | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Restricted Stock | -0- | -0- | -0- | 737,000 | -0- | -0- | 147,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation(2) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
280G TaxGross-Up | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 485,000 | -0- | -0- | 737,000 | -0- | 485,000 | 632,000 |
(1) | $485,000 represents one year of salary ($375,000) and an annual bonus for 2008 of $110,000. We have assumed, solely for purposes of preparing this table, that the amount of the annual bonus used for calculating the amounts in this line of the table is the sum of the actual amount of Mr. Pence’s bonus for 2008 and the actual amount contributed to the Supplemental Bonus Trust for Mr. Pence for 2008. We did not use the year prior to the year of termination because Mr. Pence was not an employee for all of 2007 and received a contractually agreed upon bonus of $75,000 for the part-year period, as approved by the Compensation Committee prior to his employment. | |
(2) | Although Dr. Pence would be entitled to COBRA premiums to be paid by WebMD if his employment were terminated by WebMD without Cause or by him for Good Reason, he has not enrolled in WebMD’s health insurance plan. |
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Termination of | ||||||||||||||||||||||||||||
Employment | ||||||||||||||||||||||||||||
Voluntary | without | |||||||||||||||||||||||||||
Termination | ‘‘Cause” or for | |||||||||||||||||||||||||||
Voluntary | in Connection | Involuntary | “Good Reason” | |||||||||||||||||||||||||
Termination | with a | Other | Permanent | Involuntary | Termination | Following a | ||||||||||||||||||||||
Executive Benefits and | for ‘‘Good | “Change in | Voluntary | Disability | Termination | without | “Change in | |||||||||||||||||||||
Payments(2) | Reason” | Control” | Termination | or Death | for “Cause” | “Cause” | Control” | |||||||||||||||||||||
Cash Severance(3) | 5,258,000 | 5,258,000 | -0- | 5,258,000 | -0- | 5,258,000 | 5,258,000 | |||||||||||||||||||||
Stock Options | 1,788,000 | 1,788,000 | -0- | 1,788,000 | -0- | 1,788,000 | 1,788,000 | |||||||||||||||||||||
Restricted Stock | 6,028,000 | 6,028,000 | -0- | 6,028,000 | -0- | 6,028,000 | 6,028,000 | |||||||||||||||||||||
Health and Welfare Benefits Continuation | 38,000 | 38,000 | -0- | 38,000 | -0- | 38,000 | 38,000 | |||||||||||||||||||||
280G TaxGross-Up(4) | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
Other | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
TOTAL | 13,112,000 | 13,112,000 | -0- | 13,112,000 | -0- | 13,112,000 | 13,112,000 |
(1) | This table assumes a termination on December 31, 2008 and does not reflect the 2009 Amendment to Mr. Wygod’s employment agreement. For additional information regarding the amendment to Mr. Wygod’s employment agreement in July 2009 and the effect of the completion of the merger on his compensation, see “The Merger — Interests of Certain Persons in the Merger — Employment Arrangements — Martin J. Wygod.” | |
(2) | If there is a Change in Control of WebMD only (and not HLTH) or if Mr. Wygod resigns as a result of a material reduction in his title or responsibilities by WebMD, WebMD has no obligation with respect to cash severance or benefits. WebMD’s only obligation relates to vesting and exercisability of grants of WebMD equity that it has made to him. If either of such events occurred on December 31, 2008, he would have received an aggregate value of $1,740,000 representing WebMD accelerated restricted stock and $335,000 representing WebMD accelerated options. | |
(3) | Represents salary and bonus for three years as well as a bonus for the year of termination (the bonus is determined by averaging bonus amounts for the prior three years). Prior to the 2009 Amendment, Mr. Wygod would have been required to provide certain consulting services during the period he is receiving severance payments, but at no more than 20% of the level he provided in the three year period prior to the date of termination. | |
(4) | We have assumed, solely for purposes of preparing this table, that the salary continuation portion of the severance and the bonus for the year of termination are the only portion of the benefits that constitutes “reasonable compensation” for the consulting services required of Mr. Wygod, the restrictive covenants to which the executive is bound following the termination of employment and the services rendered for 2008. Accordingly, we have not treated the salary continuation portion and such bonus as a parachute payment for purposes of Section 280G. Such assumption may change at the time of an actual change in control. Pursuant to the 2009 Amendment, Mr. Wygod’s salary will be reduced to $120,000 per annum upon consummation of the merger and he will no longer be required to provide consulting services following the termination of his employment agreement in order to receive the benefits of his employment agreement. |
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• | Mr. Gattinella currently receives an annual base salary of $560,000 and is eligible to earn a bonus of up to 100% of his base salary, the actual amount to be determined by the WebMD Compensation Committee in its discretion. For 2008, Mr. Gattinella received an annual bonus of $135,000, determined by the WebMD Compensation Committee in its discretion. In addition, the WebMD Compensation Committee approved an SBP Award of $135,000 with respect to Mr. Gattinella. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above. For information regarding Mr. Gattinella’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Gattinella’s employment, prior to April 30, 2009, by WebMD without “Cause” or by Mr. Gattinella for “Good Reason” (as those terms are described below), he would be entitled to continue to receive his base salary for one year from the date of termination, to receive any unpaid bonus for the year preceding the year in which the termination occurs, and to receive healthcare coverage until the earlier of one year following his termination and the date upon which he receives comparable coverage under another plan. Amounts with respect to Mr. Gattinella’s SBP Award are payable in accordance with the terms of the Supplemental Bonus Program Trust (see “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above). In the event that a termination of Mr. Gattinella’s employment by WebMD without Cause or by Mr. Gattinella for Good Reason occurs before the fourth anniversary of the grant of the options to purchase WebMD Class A Common Stock made in connection with WebMD’s initial public offering, 25% of such options would continue to vest on the next vesting date following the date of termination. | |
• | The December 2008 amendment described the material terms of the December 2008 equity awards made to Mr. Gattinella. Specifically, Mr. Gattinella may resign one year after the occurrence of a Change in Control of WebMD (as defined in the 2005 WebMD Plan) or of HLTH (as defined in the HLTH 2000 Plan) and (i) he would continue to vest in the option granted on December 10, 2008 through the second anniversary of the Change in Control and (ii) that portion of the restricted stock award made on the same date that would have vested over the two year period following the Change in Control will become vested on the date of resignation. The grant made at the time of WebMD’s initial public offering had a similar provision (with a 6 month transition requirement), but given that the last vesting of such grant is September 28, 2009, such provision has no further effect. | |
• | For purposes of the employment agreement: (a) “Cause” includes (i) continued willful failure to perform duties after 30 days’ written notice, (ii) willful misconduct or violence or threat of violence that would harm WebMD, (iii) a breach of a material WebMD policy or a material breach of the employment agreement or the Trade Secret and Proprietary Information Agreement (as described below), that remains unremedied after 30 days’ written notice, or (iv) conviction of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude; and (b) “Good Reason” means Mr. Gattinella’s resignation within one year of any of the following conditions or events remaining in effect after applicable notice periods: (i) a material reduction in base salary, (ii) a material reduction in authority, or (iii) any material breach of the employment agreement by WebMD. | |
• | The December 2008 amendment also made changes to the agreement that were intended to bring its terms into compliance with Section 409A by, among other things, clarifying the timing of certain payments. | |
• | The employment agreement and the Trade Secret and Proprietary Information Agreement described below are governed by the laws of the State of New York. |
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• | The employment agreement provides that Mr. Vuolo will receive an annual base salary of $450,000 and is eligible to earn a bonus of up to 100% of his base salary, the actual amount to be determined by the WebMD Compensation Committee in its discretion. For 2008, Mr. Vuolo received an annual bonus of $125,000 from WebMD, determined by the WebMD Compensation Committee in its discretion. In addition, the Compensation Committee approved an SBP Award of $125,000 with respect to Mr. Vuolo. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above. The Compensation Committee of the HLTH Board also approved a bonus of $250,000 paid by HLTH to Mr. Vuolo in recognition for services he provided to HLTH during 2008 outside his responsibilities as an officer of WebMD, including services in connection with HLTH’s divestitures and tender offer during 2008. The employment agreement specifically contemplated that Mr. Vuolo would, from time to time, provide services to HLTH unrelated to his WebMD responsibilities. For information regarding Mr. Vuolo’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Vuolo’s employment due to his death or disability, by WebMD without Cause (as described below), or by Mr. Vuolo for Good Reason (as described below), or as a result of WebMD’s failure to renew his employment agreement, he would be entitled to: |
(b) | any unpaid bonus for the year preceding the year in which the termination of employment occurs, as well as payment for bonuses for the eighteen-month period following the date of termination calculated using the bonus paid for the year prior to the year of termination (and, for this purpose only, the amount of his SBP Award for such year, if any); and |
(c) | continued participation in WebMD’s welfare benefit plans for thirty-six months (or if earlier, until he is eligible for comparable benefits); provided that, pursuant to the December 2008 amendment, he will no longer be entitled to participate in WebMD’s disability plans and will instead be entitled to a payment equal to the greater of $10,000 and 200% of the cost of his coverage for up to three years. |
Amounts with respect to Mr. Vuolo’s SBP Award are payable only in accordance with the terms of the Supplemental Bonus Trust (see “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and |
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“— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above). In addition, all vested options to purchase HLTH Common Stock granted to Mr. Vuolo (other than the options granted on March 17, 2004 and on December 10, 2008) would remain exercisable as if he remained in HLTH’s employ through the original expiration date specified in each applicable stock option agreement. Further, the options to purchase WebMD Class A Common Stock granted in connection with WebMD’s initial public offering would continue to vest through the next vesting date following the date of termination. Mr. Vuolo’s receipt of these severance benefits is subject to his continued compliance with the applicable restrictive covenants described below. |
• | For purposes of the employment agreement: (a) “Cause” includes (i) a material breach of his employment agreement that remains unremedied after 30 days’ written notice, or (ii) conviction of a felony; and (b) “Good Reason” includes (i) a material reduction in his title or responsibilities, (ii) the requirement to report to anyone other than WebMD’s CEO, (iii) a reduction in his base salary or material fringe benefits, (iv) a material breach by WebMD of his employment agreement, (v) relocation of his place of work outside Manhattan, New York, unless it is within 25 miles of his current residence, or (vi) the date that is six months following a Change in Control (as described below) of WebMD or HLTH (so long as we are a subsidiary of HLTH at the time of a Change in Control of HLTH and that Mr. Vuolo remains employed by WebMD’s successor or HLTH’s successor, or is terminated without Cause or resigns for Good Reason, during such six-month period). | |
• | For purposes of the employment agreement, a “Change in Control” would occur when: (i) any person, entity, or group acquires at least 50% of the voting power of WebMD or HLTH, (ii) there is a sale of all or substantially all of WebMD’s or HLTH’s assets in a transaction where then current stockholders do not receive a majority of the voting power or equity interest in the acquiring entity or its controlling affiliates or (iii) a complete liquidation or dissolution of WebMD or HLTH occurs. | |
• | The December 2008 amendment described the material terms of the December 2008 WebMD equity awards made to Mr. Vuolo. Specifically, Mr. Vuolo may resign one year after the occurrence of a Change in Control of WebMD (as defined in the WebMD 2005 Plan) or of HLTH (as defined in the HLTH 2000 Plan) and (i) he would continue to vest in the option granted on December 10, 2008 through the second anniversary of the Change in Control and (ii) that portion of the restricted stock award made on the same date that would have vested over the two year period following the Change in Control will become vested on the date of resignation. The February 2009 amendment provided that the option granted to Mr. Vuolo by HLTH on December 10, 2008 will be treated in the same manner as the WebMD grants made on such date and described above. The grant made at the time of WebMD’s initial public offering had a similar provision (with a 6 month transition requirement), but given that the last vesting of such grant is September 28, 2009, such provision has no further effect. | |
• | The employment agreement provides that in the event of a transaction whereby we are no longer a subsidiary of HLTH and, as a result, Mr. Vuolo is no longer providing services to HLTH, then all options to purchase HLTH’s stock granted to Mr. Vuolo will be treated as if his employment was terminated without Cause. | |
• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the second anniversary of the date employment has ceased. | |
• | The December 2008 amendment also made changes to the agreement that were intended to bring its terms into compliance with Section 409A by, among other things, clarifying the timing of certain payments. | |
• | The employment agreement is governed by the laws of the State of New York. | |
• | The employment agreement contains a taxgross-up provision relating to any excise tax that Mr. Vuolo incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G. Any excess parachute and relatedgross-up payments made to Mr. Vuolo will not be deductible for federal income tax purposes. |
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• | The agreement provides for an employment period for five years from November 13, 2006. | |
• | Under the agreement, Mr. Funston’s annual base salary is $375,000 and Mr. Funston is eligible to receive an annual bonus of up to 50% of his annual base salary, the actual amount to be determined by the HLTH Compensation Committee in its discretion. For 2008, Mr. Funston received a bonus of $130,000. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by HLTH to WebMD Named Executive Officers” above. For information regarding Mr. Funston’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Mr. Funston’s employment by HLTH without “Cause” (as described below), he would be entitled to: (i) continuation of his base salary, as severance, for one year for each year of completed service with a minimum of one year and a maximum of three years (provided that if the termination occurs following a Change in Control (as defined in the HLTH 2000 Plan), the minimum severance pay period will be two years); (ii) payment of COBRA premiums as if he were an active employee with similar coverage for up to 18 months (or earlier, if he becomes eligible for comparable coverage); (iii) the restricted stock granted in November 2006, at the inception of his employment by HLTH, will vest and the restrictions thereon will lapse on the date of termination for that portion of the award that would have vested on the next two vesting dates (to the extent not previously vested); and (iv) the option granted by HLTH at the time of his employment will continue to vest and remain outstanding through the next two vesting dates (to the extent not previously vested). If his employment is terminated as a result of his becoming disabled or his death, he (or his estate) will be entitled to the payments and benefits as if his employment had been terminated by HLTH without cause. The purposes of the December 2008 amendment were to (i) bring the terms of the employment agreement into compliance with Section 409A by, among other things, clarifying the timing of certain payments and (ii) clarify that if Mr. Funston is solely serving as the Chief Financial Officer of WebMD and not of HLTH, the severance obligations will not be triggered. If, however, a transaction occurs that would result in the forfeiture of the HLTH equity granted to Mr. Funston in November 2006, the vesting of such equity will be treated, under the employment agreement, as if his employment was terminated without cause. | |
• | If Mr. Funston’s employment is terminated by HLTH for “Cause” or by him, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to the restricted stock or the stock options following the date of termination. | |
• | For purposes of Mr. Funston’s employment agreement, “Cause” generally includes: (i) his bad faith in connection with the performance of his duties or his willful failure to follow the lawful instructions of the Chief Executive Officer, the Board or the Audit Committee of HLTH, following written notice and a 20 day period of time to remedy such failure; (ii) his engaging in any willful misconduct that is, or is reasonably likely to be, injurious to HLTH (or any of its affiliates) or which could reasonably be expected to reflect negatively upon HLTH or otherwise impair or impede its operations; (iii) his material breach of a policy of HLTH, which breach is not remedied (if susceptible to remedy) following written notice and a 20 day period of time to remedy such breach; (iv) his material breach of the employment agreement, which breach is not remedied (if susceptible to remedy) following written notice and a 20 day period of time to remedy such breach; or (v) his commission of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude. |
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• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the second anniversary of the date employment has ceased for any reason. The severance payments and other post-employment benefits due to Mr. Funston under the employment agreement are subject to Mr. Funston’s continued compliance with these covenants. | |
• | The employment agreement is governed by the laws of the State of New Jersey. |
• | Under his employment agreement, Dr. Pence’s annual base salary is $375,000 and he is eligible for an annual bonus, the target of which is 35% of his base salary, the actual amount to be determined by the WebMD Compensation Committee in its discretion. For 2008, Dr. Pence received an annual bonus of $55,000, determined by the WebMD Compensation Committee in its discretion. In addition, the Compensation Committee approved an SBP Award of $55,000 with respect to Dr. Pence. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above. For information regarding Dr. Pence’s equity compensation, see “— Executive Compensation Tables” above. | |
• | In the event of the termination of Dr. Pence’s employment prior to November 1, 2011, by WebMD without “Cause” or by Dr. Pence for “Good Reason” (as those terms are described below), he would be entitled to continue to receive his base salary for one year from the date of termination, to receive any unpaid bonus for the year preceding the year in which the termination occurs, and to receive the employer portion of COBRA premiums until the earlier of one year following his termination and the date upon which he receives comparable coverage under another plan. Amounts with respect to Dr. Pence’s SBP Award are payable in accordance with the terms of the Supplemental Bonus Program Trust (see “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by WebMD to its Named Executive Officers” and “Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Supplemental Bonus Program (SBP)” above). In addition, in the event that a termination of Dr. Pence’s employment by WebMD without Cause or by Dr. Pence for Good Reason occurs before the fourth anniversary of the applicable grant date, 25% of his new hire option and the option granted on December 10, 2008 to purchase WebMD Class A Common Stock would continue to vest on the next vesting date following the date of termination. | |
• | In the event of a “Change in Control” of WebMD (as such term is defined in the WebMD 2005 Plan) and his subsequent termination by WebMD without Cause or by him for Good Reason within 12 months following such Change in Control, the unvested portion of his new hire option and the December 10, 2008 option to purchase WebMD Class A Common Stock would continue to vest through the second vesting date following such termination and 25% of the restricted shares of WebMD Class A Common Stock granted to him on his hire date would continue to vest as though he were an employee of WebMD through the next vesting date following the date of termination. | |
• | For purposes of the employment agreement: |
— | a “Change in Control” would occur when: (i) a person, entity or group acquires more than 50% of the voting power of WebMD, (ii) there is a reorganization, merger or consolidation or sale involving all or substantially all of WebMD’s assets, or (iii) there is a complete liquidation or dissolution of WebMD. |
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— | “Cause” includes (i) continued willful failure to perform duties after 30 days’ written notice, (ii) willful misconduct or violence or threat of violence that would harm WebMD, (iii) a breach of a material WebMD policy, the employment agreement, or the Trade Secret and Proprietary Information Agreement (as described below), that remains unremedied after 30 days’ written notice, or (iv) conviction of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude. | |
— | “Good Reason” means Dr. Pence’s resignation of employment within 1 year of the occurrence of any of the following conditions or events: (i) a material reduction in base salary, (ii) a material reduction in authority, or (iii) any material breach of the employment agreement by WebMD; provided that Dr. Pence has provided written notice to WebMD within 90 days after the occurrence of such condition or event claimed to be Good Reason and WebMD has failed to remedy such condition or event within 30 days of receipt of such written notice. |
• | The employment agreement and the Trade Secret and Proprietary Information Agreement described below are governed by the laws of the State of New York. |
• | The 2008 Amendment extended the employment period, under the employment agreement, through December 31, 2012, provided that a non-renewal by HLTH will be treated as a termination without “Cause” (as that term is described below) and have the consequences described below. | |
• | Under the employment agreement, Mr. Wygod received an annual base salary of $1.26 million, for his services as Chairman of the Board of HLTH, until the completion of WebMD’s initial public offering; when the initial public offering was completed in September 2005, Mr. Wygod’s base salary was reduced to $975,000 per year. Upon the closing date of the merger, Mr. Wygod’s salary will be reduced |
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to $120,000. The amount of any bonus is in the discretion of the Compensation Committee of the Board of HLTH. For 2008, Mr. Wygod received an annual bonus of $1,500,000 from HLTH. See “— Compensation Discussion and Analysis — Use of Specific Types of Compensation in 2008 — Bonuses Paid by HLTH to WebMD Named Executive Officers” above. For information regarding Mr. Wygod’s equity compensation, see “— Executive Compensation Tables” above. |
• | In the event of the termination of Mr. Wygod’s employment by HLTH without “Cause” or by Mr. Wygod for “Good Reason” (as those terms are described below), Mr. Wygod would be entitled to receive: (i) continuation of his salary, at the higher of his salary on December 1, 2008 or his salary on the date of his termination, and continuation of benefits until the third anniversary of the date of such termination; and (ii) for the year of such termination (and, if termination is after the end of a fiscal year for which bonuses have not yet been paid, for such fiscal year) and for each of the two years following such termination, an amount equal to the average of the annual bonuses received by Mr. Wygod for the three years prior to such termination (with any special or supplemental bonuses excluded for the purposes of such calculation). In addition, all options, or other forms of equity compensation, granted to Mr. Wygod by HLTH or any of its affiliates (which would include WebMD) that have not vested prior to the date of termination would become vested as of the date of termination and, assuming there has not been a Change in Control of HLTH or of WebMD, would continue to be exercisable for such three year period. In the event that Mr. Wygod’s employment is terminated due to death or disability, he or his estate would receive the same benefits as described above. | |
• | The employment agreement provides that in the event there is a Change in Control of HLTH, all outstanding options and other forms of equity compensation (including equity compensation granted by WebMD) would become immediately vested on the date of the Change in Control and, if following the Change in Control, Mr. Wygod’s employment terminates for any reason other than Cause, they would continue to be exercisable until expiration of their original terms. A Change in Control of HLTH is also an event that constitutes Good Reason for purposes of a termination by Mr. Wygod. In the event there is a Change in Control of WebMD, any portion of Mr. Wygod’s equity that relates to WebMD will fully vest and become exercisable on the date of such event, and if following such event, Mr. Wygod’s engagement with WebMD is terminated for any reason other than Cause, such equity will remain outstanding until the expiration of its original term. In addition, in the event of a Change of Control of HLTH, amounts payable under the employment agreement would be required to be placed in a rabbi trust for the benefit of Mr. Wygod. | |
• | For purposes of the employment agreement: (a) “Cause” includes a final court adjudication that Mr. Wygod (i) committed fraud or a felony directed against HLTH or an affiliate relating to his employment, or (ii) materially breached any of the material terms of the employment agreement; and (b) the definition of “Good Reason” includes the following conditions or events: (i) a material reduction in title or responsibility that remains in effect for 30 days after written notice, (ii) a final court adjudication that we materially breached any material provisions of the employment agreement, (iii) failure to serve on HLTH’s Board or Executive Committee of HLTH’s Board, or (iv) the occurrence of a Change in Control of HLTH. | |
• | In the event Mr. Wygod terminates his engagement with WebMD for “Good Reason” (as described in the following sentence), any portion of equity that relates to WebMD will fully vest and become exercisable on the date his engagement terminates and will remain exercisable for the three year severance period. For the purposes of a termination of Mr. Wygod’s engagement with WebMD by him, “Good Reason” means a material reduction in Mr. Wygod’s title or responsibilities as Chairman of the Board of WebMD. | |
• | Pursuant to the 2008 Amendment, in the event of a transaction between HLTH and WebMD that does not constitute a Change in Control but in which the two entities combine, Mr. Wygod would have served as a non-employee, non-executive Chairman with no salary and (i) he would have received the cash severance and benefit continuation provided in the employment agreement and (ii) provisions contained in the employment agreement applicable to equity awards would have remained in effect and would apply in the event that Mr. Wygod were to cease serving as Chairman of the Board for certain |
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reasons. Pursuant to the 2009 Amendment, however, Mr. Wygod will continue to serve as the Executive Chairman of the Board of WebMD and will continue to be an employee and executive officer of WebMD following the closing date of the merger. The terms of Mr. Wygod’s employment agreement (as amended in December 2008) will generally remain in effect as described above; however (i) his base salary will be reduced to $120,000 and (ii) if his employment terminates for any reason or for no reason following the merger, Mr. Wygod will be entitled to the cash severance and continued benefit participation he would have received if his employment terminated upon the consummation of the merger as had been contemplated, calculated as if such termination occurred immediately prior to the closing date of the merger. Mr. Wygod will not be required to provide any consulting services following his termination of employment in order to receive these payments. Mr. Wygod may not resign without “Good Reason” and receive the acceleration of vesting of his equity. |
• | The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that continue until the third anniversary of the date his employment has ceased. The post-employment payments and benefits due to Mr. Wygod under the employment agreement are subject to his continued compliance with these covenants. | |
• | The employment agreement contains a taxgross-up provision relating to any excise tax that Mr. Wygod incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G. Any excess parachute payments and related taxgross-up payments made to Mr. Wygod will not be deductible by HLTH for federal income tax purposes. |
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• | the operations of WebMD’s business; |
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• | any material untrue statements or omissions in the prospectus included in the registration statement for WebMD’s initial public offering (which we refer to as the IPO Prospectus), other than material untrue statements or omissions contained in or pertaining to information relating solely to HLTH; and | |
• | guarantees or undertakings made by HLTH to third parties in respect of WebMD’s liabilities or obligations or those of WebMD’s subsidiaries. |
• | the operations of HLTH’s business; | |
• | any material untrue statements or omissions in the IPO Prospectus, other than material untrue statements or omissions contained in or pertaining to information relating solely to WebMD; and | |
• | certain pre-existing legal proceedings. |
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AMENDED AND RESTATED 2005 LONG-TERM INCENTIVE PLAN
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• | options to purchase shares of Class A Common Stock, which may be incentive stock options or nonqualified stock options; | |
• | stock appreciation rights (settled in cash or Class A Common Stock); | |
• | performance shares; |
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• | restricted stock; | |
• | dividend equivalents; | |
• | other stock-based awards; | |
• | any other right or interest relating to Class A Common Stock; or | |
• | cash. |
• | to designate participants; | |
• | to determine the type or types of awards to be granted to each participant and the number, terms and conditions of awards or amend the terms of such award (subject to the terms of the WebMD 2005 Plan); | |
• | to accelerate the vesting or lapse of restrictions applicable to an award based in each case on such considerations as the Compensation Committee may determine in its discretion; | |
• | to establish, adopt or revise any rules and regulations as it may deem advisable to administer the WebMD 2005 Plan; and | |
• | to make all other decisions and determinations that may be required under the WebMD 2005 Plan. |
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• | the achievement by WebMD or one of its subsidiaries of a specified target return, or target growth in return, on equity or assets; | |
• | total stockholder return, described as WebMD’s stock price appreciation plus reinvested dividends, relative to a defined comparison group or target over a specific performance period; | |
• | WebMD’s stock price; | |
• | the achievement by WebMD or a business unit, or one of WebMD’s subsidiaries, of a specified target, or target growth in, revenues, net income, earnings per share, EBIT or EBITDA; or | |
• | any combination of the above. |
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Name and Position | Number of Options | Dollar Value of Shares | ||||||
Wayne T. Gattinella, Chief Executive Officer and President | 240,000 | $ | 1,416,600 | (1) | ||||
Anthony Vuolo, Chief Operating Officer | 196,000 | $ | 1,156,890 | (1) | ||||
Mark D. Funston, Executive VP and Chief Financial Officer | 60,000 | -0- | ||||||
William Pence, Executive VP and Chief Technology Officer | 150,000 | $ | 295,125 | (1) | ||||
Martin J. Wygod, Chairman of the Board | 240,000 | $ | 1,416,600 | (1) | ||||
Executive Group | 1,286,000 | $ | 6,268,455 | (1) | ||||
Non-Executive Director Group | 158,400 | $ | 340,000 | (2) | ||||
Non-Executive Officer Employee Group | 4,704,525 | $ | 6,918,309 | (1) |
(1) | Represents the aggregate dollar value, on the respective dates of issuance, of shares of WebMD restricted stock. | |
(2) | Represents the aggregate dollar value, on date of issuance, of shares of Class A Common Stock issued to non-employee directors in payment of annual fees for service on the WebMD board. See “WebMD Non-Employee Director Compensation — Annual Fees” above. |
(a) | (c) | |||||||||||
Number of | Number of Securities | |||||||||||
Securities to | (b) | Remaining Available for | ||||||||||
Be Issued Upon | Weighted-Average | Future Issuance Under Equity | ||||||||||
Exercise of | Exercise Price of | Compensation Plans | ||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | ||||||||||
Plan Category(1) | Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||
Equity compensation plans approved by security holders | 10,216,186 | $ | 25.36 | 2,049,732(3 | ) | |||||||
Equity compensation plans not approved by security holders(2) | 68,050 | $ | 40.60 | — | ||||||||
Total | 10,284,236 | $ | 25.46 | 2,049,732 | ||||||||
(1) | This table does not include equity plans of HLTH providing for options to purchase shares of HLTH Common Stock and shares of HLTH Restricted Stock. For information regarding those equity compensation plans, see Note 13 to the WebMD Consolidated Financial Statements included inAnnex C-1 to this joint proxy statement/prospectus. | |
(2) | The plan included in this category is the WebMD Health Corp. Long-Term Incentive Plan for Employees of Subimo, LLC, which did not require approval of WebMD’s stockholders under applicable law and Nasdaq rules. We refer to that Plan as the Subimo Plan. A description of the Subimo Plan follows this table. | |
(3) | Under the WebMD 2005 Plan, if any outstanding stock option expires or is terminated before being fully exercised or any restricted stock or other share-based award is forfeited, then the shares allocable to the unexercised or forfeited portion would again become available for issuance under the WebMD 2005 Plan. WebMD is not currently granting options under any other equity plan. Optionholders may exercise options granted under WebMD’s equity plans by net settlement, pursuant to which the optionholder is not required to pay the exercise price in cash and WebMD reduces the amount of shares to be issued upon exercise to reflect the amount of the exercise price and the amount of the required tax withholding for the exercise. In addition, with respect to stock options granted during or after December 2008, WebMD may require optionholders to exercise those stock options by net settlement. Shares that are not issued or delivered as a result of the net settlement of a stock option and shares used to pay the withholding taxes related to a stock award do not become available again for future grants under the WebMD 2005 Plan; instead, the full number of shares underlying options exercised by net settlement are deemed to have already been used for purposes of determining the number of shares remaining available for future grants. |
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• | retaining and overseeing the registered public accounting firm that serves as WebMD’s independent auditor and evaluating their performance and independence; | |
• | reviewing the annual audit plan with WebMD’s management and registered public accounting firm; | |
• | pre-approving any permitted non-audit services provided by WebMD’s registered public accounting firm; | |
• | approving the fees to be paid to WebMD’s registered public accounting firm; | |
• | reviewing the adequacy and effectiveness of WebMD’s internal controls with WebMD’s management, internal auditors and registered public accounting firm; | |
• | reviewing and discussing the annual audited financial statements and the interim unaudited financial statements with WebMD’s management and registered public accounting firm; | |
• | approving WebMD’s internal audit plan and reviewing reports of WebMD’s internal auditors; | |
• | determining whether to approve certain related party transactions; and | |
• | overseeing the administration of WebMD’s Code of Business Conduct. |
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James V. Manning
Stanley S. Trotman, Jr.
