<PAGE> 1
As filed with the Securities and Exchange Commission on November 9, 2000
This Form S-3 amends the Form S-3 (Registration No. 333-47248) previously
filed by WebMD Corporation on October 4, 2000.
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
WEBMD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------
DELAWARE 94-3236644
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
400 THE LENOX BUILDING
3399 PEACHTREE ROAD NE
ATLANTA, GEORGIA 30326
(404) 495-7600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------
W. MICHAEL LONG
CHAIRMAN OF THE BOARD
WEBMD CORPORATION
400 THE LENOX BUILDING
3399 PEACHTREE ROAD NE
ATLANTA, GEORGIA 30326
(404) 495-7600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------------
COPIES TO:
H. BRYAN IVES III, ESQ.
C. MARK KELLY, ESQ.
ALSTON & BIRD LLP
1211 EAST MOREHEAD STREET
CHARLOTTE, NORTH CAROLINA 28204
(704) 331-6000
--------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SHARES TO TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER SHARE PRICE FEE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $0.0001 par value..... 15,000,000 shares(1) not applicable $191,250,000(2) $50,490.00
================================================================================================================================
</TABLE>
(1) Represents the number of shares of the Common Stock of the Registrant
which may be sold by the selling stockholders of the Registrant.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act, based upon the product of
(i) $12.75, the average of the high and low prices per share of Registrant
Common Stock on September 28, 2000 as reported on the Nasdaq National
Market and (ii) 15,000,000 shares of Registrant Common Stock.
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2
EXPLANATORY NOTE: THE REGISTRATION STATEMENT FILED IN CONNECTION WITH
THIS PROSPECTUS AMENDS THE FORM S-3 (REGISTRATION NO. 333-47248) PREVIOUSLY
FILED BY WEBMD CORPORATION ON OCTOBER 4, 2000.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion, dated November 9, 2000
----------------------------------------------------
PROSPECTUS
----------------------------------------------------
WEBMD CORPORATION
----------------------------------------------------
WebMD's common stock, par value $.0001 per
share, currently trades on the Nasdaq Stock
Market.
Last reported sale price on November __, 2000:
$_____ per share.
Trading Symbol: HLTH
----------------------------------------------------
THE OFFERING
----------------------------------------------------
This prospectus relates to the offering of up to 15,000,000 shares of
our common stock, par value $.0001 per share.
The shares of common stock offered hereunder are held by the selling
stockholders named on page 26 of this prospectus.
None of the proceeds from the sale of the shares by the selling
stockholders will be received by us. We have agreed to bear all expenses,
including registration and filing fees, printing expenses, and certain fees and
disbursements of counsel to the selling stockholders (other than selling
discounts, commissions and transfer taxes) in connection with the registration
and sale of the shares being offered by the selling stockholders. We have
agreed to indemnify the selling stockholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
This investment involves a high degree of risk. Please carefully
consider the "Risk Factors" beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the securities to be
distributed under this prospectus or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is November __, 2000
<PAGE> 3
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<S> <C>
REFERENCES TO ADDITIONAL INFORMATION.................................... 3
ABOUT THIS PROSPECTUS................................................... 3
THE COMPANY............................................................. 4
RECENT DEVELOPMENTS..................................................... 4
RISK FACTORS ........................................................... 5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS..............22
SHARES ELIGIBLE FOR FUTURE SALE.........................................22
USE OF PROCEEDS ........................................................25
SELLING STOCKHOLDERS ...................................................25
PLAN OF DISTRIBUTION....................................................26
DOCUMENTS INCORPORATED BY REFERENCE ....................................28
WHERE YOU CAN FIND MORE INFORMATION ....................................30
LEGAL MATTERS...........................................................31
EXPERTS ................................................................31
</TABLE>
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REFERENCES TO ADDITIONAL INFORMATION
Unless the context otherwise requires or as otherwise indicated, the
terms "we," "our," "us" and "WebMD" as used in this prospectus refer to WebMD
Corporation, a Delaware corporation and its consolidated subsidiaries. We were
formerly known as Healtheon/WebMD Corporation until we changed our name on
September 12, 2000. This prospectus incorporates important business and
financial information about WebMD that is not included in or delivered with this
prospectus. You may obtain documents that are filed by us with the Securities
and Exchange Commission and incorporated by reference in this prospectus by
requesting them in writing or by telephone from our investor relations
department at:
WebMD Corporation
400 The Lenox Building
3399 Peachtree Road NE
Atlanta, Georgia 30326
1-877-469-3263
[email protected]
See, "Where You Can Find More Information" on page 30.
IN CONNECTION WITH THIS OFFERING, NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
SUCH INFORMATION IS GIVEN OR REPRESENTATIONS MADE, YOU MAY NOT RELY ON SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE REGISTERED HEREBY, NOR IS IT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES WHERE SUCH AN OFFER OR SOLICITATION
WOULD BE UNLAWFUL. YOU MAY NOT IMPLY FROM THE DELIVERY OF THIS PROSPECTUS, NOR
FROM ANY SALE MADE UNDER THIS PROSPECTUS, THAT OUR AFFAIRS ARE UNCHANGED SINCE
THE DATE OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under this shelf registration process, the selling stockholders may,
from time to time, offer shares of our common stock which are owned by them.
Each time the selling stockholders offer common stock under this prospectus,
they will provide a prospectus supplement, if required, that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described in "Where You Can Find More Information" on
page 30.
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<PAGE> 5
THE COMPANY
We were incorporated in December 1995 and commenced operations in
January 1996 as Healtheon Corporation. In November 1999, Healtheon Corporation
completed mergers with WebMD, Inc., MedE America Corporation and Greenberg
News Networks, Inc., which is referred to as Medcast, and we changed our
name to Healtheon/WebMD Corporation. We launched our integrated web site in
November 1999, following the closing of these mergers. In May 2000, we acquired
Envoy Corporation. On September 12, 2000, we completed our mergers with Medical
Manager Corporation, CareInsite, Inc. and OnHealth Network Company, and we
changed our name to WebMD Corporation.
As a result of the completion of these transactions, our core business
now encompasses:
- providing services to facilitate connectivity and healthcare
transactions among physicians, payers, patients and other healthcare
industry participants
- providing comprehensive physician practice management information
systems to independent physicians, independent practice
associations, management service organizations, physician practice
management organizations and other providers of healthcare services
in the U.S.
- providing Internet-based content, applications and services to
physicians, consumers, payers and other healthcare organizations
The address of our principal executive office is 400 The Lenox
Building, 3399 Peachtree Road NE, Atlanta, Georgia 30324 and our telephone
number is (404) 495-7600. Our web site is www.webmd.com. The information on our
web site is not a part of this prospectus.
The Medical Manager(TM), CareInsite(TM), Porex(R), MEDPOR(R),
Squeeze-Mark(R) and TLS(R) are registered, pending or licensed trademarks of
WebMD.
WebMD(R) and WebMD(R) are registered trademarks of WebMD. Health has a
Homepage(SM), WebMD Practice(SM), WebMD Health(SM), Healtheon(SM) and WebMD
OnCall(SM) are service marks of WebMD for which federal registration is
pending.
RECENT DEVELOPMENTS
We announced several significant management and board of director
changes in September and October 2000. We announced that Martin J. Wygod has
assumed the position of sole Chief Executive Officer following the resignation
of Jeffrey T. Arnold from his office as Co-Chief Executive Officer and from the
board of directors. Steven Zatz, M.D., former Senior Vice President, Product
Development and Engineering of CareInsite, has been named to the newly created
position of Executive Vice President, Internet Portals and Applications Services
Group. This position replaces the role of Chief Technology Officer previously
held by Pavan Nigam, who will continue in an advisory capacity through the end
of this year. Anthony Vuolo, former Senior Vice president of Business
Development of Medical Manager, has been named Executive Vice President, Chief
Financial Officer and Treasurer. Charles A. Mele, former General Counsel of
Medical Manager, will join Jack D. Dennison as our Co-General Counsel. We also
announced the resignation of James H. Clark from our board.
As we previously announced in a press release on September 28, 2000,
and discussed in a presentation to analysts, investors and others at a meeting
on October 12, 2000, our board of directors has approved an integration plan
that was developed in connection with the combination of our business with those
of Envoy, Medical Manager, CareInsite and OnHealth. The first phase of this plan
includes a consolidation of offices and data centers and reduction in marketing
and promotional expenses, the result of which we believe will substantially
eliminate the redundancies that resulted from these business combinations. We
anticipate total annualized savings of approximately $260 million to be realized
by the fourth quarter of 2001 resulting from the first phase of the integration
plan. We expect that the integration plan will result in the elimination of
approximately 1,100 jobs by the end of calendar year 2001. We anticipate taking
a pre-tax restructuring charge of between $35 million and $45 million in the
quarter ending September 30, 2000. As a result of the execution of this phase of
the integration plan, we expect to incur additional costs relating to moving and
relocations that will be expensed as incurred in accordance with applicable
accounting guidelines. Additionally, we are evaluating many of the business
relationships that we currently have in place. It is possible that some of these
relationships may be revised or terminated, which may result in restructuring
charges in future quarters.
We also announced on September 28, 2000 that we will divest our
plastics and filtration technologies subsidiaries, which were acquired when we
merged with Medical Manager. We plan to explore various divestiture
alternatives in consultation with our financial advisors.
On September 12, 2000, Medical Manager amended the options granted on
August 21, 2000 to Mr. Wygod and six other key employees of Medical Manager and
CareInsite to purchase, in the aggregate, 1.6 million shares of Medical Manager
common stock, which were automatically converted in our merger into options to
purchase 4.0 million shares of WebMD common stock. As a result of the merger and
the amendment, these options now represent the right to purchase shares of our
common stock at an exercise price of $12.75 per share and vest and become
exercisable over a period of 4 years. The amendment also returned the terms of
Mr. Wygod's noncompetition and customer nonsolicitation restrictive covenants to
those in existence prior to the grant of the options.
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<PAGE> 6
RISK FACTORS
Please carefully consider the specific factors set forth below as well
as the other information contained in, or incorporated by reference into, this
prospectus before making an investment decision to purchase shares of our
common stock. We have a history of losses, and we cannot give you assurances
that we will achieve profitability in the future.
WE HAVE INCURRED AND MAY CONTINUE TO INCUR SUBSTANTIAL LOSSES
We began operations in January 1996 and have incurred net losses from
operations in each fiscal period since our inception. As of June 30, 2000, on a
pro forma basis we had accumulated net losses of approximately $1.5 billion
giving effect to our recently completed mergers with Medical Manager, CareInsite
and OnHealth. In addition, we may invest heavily in infrastructure development,
applications development and sales and marketing in order to deploy our services
to a growing number of potential customers and strategic partners. Moreover, the
purchase price of our recent and any future acquisitions will be amortized over
the useful lives of the tangible and intangible assets. As of June 30, 2000, we
had approximately $5.7 billion of unamortized goodwill and other intangible
assets reflected on our financial statements as a result of previous
acquisitions.
