-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bgj86wknl4aaeLGJuak/n0qORR4BYVc1SlS3L0I+4UhDm0Ublocs9Ot093T2x6P2 nYNK67cuNeC8w4j05mJXwA== 0000950144-01-501348.txt : 20010501 0000950144-01-501348.hdr.sgml : 20010501 ACCESSION NUMBER: 0000950144-01-501348 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBMD CORP /NEW/ CENTRAL INDEX KEY: 0001009575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 943236644 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-24975 FILM NUMBER: 1617045 BUSINESS ADDRESS: STREET 1: RIVER DRIVE CENTER 2 STREET 2: 669 RIVER DR CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 BUSINESS PHONE: 4088765000 MAIL ADDRESS: STREET 1: RIVER DRIVE CENTER 2 STREET 2: 669 RIVER DR CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 FORMER COMPANY: FORMER CONFORMED NAME: HEALTHEON CORP DATE OF NAME CHANGE: 19980729 10-K/A 1 g68745a1e10-ka.txt WEBMD CORP 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 0-24975 WEBMD CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3236644 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 669 RIVER DRIVE, CENTER 2 07407-1361 ELMWOOD PARK, NEW JERSEY (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (201) 703-3400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $.0001 PER SHARE (TITLE OF EACH CLASS) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant (based upon the closing sale price of $6.50 on March 14, 2001, as reported on the Nasdaq Stock Market's National Market and, for purposes of this computation only, the assumption that Microsoft Corporation, Quintiles Transnational Corp. and all of the registrant's directors and executive officers are affiliates) was approximately $1,824,460,131. As of March 14, 2001, the registrant had outstanding 357,112,937 shares of common stock. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information regarding our current executive officers and directors:
NAME AGE POSITION - ---- --- -------- Martin J. Wygod(1)........................ 61 Chairman of the Board of Directors and Chief Executive Officer Marvin P. Rich............................ 55 President and a Director Thomas P. Apker........................... 45 Chief Operating Officer Richard C. Bleil.......................... 41 Executive Vice President, Corporate Accounts (Western Region) Kevin Cameron............................. 34 Executive Vice President, Business Development K. Robert Draughon........................ 41 Executive Vice President, Business Development Patricia Fili-Krushel..................... 47 Chief Executive Officer, Consumer Sales and Services Roger C. Holstein......................... 48 Executive Vice President, Marketing and Strategic Planning Charles A. Mele........................... 44 Executive Vice President, General Counsel and Secretary Steven E. Simpson......................... 41 Executive Vice President, Sales and Product Management Michael A. Singer......................... 53 Chief Executive Officer and President, Practice Management Sales and Services and a Director Anthony Vuolo............................. 43 Executive Vice President and Chief Financial Officer Steven Zatz, M.D.......................... 44 Executive Vice President, Internet Portals and Applications Services Mark J. Adler, M.D.(2)(3)................. 44 Director Paul A. Brooke(1)......................... 55 Director L. John Doerr(1)(2)(3).................... 49 Director Dennis B. Gillings, Ph.D.................. 57 Director James V. Manning(1)....................... 54 Director Herman Sarkowsky.......................... 75 Director Joseph E. Smith(1)(2)(3).................. 62 Director Charles G. V. Stevens..................... 43 Director
- --------------- (1) Member of the executive committee (2) Member of the compensation committee (3) Member of the audit committee Martin J. Wygod has served as Chairman of the Board of Directors of WebMD Corporation since March 2001, as our Chief Executive Officer since October 2000 and as a director since September 2000. From September 2000 until October 2000, Mr. Wygod served as Co-Chief Executive Officer of WebMD. From May 1989 until September 2000, Mr. Wygod was Chairman of the Board and a director of Medical Manager Corporation and its predecessor, Synetic, Inc., until 1999. For part of that time, he was also Chief Executive Officer of Medical Manager. He also served as Chairman of the Board of CareInsite, Inc. from 1999 until September 2000. He is also engaged in the business of racing, boarding and breeding thoroughbred horses, and is President of River Edge Farm, Inc. Marvin P. Rich has served as President and a director of WebMD since September 2000. He served as Chief Executive Officer and a director of CareInsite from January 2000 until September 2000. Mr. Rich was also President and a director of Medical Manager until September 2000. Mr. Rich was Chief Administrative Officer for Oxford Health Plans, from 1998 to January 2000. Prior to such time, he 1 3 served as the Executive Vice President of Finance, Strategic Planning and Administration for Kmart Corporation from 1994 to 1998. Thomas P. Apker has served as Chief Operating Officer of WebMD since December 2000. From March 1990 until January 1999, Mr. Apker was Senior Vice President of Operations at Merck-Medco Managed Care, L.L.C., a pharmacy benefits management company. Richard C. Bleil has served as Executive Vice President, Corporate Accounts (Western Region) of WebMD since December 2000 and was a Senior Vice President of WebMD from September 2000 through December 2000. From March 1998 until September 2000, Mr. Bleil was Senior Vice President -- Corporate Development at Medical Manager. From 1995 to 1998, he was General Manager of WellPoint Pharmacy Management, a pharmacy benefits management company. Mr. Bleil was Vice President of Corporate Development for WellPoint Health Networks from November 1993 until August 1994. Kevin Cameron has served as Executive Vice President, Business Development of WebMD since September 2000. Mr. Cameron was Executive Vice President, Corporate