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THE APPROVAL OF PROPOSAL 4.
Type of Fees | 2008 | 2007 | ||||||
Audit Fees | $ | 800,000 | $ | 850,000 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | 18,034 | 9,990 | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 818,034 | $ | 859,990 | ||||
• | “audit fees” included: (a) fees for professional services (i) for the audit of the consolidated financial statements for that fiscal year, and (ii) for review of the consolidated financial statements included in WebMD’s Quarterly Reports onForm 10-Q filed during that fiscal year; (b) fees for the audit of internal control over financial reporting for that fiscal year; and (c) fees for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for that year; | |
• | “tax fees” for consisted of fees for assistance in the preparation of certain tax returns. |
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111 Eighth Avenue
New York, New York 10011
Attention: Investor Relations
Telephone Number:(212) 624-3817
669 River Drive, Center 2
Elmwood Park, New Jersey 07407
Attention: Investor Relations
Telephone Number:(201) 414-2002
WebMD Filings (FileNo. 000-51547) | ||
Annual Report onForm 10-K | For the fiscal year ended December 31, 2008 (except to the extent superseded by theForm 8-K filed by WebMD on July 2, 2009) | |
Amendment to Annual Report onForm 10-K/A | For the fiscal year ended December 31, 2008 | |
Quarterly Reports onForm 10-Q | For the quarters ended March 31, 2009 and June 30, 2009 |
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Current Reports onForm 8-K | Filed on: February 23, 2009, May 4, 2009, May 5, 2009 (but only with respect to Item 8.01), June 18, 2009 (as amended byForm 8-K/A filed on June 22, 2009), July 2, 2009, July 14, 2009 and September 4, 2009 |
The description of WebMD’s Class A Common Stock, $.01 par value per share, contained in WebMD’s Registration Statement on Form8-A | Filed on: September 29, 2005 | |
HLTH Filings (FileNo. 000-24975) | ||
Annual Report onForm 10-K | For the fiscal year ended December 31, 2008 (except to the extent superseded by theForm 8-K filed by HLTH on July 2, 2009) | |
Amendment to Annual Report onForm 10-K/A | For the fiscal year ended December 31, 2008 | |
Quarterly Reports onForm 10-Q | For the quarters ended March 31, 2009 and June 30, 2009 |
Current Reports onForm 8-K | Filed on: February 23, 2009, May 4, 2009, May 5, 2009 (but only with respect to Item 8.01), June 18, 2009 (as amended byForm 8-K/A filed on June 22, 2009), July 2, 2009, July 14, 2009 and September 4, 2009 |
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FOR THE 2009 ANNUAL MEETINGS OF STOCKHOLDERS OF
HLTH CORPORATION
AND
WEBMD HEALTH CORP.
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between
WEBMD HEALTH CORP.
and
HLTH CORPORATION
Dated as of June 17, 2009
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Page | ||||||
ARTICLE I DEFINITIONS | 1 | |||||
Section 1.01 | Certain Defined Terms | 1 | ||||
Section 1.02 | Interpretation and Rules of Construction | 8 | ||||
ARTICLE II THE MERGER | 9 | |||||
Section 2.01 | The Merger | 9 | ||||
Section 2.02 | Effective Time; Closing | 9 | ||||
Section 2.03 | Effect of the Merger | 9 | ||||
Section 2.04 | Certificate of Incorporation and Bylaws | 10 | ||||
Section 2.05 | Directors and Officers | 10 | ||||
ARTICLE III EFFECT ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES | 10 | |||||
Section 3.01 | Effect on Capital Stock; Merger Consideration | 10 | ||||
Section 3.02 | Exchange of Certificates | 10 | ||||
Section 3.03 | Stock Transfer Books | 12 | ||||
Section 3.04 | HLTH Stock Options | 13 | ||||
Section 3.05 | Restricted Stock | 14 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HLTH | 14 | |||||
Section 4.01 | Corporate Organization | 14 | ||||
Section 4.02 | Capitalization | 15 | ||||
Section 4.03 | Authority Relative to This Agreement | 15 | ||||
Section 4.04 | No Conflict; Required Filings and Consents | 15 | ||||
Section 4.05 | SEC Filings; Financial Statements | 16 | ||||
Section 4.06 | Compliance with Laws | 16 | ||||
Section 4.07 | Absence of HLTH Material Adverse Effect | 16 | ||||
Section 4.08 | Absence of Litigation | 16 | ||||
Section 4.09 | Employee Benefit Plans | 17 | ||||
Section 4.10 | Taxes | 18 | ||||
Section 4.11 | Board Approval; Vote Required | 19 | ||||
Section 4.12 | Opinion of Financial Advisor | 19 | ||||
Section 4.13 | Joint Proxy Statement/Prospectus | 19 | ||||
Section 4.14 | Brokers | 19 | ||||
Section 4.15 | Labor | 19 | ||||
Section 4.16 | Environmental Laws | 19 | ||||
Section 4.17 | Intellectual Property | 19 | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF WEBMD | 20 | |||||
Section 5.01 | Corporate Organization | 20 | ||||
Section 5.02 | Capitalization | 20 | ||||
Section 5.03 | Authority Relative to This Agreement | 21 | ||||
Section 5.04 | No Conflict; Required Filings and Consents | 21 | ||||
Section 5.05 | SEC Filings; Financial Statement | 22 | ||||
Section 5.06 | Absence of WebMD Material Adverse Effect | 22 | ||||
Section 5.07 | Absence of Litigation | 22 |
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Section 5.08 | Board Approval; Vote Required | 22 | ||||
Section 5.09 | Ownership of HLTH Capital Stock | 23 | ||||
Section 5.10 | Opinion of Financial Advisor | 23 | ||||
Section 5.11 | Joint Proxy Statement/Prospectus | 23 | ||||
Section 5.12 | Brokers | 23 | ||||
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER | 23 | |||||
Section 6.01 | Conduct of Business by HLTH Pending the Merger | 23 | ||||
Section 6.02 | Conduct of Business by WebMD Pending the Merger | 25 | ||||
ARTICLE VII ADDITIONAL AGREEMENTS | 26 | |||||
Section 7.01 | Registration Statement and Other SEC Filings | 26 | ||||
Section 7.02 | Stockholders’ Meetings | 27 | ||||
Section 7.03 | Access to Information | 27 | ||||
Section 7.04 | Directors’ and Officers’ Insurance | 28 | ||||
Section 7.05 | Further Action; Reasonable Best Efforts | 28 | ||||
Section 7.06 | Plan of Reorganization | 28 | ||||
Section 7.07 | Nasdaq Quotation | 28 | ||||
Section 7.08 | Public Announcements | 29 | ||||
Section 7.09 | Assumption of Existing Indentures | 29 | ||||
Section 7.10 | Notification of Certain Matters | 29 | ||||
ARTICLE VIII CONDITIONS TO THE MERGER | 29 | |||||
Section 8.01 | Conditions to the Obligations of Each Party | 29 | ||||
Section 8.02 | Conditions to the Obligations of WebMD | 30 | ||||
Section 8.03 | Conditions to the Obligations of HLTH | 30 | ||||
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER | 31 | |||||
Section 9.01 | Termination | 31 | ||||
Section 9.02 | Effect of Termination | 32 | ||||
Section 9.03 | Fees and Expenses | 32 | ||||
Section 9.04 | Amendment | 32 | ||||
Section 9.05 | Waiver | 32 | ||||
ARTICLE X GENERAL PROVISIONS | 32 | |||||
Section 10.01 | Non-Survival of Representations, Warranties, Covenants and Agreements | 32 | ||||
Section 10.02 | Notices | 33 | ||||
Section 10.03 | Severability | 33 | ||||
Section 10.04 | Entire Agreement; Assignment | 34 | ||||
Section 10.05 | Parties in Interest | 34 | ||||
Section 10.06 | Specific Performance | 34 | ||||
Section 10.07 | Governing Law; Jurisdiction | 34 | ||||
Section 10.08 | Waiver of Jury Trial | 34 | ||||
Section 10.09 | Headings | 34 | ||||
Section 10.10 | Counterparts | 34 | ||||
Section 10.11 | Joint Participation in Drafting This Agreement | 34 |
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Exhibit 2.04 | WebMD Charter Amendment | |||||
Exhibit 2.05 | HLTH Director Classes | |||||
HLTH DISCLOSURE SCHEDULE | ||||||
Section 4.01(b) | HLTH Subsidiaries | |||||
Section 4.02(a) | Capital Stock | |||||
Section 4.02(b) | Encumbrances Against HLTH Capital Stock | |||||
Section 4.04 | No Conflicts | |||||
Section 4.06 | Compliance with Laws | |||||
Section 4.07 | Absence of Certain Changes | |||||
Section 4.08 | Litigation | |||||
Section 4.09(a) | HLTH Plans | |||||
Section 4.09(g) | Certain Employment Agreements | |||||
Section 4.09(h) | HLTH Equity Awards Outstanding | |||||
Section 4.10 | Taxes | |||||
Section 6.01 | HLTH Permitted Deviations from Ordinary Course | |||||
WEBMD DISCLOSURE SCHEDULE | ||||||
Section 5.01(b) | WebMD Subsidiaries | |||||
Section 6.02 | WebMD Permitted Deviations from Ordinary Course |
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Defined Term | Location of Definition | |
Action | § 1.01(a) | |
Affiliate | § 1.01(a) | |
Agreement | Preamble | |
Beneficial Owner | § 1.01(a) | |
Blue Sky Laws | § 4.04(b) | |
Business Day | § 1.01(a) | |
Certificate of Merger | § 2.02 | |
Certificates | § 3.02(b) | |
Closing | § 2.02 | |
Closing Date | § 2.02 | |
Code | Recitals | |
Competing Transaction | § 1.01(a) | |
Consent | § 1.01(a) | |
Contract | § 1.01(a) | |
Control | § 1.01(a) | |
Convertible Notes | § 1.01(a) | |
Default | § 1.01(a) | |
Designated Employee | § 1.01(a) | |
DGCL | Recitals |
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Defined Term | Location of Definition | |
Effective Time | § 2.02 | |
Encumbrance | § 1.01(a) | |
End Date | § 1.01(a) | |
Environmental Laws | § 1.01(a) | |
ERISA | § 4.09(a) | |
Exchange Act | § 1.01(a) | |
Exchange Agent | § 3.02(a) | |
Exchange Fund | § 1.01(a) | |
Exchange Ratio | § 1.01(a) | |
Existing Indentures | § 1.01(a) | |
Expenses | § 9.03 | |
Filed HLTH SEC Documents | Article IV | |
Filed WebMD SEC Documents | Article V | |
GAAP | § 4.05(b) | |
Governmental Approval | § 1.01(a) | |
Governmental Authority | § 1.01(a) | |
Governmental Order | § 1.01(a) | |
Hazardous Materials | § 1.01(a) | |
HLTH | Preamble | |
HLTH Board | Recitals | |
HLTH Common Stock | § 1.01(a) | |
HLTH Disclosure Schedule | Article IV | |
HLTH Equity Plans | § 1.01(a) | |
HLTH ERISA Affiliate | § 1.01(a) | |
HLTH Material Adverse Effect | § 1.01(a) | |
HLTH Options | § 1.01(a) | |
HLTH New Preferred Stock | § 4.02(a) | |
HLTH Plans | § 4.09(a) | |
HLTH Preferred Stock | § 4.02(a) | |
HLTH SEC Reports | § 4.05(a) | |
HLTH Stockholders’ Meeting | § 7.02(a) | |
HLTH Subsidiary | § 1.01(a) | |
Indebtedness | § 1.01(a) | |
Intellectual Property | § 1.01(a) | |
IRS | § 1.01(a) | |
Joint Proxy Statement/Prospectus | § 7.01(a) | |
Knowledge of HLTH | § 1.01(a) | |
Knowledge of WebMD | § 1.01(a) | |
Law | § 1.01(a) | |
Little Blue Book | § 1.01(a) | |
Little Blue Book Divestiture | § 1.01(a) | |
Merger | Recitals | |
Merger Consideration | § 3.01(b) | |
Multiemployer Plan | § 4.09(b) | |
Nasdaq | § 1.01(a) |
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Defined Term | Location of Definition | |
Ordinary Course | § 1.01(a) | |
Outstanding WebMD Capital Stock | § 1.01(a) | |
Permitted Encumbrances | § 1.01(a) | |
Person | § 1.01(a) | |
Porex | § 1.01(a) | |
Porex Divestiture | § 1.01(a) | |
Porex Surgical Divestiture | § 1.01(a) | |
Reference Price | § 3.02(d) | |
Registration Statement | § 7.01(a) | |
Release | § 1.01(a) | |
Representative | § 1.01(a) | |
Restricted Shares | § 3.05 | |
Satisfaction Date | § 2.02 | |
SEC | § 4.05(a) | |
Securities Act | § 1.01(a) | |
Share Issuance | Recitals | |
Special Committee | Recitals | |
Subsidiary | § 1.01(a) | |
Superior Proposal | § 1.01(a) | |
Surviving Corporation | § 2.01 | |
Tax | § 1.01(a) | |
Terminating HLTH Breach | § 9.01(h) | |
Terminating WebMD Breach | § 9.01(i) | |
Transactions | § 2.01 | |
Triggering Event | § 1.01(a) | |
WebMD | Preamble | |
WebMD Board | Recitals | |
WebMD Charter Amendment | § 2.04(a) | |
WebMD Class A Common Stock | § 1.01(a) | |
WebMD Class B Common Stock | § 1.01(a) | |
WebMD Common Stock | Recitals | |
WebMD Disclosure Schedule | Article V | |
WebMD Material Adverse Effect | § 1.01(a) | |
WebMD Preferred Stock | § 5.02(a) | |
WebMD SEC Reports | § 5.05(a) | |
WebMD Stockholders’ Meeting | § 7.02(a) | |
WebMD Subsidiary | § 5.01(a) |
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111 Eighth Avenue
New York, New York 10011
Attention: General Counsel
Facsimile:(212) 624-3773
Email: dwamsley@webmd.net
Eighty Pine Street
New York, New York 10005
Attention: William M. Hartnett
Facsimile:(212) 378-2198
Email: whartnett@cahill.com
River Drive Center Two
699 River Drive
Elmwood Park, New Jersey07407-1371
Attention: General Counsel
Facsimile:(201) 703-3449
Email: cmele@hlth.com
Broadgate West
9 Appold Street
London, EC2A 2AP
United Kingdom
Attention: Creighton O’M. Condon
Facsimile: +44 20 7655 5500
Email: ccondon@shearman.com
599 Lexington Avenue
New York, New York 10022
Attention: Robert M. Katz
Facsimile:(646) 848-8008
Email: rkatz@shearman.com
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By: | /s/ Anthony Vuolo |
Title: | Chief Operating Officer |
By: | /s/ Charles A. Mele |
Title: | Executive Vice President and |
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CERTIFICATE OF INCORPORATION
OF WEBMD HEALTH CORP.