Although we anticipate significant synergies and growth opportunities
resulting from our recent acquisitions and elimination of duplicative costs
currently being incurred by us, we cannot give you assurances that these
synergies, growth opportunities or cost savings will be achieved in the amounts
or time frames currently anticipated. Failure to realize these benefits may
adversely affect our ability to achieve profitability.
OUR BUSINESS MODEL IS UNPROVEN, AND WE MAY NOT ACHIEVE FAVORABLE OPERATING
RESULTS
Our business model is evolving, and our revenue and profit potential
is unproven. We currently derive a significant portion of our revenue from
non-Internet network services, management and consulting services and
management and operation of some of our customers' information technology
infrastructures. Our profitability depends upon our ability to migrate provider
and payer customers to our Internet-based transaction services, building our
online physician subscriber base, increasing traffic to our web site and
generating e-commerce revenue from the sale of healthcare products or services
over the Internet.
The provision of services over the Internet to the healthcare industry
is a developing business that is inherently riskier than businesses in
industries where companies have established operating histories. If our
Internet-based services do not achieve or sustain broad market acceptance among
participants in the healthcare industry, our business, results of operations
and financial condition will be significantly harmed, and we may never achieve
favorable operating results.
OUR QUARTERLY OPERATING RESULTS MAY VARY, WHICH COULD AFFECT THE MARKET PRICE
OF OUR COMMON STOCK
Our operating results have varied on a quarterly basis during our
limited operating history, and we expect to experience significant fluctuations
in future quarterly operating results. These fluctuations have been and may in
the future be caused by numerous factors, many of which are outside of our
control, including, but not limited to:
- market acceptance of and demand for our products and services
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<PAGE> 7
- our ability to attract and retain payer and provider
customers and subscribers
- expenses relating to acquisitions and strategic partnerships
- usage of the Internet and our ability to maintain and
increase traffic on our web site
- our ability to continue to develop and extend our brand
- our ability to effectively integrate the operations and
technologies of acquired businesses with our operations
- introduction and timing of new products and services or
enhancements by us or our competitors
- capacity constraints and dependencies on computer
infrastructure
- economic conditions affecting the Internet or healthcare
industries
- general economic conditions.
Fluctuations in our quarterly results could adversely affect the
market price of our common stock in a manner unrelated to our long-term
operating performance. We will base our expense levels in part upon our
expectations concerning future revenue, and these expense levels will be
relatively fixed in the short term. If we have lower revenue, we may not be
able to reduce spending in the short term in response. Any shortfall in revenue
would have a direct impact on our results of operations. As a result, we
believe that period-to-period comparisons of our results of operations will not
necessarily be meaningful and should not be relied upon as an indicator of
future performance. For these and other reasons, it is likely that in some
future quarter or quarters we may not meet the earnings estimates of securities
analysts or investors, which would materially and adversely affect our stock
price.
OUR STOCK PRICE HAS BEEN VOLATILE IN THE PAST AND MAY CONTINUE TO BE VOLATILE
Changes in the market price of our common stock may result from among
other things:
- quarter-to-quarter variations in operating results
- operating results being less than analysts' estimates
- changes in analysts' earnings estimates
- announcements of new technologies, products and services or
pricing policies by us or our competitors
- announcements of acquisitions or strategic partnerships by us
or our competitors
- developments in existing customer or strategic relationships
- actual or perceived changes in our business strategy
- sales of large amounts of our common stock
6
<PAGE> 8
- changes in market conditions in the Internet and healthcare
industries
- changes in prospects for healthcare reform
- changes in general economic conditions
- fluctuations in the securities markets in general.
In addition, the trading price of Internet and healthcare information
technology stocks in general, and our common stock in particular, has
experienced extreme price and volume fluctuations in recent months. These
fluctuations often may be unrelated or disproportionate to the operating
performance of these companies. Any negative change in the public's perception
of the prospects of these companies, as well as other broad market and industry
factors, may result in decreases in the price of our common stock.
OUR BUSINESS WILL SUFFER IF WE FAIL TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES AND TECHNOLOGIES
We have in the past acquired, and may in the future acquire,
businesses, technologies, services, product lines or content databases. For
example, we completed our mergers with WebMD, Inc., MedE America and Medcast in
November 1999, our mergers with Kinetra in January 2000 and Envoy in May 2000
and our mergers with Medical Manager, CareInsite and OnHealth in September 2000.
In order to achieve the potential benefits of these transactions, we must
operate as a combined organization utilizing common information and
communication systems, operating procedures, financials controls and human
resource practices. We are in the process of integrating and consolidating the
operations, products and services, technologies and personnel of these companies
and have previously announced that our board of directors has approved an
integration plan that includes in its first phase a consolidation of offices and
data centers and reduction in marketing and promotional expenses, the result of
which we believe will substantially eliminate redundancies created by our recent
mergers. In connection with this integration plan, we anticipate taking a
pre-tax restructuring charge of between $35 million and $45 million in the
quarter ending September 30, 2000. We also expect to incur additional costs
relating to moving and relocations that will be expensed as incurred in
accordance with applicable accounting guidelines. See "Recent Developments" on
page 4. The successful integration of the acquired businesses into our
operations is critical to our future performance.
The amount and timing of the benefits of the restructuring contemplated
by the integration plan and the success of the contemplated integration and
rationalization of our businesses are subject to significant risks and
uncertainties. These risks and uncertainties include, but are not limited to,
those relating to:
- centralization and consolidation of financial, operational
and administrative functions
- elimination of duplicative costs
- integration of platforms, networks and service centers
- ability to cross-sell products and services to payers and
providers with which we have established relationships and
those with which acquired companies have established
relationships
- integration of healthcare transaction processing services not
currently offered via the Internet with our Internet-based
platform
- the loss of key personnel
- diversion of management's attention from other ongoing
business concerns
- potential conflicts in payer, provider, strategic partner,
sponsor or advertising relationships
- coordination of organizations that are geographically diverse
and have different business cultures
- compliance with regulatory requirements.
We cannot guarantee that any acquired businesses will be successfully
integrated with our operations in a timely manner, or at all. Failure to
successfully integrate acquired businesses or to achieve operating synergies,
revenue enhancements or cost savings could have a material adverse effect on our
business, financial condition and results of operation.
Integrating any additional acquired organizations and technologies in
the future could be expensive, time consuming and may strain our resources.
Integrating any future acquisitions would be subject to the same challenges,
risks and uncertainties as our current integration plan, as described above. In
particular, additional acquisitions could divert management's attention from
other business concerns and expose us to unforeseen liabilities or risks
associated with entering new markets. In addition, we may lose key employees
while integrating these new companies. We may also lose our relationships with
payers, providers and strategic partners if any acquired companies have
relationships with competitors of these payers, providers and strategic
partners. Consequently, we may not be successful in integrating acquired
businesses or technologies and may not achieve anticipated revenue and cost
benefits. We also cannot guarantee that these acquisitions will result in
sufficient revenue or earnings to justify our investment in, or expenses related
to, these acquisitions or that any synergies will develop.
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<PAGE> 9
OUR ALLOCATION OF THE PURCHASE PRICE FOR OUR RECENT MERGERS MAY MATERIALLY
DIFFER FROM THAT IN THE PRO FORMA ACCOUNTING PRESENTATION
We allocated the total estimated purchase price for Medical Manager
and CareInsite on a preliminary basis to assets and liabilities based on our
best estimates of the fair value of these assets and liabilities, with the
excess costs over the net assets acquired allocated to goodwill and other
intangible assets. This allocation is subject to change pending a final
determination and analysis of the total purchase price and the fair value of
the assets acquired and liabilities assumed. The impact of these changes could
be material to our future results of operations.
SALES OF LARGE AMOUNTS OF OUR SHARES AND THE LAPSE OF TRANSFER RESTRICTIONS
COULD ADVERSELY AFFECT PREVAILING STOCK PRICES
The market price of our common stock could fall if stockholders sell large
amounts of stock in the public market following the lapse of contractual and
legal transfer restrictions. These sales, or the possibility that these sales
may occur, could make it more difficult for us to raise capital through the sale
of equity or equity-related securities in the future. A significant amount of
our common stock is subject to restrictions on transfer under federal securities
law and contractual restrictions. For details regarding these restrictions on
transfer, see "Shares Eligible for Future Sale" on page 22.
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ACQUISITIONS AND STRATEGIC RELATIONSHIPS COULD RESULT IN THE DILUTION OF OUR
STOCKHOLDERS
We expect to pay for some of our future acquisitions and strategic
relationships, if any, by issuing additional common stock, which could dilute
our stockholders. Future acquisitions could also result in the incurrence of
debt, contingent liabilities or amortization expenses related to goodwill and
other intangible assets, any of which could harm our business. Future
acquisitions may require us to obtain additional equity or debt financing,
which may not be available on favorable terms or at all. Even if available, the
financing may be dilutive. We cannot guarantee that these acquisitions or
strategic relationships will generate or result in sufficient revenue or
earnings to justify the dilution which could occur.
WE EXPECT TO DEVOTE SIGNIFICANT RESOURCES TO INTEGRATING APPLICATIONS THAT ARE
NOT INTERNET-ENABLED
Some of our applications, including Envoy's electronic data
interchange, or EDI, transaction processing services, were acquired by us and
are not Internet-enabled. We intend to integrate many of these applications, as
well as the applications that we recently acquired upon completion of the
Medical Manager, CareInsite and OnHealth mergers, with our Internet-based
platform and WebMD Practice and WebMD Health products and to consolidate our
transaction networks. Integrating these applications and platforms may be
expensive and may divert our attention from other activities.
MANAGING OUR GROWTH MAY STRAIN ADMINISTRATIVE, TECHNICAL AND FINANCIAL RESOURCES
We have rapidly and significantly expanded our operations recently and
expect to continue to do so. Our growth has been accomplished primarily through
acquisitions. We expect that future growth may also be accomplished through
internal expansion. This past and future growth has placed and will continue to
place a significant strain on our managerial, operational, financial and other
resources. If we are unable to respond to and manage this expected growth, then
the quality of our services and our results of operations could be materially
adversely affected.
Our current information systems, procedures and controls may not
continue to support our operations, and may hinder our ability to exploit the
market for healthcare applications and services. We are in the process of
completing the integration of our accounting and management information systems
following our acquisitions. We could experience interruptions to our internal
information systems while we transition to new systems. We cannot guarantee
that our systems, procedures and controls will be adequate to support expansion
of our operations.
OUR ABILITY TO GENERATE REVENUE WILL SUFFER IF WE DO NOT QUICKLY EXPAND OUR
SUITE OF APPLICATIONS AND SERVICE OFFERINGS
We currently offer a limited number of applications on our
Internet-based platform and some of our service offerings, including wireless
portal services, are not fully developed or launched. We must quickly introduce
new applications and services and improve the functionality of our existing
services in a timely manner in order to attract and retain subscribers and
consumers and payer and provider customers. We expect that our advertising
revenue will be dependent on the level of usage of our services by subscribers
and consumers, and believe that levels of usage will not increase unless we
improve functionality of our service offerings and increase payer connectivity.
We rely on a combination of internal development, strategic
relationships, licensing and acquisitions to develop these applications and
services. Each of our applications, regardless of how it was developed, must be
integrated and customized to operate with the existing legacy computer systems
of payer and provider customers and our platform. We are currently in the
process of migrating many of our acquired applications and products and services
to our Internet-based platform. Developing, integrating and customizing these
applications and services will be time consuming, and these applications and
services may never achieve market acceptance, which could also cause our
business to suffer.
WE ARE DEPENDENT ON STRATEGIC RELATIONSHIPS TO GENERATE SOME OF OUR REVENUE
OUR ABILITY TO GENERATE REVENUE WILL SUFFER IF WE CANNOT ESTABLISH AND
MAINTAIN STRATEGIC RELATIONSHIPS
We must establish and maintain successful strategic relationships with
leaders in a number of healthcare and Internet industry segments. We have
entered into strategic relationships with leading online and media distribution
and healthcare partners. Our strategic relationships are critical to our success
because we believe that these relationships will enable us to enhance our brand,
increase the number of transactions processed over our platform, generate
traffic on our web site and capitalize on additional distribution and revenue
opportunities. As previously announced, we are evaluating many of the business
relationships we currently have in place. It is possible that some of these
relationships may be modified or terminated. See "Recent Developments" on page
4. We expect that we will face intensified competition for strategic
relationships. We may not be able to establish commercial acceptance of our
platform, applications and services unless we can establish and maintain
successful strategic relationships in the future.
WE SHARE REVENUE WITH OUR STRATEGIC PARTNERS AND WILL INCUR SIGNIFICANT
EXPENSE IN CONNECTION WITH OUR STRATEGIC RELATIONSHIPS, AND THIS
EXPENSE MAY EXCEED THE NET REVENUE THESE RELATIONSHIPS GENERATE
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We intend to use a significant amount of cash to fund branding and
advertising, including promotional arrangements with our strategic partners. At
June 30, 2000, we estimated that we will make the following aggregate guaranteed
payments under our current relationships with our strategic partners in the
calendar years indicated:
<TABLE>
Year Ended December 31, Amount
---------------------------- ------
<S> <C>
2000............................. $73.8 million
2001............................. 74.7 million
2002............................. 59.8 million
2003............................. 41.4 million
2004............................. 11.2 million
</TABLE>
We have agreed to share some of our transaction processing,
advertising, carriage fee and e-commerce revenues, net of specified costs
applicable to the particular revenue category, with Microsoft Corporation and E.
I. duPont de Nemours and Company for their sponsorship of physician
subscriptions to WebMD Practice and with several physician practice management
system vendors who have agreed to promote our services to their physician
customers. This revenue sharing applies only to the extent the revenues are
derived from Microsoft- or DuPont-sponsored physicians or from physicians
subscribing to the particular vendor's practice management system. The
percentage of revenue shared varies from contract to contract and based on the
type of revenue generated.
We may enter into additional promotional arrangements with current and
future strategic partners that may require us to pay consideration in amounts
that significantly exceed the amounts we are required to pay under our current
arrangements. These guaranteed payments and promotional and other arrangements
may require us to share revenue or incur significant expenses. We cannot give
you assurances that we will generate sufficient revenue from these arrangements
to offset these expenses, in particular after we share some of our net revenue
with our strategic partners. Failure to do so could have a material adverse
effect on our financial condition and results of operations.
WE INVEST IN SOME OF OUR STRATEGIC PARTNERS, MANY OF WHICH ARE IN EARLY
STAGES OF DEVELOPMENT
We have made equity investments in some of our strategic partners. In
many instances, these investments are in the form of illiquid securities of
private companies engaged in e-Health and are made in conjunction with the
parties entering into a strategic agreement. Typically, these strategic
partners enter into agreements that obligate them to purchase advertising or
other services from us. These companies are typically in an early stage of
development and may be expected to incur substantial losses and may not
generate sufficient revenue to pay the advertising and e-commerce fees due us.
In addition, due to recent market volatility, some of these companies may alter
any plans to go public, and others that have gone public may experience
significant decreases in the trading prices of their common stock adversely
affecting the value of our investments.
WE HAVE GRANTED EXCLUSIVE RIGHTS TO STRATEGIC PARTNERS
We have agreed that some of our strategic partners will be our
exclusive providers of some of our applications and content. For example, we
have entered into strategic agreements with e-commerce companies to be our
exclusive partners supplying online pharmacy services and medical supplies and
to be our exclusive providers of various categories of content and services.
These agreements may limit our access to other applications and content we might
otherwise be able to make available to subscribers and consumers or to payer and
provider customers. Our inability to offer other applications and content could
cause our business to suffer. In addition, we have granted exclusive rights to
strategic partners which restrict our ability to pursue some business
opportunities. For example, in connection with our acquisition of Envoy from
Quintiles Transnational Corp., we granted to Quintiles the exclusive license to
use some of the de-identified data available to us by virtue of our transaction
services and some exclusive rights in the pharmaceutical market.
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RELATIONSHIPS WITH CUSTOMERS AND STRATEGIC PARTNERS MAY CONFLICT
We have developed and rely upon important relationships with payers,
providers, practice management system vendors and strategic partners, some of
which may involve conflicting contractual rights, including conflicts which may
result from our recent acquisitions. For example, in January and February 2000,
we entered into strategic alliances with three practice management system
vendors that compete with Medical Manager. As a result of our acquisition of
Medical Manager, we may lose relationships with some customers and strategic
partners, who may then establish relationships with our competitors. In
addition, we may not be able to maintain or establish relationships with key
participants in the healthcare and Internet industries if any of the companies
we acquired had already established relationships with competitors of these key
participants.
For example, we have entered into a five-year strategic alliance with
Microsoft pursuant to which we develop, host, maintain on our servers and
provide content for the health channels on MSN, MSNBC and WebTV. Similarly,
CareInsite has entered into a strategic alliance with America Online, Inc.,
pursuant to which CareInsite is AOL's exclusive provider of a comprehensive
suite of services that connect AOL and CompuServe members and visitors to AOL's
web-based brands Netscape, AOL.COM and Digital City, to physicians, health
plans, pharmacy benefit managers, covered pharmacies and labs. As a result of
the recent completion of the Medical Manager and CareInsite mergers, Microsoft
will be able to terminate its strategic alliance with us for a limited period of
time if we and Microsoft are unable to resolve conflicts that may arise as a
result of these mergers. We have agreed with Microsoft that for a 60-day period
ending November 12, 2000, we will work together to identify and resolve any
conflicts that result from these mergers. If these potential conflicts cannot be
resolved, however, Microsoft could terminate the strategic alliance. Similarly,
as a result of these mergers, AOL will be able to terminate its strategic
alliance with CareInsite, as a result of which guaranteed payments of
approximately $20.0 million due to AOL will accelerate. We cannot assure you
that the conflicts arising under either of these strategic alliances as a result
of these mergers will be resolved. If either or both strategic alliances are
terminated, and we are unable to replace the terminated alliance with a
comparable one, we could experience a material decrease in revenue.
If contractual or relationship conflicts cannot be resolved, we could
lose the benefits of some of our relationships with payers, providers or
strategic partners. Losses of any significant relationships could harm our
business or results of operations.
THE PROPOSED DISPOSITION OF OUR PLASTICS AND FILTRATION TECHNOLOGIES BUSINESS
MAY NOT BE COMPLETED IN A TIMELY MANNER OR AT ALL
The proposed disposition of Porex Corporation and our other plastics
and filtration technologies subsidiaries, which are referred to as Porex, is
important to our integration plan and, if the disposition fails to be completed
or is not completed in a timely manner, we may not be able to execute strategies
that are critical to our continued growth as planned. We cannot guarantee that
the disposition of this business will be successfully completed in a timely
manner, or at all. Failure to successfully complete this proposed disposition or
to complete it in a timely manner could harm our ability to achieve the benefits
contemplated by our integration plan, which could have a material adverse effect
on our business, financial condition and results of operation.
OUR ABILITY TO GENERATE REVENUE WILL SUFFER IF WE CANNOT ATTRACT AND RETAIN
SUBSCRIBERS
We must attract and retain subscribers to WebMD Practice, our
physician portal, in order to generate subscription revenue. In addition, our
ability to generate advertising revenue and transaction revenue will be
dependent on the number of subscribers and level of usage by those subscribers
of our Internet-based services, including our administrative transaction and
clinical information services. We cannot guarantee that we will be able to
attract new or retain existing subscribers. In particular, we cannot guarantee
that we will retain subscribers whose subscriptions are initially paid for by
our strategic partners once those subscribers are required to pay for their
subscriptions themselves or that these subscribers will actually use our
services.
IF WE ARE UNABLE TO GENERATE SIGNIFICANT ADVERTISING REVENUE, OUR FUTURE
RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED
We derive a portion of our revenue from advertising activities.
Advertising revenue is generally derived from short-term advertising contracts
in which we typically guarantee a minimum number of impressions or pages to be
delivered over a specified period of time for a fixed fee. Advertising revenue
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may also include barter transactions, which are exchanges by us of advertising
space on our web site for goods and services from strategic partners and which
might not generate any cash receipts.
The Internet advertising market is new and rapidly evolving, and no
standards have been widely accepted to measure its effectiveness as compared to
traditional media advertising. If no standards develop, existing advertisers
may not continue their current level of Internet advertising, and advertisers
that have traditionally relied on other advertising media may be reluctant to
advertise on the Internet. Moreover, filter software programs that limit or
prevent advertising from being delivered to a web user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising. Our business would be adversely
affected if the market for Internet advertising fails to develop or develops
more slowly than expected.
Various pricing models are used to sell advertising on the Internet.
It is difficult to predict which, if any, will emerge as the industry standard,
thereby making it difficult to project our future advertising rates and
revenue. The level of traffic on our web site is likely to be a factor in
determining advertising rates. We cannot predict whether our subscribers whose
subscriptions are paid for by our strategic partners will actually use our
services. In addition, there can be no assurances that we will continue to
generate significant revenue from our advertising activities.
LENGTHY SALES AND IMPLEMENTATION CYCLES FOR OUR APPLICATIONS COULD ADVERSELY
AFFECT OUR ABILITY TO GENERATE REVENUE
A key element of our strategy is to market our solutions directly to
large healthcare organizations. We will be unable to control many of the
factors that will influence the buying decisions of these organizations. We
expect that the sales and implementation process will be lengthy and will
involve a significant technical evaluation and commitment of capital and other
resources by our customers. The sale and implementation of our solutions are
subject to delays due to our payer and provider customers' internal budgets and
procedures for approving large capital expenditures and deploying new
technologies within their networks.