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Historical Financial Statements: | ||||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
7 | ||||
9 | ||||
Supplemental Financial Data: | ||||
S-1 |
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of HLTH Corporation
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December 31, | ||||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 629,848 | $ | 536,879 | ||||
Short-term investments | 371 | 290,858 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,301 at December 31, 2008 and $1,165 at December 31, 2007 | 93,082 | 83,410 | ||||||
Due from EBS Master LLC | — | 1,224 | ||||||
Prepaid expenses and other current assets | 44,369 | 72,669 | ||||||
Assets of discontinued operations | 131,350 | 277,451 | ||||||
Total current assets | 899,020 | 1,262,491 | ||||||
Investments | 288,049 | 2,383 | ||||||
Property and equipment, net | 56,633 | 49,474 | ||||||
Goodwill | 202,104 | 206,279 | ||||||
Intangible assets, net | 32,328 | 35,634 | ||||||
Investment in EBS Master LLC | — | 25,261 | ||||||
Other assets | 23,600 | 69,959 | ||||||
TOTAL ASSETS | $ | 1,501,734 | $ | 1,651,481 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accrued expenses | $ | 54,595 | $ | 49,341 | ||||
Deferred revenue | 79,613 | 75,518 | ||||||
Liabilities of discontinued operations | 100,771 | 125,547 | ||||||
Total current liabilities | 234,979 | 250,406 | ||||||
1.75% convertible subordinated notes due 2023 | 350,000 | 350,000 | ||||||
31/8% convertible notes due 2025, net of discount of $35,982 at December 31, 2008 and $44,224 at December 31, 2007 | 264,018 | 255,776 | ||||||
Other long-term liabilities | 21,816 | 21,137 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
HLTH stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares outstanding | — | — | ||||||
Common stock, $0.0001 par value; 900,000,000 shares authorized; 458,284,729 shares issued at December 31, 2008; 457,803,361 shares issued at December 31, 2007 | 46 | 46 | ||||||
Additional paid-in capital | 12,566,854 | 12,538,699 | ||||||
Treasury stock, at cost; 356,910,193 shares at December 31, 2008; 275,786,634 shares at December 31, 2007 | (3,292,997 | ) | (2,564,948 | ) | ||||
Accumulated deficit | (8,776,618 | ) | (9,336,841 | ) | ||||
Accumulated other comprehensive (loss) income | (587 | ) | 5,853 | |||||
HLTH stockholders’ equity | 496,698 | 642,809 | ||||||
Noncontrolling interest in WHC | 134,223 | 131,353 | ||||||
Total equity | 630,921 | 774,162 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 1,501,734 | $ | 1,651,481 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 373,462 | $ | 319,232 | $ | 899,585 | ||||||
Cost of operations | 135,138 | 114,000 | 542,723 | |||||||||
Sales and marketing | 106,080 | 91,035 | 116,258 | |||||||||
General and administrative | 88,053 | 102,661 | 130,056 | |||||||||
Depreciation and amortization | 28,410 | 27,808 | 44,073 | |||||||||
Interest income | 35,300 | 42,035 | 32,339 | |||||||||
Interest expense | 26,428 | 25,887 | 25,472 | |||||||||
Gain on sale of EBS Master LLC | 538,024 | — | — | |||||||||
Impairment of auction rate securities | 60,108 | — | — | |||||||||
Restructuring | 7,416 | — | — | |||||||||
Gain on 2006 EBS Sale | — | 399 | 352,297 | |||||||||
Other (expense) income, net | (5,949 | ) | 3,406 | (4,252 | ) | |||||||
Income from continuing operations before income tax provision (benefit) | 489,204 | 3,681 | 421,387 | |||||||||
Income tax provision (benefit) | 26,638 | (9,053 | ) | 50,033 | ||||||||
Equity in earnings of EBS Master LLC | 4,007 | 28,566 | 763 | |||||||||
Consolidated income from continuing operations | 466,573 | 41,300 | 372,117 | |||||||||
Consolidated income (loss) from discontinued operations (net of tax provision (benefit) of $3,134, $(4,894) and $36,887 in 2008, 2007 and 2006) | 94,682 | (18,048 | ) | 393,527 | ||||||||
Consolidated net income inclusive of noncontrolling interest | 561,255 | 23,252 | 765,644 | |||||||||
Income attributable to noncontrolling interest | (1,032 | ) | (10,667 | ) | (405 | ) | ||||||
Net income attributable to HLTH stockholders | $ | 560,223 | $ | 12,585 | $ | 765,239 | ||||||
Amounts attributable to HLTH stockholders: | ||||||||||||
Income from continuing operations | $ | 465,725 | $ | 31,845 | $ | 371,844 | ||||||
Income (loss) from discontinued operations | 94,498 | (19,260 | ) | 393,395 | ||||||||
Net income attributable to HLTH stockholders | $ | 560,223 | $ | 12,585 | $ | 765,239 | ||||||
Basic income (loss) per common share: | ||||||||||||
Income from continuing operations | $ | 2.66 | $ | 0.18 | $ | 1.33 | ||||||
Income (loss) from discontinued operations | 0.54 | (0.11 | ) | 1.41 | ||||||||
Net income attributable to HLTH stockholders | $ | 3.20 | $ | 0.07 | $ | 2.74 | ||||||
Diluted income (loss) per common share: | ||||||||||||
Income from continuing operations | $ | 2.19 | $ | 0.16 | $ | 1.20 | ||||||
Income (loss) from discontinued operations | 0.42 | (0.10 | ) | 1.18 | ||||||||
Net income attributable to HLTH stockholders | $ | 2.61 | $ | 0.06 | $ | 2.38 | ||||||
Weighted-average shares outstanding used in computing income (loss) per common share: | ||||||||||||
Basic | 174,928 | 179,330 | 279,234 | |||||||||
Diluted | 220,127 | 188,763 | 331,642 | |||||||||
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HLTH Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Total | Non- | ||||||||||||||||||||||||||||||||||||||||||
Additional | Deferred | Other | HLTH | Controlling | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Stock | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | Interest | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Compensation | Shares | Amount | Deficit | (Loss) Income | Equity | in WHC | Equity | ||||||||||||||||||||||||||||||||||
Balances at December 31, 2005 | 428,624,239 | $ | 43 | $ | 12,121,431 | $ | (3,699 | ) | 150,296,414 | $ | (950,482 | ) | $ | (10,113,667 | ) | $ | 7,607 | 1,061,233 | $ | 43,096 | 1,104,329 | |||||||||||||||||||||||
Adoption of FSP APB14-1 | — | — | 59,125 | — | — | — | (2,121 | ) | — | 57,004 | 57,004 | |||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 765,239 | — | 765,239 | 405 | 765,644 | |||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized (losses) on securities | — | — | — | — | — | — | — | (1,108 | ) | (1,108 | ) | — | (1,108 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | 3,611 | 3,611 | — | 3,611 | |||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | 2,503 | — | 2,503 | |||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | — | 767,742 | 405 | 768,147 | |||||||||||||||||||||||||||||||||
Issuance of common stock for option exercises, ESPP and other issuances | 20,976,508 | 2 | 151,237 | — | — | — | — | — | 151,239 | 5,181 | 156,420 | |||||||||||||||||||||||||||||||||
Accretion of convertible redeemable exchangeable preferred stock | — | — | — | — | — | — | (235 | ) | — | (235 | ) | — | (235 | ) | ||||||||||||||||||||||||||||||
Reversal of deferred stock compensation — adoption of SFAS 123R | — | — | (3,699 | ) | 3,699 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 26,720 | — | . | — | — | — | 26,720 | 21,615 | 48,335 | |||||||||||||||||||||||||||||||||
Purchase of treasury stock under repurchase program | — | — | — | — | 8,240,245 | (83,167 | ) | — | — | (83,167 | ) | — | (83,167 | ) | ||||||||||||||||||||||||||||||
Purchase of treasury stock in tender offer | — | — | — | — | 129,234,164 | (1,552,120 | ) | — | — | (1,552,120 | ) | — | (1,552,120 | ) | ||||||||||||||||||||||||||||||
Gain on issuance of WHC Class A Common Stock for options excercised, restricted stock released and other | — | — | 5,152 | — | — | — | — | — | 5,152 | (5,152 | ) | — | ||||||||||||||||||||||||||||||||
Issuance of WHC Class A Common Stock for the Subimo transaction | — | — | 11,627 | — | — | — | — | — | 11,627 | 14,373 | 26,000 | |||||||||||||||||||||||||||||||||
Minority interest impact of cash transferred to WHC | — | — | (22,342 | ) | — | — | — | — | — | (22,342 | ) | 22,342 | — | |||||||||||||||||||||||||||||||
Balances at December 31, 2006 | 449,600,747 | 45 | 12,349,251 | — | 287,770,823 | (2,585,769 | ) | (9,350,784 | ) | 10,110 | 422,853 | 101,860 | 524,713 | |||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 12,585 | — | 12,585 | 10,667 | 23,252 | |||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized (losses) on securities | — | — | — | — | — | — | — | (249 | ) | (249 | ) | — | (249 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | 3,318 | 3,318 | — | 3,318 | |||||||||||||||||||||||||||||||||
HLTH’s share of EBSCo’s comprehensive loss | — | — | — | — | — | — | — | (7,326 | ) | (7,326 | ) | — | (7,326 | ) | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | (4,257 | ) | — | (4,257 | ) | |||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | — | 8,328 | 10,667 | 18,995 | |||||||||||||||||||||||||||||||||
Cumulative effect to prior year related to the adoption of FIN 48 | — | — | — | — | — | — | 1,475 | — | 1,475 | — | 1,475 | |||||||||||||||||||||||||||||||||
Issuance of stock for option exercises, ESPP and other issuances | 8,202,614 | 1 | 96,893 | — | (4,715,883 | ) | 22,840 | — | — | 119,734 | 13,714 | 133,448 | ||||||||||||||||||||||||||||||||
Tax benefit realized from issuances of common stock and valuation reversal | — | — | 7,299 | — | — | — | — | — | 7,299 | — | 7,299 | |||||||||||||||||||||||||||||||||
Gain on issuance of WHC Class A Common Stock for options excercised, restricted stock released and other | — | — | 14,364 | — | — | — | — | — | 14,364 | (14,364 | ) | — | ||||||||||||||||||||||||||||||||
Conversion and accretion of convertible redeemable exchangeable preferred stock | — | — | 53,781 | — | (10,638,297 | ) | 45,104 | (117 | ) | — | 98,768 | — | 98,768 | |||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 18,699 | — | — | — | — | — | 18,699 | 17,888 | 36,587 | |||||||||||||||||||||||||||||||||
Purchase of treasury stock under repurchase program | — | — | — | — | 3,369,991 | (47,123 | ) | — | — | (47,123 | ) | — | (47,123 | ) | ||||||||||||||||||||||||||||||
Minority interest impact of cash transferred to WHC | — | — | (1,588 | ) | — | — | — | — | — | (1,588 | ) | 1,588 | — | |||||||||||||||||||||||||||||||
Balances at December 31, 2007 | 457,803,361 | 46 | 12,538,699 | — | 275,786,634 | (2,564,948 | ) | (9,336,841 | ) | 5,853 | 642,809 | 131,353 | 774,162 |
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HLTH Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Total | Non- | ||||||||||||||||||||||||||||||||||||||||||
Additional | Deferred | Other | HLTH | Controlling | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Paid-In | Stock | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | Interest | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Compensation | Shares | Amount | Deficit | (Loss) Income | Equity | in WHC | Equity | ||||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 560,223 | — | 560,223 | 1,032 | 561,255 | |||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized (losses) on securities | — | — | — | — | — | — | — | (9,588 | ) | (9,588 | ) | (702 | ) | (10,290 | ) | |||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | (4,178 | ) | (4,178 | ) | — | (4,178 | ) | ||||||||||||||||||||||||||||||
HLTH’s share of EBSCo’s comprehensive loss | 7,326 | 7,326 | — | 7,326 | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | (6,440 | ) | (702 | ) | (7,142 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | — | 553,783 | 330 | 554,113 | |||||||||||||||||||||||||||||||||
Issuance of stock for option exercises, ESPP and other issuances | 481,368 | — | 9,285 | — | (2,576,363 | ) | 9,275 | — | — | 18,560 | 3,465 | 22,025 | ||||||||||||||||||||||||||||||||
Tax benefit realized from issuances of common stock and valuation reversal | — | — | 2,232 | — | — | — | — | — | 2,232 | — | 2,232 | |||||||||||||||||||||||||||||||||
Gain on issuance of WHC Class A Common Stock for options excercised, restricted stock released and other | — | — | 3,688 | — | — | — | — | — | 3,688 | (3,688 | ) | — | ||||||||||||||||||||||||||||||||
WHC purchase of its Class A Common Stock | — | — | — | — | — | — | — | — | — | (6,728 | ) | (6,728 | ) | |||||||||||||||||||||||||||||||
Cash settlement for Subimo transaction | — | — | — | — | — | — | — | — | — | (2,782 | ) | (2,782 | ) | |||||||||||||||||||||||||||||||
Purchase of warrant | — | — | (700 | ) | — | — | — | — | — | (700 | ) | — | (700 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 13,650 | — | — | — | — | — | 13,650 | 12,273 | 25,923 | |||||||||||||||||||||||||||||||||
Purchase of treasury stock in tender offer | — | — | — | — | 83,699,922 | (737,324 | ) | — | — | (737,324 | ) | — | (737,324 | ) | ||||||||||||||||||||||||||||||
Balances at December 31, 2008 | 458,284,729 | $ | 46 | $ | 12,566,854 | $ | — | 356,910,193 | $ | (3,292,997 | ) | $ | (8,776,618 | ) | $ | (587 | ) | $ | 496,698 | $ | 134,223 | $ | 630,921 | |||||||||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Consolidated net income inclusive of noncontrolling interest | $ | 561,255 | $ | 23,252 | $ | 765,644 | ||||||
Adjustments to reconcile consolidated net income inclusive of noncontrolling interest to net cash provided by operating activities: | ||||||||||||
Consolidated (income) loss from discontinued operations, net of tax | (94,682 | ) | 18,048 | (393,527 | ) | |||||||
Depreciation and amortization | 28,410 | 27,808 | 44,073 | |||||||||
Equity in earnings of EBS Master LLC | (4,007 | ) | (28,566 | ) | (763 | ) | ||||||
Non-cash interest expense, net | 9,859 | 10,210 | 9,584 | |||||||||
Non-cash advertising | 5,097 | 5,264 | 7,414 | |||||||||
Non-cash stock-based compensation | 24,632 | 32,336 | 41,608 | |||||||||
Deferred income taxes | 7,474 | (10,430 | ) | 26,547 | ||||||||
Gain on sale of EBS Master LLC | (538,024 | ) | — | — | ||||||||
Gain on 2006 EBS Sale | (399 | ) | (352,297 | ) | ||||||||
Impairment of auction rate securities | 60,108 | — | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (9,672 | ) | 4,239 | (41,729 | ) | |||||||
Prepaid expenses and other, net | 1,893 | 5,599 | (12,243 | ) | ||||||||
Accrued expenses and other long-term liabilities | 6,052 | (44,248 | ) | 20,987 | ||||||||
Deferred revenue | 4,095 | 93 | 17,516 | |||||||||
Net cash provided by continuing operations | 62,490 | 43,206 | 132,814 | |||||||||
Net cash provided by discontinued operations | 34,624 | 32,187 | 66,206 | |||||||||
Net cash provided by operating activities | 97,114 | 75,393 | 199,020 | |||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from maturities and sales ofavailable-for-sale securities | 118,339 | 670,326 | 928,284 | |||||||||
Purchases ofavailable-for-sale securities | (177,150 | ) | (927,038 | ) | (686,815 | ) | ||||||
Purchases of property and equipment | (24,265 | ) | (19,041 | ) | (49,406 | ) | ||||||
Purchase of investment in preferred stock | (6,471 | ) | — | — | ||||||||
Cash paid in business combinations, net of cash acquired | (2,633 | ) | — | (152,672 | ) | |||||||
Purchase of noncontrolling interest in subsidiary | (12,818 | ) | — | — | ||||||||
Proceeds related to the sale of EBS Master LLC | 574,617 | — | — | |||||||||
Proceeds from the sale of discontinued operations | 247,491 | 11,667 | 522,604 | |||||||||
Proceeds from the 2006 EBS Sale, net | — | 2,898 | 1,199,872 | |||||||||
Proceeds (disbursements) from advances to EBS Master LLC | 1,224 | 18,792 | (20,016 | ) | ||||||||
Net cash provided by (used in) continuing operations | 718,334 | (242,396 | ) | 1,741,851 | ||||||||
Net cash used in discontinued operations | (4,852 | ) | (4,753 | ) | (3,310 | ) | ||||||
Net cash provided by (used in) investing activities | 713,482 | (247,149 | ) | 1,738,541 |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of HLTH and WHC common stock | 21,683 | 133,054 | 156,078 | |||||||||
Tax benefit on stock-based awards | 748 | 6,601 | — | |||||||||
Purchases of treasury stock under repurchase program | — | (47,123 | ) | (83,167 | ) | |||||||
Purchases of treasury stock in tender offer | (737,324 | ) | — | (1,552,120 | ) | |||||||
Other | (700 | ) | (20 | ) | (337 | ) | ||||||
Net cash (used in) provided by continuing operations | (715,593 | ) | 92,512 | (1,479,546 | ) | |||||||
Net cash used in discontinued operations | (76 | ) | (175 | ) | (100 | ) | ||||||
Net cash (used in) provided by financing activities | (715,669 | ) | 92,337 | (1,479,646 | ) | |||||||
Effect of exchange rates on cash | (1,958 | ) | 1,607 | 1,135 | ||||||||
Net increase (decrease) in cash and cash equivalents | 92,969 | (77,812 | ) | 459,050 | ||||||||
Changes in cash of discontinued operations | — | — | 25 | |||||||||
Cash and cash equivalents at beginning of period | 536,879 | 614,691 | 155,616 | |||||||||
Cash and cash equivalents at end of period | $ | 629,848 | $ | 536,879 | $ | 614,691 | ||||||
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1. | Background and Basis of Presentation |
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• | WebMDprovides health information services to consumers, physicians and other healthcare professionals, employers and health plans through WebMD’s public and private online portals and health-focused publications. WebMD’s public portals for consumers enable them to obtain health and wellness information (including information on specific diseases or conditions), check symptoms, locate physicians, store individual healthcare information, receive periodice-newsletters on topics of individual interest and participate in online communities with peers and experts. WebMD’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn continuing medical education (“CME”) credit and communicate with peers. WebMD’s public portals generate revenue primarily through the sale of advertising and sponsorship products, including CME services. WebMD also distributes online content and services to other entities and generates revenue from these arrangements through the sale of advertising and sponsorship products and content syndication fees, providese-detailing promotion and physician recruitment services and provides print services including the publication ofWebMD the Magazine,a consumer magazine distributed to physician office waiting rooms. The public portals sponsors and advertisers include pharmaceutical, biotechnology, medical device and consumer products companies. WebMD’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, treatment and provider decisions. WebMD also provides related services for use by such employees and members, including lifestyle education and personalized telephonic health coaching. WebMD generates revenue from its private portals through the licensing of these services to employers and health plans either directly or through distributors. | |
• | Corporateincludes personnel costs and other expenses related to executive personnel, legal, accounting, tax, internal audit, risk management, human resources and certain information technology |
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functions, as well as other corporate costs and expenses such as professional fees including legal and audit services, insurance, costs of leased property and facilities, telecommunication costs and software maintenance expenses. Corporate expenses are net of $3,410, $3,340 and $3,190 in 2008, 2007 and 2006, respectively, which are costs allocated to WebMD for services provided by the Corporate segment. In connection with the 2006 EBS Sale, EPS Sale and the ViPS Sale, the Company entered into transition services agreements whereby the Company provided ViPS, EBSCo (as defined in Note 4), and Sage Software certain administrative services, including payroll, accounting, purchasing and procurement, tax, and human resource services, as well as information technology support. Additionally, EBSCo provided certain administrative services to the Company. These services were provided through the Corporate segment, and the related transition services fees that the Company charged to ViPS, EBSCo and Sage Software, net of the fee the Company paid to EBSCo, were also included in the Corporate segment, which were intended to approximate the cost of providing these services. The transition services agreement with Sage Software was terminated on December 31, 2007 and, therefore, net transition services fees are solely for services related to EBSCo and ViPS in 2008. |
• | Emdeon Business Servicesprovides solutions that automate key business and administrative functions for healthcare payers and providers, including electronic patient eligibility and benefit verification; electronic and paper claims processing; electronic and paper paid-claims communication services; and patient billing, payment and communications services. In addition, EBS provides clinical communications services that improve the delivery of healthcare by enabling physicians to manage laboratory orders and results, hospital reports and electronic prescriptions. As a result of the 2006 EBS Sale, beginning November 17, 2006, the results of EBS were no longer included in the segment results. See Note 4. |
2. | Summary of Significant Accounting Policies |
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Computer equipment | 3 to 5 years | |
Office equipment, furniture and fixtures | 4 to 7 years | |
Software | 3 to 5 years | |
Building and improvements | Up to 40 years | |
Web site development costs | 3 years | |
Leasehold improvements | Shorter of useful life or lease term |
Content | 4 to 5 years | |
Customer relationships | 5 to 12 years | |
Acquired technology and patents | 3 years | |
Trade names | 10 years |
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• | WebMD. Revenue from advertising is recognized as advertisements are delivered or as publications are distributed. Revenue from sponsorship arrangements, content syndication and distribution arrangements, and licenses of healthcare management tools and private portals as well as related health coaching services are recognized ratably over the term of the applicable agreement. Revenue from the sponsorship of CME is recognized over the period WebMD substantially completes its contractual deliverables as determined by the applicable agreements. When contractual arrangements contain multiple elements, revenue is allocated to each element based on its relative fair value determined using prices charged when elements are sold separately. In certain instances where fair value does not exist for all the elements, the amount of revenue allocated to the delivered elements equals the total consideration less the fair value of the undelivered elements. In instances where fair value does not exist for the undelivered elements, revenue is recognized when the last element is delivered. | |
• | EBS. Through the date of the 2006 EBS Sale on November 16, 2006, the Company generated revenue by selling transaction services to healthcare payers and providers, generally on either a per transaction basis or, in the case of some providers, on a monthly fixed fee basis. The Company also generated revenue through EBS by selling its document conversion, patient statement and paid-claims communication services, typically on a per document, per statement or per communication basis. Revenue for transaction services, patient statement and paid-claims communication services was recognized as the services were provided. EBS generally charged a one-time implementation fee to healthcare payers and providers at the inception of a contract, in connection with their related setup to submit and receive medical claims and other related transactions through EBS’s clearinghouse network. The implementation fees were deferred and amortized to revenue on a straight-line basis over the contract period of the related transaction processing services, which generally vary from one to three years. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Amounts Attributable to HLTH Stockholders: | ||||||||||||
Numerator: | ||||||||||||
Income from continuing operations | $ | 465,725 | $ | 31,845 | $ | 371,844 | ||||||
Convertible redeemable exchangeable preferred stock fee | — | 174 | 350 | |||||||||
Income from continuing operations — Basic | 465,725 | 32,019 | 372,194 | |||||||||
Interest expense on convertible notes, net of tax | 15,855 | — | 25,058 | |||||||||
Effect of WHC dilutive securities | (587 | ) | (1,911 | ) | (179 | ) | ||||||
Income from continuing operations — Diluted | $ | 480,993 | $ | 30,108 | $ | 397,073 | ||||||
Income (loss) from discontinued operations, net of tax — Basic | $ | 94,498 | $ | (19,260 | ) | $ | 393,395 | |||||
Effect of WHC dilutive securities | (27 | ) | (250 | ) | (6 | ) | ||||||
Income (loss) from discontinued operations, net of tax — Diluted | $ | 94,471 | $ | (19,510 | ) | $ | 393,389 | |||||
Denominator: | ||||||||||||
Common stock | 174,928 | 174,052 | 268,596 | |||||||||
Convertible redeemable exchangeable preferred stock | — | 5,278 | 10,638 | |||||||||
Weighted-average shares — Basic | 174,928 | 179,330 | 279,234 | |||||||||
Employee stock options, restricted stock and warrants | 3,183 | 9,433 | 10,392 | |||||||||
Convertible notes | 42,016 | — | 42,016 | |||||||||
Adjusted weighted-average shares after assumed conversions — Diluted | 220,127 | 188,763 | 331,642 | |||||||||
Basic income (loss) per common share: | ||||||||||||
Income from continuing operations | $ | 2.66 | $ | 0.18 | $ | 1.33 | ||||||
Income (loss) from discontinued operations | 0.54 | (0.11 | ) | 1.41 | ||||||||
Net income attributable to HLTH stockholders | $ | 3.20 | $ | 0.07 | $ | 2.74 | ||||||
Diluted income (loss) per common share: | ||||||||||||
Income from continuing operations | $ | 2.19 | $ | 0.16 | $ | 1.20 | ||||||
Income (loss) from discontinued operations | 0.42 | (0.10 | ) | 1.18 | ||||||||
Net income attributable to HLTH stockholders | $ | 2.61 | $ | 0.06 | $ | 2.38 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Options, restricted stock and warrants | 32,653 | 19,762 | 50,505 | |||||||||
Convertible notes | — | 42,016 | — | |||||||||
32,653 | 61,778 | 50,505 | ||||||||||
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3. | Discontinued Operations |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 9,235 | $ | 12,461 | $ | 9,342 | ||||||
Earnings before taxes | 1,954 | 4,462 | 751 |
December 31, | ||||||||
2008 | 2007 | |||||||
Assets of discontinued operations: | ||||||||
Accounts receivable, net | $ | 1,058 | $ | 2,671 | ||||
Property and equipment, net | 98 | 80 | ||||||
Goodwill | 11,044 | 11,044 | ||||||
Intangible assets, net | 362 | 680 | ||||||
Other assets | 13 | 12 | ||||||
Total assets | $ | 12,575 | $ | 14,487 | ||||
Liabilities of discontinued operations: | ||||||||
Accrued expenses | $ | 113 | $ | 257 | ||||
Deferred revenue | 876 | 883 | ||||||
Deferred tax liability | 1,570 | 1,276 | ||||||
Total liabilities | $ | 2,559 | $ | 2,416 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 94,407 | $ | 92,581 | $ | 85,702 | ||||||
Earnings before taxes | 19,294 | 20,790 | 16,862 |
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December 31, | ||||||||
2008 | 2007 | |||||||
Assets of discontinued operations: | ||||||||
Accounts receivable, net | $ | 13,866 | $ | 12,922 | ||||
Inventory | 11,978 | 11,772 | ||||||
Property and equipment, net | 21,487 | 21,176 | ||||||
Goodwill | 42,297 | 43,283 | ||||||
Intangible assets, net | 24,724 | 24,872 | ||||||
Deferred tax asset | 1,420 | 1,420 | ||||||
Other assets | 3,003 | 3,554 | ||||||
Total assets | $ | 118,775 | $ | 118,999 | ||||
Liabilities of discontinued operations: | ||||||||
Accounts payable | $ | 1,601 | $ | 1,533 | ||||
Accrued expenses | 6,654 | 7,684 | ||||||
Deferred tax liability | 12,095 | 24,375 | ||||||
Other long-term liabilities | — | 101 | ||||||
Total liabilities | $ | 20,350 | $ | 33,693 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 57,497 | $ | 103,083 | $ | 98,874 | ||||||
Earnings before taxes | 8,121 | 6,601 | 6,752 | |||||||||
Gain on disposal before taxes | 96,969 | — | — |
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December 31, 2007 | ||||
Assets of discontinued operations: | ||||
Accounts receivable, net | $ | 17,240 | ||
Property and equipment, net | 4,020 | |||
Goodwill | 71,253 | |||
Intangible assets, net | 47,815 | |||
Deferred tax asset | 804 | |||
Other assets | 2,833 | |||
Total assets | $ | 143,965 | ||
Liabilities of discontinued operations: | ||||
Accounts payable | $ | 1,599 | ||
Accrued expenses and other | 4,370 | |||