We will need to expend substantial resources to integrate our
applications with the existing legacy and client-server architectures of large
healthcare organizations. We have limited experience in integrating our
applications with large, complex architectures, and we may experience delays in
the integration process. These delays would, in turn, delay our ability to
generate revenue from these applications and could adversely affect our results
of operations.
OUR BUSINESS WILL SUFFER IF HEALTHCARE INDUSTRY PARTICIPANTS DO NOT ACCEPT
INTERNET SOLUTIONS
Our business model depends on the adoption of Internet solutions by
providers, payers, patients and other healthcare industry participants. Our
ability to generate revenue could suffer dramatically if Internet solutions are
not accepted or not perceived to be effective.
The adoption of Internet solutions by healthcare participants will
require the acceptance of a new way of conducting business and exchanging
information. To maximize the benefits of our platform, healthcare participants
must be willing to allow sensitive information to be stored in our databases
and to conduct healthcare transactions over the Internet. There can be no
assurance that healthcare participants will accept Internet solutions in a
timely manner or at all.
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FAILURE TO CONTINUE TO EXPAND AND ADAPT OUR PLATFORM TO ACCOMMODATE INCREASED
USAGE COULD MAKE IT DIFFICULT TO SUCCESSFULLY IMPLEMENT OUR INTERNET-BASED
SERVICES
To successfully implement our Internet-based services, we must
continue to expand and adapt our platform and transaction networks to
accommodate additional users, increased transaction volumes and changing
customer requirements. Our infrastructure may not accommodate increased use
while maintaining acceptable overall performance. To date, we have processed a
limited number and variety of Internet-based transactions. In addition, our
Internet-based products and services have only been used by a limited number of
physicians and healthcare consumers. An unexpectedly large increase in the
volume of traffic on our web site, the number of physicians using WebMD
Practice or transactions processed over our networks may require us to expand
and further upgrade our platform. This expansion could be expensive and could
divert our attention from other activities.
PERFORMANCE PROBLEMS WITH OUR SYSTEMS COULD DAMAGE OUR BUSINESS
Our payer and provider customer satisfaction and our business could be
harmed if we or our customers experience system delays, failures or loss of
data. We currently process our payer and provider transactions and data at our
facilities and rely on a data center operated by a third party to perform
transaction processing for Envoy's EDI business, other than real-time EDI
transaction processing. This data center is located in Tampa, Florida and is
operated by Verizon Data Services, with whom Envoy has contracted for these
processing services. We assumed this contract upon our acquisition of Envoy.
Envoy relies primarily on this facility to process batch claims and other
medical EDI transaction sets. Envoy's contract with Verizon requires Verizon to
maintain continuous processing capability and a "hot site" disaster recovery
system. We have a contingency plan for emergencies with our systems; however, we
have limited backup facilities to process information if these facilities are
not functioning. The occurrence of a major catastrophic event or other system
failure at any of our facilities or at the Verizon facility could interrupt data
processing or result in the loss of stored data, which could have an adverse
impact on our business. While we have general liability insurance that we
believe is adequate, including coverage for errors and omissions, we may not be
able to maintain this insurance on reasonable terms in the future. In addition,
our insurance may not be sufficient to cover large claims and our insurer could
deny coverage on claims. If we are liable for an uninsured or underinsured claim
or if our premiums increase significantly, our financial condition could be
materially harmed.
PERFORMANCE PROBLEMS WITH THE SYSTEMS OF OUR SERVICE AND CONTENT PROVIDERS
COULD HARM OUR BUSINESS
We depend on service and content providers to provide information and
data feeds on a timely basis. Our web site could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. In addition, our customers who utilize our
web-based services depend on Internet service providers, online service
providers and other web site operators for access to our web site. All of these
providers have experienced significant outages in the past and could experience
outages, delays and other difficulties in the future due to system failures
unrelated to our systems. Any significant interruptions in our services or
increases in response time could result in a loss of potential or existing
users of and advertisers and sponsors on our web site and, if sustained or
repeated, could reduce the attractiveness of our services.
IF OUR SYSTEMS EXPERIENCE SECURITY BREACHES OR ARE OTHERWISE PERCEIVED TO BE
INSECURE, OUR REPUTATION WILL SUFFER
A material security breach could damage our reputation or result in
liability. We retain confidential information, including patient health
information in our processing centers. We may be required to expend significant
capital and other resources to protect against security breaches or to
alleviate problems caused by breaches. Any well-publicized compromise of
Internet security could deter people from using the Internet or from conducting
transactions that involve transmitting confidential
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information, including confidential healthcare information. Therefore, it is
critical that these facilities and infrastructure remain secure and are
perceived by the marketplace to be secure. Despite the implementation of
security measures, this infrastructure may be vulnerable to physical break-ins,
computer viruses, programming errors, attacks by third parties or similar
disruptive problems.
OUR BUSINESS IS DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF THE INTERNET
INFRASTRUCTURE
Our ability to deliver our Internet-based services is dependent on the
development and maintenance of the infrastructure of the Internet by third
parties. This includes maintenance of a reliable network backbone with the
necessary speed, data capacity and security, as well as timely development of
complimentary products such as high-speed modems, for providing reliable
Internet access and services. The Internet has experienced, and is likely to
continue to experience, significant growth in the number of users and the
amount of traffic. If the Internet continues to experience increased numbers of
users, increased frequency of use, or more complex requirements, the Internet
infrastructure may be unable to support the demands placed on it. In addition,
the performance of the Internet may be harmed by increased users or more
complex requirements.
The Internet has experienced a variety of outages and other delays as
a result of damages to portions of its infrastructure, and it could face
outages and delays in the future. These outages and delays could reduce the
level of Internet usage as well as the availability of the Internet to us for
delivery of our Internet-based services. In addition, the Internet could lose
its viability due to delays in the development or adoption of new standards and
protocols to handle increased levels of activity or due to increased
governmental regulation. The infrastructure and complimentary products or
services necessary to make the Internet a viable commercial marketplace for the
long-term may not be developed successfully or in a timely manner. Our
financial condition could be materially harmed if the Internet is not available
to us for the delivery of our services and products.
OUR BUSINESS WILL BE HARMED IF WE ARE UNSUCCESSFUL IN RESPONDING TO RAPID
TECHNOLOGY CHANGES IN OUR MARKETS
Healthcare information exchange and transaction processing is a
relatively new and evolving market. The pace of change in our markets is rapid
and there are frequent new product introductions and evolving industry
standards. We may be unsuccessful in responding to technological developments
and changing customer needs. In addition, our applications and services
offerings may become obsolete due to the adoption of new technologies or
standards.
OUR PLATFORM INFRASTRUCTURE AND SCALABILITY ARE NOT PROVEN, AND WE MAY NOT BE
ABLE TO ADEQUATELY ACCOMMODATE INCREASED FUNCTIONALITY OR USAGE
To date, we have processed a limited number and variety of
transactions over our platforms. Similarly, a limited number of healthcare
participants use these platforms. Our systems may not accommodate increased use
while maintaining acceptable overall performance. We must continue to expand
and adapt our network infrastructure to accommodate additional users, increased
transaction volumes and changing payer and provider customer requirements. This
expansion and adaptation may be expensive and may divert our attention from
other activities.
WE FACE SIGNIFICANT COMPETITION FOR OUR PRODUCTS AND SERVICES
HEALTHCARE TRANSACTION AND INFORMATION SERVICES
The market for healthcare transaction and information services is
intensely competitive, rapidly
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evolving and subject to rapid technological change. Many of our competitors
have greater financial, technical, product development, marketing and other
resources than us. These organizations may be better known and have more
customers than us. Many of our competitors have also announced or introduced
Internet strategies that will compete with our applications and services. We
may be unable to compete successfully against these organizations.
We have many competitors, including:
- healthcare information software vendors
- healthcare EDI companies
- large information technology consulting service providers
- online services or web sites targeted to the healthcare
industry, physicians and healthcare consumers generally
- publishers and distributors of traditional offline media,
including those targeted to healthcare professionals, many of
which have established or may establish web sites
- general purpose consumer online services and portals and
other high-traffic web sites which provide access to
healthcare-related content and services
- public sector and non-profit web sites that provide
healthcare information without advertising or commercial
sponsorships
- vendors of healthcare information, products and services
distributed through other means, including direct sales, mail
and fax messaging.
We expect that major software information systems companies and others
specializing in the healthcare industry will offer competitive applications or
services. In addition, some of our existing and potential payer and provider
customers and strategic partners may also compete with us. For example, in
April 2000, it was reported that a consortium of six health insurance companies
may join together to develop an online project which links insurers, doctors
and patients. If this consortium decides to proceed with its plans to allow
patients to enroll in health plans and choose doctors online while also taking
care of administrative tasks such as processing payment claims, it could
compete with us.
In addition, some payers currently offer electronic data transmission
services to healthcare providers that establish a direct link between the
provider and the payer, bypassing third-party EDI service providers such as us.
Any significant increase in the utilization of direct links between healthcare
providers and payers could have a material adverse effect on our business and
results of operations.
PRACTICE MANAGEMENT INFORMATION SYSTEMS BUSINESS
As a result of our recent merger with Medical Manager, we now own and
operate Medical Manager Health Systems. The market for practice management
systems such as The Medical Manager practice management system is highly
competitive. Medical Manger Health Systems' competitors vary in size and in the
scope and breadth of the products and services that they offer. Medical Manager
Health Systems competes with different companies in each of its target markets.
Many of Medical Manager Health Systems' competitors have greater financial,
development, technical, marketing and sales resources than Medical Manager
Health Systems. In addition, other entities not currently offering products and
services similar to those offered by Medical Manager Health Systems, including
claims processing organizations, hospitals, third-party administrators,
insurers, healthcare organizations and others, may enter markets in which
Medical Manager Health Systems competes. We cannot assure you that future
competition will not have a material adverse effect on Medical Manager Health
Systems', and thus, our results of operations, financial condition or business.
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HEALTHCARE REGULATION COULD ADVERSELY AFFECT OUR BUSINESS
The healthcare industry is highly regulated and is subject to changing
political, regulatory and other influences. These factors affect the purchasing
practices and operation of healthcare organizations. Federal and state
legislatures have periodically considered programs to reform or amend the U.S.
healthcare system at both the federal and state level. These programs may
contain proposals to increase governmental involvement in healthcare, lower
reimbursement rates or otherwise change the environment in which healthcare
industry participants operate. Healthcare industry participants may respond by
reducing their investments or postponing investment decisions, including
investments in our applications and services. We do not know what effect any
proposals would have on our business.
HIPAA transaction standards
On August 17, 2000, the U.S. Department of Health and Human Services,
or DHHS, published final regulations to govern electronic transactions involving
health information. These regulations constitute part of the administrative
simplification provisions of the Health Insurance Portability and Accountability
Act of 1996, or HIPAA. This rule is commonly referred to as the transaction
standards rule.
The rule establishes standards for eight of the most common health care
transactions by reference to technical standards promulgated by recognized
standards publishing organizations. Under the new standards, any party
transmitting or receiving health transactions electronically will send and
receive data in a single format, rather than the large number of different data
formats currently used. Healthcare providers, healthcare clearinghouses and
large health plans must comply by October 16, 2002, while small health plans are
given an additional year.
The transaction standards are applicable to that portion of our
business involving the processing of healthcare transactions among physicians,
payers, patients and other healthcare industry participants. The transaction
standards also are applicable to many of our customers and to our relationships
with those customers. We intend to comply with the transaction standards by
their effective date. This compliance may require modifications to some of our
products and services. We believe that we are well-positioned to effectuate
these changes and to facilitate compliance efforts of our customers and
strategic partners. However, there can be no assurance that we will be able to
do so or that we will be able to take advantage of any business opportunities
that implementation of the transaction standards may provide to us.
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Regulation regarding confidentiality and privacy of patient
information
Numerous state and federal laws govern the collection, dissemination,
use, access to and confidentiality of patient health information. Many states
have laws and regulations that protect the confidentiality of medical records or
medical information. The adoption of privacy laws at a state or federal level
could impose operational requirements on our business and affect the manner in
which we use and transmit patient information and the cost of doing so.
In addition to the transaction standards discussed above, DHHS has
proposed regulations that would impose substantial requirements on entities
that electronically store or transmit individually identifiable health
information. The proposed regulations, among other things, would require these
entities to use the information only in a highly restricted manner, to
establish safeguards with regard to security, access and use of information, to
obtain consent from the individual in some instances, to restrict the manner in
which the information is used by other parties, and to provide access to
individuals to inspect and correct the information. We do not know whether, or
in what form, the proposed regulations will be enacted. However, if similar
regulations are finally enacted, they may require us to change our platform and
services in a costly and cumbersome manner and restrict the manner in which we
transmit and use the information.
For additional information, see"--Regulation of the Internet could
adversely affect our business" on page 19.
Regulation of healthcare relationships
There are federal and state laws that govern patient referrals,
physician financial relationships and inducements to beneficiaries of federal
healthcare programs. The federal 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. The anti-kickback
law is broad and may apply to some of our activities. Penalties for violating
the anti-kickback law include imprisonment, fines and exclusion from
participating, directly or indirectly, in Medicare, Medicaid and other federal
healthcare 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. We carefully review our practices with regulatory
experts to ensure that we comply with all applicable laws. However, the laws in
this area are both broad and vague and it is often difficult or impossible to
determine precisely how the laws will be applied, particularly to new services
similar to ours. Any determination by a state or federal regulatory agency that
any of our practices violate any of these laws could subject us to civil or
criminal penalties and require us to change or terminate some portions of our
business.
We currently provide billing services and intend to provide repricing
services to providers and, therefore, may be subject to state and federal laws
that govern the submission of claims for medical expense reimbursement. These
laws generally prohibit an individual or entity from knowingly presenting or
causing to be presented a claim for payment from Medicare, Medicaid or other
third party payers that is false or fraudulent, or is for an item or service
that was not provided as claimed. These laws also provide civil and criminal
penalties for noncompliance. We have designed our current transaction services
and will design any future services to place the responsibility for compliance
with these laws on provider customers. However, we cannot guarantee that state
and federal agencies will regard billing errors processed by us as inadvertent
and not in violation of these laws. In addition, changes in current healthcare
financing and reimbursement systems could cause us to make unplanned
modifications of applications or services, or result in delays or cancellations
of orders or in the revocation of endorsement of our applications and services
by healthcare participants.
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REGULATION BY THE U.S. FOOD AND DRUG ADMINISTRATION
The Food and Drug Administration, or the FDA, has jurisdiction under
the 1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act,
or the FDA Act, to regulate computer products and software as medical devices if
they are intended for use in the diagnosis, cure, mitigation, treatment or
prevention of disease in humans. The FDA has issued a final rule under which
manufacturers of medical image storage devices and related software are required
to submit to the FDA premarket notification applications, which are each
referred to in this document as a 510(k) application, and otherwise comply with
the requirements of the FDA Act applicable to medical devices. We have attempted
to design our services so that our computer applications and software are not
considered to be medical devices. However, the FDA may take the position that
our services are subject to FDA regulation. In addition, we may expand our
services in the future to areas that subject us to FDA regulation. For example,
Medical Manager Health Systems is distributing in the U.S. a medical image
management device, which is referred to in this document as the "image module,"
which was cleared by the FDA on April 4, 1997 and is manufactured by a third
party in accordance with specifications set forth in the cleared 510(k)
application. Medical Manager Health Systems has created an interface between The
Medical Manager practice management system and the image module and is marketing
the interface and the image module as the Document Image Module System. We
believe that the addition of our practice management system to the image module
does not change the image module's intended use or significantly change the
safety or efficacy of the product to the extent that a new 510(k) application is
required. The FDA is currently reviewing its policy for the regulation of
computer software, and there is a risk that The Medical Manager software could
in the future become subject to some or all of the above requirements. Except
with respect to Porex, we have no experience in complying with FDA regulations.
We believe that complying with FDA regulations may be time consuming, burdensome
and expensive and could delay our introduction of new applications or services.
REGULATION OF TRANSACTION SERVICES
State and federal statutes and regulations governing transmission of
claims may affect our operations. For example, Medicaid rules require some
processing services and eligibility verification to be maintained as separate
and distinct operations. We believe that our practices are in compliance with
applicable state and federal laws.
These laws, though, are complex and changing, and the government may
take positions that are inconsistent with our practices.
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, which is referred to as the prohibition
against the corporate practice of medicine. We have attempted to structure our
web site, strategic relationships and other operations to avoid violating these
state licensing and professional practice laws. A state, however, may determine
that some portion of our business violates these laws and may seek to have us
discontinue those portions or subject us to penalties or licensure
requirements. We employ and contract with physicians who provide only medical
information to consumers, and we have no intention to provide medical care or
advice. We do not maintain professional liability insurance because we believe
we are not a healthcare provider. Any determination that we are a healthcare
provider and acted improperly as a healthcare provider may result in liability
for which we are not insured.
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REGULATION OF THE INTERNET COULD ADVERSELY AFFECT OUR BUSINESS
Laws and regulations may be adopted with respect to the Internet or
other online services covering user privacy, patient confidentiality and other
issues, including:
- pricing
- content
- copyrights and patents
- distribution
- characteristics and quality of products and services.
We cannot predict whether these laws will be adopted and how they will affect
our business.
Internet user privacy has become an issue both in the U.S. and abroad.
Whether and how existing privacy or consumer protection laws in various
jurisdictions apply to the Internet is uncertain and may take years to resolve.
Any legislation or regulations of this nature could affect the way we conduct
our business, particularly in our collection or use of personal information,
and could harm our business. Further, activities on or using the Internet have
come under increased scrutiny, including increased investigation in the
healthcare arena by the Federal Trade Commission, or FTC, and heightened
media attention.
Similar to many other Internet healthcare companies, we have recently
received a request for information from the FTC concerning our web site privacy
policies and practices. While we believe we are in compliance with all
applicable laws, all third party contractual commitments and our published
privacy commitments, government inquiries like this inquiry can divert
management's attention from other matters and create unfavorable publicity.
THIRD PARTIES MAY BRING CLAIMS AGAINST US AS A RESULT OF CONTENT PROVIDED ON
OUR WEB SITE, WHICH MAY BE EXPENSIVE AND TIME CONSUMING TO DEFEND
We could be subject to third party claims based on the nature and
content of information supplied on our web site by us or third parties,
including content providers, medical advisors or users. We could also be
subject to liability for content that may be accessible through our web site or
third party web sites linked from our web site or through content and
information that may be posted by users in chat rooms or bulletin boards. Even
if these claims do not result in liability to us, investigating and defending
against these claims could be expensive and time consuming and could divert
management's attention away from operating the business.
OUR INTELLECTUAL PROPERTY MAY BE SUBJECT TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON
Our intellectual property is important to our business. We could be
subject to intellectual property infringement claims as the number of our
competitors grows and the functionality of our applications overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
and divert management's attention from our operations. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and to develop noninfringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property. We may be unable to develop noninfringing
technology or obtain a license on commercially reasonable terms, or at all. In
addition, we may not be able to protect against misappropriation of our
intellectual property. Third parties may infringe upon our intellectual property
rights. If we do not detect any unauthorized use, we may be unable to enforce
our rights.
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OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE CANNOT ATTRACT AND RETAIN KEY
PERSONNEL
Our future operating results will substantially depend on the ability
of our officers and key employees to manage changing business conditions and to
implement and improve our technical, administrative, financial control and
reporting systems. We need to attract, integrate, motivate and retain highly
skilled technical people. In particular, we need to attract and retain
experienced computer, engineering, marketing, management and other professionals
capable of developing, selling and installing complex healthcare information
systems. We face intense competition for these people.
OUR BUSINESS COULD BE ADVERSELY AFFECTED AS A RESULT OF OUR INTERNATIONAL
EXPANSION
One element of our strategic alliance with The News Corporation Limited
is the formation of WebMD International as a joint venture with News Corporation
to launch our services worldwide, other than in the U.S. and Japan. In addition,
we have formed an international joint venture in Japan with one of our strategic
partners. We have extremely limited experience in developing localized versions
of our products and services. WebMD International and any future international
ventures may not be successful in launching our services into foreign markets.
A MATERIAL PORTION OF OUR PRACTICE MANAGEMENT SYSTEMS BUSINESS IS DEPENDENT ON
MEDICAL MANAGER HEALTH SYSTEMS' PRINCIPAL PRODUCTS, AND WE ARE EXPOSED TO RISKS
RELATED TO PROBLEMS WITH ANY OF THESE PRODUCTS
Medical Manager Health Systems currently derives a significant
percentage of its revenue from sales of The Medical Manager core physician
practice management system. As a result, any event adversely affecting this core
product could have a material adverse effect on our results of operations,
financial condition or business. Although Medical Manager Health Systems has
experienced increasing annual sales, on a pro forma basis, revenue associated
with existing products could decline as a result of several factors, including
price competition. Beginning in calendar year 2000, the physician practice
management system industry began to experience a slowdown in demand. This trend
impacted Medical Manager Health Systems' operating results for the three
months ended March 31, 2000, and we expect the trend towards lower operating
results to continue for the near term resulting, in part, from lower margin
service revenues replacing higher margin software upgrades, and from the
previous acquisition of Physician Computer Network, which business historically
has experienced lower margins. Medical Manager Health Systems intends to
introduce new software products at the end of calendar year 2000, and we
anticipate that demand for software products will increase. We cannot assure you
that Medical Manager Health Systems will continue to be successful in marketing
its current products or any new or enhanced products.