Deferred revenue | 10,982 | |||
Deferred tax liability | 16,924 | |||
Total liabilities | $ | 33,875 | ||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | — | $ | 4,219 | $ | 5,105 | ||||||
(Loss) earnings before taxes | — | (129 | ) | 385 | ||||||||
(Loss) gain on disposal before taxes | (234 | ) | 3,394 | — |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | — | $ | — | $ | 212,329 | ||||||
(Loss) earnings before taxes | (29,078 | ) | (58,722 | ) | 19,469 | |||||||
Gain on disposal before taxes | 790 | 662 | 386,195 |
4. | Emdeon Business Services |
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For the Period | For the Period | |||||||||||
January 1, 2008 | November 17, 2006 | |||||||||||
Through | Year Ended | Through | ||||||||||
February 8, 2008 | December 31, 2007 | December 31, 2006 | ||||||||||
Revenue | $ | 94,481 | $ | 808,537 | $ | 87,903 | ||||||
Cost of operations | 44,633 | 517,884 | 56,775 | |||||||||
Net income (loss) | 5,551 | 34,493 | (1,198 | ) |
December 31, 2007 | ||||
Current assets | $ | 168,108 | ||
Noncurrent assets | 1,179,116 | |||
Total assets | $ | 1,347,224 | ||
Current liabilities | $ | 104,404 | ||
Noncurrent liabilities | 940,220 | |||
Members’ equity | 302,600 | |||
Total liabilities and member’s equity | $ | 1,347,224 | ||
5. | Investment and Business Combinations |
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Other | Total | |||||||||||||||||||||||
Accounts | Deferred | Tangible Assets | Intangible | Purchase | ||||||||||||||||||||
Receivable | Revenue | (Liabilities), net | Assets | Goodwill | Price | |||||||||||||||||||
2006 | ||||||||||||||||||||||||
Subimo | $ | 1,725 | $ | (6,900 | ) | $ | 4,419 | $ | 12,300 | $ | 47,776 | $ | 59,320 | |||||||||||
Medsite | 2,469 | (13,124 | ) | (812 | ) | 11,000 | 31,934 | 31,467 | ||||||||||||||||
IPN | 358 | — | (143 | ) | — | 3,692 | 3,907 | |||||||||||||||||
Summex | 1,064 | (1,173 | ) | — | 11,300 | 18,852 | 30,043 | |||||||||||||||||
eMedicine | 1,717 | (2,612 | ) | (1,004 | ) | 6,390 | 20,704 | 25,195 |
Year Ended | ||||
December 31, 2006 | ||||
Revenue | $ | 924,446 | ||
Consolidated income from continuing operations | 362,791 | |||
Net income attributable to HLTH stockholders | 757,291 | |||
Amounts attributable to HLTH stockholders: | ||||
Income from continuing operations | $ | 363,448 | ||
Net income attributable to HLTH stockholders | $ | 757,291 | ||
Basic income per common share: | ||||
Income from continuing operations | $ | 1.30 | ||
Net income attributable to HLTH stockholders | $ | 2.71 | ||
Diluted income per common share: | ||||
Income from continuing operations | $ | 1.17 | ||
Net income attributable to HLTH stockholders | $ | 2.36 | ||
6. | WebMD Health Corp. |
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7. | Significant Transactions |
8. | Convertible Redeemable Exchangeable Preferred Stock |
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9. | Convertible Notes |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Contractual coupon interest | $ | 9,375 | $ | 9,375 | $ | 9,375 | ||||||
Amortization of debt discount | 8,244 | 7,655 | 7,134 | |||||||||
Amortization of debt issuance costs | 1,142 | 1,061 | 988 | |||||||||
Interest expense for 31/8% Notes | $ | 18,761 | $ | 18,091 | $ | 17,497 | ||||||
Effective interest rate | 7.4 | % | 7.4 | % | 7.4 | % |
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10. | Segment Information |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006(a) | ||||||||||
Revenue | ||||||||||||
WebMD: | ||||||||||||
Public portals | $ | 284,416 | $ | 238,022 | $ | 183,813 | ||||||
Private portals | 89,126 | 81,471 | 55,621 | |||||||||
Total WebMD | 373,542 | 319,493 | 239,434 | |||||||||
Emdeon Business Services | — | — | 661,090 | |||||||||
Inter-segment eliminations | (80 | ) | (261 | ) | (939 | ) | ||||||
$ | 373,462 | $ | 319,232 | $ | 899,585 | |||||||
Earnings before interest, taxes, non-cash and other items | ||||||||||||
WebMD | $ | 94,100 | $ | 79,471 | $ | 50,913 | ||||||
Emdeon Business Services | — | — | 152,911 | |||||||||
Corporate | (19,845 | ) | (24,502 | ) | (41,730 | ) | ||||||
74,255 | 54,969 | 162,094 | ||||||||||
Interest, taxes, non-cash and other items | ||||||||||||
Interest income | 35,300 | 42,035 | 32,339 | |||||||||
Interest expense | (26,428 | ) | (25,887 | ) | (25,472 | ) | ||||||
Income tax (provision) benefit | (26,638 | ) | 9,053 | (50,033 | ) | |||||||
Depreciation and amortization | (28,410 | ) | (27,808 | ) | (44,073 | ) | ||||||
Non-cash stock-based compensation | (24,632 | ) | (32,336 | ) | (41,608 | ) | ||||||
Non-cash advertising | (5,097 | ) | (5,264 | ) | (7,414 | ) | ||||||
Equity in earnings of EBS Master LLC | 4,007 | 28,566 | 763 | |||||||||
Gain on sale of EBS Master LLC | 538,024 | — | — | |||||||||
Gain on 2006 EBS Sale | — | 399 | 352,297 | |||||||||
Impairment of auction rate securities | (60,108 | ) | — | — | ||||||||
Restructuring | (7,416 | ) | — | — | ||||||||
Other expense, net | (6,284 | ) | (2,427 | ) | (6,776 | ) | ||||||
Consolidated income from continuing operations | 466,573 | 41,300 | 372,117 | |||||||||
Consolidated income (loss) from discontinued operations, net of tax | 94,682 | (18,048 | ) | 393,527 | ||||||||
Consolidated net income inclusive of noncontrolling interest | 561,255 | 23,252 | 765,644 | |||||||||
(Income) attributable to noncontrolling interest | (1,032 | ) | (10,667 | ) | (405 | ) | ||||||
Net income attributable to HLTH stockholders | $ | 560,223 | $ | 12,585 | $ | 765,239 | ||||||
(a) | The EBS segment was sold on November 16, 2006 and, therefore, the operations of the EBS segment are included only for the period January 1, 2006 through November 16, 2006. |
Emdeon | ||||||||||||||||
Business | Corporate | |||||||||||||||
Services | WebMD | and Other(a) | Total(b) | |||||||||||||
2008 | ||||||||||||||||
Capital expenditures | $ | — | $ | 24,180 | $ | 85 | $ | 24,265 | ||||||||
Total assets | — | 736,494 | 633,890 | 1,370,384 | ||||||||||||
2007 | ||||||||||||||||
Capital expenditures | — | 18,046 | 995 | 19,041 | ||||||||||||
Total assets | — | 699,118 | 674,912 | 1,374,030 | ||||||||||||
2006 | ||||||||||||||||
Capital expenditures | 20,835 | 28,438 | 133 | 49,406 |
(a) | Includes the Company’s investment in EBS Master LLC for 2007. | |
(b) | Excludes information related to the Company’s discontinued operations. |
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11. | Long-Lived Assets |
December 31, | ||||||||
2008 | 2007 | |||||||
Software | $ | 24,622 | $ | 17,094 | ||||
Computer equipment | 26,145 | 17,994 | ||||||
Web site development costs | 26,210 | 21,389 | ||||||
Leasehold improvements | 19,494 | 16,792 | ||||||
Office equipment, furniture and fixtures | 6,959 | 6,338 | ||||||
Land and buildings | 3,288 | 314 | ||||||
106,718 | 79,921 | |||||||
Less: accumulated depreciation | (50,085 | ) | (30,447 | ) | ||||
Property and equipment, net | $ | 56,633 | $ | 49,474 | ||||
WebMD | ||||
Segment | ||||
Balance as of January 1, 2007 | $ | 212,440 | ||
Reversal of income tax valuation allowance | (2,793 | ) | ||
Purchase price allocation and other adjustments | (3,368 | ) | ||
Balance as of December 31, 2007 | 206,279 | |||
Reversal of income tax valuation allowance | (4,027 | ) | ||
Purchase price allocation | (148 | ) | ||
Balance as of December 31, 2008 | $ | 202,104 | ||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||
Gross | Average | Gross | Average | |||||||||||||||||||||||||||||
Carrying | Accumulated | Remaining | Carrying | Accumulated | Remaining | |||||||||||||||||||||||||||
Amount | Amortization | Net | Useful Life(a) | Amount | Amortization | Net | Useful Life(a) | |||||||||||||||||||||||||
Content | $ | 15,954 | $ | (14,541 | ) | $ | 1,413 | 1.7 | $ | 15,954 | $ | (12,581 | ) | $ | 3,373 | 2.1 | ||||||||||||||||
Customer relationships | 34,057 | (12,872 | ) | 21,185 | 8.8 | 32,430 | (9,485 | ) | 22,945 | 9.2 | ||||||||||||||||||||||
Technology and patents | 14,700 | (13,370 | ) | 1,330 | 0.8 | 14,700 | (9,856 | ) | 4,844 | 1.5 | ||||||||||||||||||||||
Trade names-definite lived | 6,030 | (2,094 | ) | 3,936 | 7.4 | 6,030 | (1,558 | ) | 4,472 | 8.4 | ||||||||||||||||||||||
Trade names-indefinite lived | 4,464 | — | 4,464 | n/a | — | — | — | n/a | ||||||||||||||||||||||||
Total | $ | 75,205 | $ | (42,877 | ) | $ | 32,328 | $ | 69,114 | $ | (33,480 | ) | $ | 35,634 | ||||||||||||||||||
(a) | The calculation of the weighted average remaining useful life is based on the net book value and the remaining amortization period (reflected in years) of each respective intangible asset. |
Years Ending December 31: | ||||
2009 | $ | 6,309 | ||
2010 | 3,394 | |||
2011 | 2,627 | |||
2012 | 2,627 | |||
2013 | 2,627 | |||
Thereafter | 10,280 |
12. | Restructuring |
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13. | Accrued Expenses |
December 31, | ||||||||
2008 | 2007 | |||||||
Accrued compensation | $ | 23,258 | $ | 19,920 | ||||
Accrued restructuring | 7,071 | — | ||||||
Accrued outside services | 4,714 | 8,525 | ||||||
Accrued income, sales and other taxes | 3,204 | 5,750 | ||||||
Other accrued liabilities | 16,348 | 15,146 | ||||||
$ | 54,595 | $ | 49,341 | |||||
14. | Commitments and Contingencies |
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Years Ending December 31, | ||||
2009 | $ | 7,856 | ||
2010 | 7,685 | |||
2011 | 6,751 | |||
2012 | 4,923 | |||
2013 | 4,543 | |||
Thereafter | 11,440 | |||
Total minimum lease payments | $ | 43,198 | ||
15. | Stock-Based Compensation |
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Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise Price | Contractual Life | Intrinsic | ||||||||||||||
Shares | Per Share | (In Years) | Value(1) | |||||||||||||
Outstanding at January 1, 2006 | 88,183,095 | $ | 12.96 | |||||||||||||
Granted | 9,845,500 | 10.10 | ||||||||||||||
Exercised | (20,277,247 | ) | 7.40 | |||||||||||||
Cancelled | (14,151,477 | ) | 14.08 | |||||||||||||
Outstanding at December 31, 2006 | 63,599,871 | 14.04 | ||||||||||||||
Granted | 170,000 | 12.86 | ||||||||||||||
Exercised | (12,081,643 | ) | 10.08 | |||||||||||||
Cancelled | (4,394,651 | ) | 22.82 | |||||||||||||
Outstanding at December 31, 2007 | 47,293,577 | 14.35 | ||||||||||||||
Granted | 2,776,800 | 9.46 | ||||||||||||||
Exercised | (2,527,238 | ) | 7.61 | |||||||||||||
Cancelled | (3,061,515 | ) | 14.68 | |||||||||||||
Outstanding at December 31, 2008 | 44,481,624 | $ | 14.41 | 3.2 | $ | 25,437 | ||||||||||
Vested and exercisable at the end of the period | 38,941,519 | $ | 15.06 | 2.5 | $ | 19,650 | ||||||||||
(1) | The aggregate intrinsic value is based on the market price of HLTH’s Common Stock on December 31, 2008, which was $10.46, less the applicable exercise price of the underlying option. This aggregate intrinsic value represents the amount that would have been realized if all of the option holders had exercised their options on December 31, 2008. |
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Outstanding | Exercisable | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Weighted | Average | Average | ||||||||||||||||||
Average | Remaining | Exercise | ||||||||||||||||||
Exercise Price | Contractual Life | Price Per | ||||||||||||||||||
Exercise Prices | Shares | Per Share | (In Years) | Shares | Share | |||||||||||||||
$3.43-$8.59 | 6,791,893 | $ | 7.57 | 5.2 | 5,908,139 | $ | 7.52 | |||||||||||||
$8.60-$9.46 | 4,561,975 | 9.24 | 8.0 | 1,470,025 | 9.04 | |||||||||||||||
$9.47-$10.57 | 477,422 | 10.02 | 5.2 | 407,223 | 10.01 | |||||||||||||||
$10.60-$11.55 | 4,921,609 | 11.53 | 1.6 | 4,886,109 | 11.53 | |||||||||||||||
$11.60-$12.50 | 5,077,450 | 11.99 | 5.6 | 3,753,748 | 12.04 | |||||||||||||||
$12.54-$13.38 | 4,477,458 | 12.80 | 1.7 | 4,477,458 | 12.80 | |||||||||||||||
$13.40-$15.50 | 3,673,875 | 13.82 | 1.9 | 3,538,875 | 13.83 | |||||||||||||||
$16.06 | 4,900,000 | 16.06 | 1.5 | 4,900,000 | 16.06 | |||||||||||||||
$16.13-$20.00 | 4,641,805 | 18.00 | 1.4 | 4,641,805 | 18.00 | |||||||||||||||
$20.50-$94.69 | 4,958,137 | 31.18 | 1.1 | 4,958,137 | 31.18 | |||||||||||||||
44,481,624 | $ | 14.41 | 3.2 | 38,941,519 | $ | 15.06 | ||||||||||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Expected volatility | 0.37 | 0.31 | 0.37 | |||||||||
Risk-free interest rate | 1.42 | % | 4.67 | % | 4.54 | % | ||||||
Expected term (years) | 3.7 | 3.9 | 4.5 | |||||||||
Weighted average fair value of options granted during the year | $ | 2.81 | $ | 4.01 | $ | 3.79 |
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Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
Balance at the beginning of the year | 1,240,297 | $ | 10.74 | 2,300,846 | $ | 10.44 | 1,042,557 | $ | 8.24 | |||||||||||||||
Granted | 609,000 | 9.08 | — | — | 2,298,010 | 10.66 | ||||||||||||||||||
Vested | (593,969 | ) | 10.64 | (967,881 | ) | 10.14 | (562,575 | ) | 8.39 | |||||||||||||||
Forfeited | (42,704 | ) | 11.23 | (92,668 | ) | 9.50 | (477,146 | ) | 9.13 | |||||||||||||||
Balance at the end of the year | 1,212,624 | $ | 9.94 | 1,240,297 | $ | 10.74 | 2,300,846 | $ | 10.44 | |||||||||||||||
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Weighted | Weighted Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise Price | Contractual Life | Intrinsic | ||||||||||||||
Shares | Per Share | (In Years) | Value(1) | |||||||||||||
Outstanding at January 1, 2006 | 4,533,100 | $ | 18.31 | |||||||||||||
Granted | 1,683,700 | 38.16 | ||||||||||||||
Exercised | (291,154 | ) | 18.05 | |||||||||||||
Cancelled | (523,863 | ) | 27.84 | |||||||||||||
Outstanding at December 31, 2006 | 5,401,783 | 23.59 | ||||||||||||||
Granted | 998,850 | 47.49 | ||||||||||||||
Exercised | (684,909 | ) | 20.96 | |||||||||||||
Cancelled | (695,173 | ) | 31.80 | |||||||||||||
Outstanding at December 31, 2007 | 5,020,551 | 27.56 | ||||||||||||||
Granted | 6,148,925 | 24.37 | ||||||||||||||
Exercised | (216,311 | ) | 17.55 | |||||||||||||
Cancelled | (668,929 | ) | 33.77 | |||||||||||||
Outstanding at December 31, 2008 | 10,284,236 | $ | 25.46 | 8.8 | $ | 15,716 | ||||||||||
Vested and exercisable at the end of the period | 2,379,425 | $ | 23.36 | 7.0 | $ | 10,458 | ||||||||||
(1) | The aggregate intrinsic value is based on the market price of WHC’s Class A Common Stock on December 31, 2008, which was $23.59, less the applicable exercise price of the underlying option. This aggregate intrinsic value represents the amount that would have been realized if all of the option holders had exercised their options on December 31, 2008. |
Outstanding | Exercisable | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Weighted | Average | Average | ||||||||||||||||||
Average | Remaining | Exercise | ||||||||||||||||||
Exercise Price | Contractual Life | Price Per | ||||||||||||||||||
Exercise Prices | Shares | Per Share | (In Years) | Shares | Share | |||||||||||||||
$17.50 | 2,486,530 | $ | 17.50 | 6.8 | 1,717,267 | $ | 17.50 | |||||||||||||
$18.37-$19.95 | 114,400 | 19.27 | 9.9 | — | — | |||||||||||||||
$20.52-$23.61 | 5,377,825 | 23.60 | 9.9 | — | — | |||||||||||||||
$23.74-$49.54 | 2,074,931 | 37.19 | 8.3 | 601,823 | 37.16 | |||||||||||||||
$49.82-$61.35 | 230,550 | 52.44 | 8.5 | 60,335 | 52.42 | |||||||||||||||
10,284,236 | $ | 25.46 | 8.8 | 2,379,425 | $ | 23.36 | ||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Expected volatility | 0.57 | 0.44 | 0.60 | |||||||||
Risk-free interest rate | 1.23 | % | 4.25 | % | 4.69 | % | ||||||
Expected term (years) | 3.3 | 3.4 | 3.2 | |||||||||
Weighted average fair value of options granted during the year | $ | 9.88 | $ | 17.26 | $ | 17.33 |
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
Balance at the beginning of the year | 307,722 | $ | 29.46 | 441,683 | $ | 25.49 | 376,621 | $ | 17.55 | |||||||||||||||
Granted | 555,400 | 23.74 | 71,700 | 47.02 | 184,710 | 39.50 | ||||||||||||||||||
Vested | (100,562 | ) | 23.78 | (104,809 | ) | 21.92 | (94,418 | ) | 17.61 | |||||||||||||||
Forfeited | (56,551 | ) | 36.28 | (100,852 | ) | 32.42 | (25,230 | ) | 39.00 | |||||||||||||||
Balance at the end of the year | 706,009 | $ | 25.22 | 307,722 | $ | 29.46 | 441,683 | $ | 25.49 | |||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
HLTH Plans: | ||||||||||||
Stock options | $ | 7,740 | $ | 11,310 | $ | 20,685 | ||||||
Restricted stock | 5,828 | 7,231 | 5,635 | |||||||||
WHC Plans: | ||||||||||||
Stock options | 9,838 | 14,006 | 17,810 | |||||||||
Restricted stock | 1,356 | 2,768 | 3,736 | |||||||||
ESPP | 51 | 162 | 406 | |||||||||
Other | 1,419 | 1,455 | 409 | |||||||||
Total stock-based compensation expense | $ | 26,232 | $ | 36,932 | $ | 48,681 | ||||||
Included in: | ||||||||||||
Cost of operations | $ | 3,818 | $ | 5,027 | $ | 11,493 | ||||||
Sales and marketing | 3,591 | 4,868 | 7,165 | |||||||||
General and administrative | 17,223 | 22,441 | 22,950 | |||||||||
Gain on 2006 EBS Sale | — | — | 30 | |||||||||
Equity in earnings of EBS Master LLC | — | 2,107 | 310 | |||||||||
Consolidated income from continuing operations | 24,632 | 34,443 | 41,948 | |||||||||
Consolidated income from discontinued operations | 1,600 | 2,489 | 6,733 | |||||||||
Total stock-based compensation expense | $ | 26,232 | $ | 36,932 | $ | 48,681 | ||||||
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16. | Retirement Plans |
17. | Equity |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Foreign currency translation gains | $ | 8,091 | $ | 12,269 | $ | 8,951 | ||||||
Unrealized losses on securities, net | (8,678 | ) | 910 | 1,159 | ||||||||
Comprehensive loss of EBSCo. | — | (7,326 | ) | — | ||||||||
Total accumulated other comprehensive (loss) income | $ | (587 | ) | $ | 5,853 | $ | 10,110 | |||||
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18. | Income Taxes |
December 31, | ||||||||
2008 | 2007 | |||||||
Deferred tax assets: | ||||||||
Federal net operating loss carryforwards | $ | 230,001 | $ | 427,007 | ||||
State net operating loss carryforwards | 55,633 | 59,024 | ||||||
Federal tax credits | 36,678 | 28,809 | ||||||
Other accrued expenses | 50,395 | 39,974 | ||||||
Stock-based compensation | 22,457 | 18,341 | ||||||
Investment in EBS Master LLC | — | 19,950 | ||||||
Intangible assets | 11,279 | 11,822 | ||||||
Auction rate securities | 26,695 | — | ||||||
Other | 3,800 | 10,125 | ||||||
Total deferred tax assets | 436,938 | 615,052 | ||||||
Valuation allowance | (317,235 | ) | (486,197 | ) | ||||
Net deferred tax assets | 119,703 | 128,855 | ||||||
Deferred tax liabilities: | ||||||||
Convertible notes | (82,826 | ) | (68,988 | ) | ||||
Goodwill and indefinite-lived intangible asset | (12,420 | ) | (7,579 | ) | ||||
Other | (284 | ) | (356 | ) | ||||
Total deferred tax liabilities | (95,530 | ) | (76,923 | ) | ||||
Net deferred tax assets | $ | 24,173 | $ | 51,932 | ||||
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December 31, | ||||||||
2008 | 2007 | |||||||
Current deferred tax assets, net: | ||||||||
Current deferred tax assets, net of deferred tax liabilities | $ | 94,467 | $ | 58,228 | ||||
Valuation allowance | (68,371 | ) | (46,011 | ) | ||||
Current deferred tax assets, net | 26,096 | 12,217 | ||||||
Non-current deferred tax (liabilities) assets, net: | ||||||||
Non-current deferred tax assets, net of deferred tax liabilities | 246,941 | 479,901 | ||||||
Valuation allowance | (248,864 | ) | (440,186 | ) | ||||
Non-current deferred tax (liabilities) assets, net | (1,923 | ) | 39,715 | |||||
Net deferred tax assets | $ | 24,173 | $ | 51,932 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current: | ||||||||||||
Federal | $ | 6,602 | $ | (366 | ) | $ | 7,493 | |||||
State | 12,379 | (2,215 | ) | 15,823 | ||||||||
Foreign | 590 | (2 | ) | 170 | ||||||||
Current income tax provision (benefit) | 19,571 | (2,583 | ) | 23,486 | ||||||||
Deferred: | ||||||||||||
Federal | 2,218 | (13,276 | ) | (3,790 | ) | |||||||
State | 701 | 278 | (433 | ) | ||||||||
Deferred income tax provision (benefit) | 2,919 | (12,998 | ) | (4,223 | ) | |||||||
Reversal of valuation allowance applied to goodwill | 2,707 | 2,610 | 30,770 | |||||||||
Reversal of valuation allowance applied to additional paid-in capital | 1,441 | 3,918 | — | |||||||||
Total income tax provision (benefit) | $ | 26,638 | $ | (9,053 | ) | $ | 50,033 | |||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
United States federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes (net of federal benefit) | 1.7 | 20.0 | 1.2 | |||||||||
Gain on 2006 EBS Sale | — | (17.9 | ) | 14.3 | ||||||||
Valuation allowance | (38.6 | ) | (120.5 | ) | (85.3 | ) | ||||||
Non-deductible officer compensation | 0.1 | 6.5 | 1.0 | |||||||||
Reversal of valuation allowance applied to goodwill | 0.0 | 8.1 | 7.3 | |||||||||
Reversal of valuation allowance applied to additional paid-in capital | — | 12.2 | — | |||||||||
Losses benefited to discontinued operations | 6.5 | 25.5 | 40.8 | |||||||||
Other | 0.7 | 3.0 | (2.4 | ) | ||||||||
Effective income tax rate | 5.4 | % | (28.1 | )% | 11.9 | % | ||||||
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Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Balance at the beginning of the year | $ | 10,910 | $ | 11,268 | ||||
Increases related to prior year tax positions | — | 140 | ||||||
Increases related to current year tax positions | 734 | 1,364 | ||||||
Settlements with tax authorities | — | (769 | ) | |||||
Expiration of the statute of limitations for the assessment of taxes | (1,068 | ) | (1,093 | ) | ||||
Balance at the end of the year | $ | 10,576 | $ | 10,910 | ||||
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19. | Fair Value Disclosures and Credit Facilities |
December 31, 2008 | ||||||||||||||||
Fair Value Estimates | December 31, | |||||||||||||||
Using | 2007 | |||||||||||||||
Level 1 | Level 3 | Total | Fair Value | |||||||||||||
Financial assets carried at fair value | ||||||||||||||||
Auction rate securities | $ | — | $ | 286,552 | $ | 286,552 | $ | 269,500 | ||||||||
Equity securities | 1,497 | — | 1,497 | 2,383 | ||||||||||||
Total financial assets carried at fair value | $ | 1,497 | $ | 286,552 | $ | 288,049 | $ | 271,883 | ||||||||
Balance as of January 1, 2008 | $ | — | ||
Transfers to Level 3 | 363,700 | |||
Redemptions | (8,700 | ) | ||
Impairment charge included in earnings | (60,108 | ) | ||
Interest income accretion included in earnings | 1,067 | |||
Unrealized loss included in other comprehensive (loss) income | (9,407 | ) | ||
Fair value December 31, 2008 | $ | 286,552 | ||
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December 31, 2008 | December 31, 2007 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Financial Assets: | ||||||||||||||||
1.75% Notes(a) | $ | 350,000 | $ | 305,200 | $ | 350,000 | $ | 350,438 | ||||||||
31/8% Notes(a) | 264,018 | 243,750 | 255,776 | 303,645 |
(a) | Fair value estimate incorporates bid price quotes. |
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20. | Other (Expense) Income, Net |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Transition service fees(a) | $ | 335 | $ | 5,833 | $ | 2,524 | ||||||
Reduction of tax contingencies(b) | 1,749 | 1,497 | — | |||||||||
Legal expense(c) | (1,092 | ) | (1,397 | ) | (2,578 | ) | ||||||
Advisory expense(d) | (6,941 | ) | (2,527 | ) | (4,198 | ) | ||||||
Other (expense) income, net | $ | (5,949 | ) | $ | 3,406 | $ | (4,252 | ) | ||||
(a) | Represents the net fees received from ViPS, Sage Software and EBSCo in relation to their respective transition services agreements. | |
(b) | Represents the reduction of certain sales and use tax contingencies resulting from the expiration of various statutes. | |
(c) | Represents the costs and expenses incurred by the Company related to the investigation by the United States Attorney for the District of South Carolina and the SEC. | |
(d) | In 2008 and 2007, represents professional fees, primarily consisting of legal, accounting and financial advisory services incurred by the Company related to the potential merger of HLTH into WHC, which was terminated in October 2008. In 2006, represents similar professional fees related to the 2006 EBS Sale through September 26, 2006, the date the Company entered into a definitive agreement with General Atlantic regarding the 2006 EBS Sale. |
21. | Related Party Transactions |
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22. | Supplemental Disclosures of Cash Flow Information |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Interest paid | $ | 15,502 | $ | 15,764 | $ | 15,821 | ||||||
Taxes paid, net of refunds(a) | $ | 26,714 | $ | 27,375 | $ | 23,210 | ||||||
Supplemental Schedule of Non-Cash Investing and Financing activities: | ||||||||||||
Conversion of convertible redeemable exchangeable preferred stock to HLTH Common Stock | $ | — | $ | 100,000 | $ | — | ||||||
Accretion of convertible redeemable exchangeable preferred stock | $ | — | $ | 117 | $ | 235 | ||||||
(a) | As the Company generally files its tax returns on a consolidated basis, taxes paid, net of refunds, includes all taxes paid by the Company, including those of the Company’s discontinued operations. |
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23. | Quarterly Financial Data (Unaudited) |
2008 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Revenue | $ | 80,650 | $ | 85,964 | $ | 96,777 | $ | 110,071 | ||||||||
Cost of operations | 30,927 | 31,968 | 34,225 | 38,018 | ||||||||||||
Sales and marketing | 25,149 | 24,898 | 26,021 | 30,012 | ||||||||||||
General and administrative | 20,849 | 22,778 | 22,493 | 21,933 | ||||||||||||
Depreciation and amortization | 6,775 | 7,214 | 7,188 | 7,233 | ||||||||||||
Gain on sale of EBS Master LLC | 538,024 | — | — | — | ||||||||||||
Impairment of auction rate securities | 60,108 | — | — | — | ||||||||||||
Restructuring | — | — | — | 7,416 | ||||||||||||
Interest income (expense), net | 5,411 | 1,477 | 2,750 | (766 | ) | |||||||||||
Other (expense), net | (4,144 | ) | (666 | ) | (997 | ) | (142 | ) | ||||||||
Income (loss) from continuing operations before income tax provision (benefit) | 476,133 | (83 | ) | 8,603 | 4,551 | |||||||||||
Income tax provision (benefit) | 25,602 | 569 | 3,493 | (3,026 | ) | |||||||||||
Equity in earnings of EBS Master LLC | 4,007 | — | — | — | ||||||||||||
Consolidated income (loss) from continuing operations | 454,538 | (652 | ) | 5,110 | 7,577 | |||||||||||
Consolidated income (loss) from discontinued operations, net of tax | 3,057 | (3,063 | ) | 92,647 | 2,041 | |||||||||||
Consolidated net income inclusive of noncontrolling interest | 457,595 | (3,715 | ) | 97,757 | 9,618 | |||||||||||
Loss (income) attributable to noncontrolling interest | 3,845 | (1,071 | ) | (1,845 | ) | (1,961 | ) | |||||||||
Net income (loss) attributable to HLTH stockholders | $ | 461,440 | $ | (4,786 | ) | $ | 95,912 | $ | 7,657 | |||||||
Amounts attributable to HLTH stockholders: | ||||||||||||||||
Income (loss) from continuing operations | $ | 458,322 | $ | (1,611 | ) | $ | 3,403 | $ | 5,611 | |||||||
Income (loss) from discontinued operations | 3,118 | (3,175 | ) | 92,509 | 2,046 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 461,440 | $ | (4,786 | ) | $ | 95,912 | $ | 7,657 | |||||||
Basic income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 2.52 | $ | (0.01 | ) | $ | 0.02 | $ | 0.04 | |||||||
Income (loss) from discontinued operations | 0.01 | (0.02 | ) | 0.50 | 0.01 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 2.53 | $ | (0.03 | ) | $ | 0.52 | $ | 0.05 | |||||||
Diluted income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 2.03 | $ | (0.01 | ) | $ | 0.02 | $ | 0.03 | |||||||
Income (loss) from discontinued operations | 0.01 | (0.02 | ) | 0.49 | 0.02 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 2.04 | $ | (0.03 | ) | $ | 0.51 | $ | 0.05 | |||||||
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2007 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Revenue | $ | 70,131 | $ | 73,780 | $ | 81,708 | $ | 93,613 | ||||||||
Cost of operations | 27,840 | 28,057 | 29,248 | 28,855 | ||||||||||||
Sales and marketing | 22,284 | 21,325 | 21,654 | 25,772 | ||||||||||||
General and administrative | 27,994 | 26,522 | 25,333 | 22,812 | ||||||||||||
Depreciation and amortization | 6,213 | 7,128 | 7,278 | 7,189 | ||||||||||||
Interest income, net | 3,197 | 3,679 | 4,362 | 4,910 | ||||||||||||
Other income (expense), net | 2,882 | 1,396 | 989 | (1,462 | ) | |||||||||||
(Loss) income from continuing operations before income tax (benefit) provision | (8,121 | ) | (4,177 | ) | 3,546 | 12,433 | ||||||||||