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<PAGE> 22
PROVISIONS OF OUR CHARTER, BYLAWS OR DELAWARE LAW MAY HAVE AN ANTI-TAKEOVER
EFFECT
Certain provisions of our certificate of incorporation and bylaws may
discourage an attempt to acquire control of WebMD. These provisions may render
the removal of one or all directors more difficult or deter or delay corporate
changes of control that our board of directors did not approve. The provisions
of our certificate of incorporation or bylaws that may have an anti-takeover
effect include the following:
- the board of directors is divided into three classes, as nearly
equal in size as possible, with staggered terms of office and with
one class elected annually
- the board is entitled to issue preferred stock in one or more series
and to fix the designations, preferences, powers and rights of the
shares to be included in each series
- directors may be removed only for cause by a majority of the shares
entitled to vote in the election of directors
- any vacancy on the board of directors may be filled only by a
majority of the directors remaining in office
- our bylaws require advance written notice by any stockholder who
wishes to make a board nomination or recommend other stockholder
business
- only the board of directors, president or stockholders holding at
least 10% of the outstanding shares are entitled to call a special
meeting of the stockholders
- no stockholder action can be taken by written consent.
UNTIL WE DISPOSE OF OUR PLASTIC AND FILTRATION TECHNOLOGIES BUSINESS, WE WILL
BE SUBJECT TO RISKS ASSOCIATED WITH THAT BUSINESS
Until the proposed disposition of our plastic and filtration
technologies business is completed, we will continue to operate that business
and to be subject to additional risks associated with that business.
We face significant competition for the products and services of our
plastic and filtration technologies business
Competition in our plastics and filtration technology business is
characterized by the introduction of competitive products at lower prices. We
believe that Porex's principal competitive strengths are its manufacturing
processes, quality control, relationships with its customers and distribution of
its proprietary healthcare products.
In the porous plastics area, Porex's competitors include other
producers of porous plastic materials as well as companies that manufacture and
sell products made from materials other than porous plastics which can be used
for the same purposes as Porex's products. In this area, Porex has several
direct competitors in the U.S., Europe and Asia. Porex's porous plastic pen
nibs compete with felt and fiber tips manufactured by a variety of suppliers
worldwide. Other Porex industrial products made of porous plastic compete,
depending on the industrial application, with porous metals, metal screens,
fiberglass tubes, pleated paper, resin-impregnated felt, ceramics and other
substances and devices.
The market for Porex's injection molded solid plastic components and
products, including its medical products, is highly competitive and highly
fragmented. Porex's pipette tips and racks also compete with similar products
manufactured by domestic and foreign manufacturers. Porex's injection molding
and mold making services compete with services offered by several foreign and
domestic companies. The MEDPOR(R) Biomaterial products compete for surgical use
against autogenous and allograph materials and alloplastic biomaterials. Porex's
surgical drains and markers compete against a variety of products from several
manufacturers.
Healthcare regulation could adversely effect our plastics and
filtration technologies business
Porex manufactures and distributes medical/surgical devices, such as
plastic and reconstructive surgical implants and tissue expanders, which are
subject to government regulations, under the FDA Act and additional regulations
promulgated by the FDA. Future healthcare products may also be subject to these
regulations and approval processes. Compliance with these regulations and the
process of obtaining approvals can be costly, complicated and time-consuming,
and we cannot assure you that these approvals will be granted on a timely
basis, if ever.
The nature of Porex's products expose it to product liability claims
and may make it difficult to get adequate insurance coverage
The products sold by Porex expose it to potential risk for product liability
claims, particularly with respect to Porex's life sciences, clinical, surgical
and medical products. We believe that Porex carries adequate insurance coverage
against product liability claims and other risks. We cannot assure you,
however, that claims in excess of Porex's insurance coverage will not arise.
In addition, Porex's insurance policies must be renewed annually. Although
Porex has been able to obtain adequate insurance coverage at an acceptable cost
in the past and believes that it is adequately indemnified for products
manufactured by others and distributed by it, we cannot assure you that in the
future Porex will be able to obtain this insurance at an acceptable cost or be
adequately protected by this indemnification.
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<PAGE> 23
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus, the related registration statement on Form S-3 and
the documents incorporated by reference into this prospectus contain both
historical and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements
within the meaning of section 27A of the Securities Act, and section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are not based on historical facts, but rather reflect management's current
expectations concerning future results and events. These forward-looking
statements generally can be identified by use of statements that include phrases
such as "believe," "expect," "anticipate," "intend," "plan," "foresee,"
"likely," "will" or other similar words or phrases. Similarly, statements that
describe our objectives, plans or goals are or may be forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of WebMD to be different from any future results, performance
and achievements expressed or implied by these statements. You should review
carefully all information, including the financial statements and the notes to
the financial statements, included or incorporated by reference into this
prospectus.
In addition to the risk factors described in the preceding section,
the following important risks and uncertainties could affect future results,
causing these results to differ materially from those expressed in our
forward-looking statements:
- expected benefits from our recent mergers and our integration
plan not being fully realized or not being realized within the
expected time frames
- the failure to achieve sufficient levels of physician
utilization and market acceptance of our services
- the inability to quickly and successfully deploy our
applications
- inability to attract and retain qualified personnel
- general economic, business or regulatory conditions affecting
the Internet and healthcare communications industries being
less favorable than expected.
These factors and the risk factors described in the preceding section
are not necessarily all of the important factors that could cause actual
results to differ materially from those expressed in any of our forward-looking
statements. Other unknown or unpredictable factors also could have material
adverse effects on our future results. The forward-looking statements included
in the prospectus are made only as of the date of this prospectus and under
section 27A of the Securities Act and section 21E of the Exchange Act. We do
not have any obligation to publicly update any forward-looking statements to
reflect subsequent events or circumstances. We cannot assure you that projected
results will be achieved.
SHARES ELIGIBLE FOR FUTURE SALE
Substantial amounts of our outstanding common stock will become freely
transferable after contractual and legal transfer restrictions lapse. Sales of
substantial amounts of our common stock in the public market, or the perception
that these sales may occur, could materially and adversely affect the prevailing
market prices for our common stock.
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<PAGE> 24
We currently have an aggregate of approximately 380 million shares of
common stock outstanding, including the approximately 21.3 million shares
issuable upon conversion of the shares of our Series A preferred stock
outstanding as of September 30, 2000. Of these shares, approximately 288.9
million shares are freely tradeable without restrictions or further registration
under the Securities Act, unless owned by our "affiliates", as that term is
defined in Rule 144 under the Securities Act, or former affiliates of Medical
Manager, CareInsite or OnHealth. The remaining approximately 91.1 million shares
of outstanding common stock are subject to contractual restrictions on transfer
as described below.
As a result of the contractual restrictions, and subject to the provisions
of Rule 144 and 144(k), each described below, additional shares are or will be
available for sale in the public market as follows:
- 35.0 million shares of our common stock held by Quintiles as a result
of our acquisition of Envoy are subject to contractual transfer
restrictions until May 26, 2002, except that up to one-third of these
shares may be sold in the public market without contractual
restriction at any time after May 26, 2001 and up to two-thirds of
these shares may be sold in the public market without contractual
restriction at any time after November 26, 2001.
- 155,951 shares of our Series A preferred stock held by affiliates of
News Corporation, and the 21,282,645 shares of common stock into which
the shares of Series A preferred stock are convertible, are subject to
contractual transfer restrictions until the earlier of one year after
a change of control of WebMD, the liquidation, dissolution or winding
up of WebMD, or January 26, 2003. Upon the lapse of these contractual
restrictions, the shares would be transferable pursuant to Rule 144 or
upon exercise of News Corporation's registration rights. An additional
2.0 million shares of common stock owned by affiliates of News
Corporation are not subject to contractual transfer restrictions and
will be eligible for sale, subject to the volume, manner of sale and
reporting requirements of Rule 144, after January 26, 2001. These 2.0
million shares of common stock and, after the lapse of the contractual
restrictions, the 21,282,645 shares of common stock underlying the
Series A preferred stock may also be sold pursuant to News
Corporation's registration rights, if not previously sold pursuant to
Rule 144 or another exemption from registration under the Securities
Act, which would result in these shares becoming eligible for sale in
the public market without restriction immediately upon the
effectiveness of such registration.
- 15.0 million shares held by the entities associated with Janus Capital
Corporation, which are the selling stockholders set forth on page 26
of this prospectus, will be eligible for sale, subject to the volume,
manner of sale and reporting requirements of Rule 144 after
January 26, 2001 if these shares are not previously sold pursuant to
this prospectus and the related registration statement.
- 17,094,037 shares of our common stock held by Cerner are subject to
contractual restrictions on transfer until September 15, 2001,
except that Cerner may effect:
- transfers in connection with a merger, consolidation or sale of
all or substantially all of Cerner's assets in which the
surviving corporation or purchaser agrees to be bound by the
provisions of a voting agreement entered into with WebMD
- sales of up to 25% of the shares subject to transfer restrictions
beginning December 11, 2000
- sales of up to an additional 25% of the shares subject to
transfer restrictions commencing on March 15, 2001.
- Approximately 850,000 shares of our common stock issued to former
holders of CareInsite common stock in our merger with CareInsite are
subject to contractual restrictions on transfer. Approximately 278,000
of these shares will no longer be subject to these restrictions after
November 2000 and the balance will no longer be subject to these
restrictions after May 2001.
- 100 shares of our Series B preferred stock held by AOL are convertible
into shares of our common stock after March 2002. In the event that
AOL elects to convert the 100 shares of Series B preferred stock, it
would receive 263,960 shares of our common stock and a warrant
exercisable for an additional 263,960 shares at $37.88 per share. None
of these shares of our common stock will be eligible for sale prior to
March 2002.
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<PAGE> 25
The shares of our common stock issued to or held by any person who is
our affiliate are subject to restrictions on transfer. Persons who may be deemed
to be affiliates include individuals or entities that control, are controlled
by, or are under common control with WebMD and may include some of officers and
directors, as well as principal stockholders. Affiliates may not sell their
shares of our common stock except pursuant to:
- an effective registration statement under the Securities Act covering
the resale of those shares,
- an exemption under Rule 144 under the Securities Act, or
- any other applicable exemption under the Securities Act.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares of our common stock for at least one year,
or an affiliate who beneficially owns shares of our common stock, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which
equals approximately 3.6 million shares based on the approximately
359 million shares currently outstanding, or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
WebMD.
Under Rule 144(k), a person who is not one of our affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years including the holding
period of any prior owner other than an affiliate, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, these may be sold immediately.