Income tax (benefit) provision | (46 | ) | 1,466 | 2,613 | (13,086 | ) | ||||||||||
Equity in earnings of EBS Master LLC | 7,099 | 7,575 | 8,005 | 5,887 | ||||||||||||
Consolidated (loss) income from continuing operations | (976 | ) | 1,932 | 8,938 | 31,406 | |||||||||||
Consolidated income (loss) from discontinued operations, net of tax | 5,025 | (48,357 | ) | 7,591 | 17,693 | |||||||||||
Consolidated net income inclusive of noncontrolling interest | 4,049 | (46,425 | ) | 16,529 | 49,099 | |||||||||||
Income attributable to noncontrolling interest | (115 | ) | (843 | ) | (1,800 | ) | (7,909 | ) | ||||||||
Net income (loss) attributable to HLTH stockholders | $ | 3,934 | $ | (47,268 | ) | $ | 14,729 | $ | 41,190 | |||||||
Amounts attributable to HLTH stockholders: | ||||||||||||||||
(Loss) income from continuing operations | $ | (1,113 | ) | $ | 1,269 | $ | 7,372 | $ | 24,317 | |||||||
Income (loss) from discontinued operations | 5,047 | (48,537 | ) | 7,357 | 16,873 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 3,934 | $ | (47,268 | ) | $ | 14,729 | $ | 41,190 | |||||||
Basic income (loss) per common share: | ||||||||||||||||
(Loss) income from continuing operations | $ | (0.01 | ) | $ | 0.01 | $ | 0.04 | $ | 0.13 | |||||||
Income (loss) from discontinued operations, net of tax | 0.03 | (0.27 | ) | 0.04 | 0.10 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 0.02 | $ | (0.26 | ) | $ | 0.08 | $ | 0.23 | |||||||
Diluted income (loss) per common share: | ||||||||||||||||
(Loss) income from continuing operations | $ | (0.01 | ) | $ | 0.01 | $ | 0.04 | $ | 0.12 | |||||||
Income (loss) from discontinued operations, net of tax | 0.03 | (0.26 | ) | 0.04 | 0.08 | |||||||||||
Net income (loss) attributable to HLTH stockholders | $ | 0.02 | $ | (0.25 | ) | $ | 0.08 | $ | 0.20 | |||||||
24. | Retrospective Application of New Accounting Standards |
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Consolidated Balance Sheets | ||||||||
As Previously | As | |||||||
Reported(a) | Adjusted | |||||||
As of December 31, 2008: | ||||||||
Prepaid expenses and other current assets | $ | 40,798 | $ | 44,369 | ||||
Other assets | 24,465 | 23,600 | ||||||
31/8% convertible notes due 2025 | 300,000 | 264,018 | ||||||
Other long-term liabilities | 21,094 | 21,816 | ||||||
Additional paid-in capital | 12,507,729 | 12,566,854 | ||||||
Accumulated deficit | (8,755,459 | ) | (8,776,618 | ) | ||||
As of December 31, 2007: | ||||||||
Prepaid expenses and other current assets | $ | 71,078 | $ | 72,669 | ||||
Other assets | 72,742 | 69,959 | ||||||
31/8% convertible notes due 2025 | 300,000 | 255,776 | ||||||
Additional paid-in capital | 12,479,574 | 12,538,699 | ||||||
Accumulated deficit | (9,320,748 | ) | (9,336,841 | ) |
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Consolidated Statements of Operations | ||||||||
As Previously | As | |||||||
Reported(a) | Adjusted | |||||||
For the year ended December 31, 2008: | ||||||||
Interest expense | $ | 18,513 | $ | 26,428 | ||||
Income tax provision | 29,487 | 26,638 | ||||||
Consolidated income from continuing operations | 471,639 | 466,573 | ||||||
Consolidated net income inclusive of noncontrolling interest | 566,321 | 561,255 | ||||||
Net income attributable to HLTH stockholders | 565,289 | 560,223 | ||||||
Basic income per common share: | ||||||||
Income from continuing operations | $ | 2.69 | $ | 2.66 | ||||
Income from discontinued operations | 0.54 | 0.54 | ||||||
Net income attributable to HLTH stockholders | $ | 3.23 | $ | 3.20 | ||||
Diluted income per common share: | ||||||||
Income from continuing operations | $ | 2.19 | $ | 2.19 | ||||
Income from discontinued operations | 0.43 | 0.42 | ||||||
Net income attributable to HLTH stockholders | $ | 2.62 | $ | 2.61 | ||||
For the year ended December 31, 2007: | ||||||||
Interest expense | $ | 18,593 | $ | 25,887 | ||||
Consolidated income from continuing operations | 48,594 | 41,300 | ||||||
Consolidated net income inclusive of noncontrolling interest | 30,546 | 23,252 | ||||||
Net income attributable to HLTH stockholders | 19,879 | 12,585 | ||||||
Basic income (loss) per common share: | ||||||||
Income from continuing operations | $ | 0.21 | $ | 0.18 | ||||
Income (loss) from discontinued operations | (0.10 | ) | (0.11 | ) | ||||
Net income attributable to HLTH stockholders | $ | 0.11 | $ | 0.07 | ||||
Diluted income (loss) per common share: | ||||||||
Income from continuing operations | $ | 0.19 | $ | 0.16 | ||||
Income (loss) from discontinued operations | (0.10 | ) | (0.10 | ) | ||||
Net income attributable to HLTH stockholders | $ | 0.09 | $ | 0.06 | ||||
For the year ended December 31, 2006: | ||||||||
Interest expense | $ | 18,794 | $ | 25,472 | ||||
Consolidated income from continuing operations | 378,795 | 372,117 | ||||||
Consolidated net income inclusive of noncontrolling interest | 772,322 | 765,644 | ||||||
Net income attributable to HLTH stockholders | 771,917 | 765,239 | ||||||
Basic income per common share: | ||||||||
Income from continuing operations | $ | 1.36 | $ | 1.33 | ||||
Income from discontinued operations | 1.41 | 1.41 | ||||||
Net income attributable to HLTH stockholders | $ | 2.77 | $ | 2.74 | ||||
Diluted income per common share: | ||||||||
Income from continuing operations | $ | 1.20 | $ | 1.20 | ||||
Income from discontinued operations | 1.18 | 1.18 | ||||||
Net income attributable to HLTH stockholders | $ | 2.38 | $ | 2.38 | ||||
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Consolidated Statements of Cash Flows | ||||||||
As Previously | As | |||||||
Reported(a) | Adjusted | |||||||
For the year ended December 31, 2008: | ||||||||
Consolidated net income inclusive of noncontrolling interest | $ | 566,321 | $ | 561,255 | ||||
Non-cash interest expense, net | 1,944 | 9,859 | ||||||
Deferred income taxes | 10,911 | 7,474 | ||||||
For the year ended December 31, 2007: | ||||||||
Consolidated net income inclusive of noncontrolling interest | $ | 30,546 | $ | 23,252 | ||||
Non-cash interest expense, net | 2,916 | 10,210 | ||||||
Deferred income taxes | (9,842 | ) | (10,430 | ) | ||||
For the year ended December 31, 2006: | ||||||||
Consolidated net income inclusive of noncontrolling interest | $ | 772,322 | $ | 765,644 | ||||
Non-cash interest expense, net | 2,906 | 9,584 | ||||||
Deferred income taxes | 27,135 | 26,547 |
(a) | The previously reported balances have been adjusted to reflect the reclassifications associated with the presentation of LBB as a discontinued operation and the adoption of SFAS 160. |
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Years Ended December 31, 2008, 2007 and 2006 | ||||||||||||||||||||||||
Balance at | Charged to | |||||||||||||||||||||||
Beginning | Costs and | Balance at | ||||||||||||||||||||||
of Year | Expenses | Acquired | Write-offs | Other | End of Year | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | $ | 1,165 | $ | 668 | $ | — | $ | (532 | ) | $ | — | 1,301 | ||||||||||||
Valuation Allowance for Deferred Tax Assets | 486,197 | (194,057 | ) | 24,775 | — | 320 | 317,235 | |||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | 956 | 1,074 | — | (865 | ) | — | 1,165 | |||||||||||||||||
Valuation Allowance for Deferred Tax Assets | 533,724 | (40,176 | ) | 1,449 | — | (8,800 | )(a) | 486,197 | ||||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | 6,245 | 1,852 | 229 | (3,731 | ) | (3,639 | )(b) | 956 | ||||||||||||||||
Valuation Allowance for Deferred Tax Assets | 923,547 | (367,954 | ) | 362 | — | (22,231 | )(c) | 533,724 |
(a) | Represents the valuation allowance released as a result of (i) the adoption of FIN 48, and (ii) stock option and warrant exercises, partially offset by the valuation allowance established relating to the Company’s share of unrealized loss on the fair value of EBSCo’s interest rate swap agreements. | |
(b) | Represents the sale of the Emdeon Business Services segment on November 16, 2006. | |
(c) | Represents the valuation allowance released as a result of the adoption of FSP APB14-1 on the balance at the beginning of the year. |
S-1
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• | Introduction. This section provides a general description of our company and operating segments, background information on certain trends and developments affecting our company, a summary of our acquisition and disposition transactions during the period from 2006 through 2008 and a discussion of how seasonal factors may impact the timing of our revenue. |
• | Critical Accounting Estimates and Policies. This section discusses those accounting policies that are considered important to the evaluation and reporting of our financial condition and results of operations, and whose application requires us to exercise subjective or complex judgments in making estimates and assumptions. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 2 to the Consolidated Financial Statements included inAnnex B-1 above. |
• | Results of Operations and Results of Operations by Operating Segment. These sections provide our analysis and outlook for the significant line items on our consolidated statements of operations, as well |
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as other information that we deem meaningful to understand our results of operations on both a consolidated basis and an operating segment basis. |
• | Liquidity and Capital Resources. This section provides an analysis of our liquidity and cash flows and discussions of our contractual obligations and commitments, as well as our outlook on our available liquidity as of December 31, 2008. | |
• | Recent Accounting Pronouncements. This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our company or may be adopted in the future. |
• | Emdeon Practice Services. We completed the sale of our Emdeon Practice Services segment (which we refer to as EPS) to Sage Software, Inc. (which we refer to as Sage Software) on September 14, 2006. In this MD&A, we refer to this transaction as the EPS Sale. Through EPS, we provided practice management and electronic health records software solutions used by medical practices and related services. The historical results of EPS, including the gain related to the sale have been reclassified as discontinued operations in our financial statements and our discussions in this MD&A reflect EPS as discontinued operations. Discontinued operations for periods after the sale includes post-sale activities related to EPS, including litigation costs that were indemnified as part of the EPS Sale, as more fully described under “— Background Information on Certain Trends and Developments — Indemnification Obligations to Former Officers and Directors of EPS.” | |
• | 52% Interest in Emdeon Business Services. On November 16, 2006, we completed the sale of a 52% interest in the business that constituted our Emdeon Business Services segment, excluding its ViPS business unit (which we refer to as EBS) to an affiliate of General Atlantic LLC (which we refer to as GA). In this MD&A, we refer to this transaction as the 2006 EBS Sale. From the closing of the 2006 EBS Sale to the closing of the 2008 EBSCo Sale (described below) on February 8, 2008, we owned 48% of EBS Master LLC (which we refer to as EBSCo), the entity that acquired EBS in the 2006 EBS Sale and we accounted for that 48% ownership interest as an equity investment in our consolidated financial statements. In this MD&A, we use the names Emdeon Business Services and EBS to refer to the business owned by EBSCo and, with respect to periods prior to the consummation of the 2006 EBS Sale, to the reporting segment of our company. A description of EBS is included under “— Segments — Emdeon Business Services” below. |
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• | Remaining 48% Interest in EBS. On February 8, 2008, we completed the sale of our 48% noncontrolling ownership interest in EBSCo (which we refer to as the 2008 EBSCo Sale) to an affiliate of GA and affiliates of Hellman & Friedman, LLC. | |
• | ViPS. On February 21, 2008, we announced our intention to divest our ViPS segment. On July 22, 2008, we completed the sale of our ViPS segment to an affiliate of General Dynamics Corporation. In this MD&A, we refer to this transaction as the ViPS Sale. The historical results of ViPS, including the gain related to the sale, have been reclassified as discontinued operations in our financial statements and our discussions in this MD&A reflect ViPS as discontinued operations. Through ViPS, we provided healthcare data management, analytics, decision-support and process automation solutions and related information technology services to governmental, Blue Cross Blue Shield and commercial healthcare payers. |
• | WebMD. WebMD is a leading provider of health information services to consumers, physicians and other healthcare professionals, employers and health plans through WebMD’s public and private online portals and health-focused publications. WebMD’s public portals for consumers enable them to obtain health and wellness information (including information on specific diseases or conditions), check symptoms, locate physicians, store individual healthcare information, receive periodice-newsletters on topics of individual interest and participate in online communities with peers and experts. WebMD’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, |
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earn continuing medical education (which we refer to as CME) credit and communicate with peers. WebMD public portals generate revenue primarily through the sale of advertising and sponsorship products, including CME services. WebMD also distributes its online content and services to other entities and generates revenue from these arrangements through the sale of advertising and sponsorship products and content syndication fees. WebMD also providese-detailing promotion and physician recruitment services for use by pharmaceutical, medical device and healthcare companies. WebMD also provides print services including the publication ofWebMD the Magazine,a consumer magazine distributed to physician office waiting rooms. WebMD’s public portals sponsors and advertisers include pharmaceutical, biotechnology, medical device and consumer products companies. WebMD’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, treatment and provider decisions. WebMD also provides related services for use by such employees and members, including lifestyle education and personalized telephonic health coaching. WebMD generates revenue from our private portals through the licensing of these services to employers and health plans either directly or through distributors. |
• | Corporate. Corporate includes personnel costs and other expenses related to executive personnel, legal, accounting, tax, internal audit, risk management, human resources and certain information technology functions, as well as other corporate costs and expenses such as professional fees including legal and audit services, insurance, costs of leased property and facilities, telecommunication costs and software maintenance expenses. Corporate expenses are net of $3,410, $3,340 and $3,190 in 2008, 2007 and 2006, respectively, which are costs allocated to WebMD for services provided by the Corporate segment. In connection with the 2006 EBS Sale, the EPS Sale and the ViPS Sale, we entered into transition services agreements whereby we provided EBSCo, Sage Software and ViPS certain administrative services, including payroll, accounting, purchasing and procurement, tax, and human resource services, as well as information technology support. Additionally, EBSCo provided us certain administrative services, including telecommunication infrastructure and management services, data center support and purchasing and procurement services. Some of the services provided by EBSCo to HLTH were, in turn, used to fulfill HLTH’s obligations to provide transition services to Sage Software. These services were provided through the Corporate segment, and the related transition services fees we charged to EBSCo, Sage Software and ViPS, net of the fee we paid to EBSCo, are also included in the Corporate segment, which were intended to approximate the cost of providing these services. The transition services agreement with Sage Software was terminated on December 31, 2007 and, therefore, net transition services fees are for services related to EBSCo and ViPS in 2008. | |
• | Emdeon Business Services. Through EBS, we provided solutions that automate key business and administrative functions for healthcare payers and providers, including electronic patient eligibility and benefit verification; electronic and paper claims processing; electronic and paper paid-claims communication services; and patient billing, payment and communications services. In addition, through EBS, we provided clinical communications services that improve the delivery of healthcare by enabling physicians to manage laboratory orders and results, hospital reports and electronic prescriptions. From November 17, 2006, the date of the 2006 EBS Sale, to February 8, 2008, the date of the 2008 EBSCo Sale, the results of EBS were reflected as an equity investment in our operating results. |
• | Use of the Internet by Consumer and Physicians. The Internet has emerged as a major communications medium and has already fundamentally changed many sectors of the economy, including the marketing and sales of financial services, travel, and entertainment, among others. The |
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Internet is also changing the healthcare industry and has transformed how consumers and physicians find and utilize healthcare information. |
— | Healthcare consumers increasingly seek to educate themselves online about their healthcare related issues, motivated in part by the continued availability of new treatment options and in part by the larger share of healthcare costs they are being asked to bear due to changes in the benefit designs being offered by health plans and employers. The Internet has fundamentally changed the way consumers obtain health and wellness information, enabling them to have immediate access to searchable information and dynamic interactive content to check symptoms, assess risks, understand diseases, find providers and evaluate treatment options. The Internet is consumers’ fastest growing health information resource, according to a national study released in August 2008 by the Center for Studying Health System Change. Researchers found that 32 percent of American consumers (approximately 70 million adults) conducted online health searches in 2007, compared with 16 percent in 2001. More than half of those surveyed said the information changed their overall approach to maintaining their health. Four in five said the information helped them better understand how to treat an illness or condition. | |
— | The Internet has also become a primary source of information for physicians seeking to improve clinical practice and is growing relative to traditional information sources, such as conferences, meetings and offline journals. |
• | Increased Online Marketing and Education Spending for Healthcare Products. Pharmaceutical, biotechnology and medical device companies spend large amounts each year marketing their products and educating consumers and physicians about them; however, only a small portion of this amount is currently spent on online services. We believe that these companies, which comprise the majority of the advertisers and sponsors of our public portals, are becoming increasingly aware of the effectiveness of the Internet relative to traditional media in providing health, clinical and product-related information to consumers and physicians, and this increasing awareness will result in increasing demand for our services. However, notwithstanding our general expectation for increased demand, our public portals revenue may vary significantly from quarter to quarter due to a number of factors, many of which are not in our control, and some of which may be difficult to forecast accurately, including general economic conditions and the following: |
— | The majority of our advertising and sponsorship contracts are for terms of approximately four to twelve months. We have relatively few longer term advertising and sponsorship contracts. | |
— | The time between the date of initial contact with a potential advertiser or sponsor regarding a specific program and the execution of a contract with the advertiser or sponsor for that program may be subject to delays over which we have little or no control, including as a result of budgetary constraints of the advertiser or sponsor or their need for internal approvals. |
Other factors that may affect the timing of contracting for specific programs with advertisers and sponsors, or receipt of revenue under such contracts, include: the timing of FDA approval for new products or for new approved uses for existing products; the timing of FDA approval of generic products that compete with existing brand name products; the timing of withdrawals of products from the market; seasonal factors relating to the prevalence of specific health conditions and other seasonal factors that may affect the timing of promotional campaigns for specific products; and the scheduling of conferences for physicians and other healthcare professionals. | ||
• | Changes in Health Plan Design; Health Management Initiatives. In a healthcare market where the responsibility for healthcare costs and decision-making has been increasingly shifting to consumers, use of information technology (including personal health records) to assist consumers in making informed decisions about healthcare has also increased. We believe that through our WebMD Health and Benefits Manager tools, including our personal health record application, we are well positioned to play a role in this environment, and these services will be a significant driver for the growth of our private portals |
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during the next several years. However, our growth strategy depends, in part, on increasing usage of our private portal services by our employer and health plan clients’ employees and members, respectively. Increasing usage of our services requires us to continue to deliver and improve the underlying technology and develop new and updated applications, features and services. In addition, we face competition in the area of healthcare decision-support tools and online health management applications and health information services. Many of our competitors have greater financial, technical, product development, marketing and other resources than we do, and may be better known than we are. We also expect that, for clients and potential clients in the industries most seriously affected by recent adverse changes in general economic conditions (including those in the financial services industry), we may experience some reductions in initial contracts, contract expansions and contract renewals for our private portal services, as well as reductions in the size of existing contracts. |
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• | On December 15, 2006, WHC acquired Subimo, a privately held provider of healthcare decision-support applications to large employers, health plans and financial institutions, from Subimo’s security holders (referred to below as the Subimo Sellers). The initial purchase consideration for Subimo was valued at approximately $59,320, comprised of $32,820 in cash, net of cash acquired, $26,000 of WHC Class A Common Stock and $500 of acquisition costs. Pursuant to the terms of the purchase agreement for Subimo, as amended (referred to below as the Subimo Purchase Agreement), WHC deferred the issuance of 640,930 shares of WHC Class A Common Stock included in the purchase consideration (which we refer to as the Deferred Shares) to December 3, 2008. The Deferred Shares were repurchased from the Subimo Sellers immediately following their issuance at a purchase price of $20.00 per share, the closing market price of WHC Class A Common Stock on The Nasdaq Global Select Market on December 3, 2008. Since the Deferred Shares had a market value that was less than $24.34 per share when issued, WHC was required, under the Subimo Purchase Agreement, to pay additional cash consideration to the Subimo Sellers at the time of the issuance of the Deferred Shares in an amount equal to the aggregate shortfall, which was $2,782. The results of operations of Subimo have been included in our financial statements from December 15, 2006, the closing date of the acquisition, and are included in the WebMD segment. | |
• | On September 11, 2006, WHC acquired the interactive medical education, promotion and physician recruitment businesses of Medsite. The total purchase consideration for Medsite was approximately $31,467, comprised of $30,682 in cash, net of cash acquired, and $785 of acquisition costs. The results of operations of Medsite have been included in our financial statements from September 11, 2006, the closing date of the acquisition, and are included in the WebMD segment. | |
• | On June 13, 2006, WHC acquired Summex, a provider of health and wellness programs that include online and offline health risk assessments, lifestyle education and personalized telephonic health coaching. The total purchase consideration for Summex was approximately $30,043, comprised of $29,543 in cash, net of cash acquired, and $500 of acquisition costs. The results of operations of Summex have been included in our financial statements from June 13, 2006, the closing date of the acquisition, and are included in the WebMD segment. | |
• | On January 17, 2006, WHC acquired eMedicine, a privately held online publisher of medical reference information for physicians and other healthcare professionals. The total purchase consideration for eMedicine was approximately $25,195, comprised of $24,495 in cash, net of cash acquired, and $700 of acquisition costs. The results of operations of eMedicine have been included in our financial statements from January 17, 2006, the closing date of the acquisition, and are included in the WebMD segment. |
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• | EPS Sale. On September 14, 2006, we completed the sale of EPS to Sage Software. We received cash proceeds of $556,324 (including amounts released from escrow in 2008 and 2007), net of professional fees and other expenses associated with the EPS Sale. In connection with the EPS Sale, we recognized a gain of $353,158, net of tax of $33,037, which is included in consolidated income (loss) from discontinued operations in our operating results during 2006. In connection with the EPS Sale, we entered into a transition services agreement with EPS whereby we provided EPS with certain administrative services, including payroll, accounting, purchasing and procurement, tax and human resource services, as well as IT support. The transition services agreement terminated on December 31, 2007 and the fees charged to EPS during 2007 and the period from September 15, 2006 to December 31, 2006 was $3,894 and $2,099, respectively. | |
• | 2006 EBS Sale. On November 16, 2006, we completed the sale of a 52% interest in EBS to an affiliate of GA. The 2006 EBS Sale was structured so that HLTH and GA each own interests in EBSCo, a limited liability company owning the entities comprising EBS. We received gross cash proceeds of approximately $1,209,000 at closing, and received $11,099 subsequent to December 31, 2006 in connection with a working capital adjustment. In connection with the 2006 EBS Sale, we recognized a gain of $352,297, which considers approximately $16,103 of professional fees and other expenses associated with the 2006 EBS Sale. During 2007, we recognized a gain of $399 which relates to the finalization of the working capital adjustment. In connection with the 2006 EBS Sale, we entered into a transition services agreement whereby we provided EBSCo with certain administrative services, including payroll, accounting, tax, treasury, contract and litigation support, real estate vendor management and human resource services, as well as IT support. Additionally, EBSCo provided certain administrative services to us, including telecommunication infrastructure and management services, data center support, purchasing and procurement and certain other services. Some of the services provided by EBSCo to HLTH were, in turn, used to fulfill HLTH’s obligation to provide transition services to EPS. The fees charged to EBSCo were $162, $3,009 and $610 during 2008, 2007 and 2006 is net of the amount charged to our company of $109, $1,070 and $185, respectively. | |