Under an exemption available under Rule 145(d) under the Securities
Act, sales of shares of our common stock issued in our mergers with Medical
Manager, CareInsite and OnHealth to persons who were affiliates of those
companies are subject to volume limitations until September 12, 2001. The amount
of those shares that each such affiliate of Medical Manager, CareInsite or
OnHealth can sell is limited to the same volume that would be permitted, under
Rule 144, for sales by our affiliates, as described above. These volume
restrictions apply unless the shares are sold pursuant to an effective
registration statement or another applicable exemption under the Securities Act.
In addition, we have outstanding warrants exercisable for
approximately 43 million shares of our common stock, of which warrants to
acquire 7.7 million shares are subject to vesting conditions. Generally, the
shares of our common stock issued upon exercise of these warrants will also be
restricted securities and may not be sold in the absence of registration other
than in accordance with Rule 144 or another exemption from registration under
the Securities Act. Approximately 26.5 million shares of our common stock
issuable upon the exercise of these warrants may also be sold pursuant to
registration rights, which would result in such shares becoming eligible for
sale in the public market without restriction immediately upon the effectiveness
of a registration.
We have filed registration statements registering 139,480,020 shares of
common stock reserved for issuance under our stock option plans, in addition to
the warrants described above. Persons acquiring these shares upon exercise of
their options, whether or not they are affiliates, will be permitted to resell
their shares in the public market without regard to the Rule 144 holding period.
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<PAGE> 26
USE OF PROCEEDS
All sales of the common stock under this prospectus will be by or for
the account of the selling stockholders listed in the following section. We
will not receive any proceeds from the sale of the common stock by any of the
selling stockholders.
SELLING STOCKHOLDERS
We have filed a registration statement on Form S-3 with the SEC, of
which this prospectus forms a part, pursuant to registration rights we granted
to the selling stockholders upon the issuance of their respective securities.
All of the shares of common stock offered under this prospectus are
being offered and sold by the selling stockholders listed in the table below.
Only those shares of common stock listed below may be offered pursuant to this
prospectus by the selling stockholders. The common stock reflected below in the
column entitled "Number of Shares Being Offered" are restricted securities
within the meaning of Rule 144 of the Securities Act because they were issued in
private placement transactions exempt from the registration requirements of the
Securities Act.
Those selling stockholders who acquired their shares in private
placement transactions represented to us that they were purchasing the
securities for investment and with no intention at that time of distributing or
reselling the securities. We are filing this registration statement because
these stockholders, even though they originally purchased the securities for
investment, wish to be legally permitted to sell the shares of common stock
when they deem appropriate.
No offer or sale under this prospectus may be made by a holder of the
shares of common stock, unless that holder is listed in the table below or
until that holder has notified us and a supplement to this prospectus has been
filed or an amendment to the registration statement has become effective. We
will supplement or amend this prospectus to include additional selling
stockholders who have been granted registration rights upon request and upon
provision of all required information to us.
The selling stockholders may offer and sell, from time to time, any or
all of their common stock listed below by using this prospectus. Because the
selling stockholders may offer all or only some portion of the common stock
listed in the table, no estimate can be given as to the amount or percentage of
these shares of common stock that will be held by the selling stockholders upon
termination of the offering.
The information in the table reflects information as of September 12,
2000 with respect to the selling stockholders. Unless otherwise disclosed in the
footnotes to the table, no selling stockholders has indicated that it has held
any position, office or other material relationship with us or our affiliates
during the past three years.
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<PAGE> 27
We prepared the table based on the information supplied to us by the
selling stockholders named in the table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR NUMBER OF SHARES BENEFICIALLY OWNED AFTER
TO THE OFFERING (1) BEING OFFERED THE OFFERING (1)
------------------------ ---------------- -------------------------
NAME
<S> <C> <C> <C>
Bridgeview & Co., 11,000,000 11,000,000 0
as nominee for
Janus Twenty Fund(2)
Newsroom & Co., 2,400,000 2,400,000 0
as nominee for
Janus Mercury Fund(2)
Buoybreese & Co., as 1,000,000 1,000,000 0
nominee for
Janus Global Life Sciences Fund(2)
Cruisecoat & Co., 600,000 600,000 0
as nominee for
Janus Global Technology Fund(2)
</TABLE>
----------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Unless otherwise indicated below, the persons and entities
named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where
applicable.
(2) As a result of its role as investment advisor or sub-advisor to managed
portfolios, Janus Capital Corporation, a registered investment advisor
furnishing investment advice to investment companies and institutional
clients, may be deemed a beneficial owner of shares held by managed
portfolios, including Janus Twenty Fund, Janus Mercury Fund, Janus Global
Life Sciences Fund and Janus Global Technology Fund. Janus Capital
Corporation, however, has no right to receive dividends from or proceeds
from the sales of the securities and disclaims ownership associated with
these rights.
PLAN OF DISTRIBUTION
To our knowledge, no selling stockholder has entered into any
agreement, arrangement or understanding with any particular broker or market
maker with respect to the shares of common stock offered hereby, nor do we know
the identity of the brokers or market makers that will participate in the sale
of the shares. As used in this prospectus, the term "selling stockholders"
includes donees and pledgees selling shares received from a named selling
stockholder after the date of this prospectus.
Who may sell, how much and applicable restrictions. The selling
stockholders may from time to time offer the shares of common stock listed in
the preceding section through brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the shares of common stock for
whom they may act as agent. In effecting sales, broker-dealers that are engaged
by the selling stockholders may arrange for other broker-dealers to participate.
The selling stockholders and any such brokers, dealers or agents who participate
in the distribution of the shares of common stock may be deemed to be
underwriters, and any profits on the sale of the shares of common stock by them
and any discounts, commissions or concessions received by any such brokers,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. To the extent the selling stockholders may be deemed
to be underwriters, the selling stockholders may be subject to certain statutory
liabilities of, including but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act. To our knowledge, there
are currently no plans, arrangements or understandings between any selling
stockholders and any broker, dealer, agent or underwriter regarding the sale of
the shares of common stock by the selling stockholders.
Manner of sales and applicable restrictions. The selling stockholders
will act independently of WebMD in making decisions with respect to the timing,
manner and size of each sale. These sales may be made over the Nasdaq National
Market or otherwise, at then prevailing market prices, at prices related to
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<PAGE> 28
prevailing market prices or at negotiated prices. The shares of common stock
may be sold according to one or more of the following methods:
- a block trade in which the broker or dealer so engaged will
attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction
- purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
prospectus
- an over-the-counter distribution in accordance with the
Nasdaq rules
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers
- privately negotiated transactions.
A selling stockholder may decide not to sell any shares. We cannot
assure you that any selling stockholder will use this prospectus to sell any or
all of the shares. Any shares covered by this prospectus which qualify for sale
pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule
144 or Rule 144A rather than pursuant to this prospectus. In addition, a selling
stockholder may transfer, devise or gift the shares by other means not described
in this prospectus.
Some persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of our common stock,
including the entry of stabilizing bids or syndicate covering transactions or
the imposition of penalty bids. The selling stockholders and any other person
participating in such distribution will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder including, without
limitation, Regulation M, which regulation may limit the timing of purchases and
sales of any of the shares of common stock by the selling stockholders and any
other person. The anti-manipulation rules under the Exchange Act may apply to
sales of shares of common stock in the market and to the activities of the
selling stockholders and their affiliates. Furthermore, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the shares of common stock to engage in market-making activities with respect
to the particular shares of common stock being distributed for a period of up to
five business days prior to the commencement of such distribution. All of the
foregoing may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.
Rules 101 and 102 of Regulation M under the Exchange Act, among other
things, generally prohibit certain participants in a distribution from bidding
for or purchasing for an account in which the participant has a beneficial
interest, any of the securities that are the subject of the distribution. Rule
104 of Regulation M governs bids and purchases made to stabilize the price of a
security in connection with a distribution of the security.
Hedging and other transactions with broker-dealers. In connection with
distributions of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares of common stock registered hereunder in the course of hedging the
positions they assume with selling stockholders. The selling stockholders may
also sell shares of common stock short and redeliver the shares of common stock
to close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the
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<PAGE> 29
shares of common stock registered hereunder, which the broker-dealer may resell
or otherwise transfer pursuant to this prospectus. Selling stockholders may
also loan or pledge the shares of common stock registered hereunder to a
broker-dealer and the broker-dealer may sell the shares of common stock so
loaned or, upon a default, the broker-dealer may effect sales of the pledged
shares of common stock pursuant to this prospectus.
Expenses associated with registration. We have agreed to pay the
expenses of registering the shares of common stock under the Securities Act,
including registration and filing fees, printing expenses, administrative
expenses and certain legal and accounting fees. Each of the selling
stockholders will bear its pro rata share of all discounts, commissions or
other amounts payable to underwriters, dealers or agents as well as fees and
disbursements for legal counsel retained by any selling stockholder.
Indemnification. We have agreed to indemnify each of the selling
stockholders against specified liabilities in connection with the offering of
the shares of common stock, including liabilities arising under the Securities
Act.
Prospectus updates and suspension of this offering. At any time a
particular offer of the shares of common stock is made, a revised prospectus or
prospectus supplement, if required, will be distributed. A prospectus supplement
or post-effective amendment will be filed with the SEC to reflect the disclosure
of required additional information with respect to the distribution of the
shares of common stock. Under the terms of the registration rights agreement or
investment agreement giving rise to the selling stockholders being permitted to
include their shares in this prospectus, upon the occurrence of any event known
to our executive officers as a result of which this prospectus is known by our
executive officers to include an untrue statement of a material fact or to omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, the parties have each agreed not to trade shares of common stock from
the time the selling stockholder receives notice from us of such an event until
such party receives a prospectus supplement or amendment. Upon the occurrence of
such an event, a prospectus supplement or post-effective amendment, if required,
will be distributed to the parties.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file
with the SEC. We are also allowed to incorporate by reference the information
filed with the SEC by companies we have acquired. Incorporation by reference
means that we can disclose important information to you by referring you to
documents previously filed with the SEC. The information incorporated by
reference is considered a part of this prospectus, and any later information
that we file with the SEC will automatically update and supersede this
information from the date of filing of these documents.
We incorporate by reference the documents listed below, and any
additional documents filed by us with the SEC under Section 13(a) or 15(d) of
the Securities Exchange Act of 1934. This prospectus is part of a registration
statement on Form S-3 filed by WebMD with the SEC with respect to the WebMD
common stock to be offered and sold by the selling stockholders. This prospectus
does not contain all of the information set forth in the registration statement
because certain parts of the registration statement are omitted as provided by
the rules and regulations of the SEC. You may obtain a copy of the registration
statement from the SEC as described in "Where You Can Find More Information" on
page 30.