• | Sale of ACP Medicine and ACS Surgery. As of December 31, 2007, through WHC, we entered into an Asset Sale Agreement and completed the sale of certain assets and certain liabilities of WebMD’s medical reference publications business, including the publicationsACP MedicineandACS Surgery: Principles and Practice. The assets and liabilities sold are referred to below as the ACS/ACP Business.ACP MedicineandACS Surgeryare official publications of the American College of Physicians and the American College of Surgeons, respectively. We will receive net cash proceeds of $2,575, consisting of $1,925 received during 2008 and the remaining $650 to be received during 2009. We incurred approximately $750 of professional fees and other expenses associated with the sale of the ACS/ACP Business. In connection with the sale, we recognized a pre-tax loss of $234 and a pre-tax gain of $3,394 in 2008 and 2007. The decision to divest the ACS/ACP Business was made because management determined that it was not a good fit with WebMD’s core business. |
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• | 2008 EBSCo Sale. On February 8, 2008, we entered into a Securities Purchase Agreement and simultaneously completed the sale of our 48% noncontrolling ownership interest in EBSCo for $574,617 in cash, net of professional fees and other expenses, to an affiliate of GA and affiliates of Hellman & Friedman, LLC. In connection with the 2008 EBSCo Sale, we recognized a pre-tax gain of $538,024. | |
• | ViPS Sale. On July 22, 2008, we completed the sale of our ViPS segment to an affiliate of General Dynamics Corporation. We received cash proceeds of $223,175, net of the working capital adjustment, professional fees and other expenses associated with the ViPS Sale. During 2008, we incurred approximately $1,472 of professional and other expenses and recognized a pre-tax gain of $96,969. In connection with the ViPS Sale, we entered into a transition services agreement with ViPS whereby we will provide ViPS with certain administrative services. The fee charged to ViPS for the year ended December 31, 2008 was $282. |
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• | Revenue. Our revenue recognition policies are as follows: |
• | Long-Lived Assets. Our long-lived assets consist of property and equipment, goodwill and other intangible assets. Goodwill and other intangible assets arise from the acquisitions we have made. The amount assigned to intangible assets is subjective and based on our estimates of the future benefit of the intangible assets using accepted valuation techniques, such as discounted cash flow and replacement cost models. Our long-lived assets, excluding goodwill and indefinite lived intangible assets, are amortized over their estimated useful lives, which we determine based on the consideration of several factors including the period of time the asset is expected to remain in service. We evaluate the carrying value and remaining useful lives of long-lived assets, excluding goodwill and indefinite lived intangible assets, whenever indicators of impairment are present. We evaluate the carrying value of goodwill and indefinite lived intangible assets annually, or whenever indicators of impairment are present. We use a discounted cash flow approach to determine the fair value of goodwill and indefinite lived intangible assets. Long-lived assets held for sale are reported at the lower of cost or fair value less cost to sell. There was no impairment of goodwill or indefinite lived intangible assets noted as a result of our impairment testing in 2008. | |
• | Fair Value of Investments. We hold investments in ARS which are backed by student loans, which are 97% guaranteed under the Federal Family Education Loan Program (FFELP), and which had credit ratings of AAA or Aaa when purchased. Historically, the fair value of our ARS investments approximated face value due to the frequent auction periods, generally every 7 to 28 days, which provided liquidity to these investments. However, since February 2008, all auctions involving these securities have failed. As a secondary market has yet to develop, these investments have been reclassified to long-term investments as of December 31, 2008. The result of a failed auction is that these ARS will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems |
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the securities, the securities mature or until such time as other markets for these ARS develop. We cannot be certain regarding the amount of time it will take for an auction market or other markets to develop. Accordingly, during the three months ended March 31, 2008, we concluded that the estimated fair value of the ARS no longer approximated the face value due to the lack of liquidity and accordingly, we recorded another-than-temporary impairment as of March 31, 2008. |
• | Sale of Subsidiary Stock. Our WHC subsidiary issues its Class A Common Stock in various transactions, which results in a dilution of our percentage ownership in WHC. We account for the sale of WHC Class A Common Stock in accordance with SFAS 160. The difference between the carrying amount of our investment in WHC before and after the issuance of WHC Class A Common Stock is considered an equity transaction and is reflected as a component of our equity. During 2008 and 2007, WHC issued Class A Common Stock for the following transactions, which resulted in our ownership in WHC decreased to 83.6% as of December 31, 2008 from 84.1% as of December 31, 2007: |
— | Compensation Related. During 2008, 2007 and 2006, WHC stock options were exercised and restricted stock awards were released in accordance with WHC’s 2005 Long-Term Incentive Plan and WHC issued WHC Class A Common Stock to its Board of Directors as payment for their services. The issuance of these shares resulted in aggregate increases to additional paid-in capital of $3,688, $14,364 and $5,152 in 2008, 2007 and 2006. | |
— | Acquisition of Subimo.During 2006, we recorded an increase to additional paid-in capital of $11,627, in connection with the committed future issuance of 394,422 shares of WHC Class A Common Stock in connection with the acquisition of Subimo. In December 2008, WHC issued an additional 246,508 shares of WHC Class A Common Stock to the Subimo shareholders. We did not recognize an increase to additional paid-in capital related to the issuance of these shares, as they were subsequently repurchased in a related transaction. |
• | Stock-Based Compensation. On January 1, 2006, we adopted SFAS No. 123, “(Revised 2004): Share-Based Payment” (which we refer to as SFAS 123R), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (which we refer to as SFAS 123) and supersedes Accounting Principles Board (which we refer to as APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (which we refer to as APB 25). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the Consolidated Financial Statements based on their fair values. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option |
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pricing model. The assumptions used in this model are expected dividend yield, expected volatility, risk-free interest rate and expected term. We elected to use the modified prospective transition method. Under the modified prospective transition method, awards that were granted or modified on or after January 1, 2006 are measured and accounted for in accordance with SFAS 123R. Unvested stock options and restricted stock awards that were granted prior to January 1, 2006 will continue to be accounted for in accordance with SFAS 123, using the same grant date fair value and same expense attribution method used under SFAS 123, except that all awards are recognized in the results of operations over the remaining vesting periods. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized for all stock-based compensation beginning January 1, 2006. As of December 31, 2008, approximately $20,923 and $77,543 of unrecognized stock-based compensation expense related to unvested awards (net of estimated forfeitures) is expected to be recognized over a weighted-average period of approximately 2.3 years and 3.5 years, related to the HLTH and WHC stock-based compensation plans, respectively. |
• | Deferred Taxes. Our deferred tax assets are comprised primarily of net operating loss carryforwards. These net operating loss carryforwards may be used to offset taxable income in future periods, reducing the amount of taxes we might otherwise be required to pay. A significant portion of our deferred tax assets are reserved for by a valuation allowance. In determining the need for a valuation allowance, management determined the probability of realizing deferred tax assets, taking into consideration factors including historical operating results, expectations of future earnings and taxable income. Management will continue to evaluate the need for a valuation allowance, and in the future, should management determine that realization of the net deferred tax asset is more likely than not, some or all of the remaining valuation allowance will be reversed, and our effective tax rate may be reduced by such reversal. | |
• | Tax Contingencies. Our tax contingencies are recorded to address potential exposures involving tax positions we have taken that could be challenged by tax authorities. These potential exposures result from applications of various statutes, rules, regulations and interpretations. Our estimates of tax contingencies reflect assumptions and judgments about potential actions by taxing jurisdictions. We believe that these assumptions and judgments are reasonable; however, our accruals may change in the future due to new developments in each matter and the ultimate resolution of these matters may be greater or less than the amount that we have accrued. Consistent with our historical financial reporting, we have elected to reflect interest and penalties related to uncertain tax positions as part of the income tax provision. |
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Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||||||
Revenue | $ | 373,462 | 100.0 | $ | 319,232 | 100.0 | $ | 899,585 | 100.0 | |||||||||||||||
Cost of operations | 135,138 | 36.2 | 114,000 | 35.7 | 542,723 | 60.3 | ||||||||||||||||||
Sales and marketing | 106,080 | 28.4 | 91,035 | 28.5 | 116,258 | 12.9 | ||||||||||||||||||
General and administrative | 88,053 | 23.6 | 102,661 | 32.2 | 130,056 | 14.6 | ||||||||||||||||||
Depreciation and amortization | 28,410 | 7.6 | 27,808 | 8.7 | 44,073 | 4.9 | ||||||||||||||||||
Interest income | 35,300 | 9.5 | 42,035 | 13.2 | 32,339 | 3.6 | ||||||||||||||||||
Interest expense | 26,428 | 7.1 | 25,887 | 8.1 | 25,472 | 2.8 | ||||||||||||||||||
Gain on sale of EBS Master LLC | 538,024 | 144.1 | — | — | — | — | ||||||||||||||||||
Impairment of auction rate securities | 60,108 | 16.1 | — | — | — | — | ||||||||||||||||||
Restructuring | 7,416 | 2.0 | — | — | — | — | ||||||||||||||||||
Gain on 2006 EBS Sale | — | — | 399 | 0.1 | 352,297 | 39.2 | ||||||||||||||||||
Other (expense) income, net | (5,949 | ) | (1.6 | ) | 3,406 | 1.1 | (4,252 | ) | (0.5 | ) | ||||||||||||||
Income from continuing operations before income tax provision (benefit) | 489,204 | 131.0 | 3,681 | 1.2 | 421,387 | 46.8 | ||||||||||||||||||
Income tax provision (benefit) | 26,638 | 7.2 | (9,053 | ) | (2.8 | ) | 50,033 | 5.5 | ||||||||||||||||
Equity in earnings of EBS Master LLC | 4,007 | 1.1 | 28,566 | 8.9 | 763 | 0.1 | ||||||||||||||||||
Consolidated income from continuing operations | 466,573 | 124.9 | 41,300 | 12.9 | 372,117 | 41.4 | ||||||||||||||||||
Consolidated income (loss) from discontinued operations, net of tax | 94,682 | 25.4 | (18,048 | ) | (5.6 | ) | 393,527 | 43.7 | ||||||||||||||||
Consolidated net income inclusive of noncontrolling interest | 561,255 | 150.3 | 23,252 | 7.3 | 765,644 | 85.1 | ||||||||||||||||||
Income attributable to noncontrolling interest | (1,032 | ) | (0.3 | ) | (10,667 | ) | (3.4 | ) | (405 | ) | 0.0 | |||||||||||||
Net income attributable to HLTH stockholders | $ | 560,223 | 150.0 | $ | 12,585 | 3.9 | $ | 765,239 | 85.1 | |||||||||||||||
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• | Non-cash advertising expense. Expense related to the use of WebMD’s prepaid advertising inventory that WebMD received from News Corporation in exchange for equity instruments we issued in connection with an agreement we entered into with News Corporation in 1999 and subsequently amended in 2000. This non-cash advertising expense is included in sales and marketing expense as WebMD uses the asset for promotion of WebMD’s brand. | |
• | Non-cash stock-based compensation expense. Expense related to the awards of all share-based payments to employees and non-employee directors, including grants of employee stock options. Non-cash stock-based compensation expense is reflected in the same expense captions as the related salary cost of the respective employee. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Advertising expense included in: | ||||||||||||
Sales and marketing | $ | 5,097 | $ | 5,264 | $ | 7,414 | ||||||
Stock-based compensation expense included in: | ||||||||||||
Cost of operations | $ | 3,818 | $ | 5,027 | $ | 11,493 | ||||||
Sales and marketing | 3,591 | 4,868 | 7,165 | |||||||||
General and administrative | 17,223 | 22,441 | 22,950 | |||||||||
Total | $ | 24,632 | $ | 32,336 | $ | 41,608 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006(a) | ||||||||||
Revenue | ||||||||||||
WebMD: | ||||||||||||
Public portals | $ | 284,416 | $ | 238,022 | $ | 183,813 | ||||||
Private portals | 89,126 | 81,471 | 55,621 | |||||||||
Total WebMD | 373,542 | 319,493 | 239,434 | |||||||||
Emdeon Business Services | — | — | 661,090 | |||||||||
Inter-segment eliminations | (80 | ) | (261 | ) | (939 | ) | ||||||
$ | 373,462 | $ | 319,232 | $ | 899,585 | |||||||
Earnings before interest, taxes, non-cash and other items | ||||||||||||
WebMD | $ | 94,100 | $ | 79,471 | $ | 50,913 | ||||||
Emdeon Business Services | — | — | 152,911 | |||||||||
Corporate | (19,845 | ) | (24,502 | ) | (41,730 | ) | ||||||
74,255 | 54,969 | 162,094 | ||||||||||
Interest, taxes, non-cash and other items | ||||||||||||
Interest income | 35,300 | 42,035 | 32,339 | |||||||||
Interest expense | (26,428 | ) | (25,887 | ) | (25,472 | ) | ||||||
Income tax (provision) benefit | (26,638 | ) | 9,053 | (50,033 | ) | |||||||
Depreciation and amortization | (28,410 | ) | (27,808 | ) | (44,073 | ) | ||||||
Non-cash stock-based compensation | (24,632 | ) | (32,336 | ) | (41,608 | ) | ||||||
Non-cash advertising | (5,097 | ) | (5,264 | ) | (7,414 | ) | ||||||
Equity in earnings of EBS Master LLC | 4,007 | 28,566 | 763 | |||||||||
Gain on sale of EBS Master LLC | 538,024 | — | — | |||||||||
Gain on 2006 EBS Sale | — | 399 | 352,297 | |||||||||
Impairment of auction rate securities | (60,108 | ) | — | — | ||||||||
Restructuring | (7,416 | ) | — | — | ||||||||
Other expense, net | (6,284 | ) | (2,427 | ) | (6,776 | ) | ||||||
Consolidated income from continuing operations | 466,573 | 41,300 | 372,117 | |||||||||
Consolidated income (loss) from discontinued operations, net of tax | 94,682 | (18,048 | ) | 393,527 | ||||||||
Consolidated net income inclusive of noncontrolling interest | 561,255 | 23,252 | 765,644 | |||||||||
(Income) attributable to noncontrolling interest | (1,032 | ) | (10,667 | ) | (405 | ) | ||||||
Net income attributable to HLTH stockholders | $ | 560,223 | $ | 12,585 | $ | 765,239 | ||||||
(a) | The EBS segment was sold on November 16, 2006 and, therefore, the operations of the EBS segment are included only for the period January 1, 2006 through November 16, 2006. |
• | Public portals. Public portals revenue increased $46,394 or 19.5% compared to the prior year period. The increase in public portals revenue was primarily attributable to an increase in the number of unique sponsored programs on our sites including both brand sponsorship and educational programs. The number of such programs grew to approximately 1,400 in 2008 compared to approximately 1,000 in |
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the prior year period. In general, pricing remained relatively stable for our advertising and sponsorship programs and was not a significant source of the revenue increase. |
• | Private portals. Private portals revenue increased $7,655 or 9.4% compared to the prior year period. This increase was due to an increase in the number of companies using our private portal platform to 134 from 117 in the prior year period. In general, pricing remained relatively stable for our private portal licenses and was not a significant source of the revenue increase. We also have approximately 140 additional customers who purchase stand-alone decision support services from us. |
• | Public portals. Public portals revenue increased $54,209 or 29.5% compared to the prior year period. The increase in public portals revenue was primarily attributable to an increase in the number of brands and sponsored programs promoted on our sites, as well as the inclusion, for all of 2007, of revenue of Medsite, which we acquired in September 2006. The acquisition of Medsite contributed $16,291 and $4,852 of public portals revenue for the years ended December 31, 2007 and 2006, respectively. Including the Medsite acquisition, the number of sponsored programs on our site grew to approximately 1,000 in 2007, compared to approximately 800 in the prior year period. | |
• | Private portals. Private portals revenue increased $25,850 or 46.5% compared to the prior year period. This increase was due to an increase in the number of companies using our private portal platform to 117 from 99 in the prior year period. We also have approximately 150 additional customers who purchase stand-alone decision support services from us as a result of the acquisitions completed in 2006. The acquisitions of Summex and Subimo contributed $19,526 and $4,398 in private portals revenue for years ended December 31, 2007 and 2006, respectively. |
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Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Long-term debt(a) | $ | 696,688 | $ | 15,500 | $ | 371,813 | $ | 309,375 | $ | — | ||||||||||
Leases(b) | 47,086 | 9,030 | 16,329 | 10,287 | 11,440 | |||||||||||||||
Purchase obligations(c) | 2,927 | 2,927 | — | — | — | |||||||||||||||
Other long-term obligation | 100 | 100 | — | — | — | |||||||||||||||
Total | $ | 746,801 | $ | 27,557 | $ | 388,142 | $ | 319,662 | $ | 11,440 | ||||||||||
(a) | Long-term debt includes our 31/8% Notes, and our 1.75% Notes, which are first puttable at the option of the holders in 2012 and 2010, respectively. Amounts include our contractual interest payments through the earliest date at which these notes are puttable by the holder. | |
(b) | The lease amounts are net of sublease income. |
(c) | Purchase obligations include amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery. |
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Among HLTH Corporation, The NASDAQ Composite Index
And The RDG Internet Composite Index
Fiscal year ending December 31.
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Historical Financial Statements: | ||||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
Supplemental Financial Data: | ||||
S-1 |
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of WebMD Health Corp.
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(In thousands, except share and per share data)
December 31, | ||||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 191,659 | $ | 213,753 | ||||
Short-term investments | — | 80,900 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,301 at December 31, 2008 and $1,165 at December 31, 2007 | 93,082 | 83,410 | ||||||
Current portion of prepaid advertising | 1,753 | 2,329 | ||||||
Due from HLTH | — | 1,153 | ||||||
Other current assets | 11,358 | 10,828 | ||||||
Assets of discontinued operations | 12,575 | 14,487 | ||||||
Total current assets | 310,427 | 406,860 | ||||||
Investments | 133,563 | — | ||||||
Property and equipment, net | 54,165 | 48,509 | ||||||
Prepaid advertising | — | 4,521 | ||||||
Goodwill | 208,967 | 210,385 | ||||||
Intangible assets, net | 26,237 | 35,634 | ||||||
Other assets | 22,573 | 14,264 | ||||||
$ | 755,932 | $ | 720,173 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accrued expenses | $ | 31,241 | $ | 26,241 | ||||
Deferred revenue | 79,613 | 75,518 | ||||||
Due to HLTH | 427 | — | ||||||
Liabilities of discontinued operations | 2,599 | 2,449 | ||||||
Total current liabilities | 113,880 | 104,208 | ||||||
Other long-term liabilities | 8,334 | 9,210 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, 50,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Class A Common Stock, $0.01 par value per share, 500,000,000 shares authorized; 10,044,372 shares issued at December 31, 2008 and 9,113,708 shares issued and outstanding at December 31, 2007 | 100 | 91 | ||||||
Class B Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 48,100,000 shares issued and outstanding at December 31, 2008 and 2007 | 481 | 481 | ||||||
Additional paid-in capital | 548,069 | 531,043 | ||||||
Class A Treasury Stock, at cost; 624,871 shares at December 31, 2008 and no shares at December 31, 2007 | (12,497 | ) | — | |||||
Accumulated other comprehensive loss | (4,277 | ) | — | |||||
Retained earnings | 101,842 | 75,140 | ||||||
Total stockholders’ equity | 633,718 | 606,755 | ||||||
$ | 755,932 | $ | 720,173 | |||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 373,542 | $ | 319,493 | $ | 239,434 | ||||||
Cost of operations | 135,138 | 114,000 | 98,692 | |||||||||
Sales and marketing | 106,080 | 91,035 | 73,344 | |||||||||
General and administrative | 56,635 | 59,326 | 50,060 | |||||||||
Depreciation and amortization | 27,921 | 26,785 | 17,154 | |||||||||
Interest income | 10,452 | 12,378 | 5,099 | |||||||||
Impairment of auction rate securities | 27,406 | — | — | |||||||||
Restructuring | 2,910 | — | — | |||||||||
Income from continuing operations before | ||||||||||||
income tax provision (benefit) | 27,904 | 40,725 | 5,283 | |||||||||
Income tax provision (benefit) | 2,211 | (17,644 | ) | 3,571 | ||||||||
Income from continuing operations | 25,693 | 58,369 | 1,712 | |||||||||
Income from discontinued operations (net of tax of $711, $212 and $312 in 2008, 2007 and 2006) | 1,009 | 7,515 | 824 | |||||||||
Net income | $ | 26,702 | $ | 65,884 | $ | 2,536 | ||||||
Basic income per common share: | ||||||||||||
Income from continuing operations | $ | 0.45 | $ | 1.02 | $ | 0.03 | ||||||
Income from discontinued operations | 0.01 | 0.13 | 0.02 | |||||||||
Net income | $ | 0.46 | $ | 1.15 | $ | 0.05 | ||||||
Diluted income per common share: | ||||||||||||
Income from continuing operations | $ | 0.44 | $ | 0.98 | $ | 0.03 | ||||||
Income from discontinued operations | 0.01 | 0.12 | 0.01 | |||||||||
Net income | $ | 0.45 | $ | 1.10 | $ | 0.04 | ||||||
Weighted-average shares outstanding used in computing net income per common share: | ||||||||||||
Basic | 57,717 | 57,184 | 56,145 | |||||||||
Diluted | 58,925 | 59,743 | 58,075 | |||||||||
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Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Class A | Other | Total | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Deferred | Additional | Treasury Stock | Comprehensive | Retained | Stockholders’ | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Compensation | Paid-in-Capital | Shares | Amount | Income | Earnings | Equity | ||||||||||||||||||||||||||||||||||
Balances at January 1, 2006 | 7,954,426 | $ | 80 | 48,100,000 | $ | 481 | $ | (5,736 | ) | $ | 293,827 | — | $ | — | $ | (112 | ) | $ | 7,415 | $ | 295,955 | |||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 2,536 | 2,536 | |||||||||||||||||||||||||||||||||
Changes in unrealized losses on securities | — | — | — | — | — | — | — | — | 112 | — | 112 | |||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | — | — | — | 2,648 | |||||||||||||||||||||||||||||||||
Contribution from HLTH for utilization of Federal NOL | — | — | — | — | — | 140,000 | — | — | — | — | 140,000 | |||||||||||||||||||||||||||||||||
Issuance of Class A Common Stock for option exercises and other issuances | 383,420 | 3 | — | — | — | 5,146 | — | — | — | — | 5,149 | |||||||||||||||||||||||||||||||||
Reversal of deferred stock-based compensation — adoption of SFAS 123R | — | — | — | — | 5,736 | (5,736 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 26,357 | — | — | — | — | 26,357 | |||||||||||||||||||||||||||||||||
Subimo Acquisition | — | — | — | — | — | 26,000 | — | — | — | — | 26,000 | |||||||||||||||||||||||||||||||||
Balances at December 31, 2006 | 8,337,846 | 83 | 48,100,000 | 481 | — | 485,594 | — | — | — | 9,951 | 496,109 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 65,884 | 65,884 | |||||||||||||||||||||||||||||||||
Contribution from HLTH for utilization of Federal NOL | — | — | — | — | — | 9,862 | — | — | — | — | 9,862 | |||||||||||||||||||||||||||||||||
Issuance of Class A Common Stock for option exercises and other issuances | 775,862 | 8 | — | — | — | 13,651 | — | �� | — | — | — | 13,659 | ||||||||||||||||||||||||||||||||
Transfer of equity awards to HLTH | — | — | — | — | — | 695 | — | — | — | (695 | ) | — | ||||||||||||||||||||||||||||||||
Tax valuation allowance reversal | — | — | — | — | — | 812 | — | — | — | — | 812 | |||||||||||||||||||||||||||||||||
Tax benefit from HLTH and deductions from stock options | — | — | — | — | — | 1,399 | — | — | — | — | 1,399 | |||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 19,030 | — | — | — | — | 19,030 | |||||||||||||||||||||||||||||||||
Balances at December 31, 2007 | 9,113,708 | 91 | 48,100,000 | 481 | — | 531,043 | — | — | — | 75,140 | 606,755 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 26,702 | 26,702 | |||||||||||||||||||||||||||||||||
Unrealized losses on securities | — | — | — | — | — | — | — | — | (4,277 | ) | — | (4,277 | ) | |||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | — | — | — | 22,425 | |||||||||||||||||||||||||||||||||
Subimo Acquisition | 640,930 | 6 | — | — | — | (2,788 | ) | — | — | — | — | (2,782 | ) | |||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | — | — | — | — | — | — | 640,930 | (12,818 | ) | — | — | (12,818 | ) | |||||||||||||||||||||||||||||||
Issuance of Class A Common Stock for option exercises and other issuances | 289,734 | 3 | — | — | — | 3,140 | (16,059 | ) | 321 | — | — | 3,464 | ||||||||||||||||||||||||||||||||
Tax valuation allowance reversal | — | — | — | — | — | 907 | — | — | — | — | 907 | |||||||||||||||||||||||||||||||||
Tax benefit from HLTH and deductions from stock options | — | — | — | — | — | 2,614 | — | — | — | — | 2,614 | |||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 13,153 | — | — | — | — | 13,153 | |||||||||||||||||||||||||||||||||
Balances at December 31, 2008 | 10,044,372 | $ | 100 | 48,100,000 | $ | 481 | $ | — | $ | 548,069 | 624,871 | $ | (12,497 | ) | $ | (4,277 | ) | $ | 101,842 | $ | 633,718 | |||||||||||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 26,702 | $ | 65,884 | $ | 2,536 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Income from discontinued operations, net of tax | (1,009 | ) | (7,515 | ) | (824 | ) | ||||||
Depreciation and amortization | 27,921 | 26,785 | 17,154 | |||||||||
Non-cash advertising | 5,097 | 5,264 | 7,415 | |||||||||
Non-cash stock-based compensation | 13,314 | 19,075 | 26,160 | |||||||||
Deferred and other income taxes | 1,175 | (21,254 | ) | 1,802 | ||||||||
Impairment of auction rate securities | 27,406 | — | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (9,672 | ) | 4,239 | (25,432 | ) | |||||||
Accrued expenses and other long-term liabilities | 4,197 | (7,115 | ) | 6,680 | ||||||||
Due to/from HLTH | 1,601 | (3,278 | ) | (1,568 | ) | |||||||
Deferred revenue | 4,095 | 93 | 17,761 | |||||||||
Other | (1,349 | ) | 1,102 | (1,122 | ) | |||||||
Net cash provided by continuing operations | 99,478 | 83,280 | 50,562 | |||||||||
Net cash provided by discontinued operations | 3,434 | 4,230 | 2,239 | |||||||||