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<PAGE> 30
The following documents that have been filed with the SEC are
incorporated by reference into this prospectus:
- Our annual report on Form 10-K and Form 10-K/A for the fiscal
year ended December 31, 1999, which we filed when our name was
"Healtheon/WebMD Corporation"
- Our quarterly reports on Form 10-Q for the quarters ended
March 31, 2000, and June 30, 2000, which we filed when our
name was "Healtheon/WebMD Corporation"
- Our current reports on Form 8-K or Form 8-K/A filed January
27, 2000, January 28, 2000, February 8, 2000, February 10,
2000, February 14, 2000, February 16, 2000, February 22, 2000,
February 24, 2000, March 23, 2000, May 2, 2000, June 1, 2000,
June 5, 2000, June 19, 2000, July 24, 2000, July 27, 2000,
August 9, 2000, August 16, 2000 and August 18, 2000, which we
filed when our name was "Healtheon/WebMD Corporation"
- Our current reports on Form 8-K filed September 13, 2000,
September 28, 2000, October 13, 2000 and October 31, 2000,
which we filed under our current name "WebMD Corporation"
- The description of our common stock contained in our
registration statement on Form 8-A filed on February 8, 1999
pursuant to Section 12(g) of the Exchange Act, which we filed
when our name was "Healtheon Corporation," and any amendment
or report filed for the purpose of updating this description
- The unaudited pro forma condensed combined financial
information contained on pages 115 through 129 of our
prospectus filed pursuant to Rule 424(b) on August 7, 2000,
which we filed when our name was "Healtheon/WebMD Corporation"
- Medical Manager's annual report on Form 10-K for the fiscal
year ended June 30, 1999, as amended by Form 10-K/A filed on
October 28, 1999
- Medical Manager's quarterly reports on Form 10-Q for the
quarters ended September 30, 1999, December 31, 1999 and March
31, 2000
- Medical Manager's current reports on Form 8-K or Form 8-K/A
filed July 29, 1998, June 4, 1999, July 21, 1999, July 27,
1999, August 10, 1999, August 24, 1999, September 20, 1999,
December 8, 1999, January 25, 2000, January 31, 2000 (two
reports), February 14, 2000 (three reports), February 17,
2000, March 23, 2000, March 29, 2000, April 19, 2000, June 19,
2000 (two reports), June 29, 2000, August 18, 2000, and
August 31, 2000
- CareInsite's annual report on Form 10-K for the fiscal year
ended June 30, 1999, as amended by Form 10-K/A filed on
October 28, 1999
- CareInsite's quarterly reports on Form 10-Q for the quarters
ended September 30, 1999, December 31, 1999 and March 31,
2000
- CareInsite's current reports on Form 8-K or Form 8-K/A filed
August 24, 1999, February 4, 2000, February 14, 2000 (two
reports), February 17, 2000, March 23, 2000, March 29, 2000,
April 10, 2000, April 28, 2000, June 19, 2000, June 29, 2000,
and August 18, 2000.
Each document filed subsequent to the date of this prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of this offering shall be deemed to be incorporated by reference
into this prospectus and shall be part hereof from the date of filing of such
document.
Any statement incorporated herein shall be deemed to be modified or
superseded for the purposes of this prospectus and the registration statement to
the extent that a statement contained herein or in any other subsequently filed
document that is or is deemed to be incorporated by reference herein modifies or
supersedes a statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus and the registration statement.
29
<PAGE> 31
WHERE YOU CAN FIND MORE INFORMATION
WebMD files annual, quarterly and special reports, proxy and
information statements and other information with the SEC. You may read and copy
any document filed by us at the SEC's public reference facilities at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information about its public reference facilities.
The SEC filings are also available to the public at the SEC's web site at
http://www.sec.gov. The WebMD common stock is quoted on the Nasdaq National
Market, under the trading symbol "HLTH." Reports, proxy statements and other
information concerning WebMD can also be inspected at the Nasdaq National
Market, Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3,
together with all amendments and exhibits thereto, under the Securities Act with
respect to the common stock offered hereby. This prospectus does not contain all
of the information set forth in the registration statement and its exhibits and
schedules, parts of which are omitted from this prospectus in accordance with
the rules and regulations of the SEC. For further information with respect to us
and our common stock, please refer to the registration statement and its
exhibits and schedules. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of the contract or document filed
as an exhibit to the registration statement. Each statement is qualified in all
respects by such reference. Copies of the registration statement, including
exhibits thereto, may be inspected without charge at the SEC's principal office
in Washington, D.C., and you may obtain copies, from that office upon payment of
the fees prescribed by the SEC.
We will furnish without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon written or oral
request, a copy of any and all of the information that has been incorporated by
reference into this prospectus, other than exhibits to such documents unless the
exhibits are specifically incorporated by reference herein as well. You can
obtain copies of the documents relating to WebMD by contacting our investor
relations department at:
WebMD Corporation
400 The Lenox Building
3399 Peachtree Road NE
Atlanta, Georgia 30326
1-877-469-3263
[email protected]
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO PURCHASE, THE WEBMD COMMON STOCK, IN ANY JURISDICTION TO OR FROM
ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE THE OFFER, SOLICITATION
OF AN OFFER IN THAT JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MEANS, UNDER ANY CIRCUMSTANCES, THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED IN THIS DOCUMENT BY
REFERENCE OR IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS.
30
<PAGE> 32
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for us by Alston & Bird LLP, our counsel.
EXPERTS
The consolidated financial statements of WebMD Corporation appearing in
WebMD Corporation's Annual Report (Form 10-K) for the year ended December 31,
1999, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon, included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon the report given on the authority of this firm as experts in
accounting and auditing.
The financial statements of Provider Technology Group (a division of
Blue Cross and Blue Shield of Massachusetts) for the year ended December 31,
1999 included in CareInsite, Inc.'s Current Report on Form 8-K/A, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon, included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of ENVOY Corporation and
subsidiaries as of December 31, 1998 and for each of the two years in the period
ended December 31, 1998 included in WebMD's Current Report on Form 8-K filed on
July 27, 2000, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon, included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Medical Manager Corporation,
formerly known as Synetic, Inc., as of June 30, 1999 and 1998 and for each of
the three years in the period ended June 30, 1999, the consolidated financial
statements of CareInsite, Inc. as of June 30, 1999 and 1998 and for each of the
two years in the period ended June 30, 1999 and for the period from inception
(December 24, 1996) through June 30, 1997, the consolidated financial statements
of The KippGroup as of December 31, 1998 and 1997 and for each of the two years
in the period ended December 31, 1998, the consolidated financial statements of
Physician Computer Network, Inc. as of December 31, 1999 and 1998 and for each
of the three years in the period ended December 31, 1999, the consolidated
financial statements of ENVOY Corporation as of December 31, 1999 and for the
year then ended, the financial statements for Professional Office Services, Inc.
as of December 31, 1997 and for the year then ended, and the financial
statements of XpiData, Inc. as of December 31, 1997 and for the year then ended,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated or
included herein in reliance upon the reports of said firm and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Point Plastics, Inc. and
subsidiaries that are incorporated herein by reference have been audited by
Linkenheimer LLP independent public accountants, indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
report of said firm and upon the authority of said firm as experts in accounting
and auditing.
The financial statements of The Health Information Network Connection,
LLC as of and for the year ended December 31, 1999 and for the cumulative period
from inception (November 26, 1996) to December 31, 1999 that are incorporated
herein by reference have been audited by KPMG LLP, independent certified public
accountants, as indicated in their report with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing.
31
<PAGE> 33
-------------------------------------------------------------------------------
WEBMD CORPORATION
15,000,000 SHARES
OF COMMON STOCK
---------------
PROSPECTUS
---------------
-------------------------------------------------------------------------------
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by us in connection with this
offering are as follows:
Nasdaq Stock Market Fee $ 17,500
---------
Securities and Exchange Commission registration fee 50,490
---------
Accounting fees and expenses 50,000
---------
Legal fees and expenses 50,000
---------
Miscellaneous 25,000
---------
Total 192,990
---------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of Delaware law authorizes a court to award, or a
corporation's board of directors to grant, indemnification to directors and
officers in terms sufficiently broad to permit indemnification under
specified circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. Our bylaws provide for the
mandatory indemnification of our directors, officers, employees and other agents
to the maximum extent permitted by Delaware law, and we have entered into
agreements with our officers, directors and some key employees implementing this
indemnification.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference herein:
4.1(1) Stock Purchase Agreement dated January 26, 2000 between Registrant and
Janus Capital Corporation.
4.2(1) Registration Rights Agreement dated January 26, 2000 between Registrant
and Janus Capital Corporation
5.1 Opinion of Counsel regarding the legality of common stock
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Arthur Andersen LLP
23.5 Consent of Ernst & Young LLP
23.6 Consent of Arthur Andersen LLP
23.7 Consent of Arthur Andersen LLP
23.8 Consent of KPMG LLP
23.9 Consent of Linkenheimer LLP
23.10 Consent of Ernst & Young LLP
23.11 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney
------------
(1) Incorporated by reference to Registrant's quarterly report on Form 10-Q
filed for the quarter ended March 31, 2000
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-1
<PAGE> 35
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information in the Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii)
do not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic
reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-2
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Elmwood Park, State of New Jersey, on this 8th day of
November, 2000.
WEBMD CORPORATION
By: /s/ ANTHONY VUOLO
-------------------------------------------
Anthony Vuolo
Executive Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer November 8, 2000
------------------------- and Director
Martin J. Wygod (Principal Executive Officer)
/s/ ANTHONY VUOLO Executive Vice President, Chief November 8, 2000
------------------------- Financial Officer and Treasurer
Anthony Vuolo (Principal Financial Officer and
Principal Accounting Officer)
Director
-------------------------
Mark J. Adler
Director
-------------------------
L. John Doerr
* Director November 8, 2000
-------------------------
Dennis B. Gillings
* Director November 8, 2000
-------------------------
Eric J. Gleacher
* Director November 8, 2000
-------------------------
W. Michael Long
Director
-------------------------
James V. Manning
/s/ MARVIN P. RICH Director November 8, 2000
-------------------------
Marvin P. Rich
Director
--------------------------
Michael A. Singer
Director
--------------------------
Joseph E. Smith
* Director November 8, 2000
--------------------------
Charles G. V. Stevens
* By: /s/ JACK D. DENNISON
--------------------------
Jack D. Dennison
Attorney-in-Fact
</TABLE>
II-3
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------ -------------
<S> <C>
4.1(1) Stock Purchase Agreement dated January 26, 2000 between Registrant and Janus
Capital Corporation.
4.2(1) Registration Rights Agreement dated January 26, 2000 between
Registrant and Janus Capital Corporation
5.1 Opinion of Counsel regarding the legality of common stock
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Arthur Andersen LLP
23.5 Consent of Ernst & Young LLP
23.6 Consent of Arthur Andersen LLP
23.7 Consent of Arthur Andersen LLP
23.8 Consent of KPMG LLP
23.9 Consent of Linkenheimer LLP
23.10 Consent of Ernst & Young LLP
23.11 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney
</TABLE>
(1) Incorporated by reference to Registrant's quarterly report on Form 10-Q
filed for the quarter ended March 31, 2000