Net cash provided by operating activities | 102,912 | 87,510 | 52,801 | |||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from maturities and sales of available-for-sale securities | 44,000 | 212,923 | 304,184 | |||||||||
Purchases of available-for-sale securities | (127,900 | ) | (284,333 | ) | (229,410 | ) | ||||||
Purchases of property and equipment | (24,180 | ) | (18,046 | ) | (28,438 | ) | ||||||
Cash paid in business combinations, net of cash acquired | (1,648 | ) | — | (130,167 | ) | |||||||
Purchase of investment in preferred stock | (6,471 | ) | — | — | ||||||||
Net cash used in continuing operations | (116,199 | ) | (89,456 | ) | (83,831 | ) | ||||||
Net cash used in discontinued operations | (70 | ) | (12 | ) | (14 | ) | ||||||
Net cash used in investing activities | (116,269 | ) | (89,468 | ) | (83,845 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of common stock | 3,797 | 14,355 | 5,257 | |||||||||
Tax benefit on stock-based awards | 284 | 1,577 | — | |||||||||
Net cash transfers with HLTH | — | 155,119 | (5,257 | ) | ||||||||
Repurchases of Class A Common Stock | (12,818 | ) | — | — | ||||||||
Net cash (used in) provided by financing activities | (8,737 | ) | 171,051 | — | ||||||||
Net (decrease) increase in cash and cash equivalents | �� | (22,094 | ) | 169,093 | (31,044 | ) | ||||||
Cash and cash equivalents at beginning of period | 213,753 | 44,660 | 75,704 | |||||||||
Cash and cash equivalents at end of period | $ | 191,659 | $ | 213,753 | $ | 44,660 | ||||||
Table of Contents
1. | Background and Basis of Presentation |
Table of Contents
2. | Summary of Significant Accounting Policies |
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Table of Contents
Computer equipment | 3 to 5 years | |
Office equipment, furniture and fixtures | 4 to 7 years | |
Software | 3 to 5 years | |
Web site development costs | 3 years | |
Leasehold improvements | Shorter of useful life or lease term |
Content | 4 to 5 years | |
Customer relationships | 5 to 12 years | |
Acquired technology and patents | 3 years | |
Trade names | 10 years |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Numerator: | ||||||||||||
Income from continuing operations | $ | 25,693 | $ | 58,369 | $ | 1,712 | ||||||
Income from discontinued operations, net of tax | $ | 1,009 | $ | 7,515 | $ | 824 | ||||||
Denominator: (shares in thousands) | ||||||||||||
Weighted-average shares — Basic | 57,717 | 57,184 | 56,145 | |||||||||
Employee stock options, restricted stock and Deferred Shares | 1,208 | 2,559 | 1,930 | |||||||||
Adjusted weighted-average shares after assumed conversions — Diluted | 58,925 | 59,743 | 58,075 | |||||||||
Basic income per common share: | ||||||||||||
Income from continuing operations | $ | 0.45 | $ | 1.02 | $ | 0.03 | ||||||
Income from discontinued operations | 0.01 | 0.13 | 0.02 | |||||||||
Net income | $ | 0.46 | $ | 1.15 | $ | 0.05 | ||||||
Diluted income per common share: | ||||||||||||
Income from continuing operations | $ | 0.44 | $ | 0.98 | $ | 0.03 | ||||||
Income from discontinued operations | 0.01 | 0.12 | 0.01 | |||||||||
Net income | $ | 0.45 | $ | 1.10 | $ | 0.04 | ||||||
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Table of Contents
3. | Discontinued Operations |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | 9,235 | $ | 12,461 | $ | 9,342 | ||||||
Income before taxes | $ | 1,954 | $ | 4,462 | $ | 751 | ||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Assets of discontinued operations: | ||||||||
Accounts receivable, net | $ | 1,058 | $ | 2,671 | ||||
Property and equipment, net | 98 | 80 | ||||||
Goodwill | 11,044 | 11,044 | ||||||
Intangible assets, net | 362 | 680 | ||||||
Other assets | 13 | 12 | ||||||
Total assets | $ | 12,575 | $ | 14,487 | ||||
Liabilities of discontinued operations: | ||||||||
Accrued expenses | $ | 113 | $ | 257 | ||||
Deferred revenue | 876 | 883 | ||||||
Deferred tax liability | 1,610 | 1,309 | ||||||
Total liabilities | $ | 2,599 | $ | 2,449 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | $ | — | $ | 4,219 | $ | 5,105 | ||||||
(Loss) income before taxes | $ | — | $ | (129 | ) | $ | 385 | |||||
(Loss) gain on disposal before taxes | $ | (234 | ) | $ | 3,394 | $ | — | |||||
4. | Stock Repurchase Program |
5. | Transactions with HLTH |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Charges from the Company to HLTH: | ||||||||||||
Intercompany revenue | $ | 80 | $ | 250 | $ | 496 | ||||||
Charges from HLTH to the Company: | ||||||||||||
Corporate services | 3,410 | 3,340 | 3,190 | |||||||||
Healthcare expense | 8,220 | 5,877 | 4,116 | |||||||||
Stock-based compensation expense | 257 | 2,249 | 6,183 |
6. | Investment and Business Combinations |
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Subimo | Medsite | Summex | eMedicine | |||||||||||||
Accounts receivable | $ | 1,725 | $ | 2,469 | $ | 1,064 | $ | 1,717 | ||||||||
Deferred revenue | (6,900 | ) | (13,124 | ) | (1,173 | ) | (2,612 | ) | ||||||||
Other tangible assets (liabilities), net | 4,419 | (812 | ) | — | (1,004 | ) | ||||||||||
Intangible assets | 12,300 | 11,000 | 11,300 | 6,390 | ||||||||||||
Goodwill | 47,776 | 31,934 | 18,852 | 20,704 | ||||||||||||
Total purchase price | $ | 59,320 | $ | 31,467 | $ | 30,043 | $ | 25,195 | ||||||||
Year Ended | ||||
December 31, | ||||
2006 | ||||
Revenue | $ | 262,523 | ||
Net loss | (6,791 | ) | ||
Basic and diluted net loss per common share | (0.12 | ) |
7. | Significant Transactions |
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8. | Long-Lived Assets |
December 31, | ||||||||
2008 | 2007 | |||||||
Computer equipment | $ | 25,850 | $ | 17,702 | ||||
Office equipment, furniture and fixtures | 6,625 | 6,005 | ||||||
Software | 23,414 | 15,894 | ||||||
Leasehold improvements | 19,448 | 16,746 | ||||||
Web site development costs | 26,210 | 21,389 | ||||||
101,547 | 77,736 | |||||||
Less: accumulated depreciation | (47,382 | ) | (29,227 | ) | ||||
Property and equipment, net | $ | 54,165 | $ | 48,509 | ||||
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Balance as of January 1, 2007 | $ | 213,984 | ||
Purchase price allocations and other adjustments | (3,599 | ) | ||
Balance as of December 31, 2007 | 210,385 | |||
Tax valuation allowance reversal | (1,270 | ) | ||
Purchase price allocations | (148 | ) | ||
Balance as of December 31, 2008 | $ | 208,967 | ||
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||
Gross | Average | Gross | Average | |||||||||||||||||||||||||||||
Carrying | Accumulated | Remaining | Carrying | Accumulated | Remaining | |||||||||||||||||||||||||||
Amount | Amortization | Net | Useful Life(a) | Amount | Amortization | Net | Useful Life(a) | |||||||||||||||||||||||||
Content | $ | 15,954 | $ | (14,541 | ) | $ | 1,413 | 1.7 | $ | 15,954 | $ | (12,581 | ) | $ | 3,373 | 2.1 | ||||||||||||||||
Customer relationships | 32,430 | (12,872 | ) | 19,558 | 8.7 | 32,430 | (9,485 | ) | 22,945 | 9.2 | ||||||||||||||||||||||
Technology and patents | 14,700 | (13,370 | ) | 1,330 | 0.8 | 14,700 | (9,856 | ) | 4,844 | 1.5 | ||||||||||||||||||||||
Trade names | 6,030 | (2,094 | ) | 3,936 | 7.4 | 6,030 | (1,558 | ) | 4,472 | 8.4 | ||||||||||||||||||||||
Total | $ | 69,114 | $ | (42,877 | ) | $ | 26,237 | $ | 69,114 | $ | (33,480 | ) | $ | 35,634 | ||||||||||||||||||
(a) | The calculation of the weighted average remaining useful life is based on the net book value and the remaining amortization period of each respective intangible asset. |
Year ending December 31: | ||||
2009 | $ | 6,146 | ||
2010 | 3,231 | |||
2011 | 2,464 | |||
2012 | 2,464 | |||
2013 | 2,464 | |||
Thereafter | 9,468 |
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9. | Accrued Expenses |
December 31, | ||||||||
2008 | 2007 | |||||||
Accrued compensation | $ | 20,287 | $ | 16,945 | ||||
Accrued outside services | 2,492 | 2,308 | ||||||
Accrued marketing and distribution | 1,937 | 1,788 | ||||||
Accrued purchases of property and equipment | 1,518 | 897 | ||||||
Other accrued liabilities | 5,007 | 4,303 | ||||||
Total accrued expenses | $ | 31,241 | $ | 26,241 | ||||
10. | Restructuring |
11. | Commitments and Contingencies |
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Year ending December 31, | ||||
2009 | $ | 7,507 | ||
2010 | 7,441 | |||
2011 | 6,690 | |||
2012 | 4,923 | |||
2013 | 4,543 | |||
Thereafter | 11,440 | |||
Total minimum lease payments | $ | 42,544 | ||
12. | Stock-Based Compensation Plans |
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Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise Price | Contractual Life | Intrinsic | ||||||||||||||
Shares | Per Share | (In Years) | Value(1) | |||||||||||||
Outstanding at January 1, 2006 | 19,628,206 | $ | 11.75 | |||||||||||||
Exercised | (3,634,936 | ) | 7.20 | |||||||||||||
Forfeited | (847,500 | ) | 16.11 | |||||||||||||
Net transfers to HLTH | (280,514 | ) | 8.46 | |||||||||||||
Outstanding at December 31, 2006 | 14,865,256 | 12.68 | ||||||||||||||
Exercised | (4,479,012 | ) | 11.06 | |||||||||||||
Forfeited | (1,167,268 | ) | 10.69 | |||||||||||||
Net transfers to HLTH | (392,988 | ) | 15.41 | |||||||||||||
Outstanding at December 31, 2007 | 8,825,988 | 13.59 | ||||||||||||||
Granted | 180,000 | 9.46 | ||||||||||||||
Exercised | (900,551 | ) | 7.41 | |||||||||||||
Forfeited | (423,630 | ) | 21.28 | |||||||||||||
Net transfers from HLTH | 3,750 | 9.70 | ||||||||||||||
Outstanding at December 31, 2008 | 7,685,557 | $ | 13.80 | 2.9 | $ | 5,796 | ||||||||||
Vested and exercisable at the end of the year | 7,384,458 | $ | 13.98 | 2.7 | $ | 5,449 | ||||||||||
(1) | The aggregate intrinsic value is based on the market price of HLTH’s Common Stock on December 31, 2008, which was $10.46, less the applicable exercise price of the underlying option. This aggregate intrinsic value represents the amount that would have been realized if all the option holders had exercised their options on December 31, 2008. |
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Outstanding | Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
�� | Weighted | Average | Weighted | |||||||||||||||||
Average | Remaining | Average | ||||||||||||||||||
Exercise Price | Contractual Life | Exercise Price | ||||||||||||||||||
Exercise Prices | Shares | Per Share | (In Years) | Shares | Per Share | |||||||||||||||
$3.43-$8.59 | 1,662,510 | $ | 7.74 | 4.8 | 1,639,760 | $ | 7.74 | |||||||||||||
$8.60-$10.87 | 1,108,872 | 9.32 | 6.0 | 830,523 | 9.29 | |||||||||||||||
$11.55 | 1,625,000 | 11.55 | 1.4 | 1,625,000 | 11.55 | |||||||||||||||
$11.69-$15.00 | 1,576,250 | 12.96 | 1.6 | 1,576,250 | 12.96 | |||||||||||||||
$15.06-$94.69 | 1,712,925 | 25.47 | 1.6 | 1,712,925 | 25.47 | |||||||||||||||
7,685,557 | $ | 13.80 | 2.9 | 7,384,458 | $ | 13.98 | ||||||||||||||
Year Ended | ||||
December 31, | ||||
2008 | ||||
Expected dividend yield | 0 | % | ||
Expected volatility | 0.37 | |||
Risk free interest rate | 1.36 | % | ||
Expected term (years) | 3.6 | |||
Weighted-average fair value of options granted during the year | $ | 2.78 |
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Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
Balance at the beginning of the year | 3,125 | $ | 11.74 | 202,414 | $ | 8.92 | 423,860 | $ | 8.46 | |||||||||||||||
Vested | (3,125 | ) | 11.74 | (130,302 | ) | 8.65 | (218,112 | ) | 8.03 | |||||||||||||||
Forfeited | — | — | (75,237 | ) | 9.51 | — | — | |||||||||||||||||
Net transfers from (to) HLTH | — | — | 6,250 | 11.74 | (3,334 | ) | 8.59 | |||||||||||||||||
Balance at the end of the year | — | $ | — | 3,125 | $ | 11.74 | 202,414 | $ | 8.92 | |||||||||||||||
Table of Contents
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise Price | Contractual Life | Intrinsic | ||||||||||||||
Shares | Per Share | (In Years) | Value(1) | |||||||||||||
Outstanding at January 1, 2006 | 4,533,100 | $ | 18.31 | |||||||||||||
Granted | 1,683,700 | 38.16 | ||||||||||||||
Exercised | (291,154 | ) | 18.05 | |||||||||||||
Forfeited | (523,863 | ) | 27.84 | |||||||||||||
Outstanding at December 31, 2006 | 5,401,783 | 23.59 | ||||||||||||||
Granted | 998,850 | 47.49 | ||||||||||||||
Exercised | (684,909 | ) | 20.96 | |||||||||||||
Forfeited | (695,173 | ) | 31.80 | |||||||||||||
Outstanding at December 31, 2007 | 5,020,551 | 27.56 | ||||||||||||||
Granted | 6,148,925 | 24.37 | ||||||||||||||
Exercised | (216,311 | ) | 17.55 | |||||||||||||
Forfeited | (668,929 | ) | 33.77 | |||||||||||||
Outstanding at December 31, 2008 | 10,284,236 | $ | 25.46 | 8.8 | $ | 15,716 | ||||||||||
Vested and exercisable at the end of the year | 2,379,425 | $ | 23.36 | 7.0 | $ | 10,458 | ||||||||||
(1) | The aggregate intrinsic value is based on the market price of the Company’s Class A Common Stock on December 31, 2008, which was $23.59, less the applicable exercise price of the underlying option. This aggregate intrinsic value represents the amount that would have been realized if all the option holders had exercised their options on December 31, 2008. |
Outstanding | Exercisable | |||||||||||||||||||
Weighted | Weighted Average | Weighted | ||||||||||||||||||
Average | Remaining | Average | ||||||||||||||||||
Exercise Price | Contractual Life | Exercise Price | ||||||||||||||||||
Exercise Prices | Shares | Per Share | (In Years) | Shares | Per Share | |||||||||||||||
$17.50 | 2,486,530 | $ | 17.50 | 6.8 | 1,717,267 | $ | 17.50 | |||||||||||||
$18.37-$19.95 | 114,400 | 19.27 | 9.9 | — | — | |||||||||||||||
$20.52-$23.61 | 5,377,825 | 23.60 | 9.9 | — | — | |||||||||||||||
$23.74-$49.54 | 2,074,931 | 37.19 | 8.3 | 601,823 | 37.16 | |||||||||||||||
$49.82-$61.35 | 230,550 | 52.44 | 8.5 | 60,335 | 52.42 | |||||||||||||||
10,284,236 | $ | 25.46 | 8.8 | 2,379,425 | $ | 23.36 | ||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Expected volatility | 0.57 | 0.44 | 0.60 | |||||||||
Risk free interest rate | 1.23 | % | 4.25 | % | 4.69 | % | ||||||
Expected term (years) | 3.3 | 3.4 | 3.2 | |||||||||
Weighted-average fair value of options granted during the year | $ | 9.88 | $ | 17.26 | $ | 17.33 |
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
Balance at the beginning of the year | 307,722 | $ | 29.46 | 441,683 | $ | 25.49 | 376,621 | $ | 17.55 | |||||||||||||||
Granted | 555,400 | 23.74 | 71,700 | 47.02 | 184,710 | 39.50 | ||||||||||||||||||
Vested | (100,562 | ) | 23.78 | (104,809 | ) | 21.92 | (94,418 | ) | 17.61 | |||||||||||||||
Forfeited | (56,551 | ) | 36.28 | (100,852 | ) | 32.42 | (25,230 | ) | 39.00 | |||||||||||||||
Balance at the end of the year | 706,009 | $ | 25.22 | 307,722 | $ | 29.46 | 441,683 | $ | 25.49 | |||||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
HLTH Plans: | ||||||||||||
Stock options | $ | 182 | $ | 2,455 | $ | 5,172 | ||||||
Restricted stock | 43 | (313 | ) | 916 | ||||||||
WebMD Plans: | ||||||||||||
Stock options | 10,350 | 13,141 | 16,606 | |||||||||
Restricted stock | 1,446 | 2,546 | 3,499 | |||||||||
ESPP | 32 | 107 | 95 | |||||||||
Other | 1,419 | 1,455 | 409 | |||||||||
Total stock-based compensation expense | $ | 13,472 | $ | 19,391 | $ | 26,697 | ||||||
Included in: | ||||||||||||
Cost of operations | $ | 3,818 | $ | 5,027 | $ | 8,696 | ||||||
Sales and marketing | 3,591 | 4,868 | 5,574 | |||||||||
General and administrative | 5,905 | 9,180 | 11,890 | |||||||||
Income from continuing operations | 13,314 | 19,075 | 26,160 | |||||||||
Income from discontinued operations, net of tax | 158 | 316 | 537 | |||||||||
Total stock-based compensation expense | $ | 13,472 | $ | 19,391 | $ | 26,697 | ||||||
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13. | Retirement Plans |
14. | Income Taxes |
Table of Contents
December 31, | ||||||||
2008 | 2007 | |||||||
Deferred tax assets: | ||||||||
Federal net operating loss carryforwards | $ | 187,268 | $ | 209,742 | ||||
State net operating loss carryforwards | 23,640 | 23,467 | ||||||
Federal tax credits | 2,935 | 1,945 | ||||||
Other accrued expenses | 9,682 | 7,649 | ||||||
Allowance for doubtful accounts | 520 | 466 | ||||||
Depreciation | 1,427 | 1,232 | ||||||
Intangible assets | 4,672 | 2,391 | ||||||
Prepaid assets | 252 | 7,986 | ||||||
Stock-based compensation | 14,355 | 12,077 | ||||||
Auction rate securities | 12,495 | — | ||||||
Other | — | 200 | ||||||
Total deferred tax assets | 257,246 | 267,155 | ||||||
Valuation allowance | (225,148 | ) | (241,675 | ) | ||||
Net deferred tax assets | 32,098 | 25,480 | ||||||
Deferred tax liabilities: | ||||||||
Goodwill | (10,953 | ) | (7,773 | ) | ||||
Total deferred tax liabilities | (10,953 | ) | (7,773 | ) | ||||
Net deferred tax assets | $ | 21,145 | $ | 17,707 | ||||
December 31, | ||||||||
2008 | 2007 | |||||||
Current deferred tax assets, net: | ||||||||
Current deferred tax assets, net of deferred tax liabilities | $ | 43,650 | $ | 42,374 | ||||
Valuation allowance | (38,175 | ) | (38,382 | ) | ||||
Current deferred tax assets, net | 5,475 | 3,992 | ||||||
Non-current deferred tax assets, net: | ||||||||
Non-current deferred tax assets, net of deferred tax liabilities | 202,643 | 217,008 | ||||||
Valuation allowance | (186,973 | ) | (203,293 | ) | ||||
Non-current deferred tax assets, net | 15,670 | 13,715 | ||||||
Net deferred tax assets | $ | 21,145 | $ | 17,707 | ||||
Table of Contents
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current: | ||||||||||||
Federal | $ | 916 | $ | 233 | $ | 46 | ||||||
State | 2,564 | 1,835 | 1,713 | |||||||||
Foreign | 304 | 37 | 10 | |||||||||
Current income tax provision | 3,784 | 2,105 | 1,769 | |||||||||
Deferred: | ||||||||||||
Federal | (2,846 | ) | (22,211 | ) | 1,495 | |||||||
State | 1,273 | 957 | 213 | |||||||||
Deferred income tax (benefit) provision | (1,573 | ) | (21,254 | ) | 1,708 | |||||||
Reversal of valuation allowance applied to goodwill | — | 231 | 94 | |||||||||
Reversal of valuation allowance applied to additional paid-in capital | — | 1,274 | — | |||||||||
Total income tax provision (benefit) | $ | 2,211 | $ | (17,644 | ) | $ | 3,571 | |||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
United States federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes (net of federal benefit) | 1.8 | (0.5 | ) | (37.0 | ) | |||||||
Valuation allowance | (56.2 | ) | (92.0 | ) | 32.2 | |||||||
Amortization | 21.1 | — | — | |||||||||
Non-deductible officer compensation | 0.3 | 1.1 | 23.7 | |||||||||
Losses benefited (from) to discontinued operations | (0.4 | ) | 7.4 | 4.8 | ||||||||
Other | 6.3 | 5.7 | 8.9 | |||||||||
Effective income tax rate | 7.9 | % | (43.3 | )% | 67.6 | % | ||||||
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Table of Contents
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Balance at the beginning of the year | $ | 603 | $ | 603 | ||||
Increases related to prior year tax positions | 111 | — | ||||||
Decreases related to prior year tax positions | (32 | ) | — | |||||
Expiration of the statute of limitations for the assessment of taxes | (71 | ) | — | |||||
Balance at the end of the year | $ | 611 | $ | 603 | ||||
15. | Fair Value Disclosures and Credit Facility |
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. | |
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. | |
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
December 31, | ||||||||
2008 | 2007 | |||||||
Financial assets carried at fair value: | ||||||||
Auction rate securities | $ | 133,563 | $ | 80,900 | ||||
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Balance as of January 1, 2008 | $ | — | ||
Transfers to Level 3 | 169,200 | |||
Redemptions | (4,400 | ) | ||
Impairment charge included in earnings | (27,406 | ) | ||
Interest income accretion included in earnings | 446 | |||
Unrealized losses included in other comprehensive (loss) income | (4,277 | ) | ||
Balance as of December 31, 2008 | $ | 133,563 | ||
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16. | Comprehensive Income |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Unrealized (losses) gains on securities | $ | (4,277 | ) | $ | — | $ | 112 | |||||
Other comprehensive (loss) income | (4,277 | ) | — | 112 | ||||||||
Net income | 26,702 | 65,884 | 2,536 | |||||||||
Comprehensive income | $ | 22,425 | $ | 65,884 | $ | 2,648 | ||||||
17. | Supplemental Disclosure of Cash Flow Information |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Taxes paid, net of refunds(1) | $ | 1,137 | $ | 2,909 | $ | 1,127 | ||||||
Supplemental Schedule of Non-cash Investing Activities: | ||||||||||||
Equity consideration of Subimo Acquisition | $ | — | $ | — | $ | 26,000 | ||||||
(1) | Includes all taxes paid by the Company, including those of the Company’s discontinued operations. |
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18. | Quarterly Financial Data (Unaudited) |
2008 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Revenue | $ | 80,650 | $ | 86,004 | $ | 96,797 | $ | 110,091 | ||||||||
Cost of operations | 30,927 | 31,968 | 34,225 | 38,018 | ||||||||||||
Sales and marketing | 25,149 | 24,898 | 26,021 | 30,012 | ||||||||||||
General and administrative | 13,480 | 14,211 | 14,774 | 14,170 | ||||||||||||
Depreciation and amortization | 6,672 | 7,087 | 7,056 | 7,106 | ||||||||||||
Interest income | 3,453 | 2,350 | 2,616 | 2,033 | ||||||||||||
Impairment of auction rate securities | 27,406 | — | — | — | ||||||||||||
Restructuring | — | — | — | 2,910 | ||||||||||||
(Loss) income from continuing operations before income tax provision (benefit) | (19,531 | ) | 10,190 | 17,337 | 19,908 | |||||||||||
Income tax provision (benefit) | 3,432 | 4,501 | 7,375 | (13,097 | ) | |||||||||||
(Loss) income from continuing operations | (22,963 | ) | 5,689 | 9,962 | 33,005 | |||||||||||
(Loss) income from discontinued operations, net of tax | (372 | ) | 663 | 804 | (86 | ) | ||||||||||
Net (loss) income | $ | (23,335 | ) | $ | 6,352 | $ | 10,766 | $ | 32,919 | |||||||
Basic income (loss) per common share: | ||||||||||||||||
(Loss) income from continuing operations | $ | (0.40 | ) | $ | 0.10 | $ | 0.17 | $ | 0.57 | |||||||
(Loss) income from discontinued operations, net of tax | (0.00 | ) | 0.01 | 0.02 | (0.00 | ) | ||||||||||
Net (loss) income | $ | (0.40 | ) | $ | 0.11 | $ | 0.19 | $ | 0.57 | |||||||
Diluted income (loss) per common share: | ||||||||||||||||
(Loss) income from continuing operations | $ | (0.40 | ) | $ | 0.10 | $ | 0.17 | $ | 0.57 | |||||||
(Loss) income from discontinued operations, net of tax | (0.00 | ) | 0.01 | 0.01 | (0.01 | ) | ||||||||||
Net (loss) income | $ | (0.40 | ) | $ | 0.11 | $ | 0.18 | $ | 0.56 | |||||||
Weighted-average shares outstanding used in computing net income (loss) per common share: | ||||||||||||||||
Basic | 57,636 | 57,693 | 57,770 | 57,771 | ||||||||||||
Diluted | 57,636 | 59,061 | 59,111 | 58,384 | ||||||||||||
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2007 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Revenue | $ | 70,194 | $ | 73,853 | $ | 81,772 | $ | 93,674 | ||||||||
Cost of operations | 27,840 | 28,057 | 29,248 | 28,855 | ||||||||||||
Sales and marketing | 22,284 | 21,325 | 21,654 | 25,772 | ||||||||||||
General and administrative | 15,056 | 15,553 | 15,003 | 13,714 | ||||||||||||
Depreciation and amortization | 5,879 | 6,830 | 6,973 | 7,103 | ||||||||||||
Interest income | 1,985 | 3,051 | 3,486 | 3,856 | ||||||||||||
Income from continuing operations before | ||||||||||||||||
income tax provision (benefit) | 1,120 | 5,139 | 12,380 | 22,086 | ||||||||||||
Income tax provision (benefit) | 278 | 902 | 2,381 | (21,205 | ) | |||||||||||
Income from continuing operations | 842 | 4,237 | 9,999 | 43,291 | ||||||||||||
(Loss) income from discontinued operations, net of tax | (136 | ) | 1,153 | 1,493 | 5,005 | |||||||||||
Net income | $ | 706 | $ | 5,390 | $ | 11,492 | $ | 48,296 | ||||||||
Basic income (loss) per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.07 | $ | 0.17 | $ | 0.75 | ||||||||
(Loss) income from discontinued operations, net of tax | (0.00 | ) | 0.02 | 0.03 | 0.09 | |||||||||||
Net income | $ | 0.01 | $ | 0.09 | $ | 0.20 | $ | 0.84 | ||||||||
Diluted income (loss) per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.07 | $ | 0.17 | $ | 0.72 | ||||||||
(Loss) income from discontinued operations, net of tax | (0.00 | ) | 0.02 | 0.02 | 0.09 | |||||||||||
Net income | $ | 0.01 | $ | 0.09 | $ | 0.19 | $ | 0.81 | ||||||||
Weighted-average shares outstanding used in computing net income (loss) per common share: | ||||||||||||||||
Basic | 56,976 | 57,071 | 57,154 | 57,534 | ||||||||||||
Diluted | 59,630 | 59,748 | 59,848 | 59,748 | ||||||||||||
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Years Ended December 31, 2008, 2007 and 2006 | ||||||||||||||||||||||||
Balance at | Charged to | |||||||||||||||||||||||
Beginning | Costs and | Balance at | ||||||||||||||||||||||
of Year | Expenses | Acquired | Write-offs | Other(a) | End of Year | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | $ | 1,165 | $ | 668 | $ | — | $ | (532 | ) | $ | — | $ | 1,301 | |||||||||||
Valuation Allowance for Deferred Tax Assets | 241,675 | (15,853 | ) | (1,470 | ) | — | 796 | 225,148 | ||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | 956 | 1,074 | — | (865 | ) | — | 1,165 | |||||||||||||||||
Valuation Allowance for Deferred Tax Assets | 276,730 | (38,353 | ) | 4,713 | — | (1,415 | ) | 241,675 | ||||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Allowance for Doubtful Accounts | 859 | 228 | 49 | (180 | ) | — | 956 | |||||||||||||||||
Valuation Allowance for Deferred Tax Assets | 279,732 | 976 | 6,296 | — | (10,274 | ) | 276,730 |
(a) | Represents valuation allowance released through equity and other adjustments. |
S-1
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• | Introduction. This section provides a general description of our company, background information on certain trends and developments affecting our company, a description of the basis of presentation of our financial statements, a summary discussion of our recent acquisitions and dispositions and a discussion of how seasonal factors may impact the timing of our revenue. | |
• | Critical Accounting Policies and Estimates. This section discusses those accounting policies that are considered important to the evaluation and reporting of our financial condition and results of operations, and whose application requires us to exercise subjective or complex judgments in making estimates and assumptions. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 2 to the Consolidated Financial Statements included inAnnex C-1 above. | |
• | Transactions with HLTH. This section describes the services that we receive from our parent company, HLTH Corporation (which we refer to as HLTH) and the costs of these services, as well as the fees we charge HLTH for our services, as well as our tax sharing agreement with HLTH. As of December 31, 2008, HLTH owned 83.6% of our outstanding capital stock through its ownership of all of our outstanding Class B Common Stock. |
• | Results of Operations and Supplemental Financial and Operating Information. These sections provide our analysis and outlook for the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on a consolidated basis. | |
• | Liquidity and Capital Resources. This section provides an analysis of our liquidity and cash flows and discussions of our commitments, as well as our outlook on our available liquidity as of December 31, 2008. |
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• | Recent Accounting Pronouncements. This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our company or may be adopted in the future. |
• | Use of the Internet by Consumer and Physicians. The Internet has emerged as a major communications medium and has already fundamentally changed many sectors of the economy, including the marketing and sales of financial services, travel, and entertainment, among others. The Internet is also changing the healthcare industry and has transformed how consumers and physicians find and utilize healthcare information. |
— | Healthcare consumers increasingly seek to educate themselves online about their healthcare related issues, motivated in part by the continued availability of new treatment options and in part by the larger share of healthcare costs they are being asked to bear due to changes in the benefit designs being offered by health plans and employers. The Internet has fundamentally changed the way consumers obtain health and wellness information, enabling them to have immediate access to searchable information and dynamic interactive content to check symptoms, assess risks, understand diseases, find providers and evaluate treatment options. The Internet is consumers’ fastest growing health information resource, according to a national study released in August 2008 by the Center for Studying Health System Change. Researchers found that 32 percent of American consumers (approximately 70 million adults) conducted online health searches in 2007, compared with 16 percent in 2001. More than half of those surveyed said the information changed their overall approach to maintaining their health. Four in five said the information helped them better understand how to treat an illness or condition. |
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— | The Internet has also become a primary source of information for physicians seeking to improve clinical practice and is growing relative to traditional information sources, such as conferences, meetings and offline journals. |
• | Increased Online Marketing and Education Spending for Healthcare Products. Pharmaceutical, biotechnology and medical device companies spend large amounts each year marketing their products and educating consumers and physicians about them; however, only a small portion of this amount is currently spent on online services. We believe that these companies, which comprise the majority of the advertisers and sponsors of our public portals, are becoming increasingly aware of the effectiveness of the Internet relative to traditional media in providing health, clinical and product-related information to consumers and physicians, and this increasing awareness will result in increasing demand for our services. However, notwithstanding our general expectation for increased demand, our public portals revenue may vary significantly from quarter to quarter due to a number of factors, many of which are not in our control, and some of which may be difficult to forecast accurately, including general economic conditions and the following: |
— | The majority of our advertising and sponsorship contracts are for terms of approximately four to twelve months. We have relatively few longer term advertising and sponsorship contracts. | |
— | The time between the date of initial contact with a potential advertiser or sponsor regarding a specific program and the execution of a contract with the advertiser or sponsor for that program may be subject to delays over which we have little or no control, including as a result of budgetary constraints of the advertiser or sponsor or their need for internal approvals. |
• | Changes in Health Plan Design; Health Management Initiatives. In a healthcare market where the responsibility for healthcare costs and decision-making has been increasingly shifting to consumers, use of information technology (including personal health records) to assist consumers in making informed decisions about healthcare has also increased. We believe that through our WebMD Health and Benefits Manager tools, including our personal health record application, we are well positioned to play a role in this environment, and these services will be a significant driver for the growth of our private portals during the next several years. However, our growth strategy depends, in part, on increasing usage of our private portal services by our employer and health plan clients’ employees and members, respectively. Increasing usage of our services requires us to continue to deliver and improve the underlying technology and develop new and updated applications, features and services. In addition, we face competition in the area of healthcare decision-support tools and online health management applications and health information services. Many of our competitors have greater financial, technical, product development, marketing and other resources than we do, and may be better known than we are. We also expect that, for clients and potential clients in the industries most seriously affected by recent adverse changes in general economic conditions (including those in the financial services industry), we may experience some reductions in initial contracts, contract expansions and contract renewals for our private portal services, as well as reductions in the size of existing contracts. |
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• | Termination of Proposed HLTH Merger. In February 2008, HLTH and WebMD entered into an Agreement and Plan of Merger (which we refer to as the Merger Agreement), pursuant to which HLTH would merge into WebMD (which we refer to as the HLTH Merger), with WebMD continuing as the surviving corporation. Pursuant to the terms of a Termination Agreement entered into on October 19, 2008 (which we refer to as the Termination Agreement), HLTH and WebMD mutually agreed, in light of the turmoil in financial markets, to terminate the Merger Agreement. The Termination Agreement maintained HLTH’s obligation, under the terms of the Merger Agreement, to pay the expenses WebMD incurred in connection with the merger. In connection with the termination of the merger, HLTH and WebMD amended the Tax Sharing Agreement between them and HLTH assigned to WebMD the Amended and Restated Data License Agreement, dated as of February 8, 2008, among HLTH, EBS Master LLC and certain affiliated companies. For additional information, see “Transactions with HLTH — Agreements with HLTH” below. | |
• | Impairment of Auction Rate Securities; Non-Recourse Credit Facility. We hold investments in auction rate securities (which we refer to as ARS) backed by student loans, which are 97% guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. Historically, the fair value of our ARS investments approximated par value due to the frequent auction periods, generally every 7 to 28 days, which provided liquidity to these investments. However, since February 2008, virtually all auctions involving these securities have failed. As a secondary market has yet to develop, these investments have been reclassified to long-term investments as of December 31, 2008. The result of a failed auction is that these ARS will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS investments develop. We concluded that the estimated fair value of the ARS no longer approximated the par value due to the lack of liquidity. |
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• | On December 15, 2006, we acquired Subimo, a privately held provider of healthcare decision-support applications to large employers, health plans and financial institutions, from Subimo’s security holders (referred to below as the Subimo Sellers). The initial purchase consideration for Subimo was valued at approximately $59,320, comprised of $32,820 in cash, net of cash acquired, $26,000 of WebMD Class A Common Stock and $500 of acquisition costs. Pursuant to the terms of the purchase agreement for Subimo, as amended (referred to below as the Subimo Purchase Agreement), we deferred the issuance of the 640,930 shares of WebMD Class A Common Stock included in the purchase consideration (which we refer to as the Deferred Shares) to December 3, 2008. The Deferred Shares were repurchased from the Subimo Sellers immediately following their issuance at a purchase price of $20.00 per share, the closing market price of WebMD Class A Common Stock on The Nasdaq Global Select Market on December 3, 2008. Since the Deferred Shares had a market value that was less than $24.34 per share when issued, WebMD was required, under the Subimo Purchase Agreement, to pay additional cash consideration to the Subimo Sellers at the time of the issuance of the Deferred Shares in an amount equal to the aggregate shortfall which was $2,782. The results of operations of Subimo have been included in our financial statements from December 15, 2006, the closing date of the acquisition. | |
• | On September 11, 2006, we acquired the interactive medical education, promotion and physician recruitment businesses of Medsite. Medsite providese-detailing promotion and physician recruitment services for pharmaceutical, medical device and healthcare companies, including program development, targeted recruitment and online distribution and delivery. In addition, Medsite provides educational programs to physicians. The total purchase consideration for Medsite was approximately $31,467, comprised of $30,682 in cash, net of cash acquired, and $785 of acquisition costs. The results of operations of Medsite have been included in our financial statements from September 11, 2006, the closing date of the acquisition. |
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• | On June 13, 2006, we acquired Summex, a provider of health and wellness programs that include online and offline health risk assessments, lifestyle education and personalized telephonic health coaching. The Summex programs complement the online health and benefits platform that we provide to employers and health plans. Summex’s team of professional health coaches workone-on-one with employees and plan members to modify behaviors that may lead to illness and high medical costs. The total purchase consideration for Summex was approximately $30,043, comprised of $29,543 in cash, net of the cash acquired, and $500 of acquisition costs. The results of operations of Summex have been included in our financial statements from June 13, 2006, the closing date of the acquisition. | |
• | On January 17, 2006, we acquired eMedicine, a privately held online publisher of medical reference information for physicians and other healthcare professionals. The total purchase consideration for eMedicine was approximately $25,195, comprised of $24,495 in cash, net of cash acquired, and $700 of acquisition costs. The results of operations of eMedicine have been included in our financial statements from January 17, 2006, the closing date of the acquisition. |
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• | Revenue Recognition. Revenue from advertising is recognized as advertisements are delivered or as publications are distributed. Revenue from sponsorship arrangements, content syndication and distribution arrangements, and licenses of healthcare management tools and private portals as well as related health coaching services are recognized ratably over the term of the applicable agreement. Revenue from the sponsorship of CME is recognized over the period we substantially complete our contractual deliverables as determined by the applicable agreements. When contractual arrangements contain multiple elements, revenue is allocated to each element based on its relative fair value determined using prices charged when elements are sold separately. In certain instances where fair value does not exist for all the elements, the amount of revenue allocated to the delivered elements equals the total consideration less the fair value of the undelivered elements. In instances where fair value does not exist for the undelivered elements, revenue is recognized when the last element is delivered. | |
• | Long-Lived Assets. Our long-lived assets consist of property and equipment, goodwill and other intangible assets. Goodwill and other intangible assets arise from the acquisitions we have made. The amount assigned to intangible assets is subjective and based on our estimates of the future benefit of the intangible assets using accepted valuation techniques, such as discounted cash flow and replacement cost models. Our long-lived assets, excluding goodwill, are amortized over their estimated useful lives, which we determine based on the consideration of several factors including the period of time the asset is expected to remain in service. We evaluate the carrying value and remaining useful lives of long-lived assets, excluding goodwill, whenever indicators of impairment are present. We evaluate the carrying value of goodwill annually, and whenever indicators of impairment are present. We use a discounted cash flow approach to determine the fair value of goodwill. There was no impairment of goodwill noted as a result of our impairment testing in 2008, 2007 and 2006. | |
• | Fair Value of Investments. We hold investments in ARS which are backed by student loans, which are 97% guaranteed under the Federal Family Education Loan Program (FFELP), and which had credit ratings of AAA or Aaa when purchased. Historically, the fair value of our ARS investments approximated face value due to the frequent auction periods, generally every 7 to 28 days, which provided liquidity to these investments. However, since February 2008, all auctions involving these securities have failed. As a secondary market has yet to develop, these investments have been reclassified to long-term investments as of December 31, 2008. The result of a failed auction is that these ARS will continue to pay interest in accordance with their terms at each respective auction date; |
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however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS investments develop. We cannot be certain regarding the amount of time it will take for an auction market or other markets to develop. Accordingly, during the three months ended March 31, 2008, we concluded that the estimated fair value of the ARS no longer approximated the face value due to the lack of liquidity and accordingly, we recorded an other-than-temporary impairment as of March 31, 2008. |
• | Stock-Based Compensation. In December 2004, the Financial Accounting Standards Board (which we refer to as FASB) issued SFAS No. 123, “(Revised 2004): Share-Based Payment” (which we refer to as SFAS 123R), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (which we refer to as SFAS 123) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the Consolidated Financial Statements based on their fair values. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in this model are expected dividend yield, expected volatility, risk-free interest rate and expected term. We elected to use the modified prospective transition method. Under the modified prospective method, awards that were granted or modified on or after January 1, 2006 are measured and accounted for in accordance with SFAS 123R. Unvested stock options and restricted stock awards that were granted prior to January 1, 2006 will continue to be accounted for in accordance with SFAS 123, using the same grant date fair value and same expense attribution method used under SFAS 123, except that all awards are recognized in the results of operations over the remaining vesting periods. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized for all stock-based compensation beginning January 1, 2006. As of December 31, 2008, approximately $556 and $75,837 of unrecognized stock-based compensation expense related to unvested awards (net of estimated forfeitures) is expected to be recognized over a weighted-average period of approximately 2.5 years and 3.6 years, related to the HLTH and WebMD stock-based compensation plans, respectively. | |
• | Deferred Tax Assets. Our deferred tax assets are comprised primarily of net operating loss (which we refer to as NOL) carryforwards on a separate return basis. Subject to certain limitations, these loss carryforwards may be used to offset taxable income in future periods, reducing the amount of taxes we might otherwise be required to pay. A significant portion of our deferred tax assets are reserved for through a valuation allowance. In determining the need for a valuation allowance, management |
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determined the probability of realizing deferred tax assets, taking into consideration factors including historical operating results, expectations of future earnings and taxable income. Management will continue to evaluate the need for a valuation allowance and, in the future should management determine that realization of the net deferred tax asset is more likely than not, some or all of the remaining valuation allowance will be reversed, and our effective tax rate may be reduced by such reversal. |
• | Transactions with HLTH. As discussed further below, our expenses reflect a services fee for an allocation of costs for corporate services provided by HLTH. Our expenses also reflect the allocation of a portion of the cost of HLTH’s healthcare plans and the allocation of stock-based compensation expense related to HLTH restricted stock awards and HLTH stock options held by our employees. Additionally, our revenue includes revenue from HLTH for services we provide. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Charges from the Company to HLTH: | ||||||||||||
Intercompany revenue | $ | 80 | $ | 250 | $ | 496 | ||||||
Charges from HLTH to the Company: | ||||||||||||
Corporate services | 3,410 | 3,340 | 3,190 | |||||||||
Healthcare expense | 8,220 | 5,877 | 4,116 | |||||||||
Stock-based compensation expense | 257 | 2,249 | 6,183 |
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�� | ||||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||||||
Revenue | $ | 373,542 | 100.0 | $ | 319,493 | 100.0 | $ | 239,434 | 100.0 | |||||||||||||||
Cost of operations | 135,138 | 36.2 | 114,000 | 35.7 | 98,692 | 41.2 | ||||||||||||||||||
Sales and marketing | 106,080 | 28.4 | 91,035 | 28.5 | 73,344 | 30.6 | ||||||||||||||||||
General and administrative | 56,635 | 15.2 | 59,326 | 18.6 | 50,060 | 20.9 | ||||||||||||||||||
Depreciation and amortization | 27,921 | 7.5 | 26,785 | 8.4 | 17,154 | 7.2 | ||||||||||||||||||
Interest income | 10,452 | 2.9 | 12,378 | 3.9 | 5,099 | 2.1 | ||||||||||||||||||
Impairment of auction rate securities | 27,406 | 7.3 | — | — | — | — | ||||||||||||||||||
Restructuring | 2,910 | 0.8 | — | — | — | — | ||||||||||||||||||
Income from continuing operations before income tax provision (benefit) | 27,904 | 7.5 | 40,725 | 12.7 | 5,283 | 2.2 | ||||||||||||||||||
Income tax provision (benefit) | 2,211 | 0.6 | (17,644 | ) | (5.5 | ) | 3,571 | 1.5 | ||||||||||||||||
Income from continuing operations | 25,693 | 6.9 | 58,369 | 18.2 | 1,712 | 0.7 | ||||||||||||||||||
Income from discontinued operations, net of tax | 1,009 | 0.2 | 7,515 | 2.4 | 824 | 0.4 | ||||||||||||||||||
Net income | $ | 26,702 | 7.1 | $ | 65,884 | 20.6 | $ | 2,536 | 1.1 | |||||||||||||||
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• | Non-cash advertising expense. Expense related to the use of our prepaid advertising inventory that we received from News Corporation in exchange for equity instruments that HLTH issued in connection with an agreement it entered into with News Corporation in 1999 and subsequently amended in 2000. This non-cash advertising expense is included in sales and marketing expense since we use the asset for promotion of our brand. | |
• | Non-cash stock-based compensation expense. Expense related to awards of our restricted Class A Common Stock and awards of employee stock options, as well as awards of restricted HLTH Common Stock and awards of HLTH stock options that have been granted to certain of our employees. Expense also related to shares issued to our non-employee directors. Non-cash stock-based compensation expense is reflected in the same expense captions as the related salary costs of the respective employees. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Advertising expense: | ||||||||||||
Sales and marketing | $ | 5,097 | $ | 5,264 | $ | 7,415 | ||||||
Stock-based compensation expense: | ||||||||||||
Cost of operations | $ | 3,818 | $ | 5,027 | $ | 8,696 | ||||||
Sales and marketing | 3,591 | 4,868 | 5,574 | |||||||||
General and administrative | 5,905 | 9,180 | 11,890 | |||||||||
Total stock-based compensation expense | $ | 13,314 | $ | 19,075 | $ | 26,160 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue | ||||||||||||
Public portals | $ | 284,416 | $ | 238,022 | $ | 183,813 | ||||||
Private portals | 89,126 | 81,471 | 55,621 | |||||||||
$ | 373,542 | $ | 319,493 | $ | 239,434 | |||||||
Earnings before interest, taxes, non-cash and other items (Adjusted EBITDA) | $ | 94,100 | $ | 79,471 | $ | 50,913 | ||||||
Interest, taxes, non-cash and other items | ||||||||||||
Interest income | 10,452 | 12,378 | 5,099 | |||||||||
Depreciation and amortization | (27,921 | ) | (26,785 | ) | (17,154 | ) | ||||||
Non-cash advertising | (5,097 | ) | (5,264 | ) | (7,415 | ) | ||||||
Non-cash stock-based compensation | (13,314 | ) | (19,075 | ) | (26,160 | ) | ||||||
Impairment of auction rate securities | (27,406 | ) | — | — | ||||||||
Restructuring | (2,910 | ) | — | — | ||||||||
Income tax (provision) benefit | (2,211 | ) | 17,644 | (3,571 | ) | |||||||
Income from continuing operations | 25,693 | 58,369 | 1,712 | |||||||||
Income from discontinued operations, net of tax | 1,009 | 7,515 | 824 | |||||||||
Net income | $ | 26,702 | $ | 65,884 | $ | 2,536 | ||||||
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Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating leases | $ | 42,524 | $ | 7,496 | $ | 14,122 | $ | 9,466 | $ | 11,440 | ||||||||||
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Among WebMD Health Corp., The NASDAQ Composite Index
And The RDG Internet Composite Index
* | $100 invested on 9/29/05 in stock & 9/30/05 in index — including reinvestment of dividends. Fiscal year ending December 31. |
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• | Depreciation and Amortization. Depreciation and amortization expense is a non-cash expense relating to capital expenditures and intangible assets arising from acquisitions that are expensed on a straight-line basis over the estimated useful life of the related assets. WebMD excludes depreciation and amortization expense from Adjusted EBITDA because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of WebMD’s business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired tangible and intangible assets. Accordingly, WebMD believes this exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that use of tangible and intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expenses will recur in future periods. |
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• | Stock-Based Compensation Expense. Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards to employees. WebMD believes that excluding the effect of stock-based compensation from Adjusted EBITDA assists management and investors in making period-to-period comparisons in its operating performance because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of WebMD’s business operations and (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Additionally, WebMD believes that excluding stock-based compensation from Adjusted EBITDA assists management and investors in making meaningful comparisons between WebMD’s operating performance and the operating performance of other companies that may use different forms of employee compensation or different valuation methodologies for their stock-based compensation. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods. Investors should also note that such expenses will recur in the future. |
• | Non-Cash Advertising Expense. This expense relates to the usage of non-cash advertising obtained from News Corporation (“Newscorp”) in exchange for equity securities issued by our parent, HLTH Corporation in 2000. The advertising is available only on various Newscorp properties, primarily its television network and cable channels, without any cash cost to WebMD and will expire later this year. WebMD excludes this expense from Adjusted EBITDA (i) because it is a non-cash expense, (ii) because it is incremental to other non-television cash advertising expense that WebMD otherwise incurs and (iii) to assist management and investors in comparing its operating results over multiple periods. Investors should note that it is likely that WebMD derives some benefit from such advertising. |
• | Interest Income. Interest income is associated with the level of marketable debt securities and other interest bearing accounts in which WebMD invests. Interest income varies over time due to varying levels of securities available for investment. Transactions that WebMD has entered into in recent periods that have impacted securities available for investment include the initial public offering of equity in WebMD and acquisitions of other companies for varying amounts of cash since our initial public offering. Additional financing transactions as well as potential acquisitions that WebMD may enter into in the future could impact the levels and timing of securities available for investment. WebMD excludes interest income from Adjusted EBITDA (i) because it is not directly attributable to the performance of WebMD’s business operations and, accordingly, its exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that interest income will recur in future periods. |
• | Income Tax (Provision) Benefit. WebMD maintains a valuation allowance on a portion of its net operating loss carryforwards, the amount of which may change from period to period based on factors that are not directly related to WebMD’s results for the period. The valuation allowance is reversed through the statement of operations, additional paid-in capital, or goodwill to the extent those tax benefits were acquired through business combinations. The timing of such reversals has not been consistent and as a result, WebMD’s income tax expense can fluctuate significantly from period to period in a manner not directly related to WebMD’s operating performance. WebMD excludes the income tax provision from Adjusted EBITDA (i) because it believes that the income tax provision is not directly attributable to the underlying performance of WebMD’s business operations and, accordingly, its exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different tax attributes. Investors should note that income tax (provision) benefit will recur in future periods. |
• | Other Items. WebMD engages in other activities and transactions that can impact WebMD’s overall income (loss) from continuing operations. WebMD excludes these other items from Adjusted EBITDA when it believes these activities or transactions are not directly attributable to the performance of WebMD’s business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that these other items may recur in future periods. In the MD&A, WebMD has excluded loss on the impairment of auction rate securities and a restructuring charge from Adjusted EBITDA. |
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AMENDED AND RESTATED
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As Amended Through July 2, 2009
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WebMD Health Corp.
June 17, 2009
Page 2
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WebMD Health Corp.
June 17, 2009
Page 3
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CERTIFICATE OF INCORPORATION
OF WEBMD HEALTH CORP.
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ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 23, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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FOR | AGAINST | ABSTAIN | ||||||
1. | To adopt the Agreement and Plan of Merger, dated June 17, 2009, between WebMD Health Corp. and HLTH, and to approve the transactions contemplated by that agreement, including the merger. | o | o | o | ||||
WITHHOLD | FOR ALL | |||||||
AUTHORITY | EXCEPT | |||||||
FOR ALL | FOR ALL | (See instructions | ||||||
NOMINEES | NOMINEES | below) | ||||||
2. | To elect the persons listed below to each serve a three-year term as a Class II director. | o | o | o | ||||
NOMINEES: | ||||||||
O Paul A. Brooke | ||||||||
O James V. Manning | ||||||||
O Martin J. Wygod | ||||||||
(INSTRUCTION:To withhold authority to vote for any individual nominee, mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: •) | ||||||||
FOR | AGAINST | ABSTAIN | ||||||
3. | To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm to serve as HLTH’s independent auditor for the fiscal year ending December 31, 2009 in the event the merger is not completed. | o | o | o |
Signature: | Signature: | |
Date: | Date: |
NOTE: | Please sign exactly as your name or names appear on this Proxy Card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give your full title as such. If the signer is a corporation, please print the full corporate name and the full title of the duly authorized officer executing on behalf of the corporation. If the signer is a partnership, please print full partnership name and the full title of the duly authorized person executing on behalf of the partnership. |