Development of Medical Manager and CareInsite from April 2000 until September 2000. From March 1999 until April 2000, he was Managing Director of the Health Care Group in the Investment Banking division of UBS Warburg. Prior to March 1999, Mr. Cameron held various positions over a nine-year period at Salomon Smith Barney, including Director of Health Care Investment Banking. K. Robert Draughon has served as Executive Vice President, Business Development of WebMD since November 1999. From February 1998 until November 1999, he served as Chief Financial Officer of WebMD, Inc. From January 1988 to February 1998, he served as Chief Investment Officer for Fuqua Capital Corporation, a private investment firm. Patricia Fili-Krushel has served as Chief Executive Officer, Consumer Sales and Services, since April 2000. From June 1998 until April 2000, she served as the President of ABC Television Network, a division of The Walt Disney Company. From 1993 until 1998, she served as President of ABC Daytime. Roger C. Holstein has served as Executive Vice President, Marketing and Strategic Planning of WebMD since September 2000. Mr. Holstein served as Executive Vice President -- Sales & Marketing and a director of CareInsite from March 1999 until September 2000. Mr. Holstein was Executive Vice President -- Marketing and Sales of Medical Manager from 1997 to July 1999. He was a Special Consultant to Merck-Medco from 1996 to 1998. Prior to that time, Mr. Holstein served as Senior Executive Vice President -- Chief Marketing Officer of Merck-Medco from 1994 to 1995 and Senior Executive Vice President -- Marketing and Sales of Merck-Medco from 1991 to 1994. Charles A. Mele has served as Executive Vice President, General Counsel and Secretary of WebMD since January 2001. He served as Executive Vice President and Co-General Counsel of WebMD from September 2000 until January 2001. He served as a director of CareInsite from 1998 until September 2000. Mr. Mele was Executive Vice President -- General Counsel of Medical Manager and its predecessor, Synetic, from March 1998 until September 2000 and was its Vice President -- General Counsel from July 1995 to March 1998. Mr. Mele is also a director of Group 1 Software, Inc., a computer software company. Steven E. Simpson has served as Executive Vice President, Sales and Product Management of WebMD since April 2001. Mr. Simpson served as our President of Transaction Services from November 2000 until April 2001. He served as Chief Operating Officer of Envoy Corporation from July 1999 until November 2000. Mr. Simpson served as Senior Vice President of Sales and Product Development for Columbia/HCA Inc., a hospital and healthcare services company, from 1996 until 1998. Prior to that time, Mr. Simpson spent 11 years with Johnson & Johnson, a health and personal care products manufacturing and sales company, where he held senior level positions in the Pharmaceutical Sales, Marketing and Managed Care divisions. Michael A. Singer has served as Chief Executive Officer and President, Practice Management Sales and Services and as a director of WebMD since September 2000. He served as a director of CareInsite 2 4 from 1999 until September 2000. Mr. Singer was Vice Chairman and Co-Chief Executive Officer of Medical Manager from July 1999 until September 2000. Mr. Singer was Chairman of the Board and a Chief Executive Officer of Medical Manager Health Systems, Inc., then known as Medical Manager Corporation, and its predecessors for more than five years prior to July 1999. Anthony Vuolo has served as Executive Vice President and Chief Financial Officer of WebMD since September 2000. Mr. Vuolo was Senior Vice President -- Business Development and Treasurer of Medical Manager and its predecessor, Synetic, from March 1999 until September 2000 and was its Executive Vice President -- Finance and Administration and Chief Financial Officer from March 1998 until March 1999. Mr. Vuolo served as an executive officer of Medical Manager and Synetic from May 1997 until September 2000 and an officer for more than five years. Steven Zatz, M.D. has served as Executive Vice President, Internet Portals and Applications Services of WebMD since October 2000. Dr. Zatz was a Senior Vice President, Medical Director of CareInsite from June 1999 until September 2000. Prior to joining CareInsite, Dr. Zatz was senior vice president of RR Donnelley Financial, a financial printer, in charge of its healthcare business from October 1998 to May 1999. From August 1995 to May 1998, Dr. Zatz was the president of Physicians' Online, Inc., an Internet portal service for physicians. Mark J. Adler, M.D. has served as a director of WebMD since September 2000. He served as a director of CareInsite from 1999 until September 2000. Dr. Adler has been medical director and an oncologist for the Oncology Medical Center of San Diego, since he founded it in 1991. He is also currently President and Chief Executive Officer of Medical Group of North County's internal medicine and oncology group, which is based in San Diego, California. Paul A. Brooke has served as a director of WebMD since November 2000. Mr. Brooke has been the managing member of PMSV Holdings LLC, a private investment firm, since 1993 and a venture partner of MPM Bioventures, a venture capital firm specializing in the healthcare industry, since 1997. Mr. Brooke has also been an advisory director to each of Morgan Stanley Dean Witter & Co. and Skyline Partners since April 2000. From 1983 until April 1999, Mr. Brooke was a Managing Director and the Global Head of Healthcare Research and Strategy at Morgan Stanley. From April 1999 until May 2000, he was a Managing Director at Tiger Management LLC. L. John Doerr has served as a director of WebMD since July 1997. He has been a general partner at Kleiner Perkins Caufield & Byers, or KPCB, a venture capital firm, since 1980. Prior to joining KPCB, Mr. Doerr worked at Intel Corporation for five years. He is also a director of Amazon.com, Inc., drugstore.com, Inc., Freemarkets, Inc., Handspring, Inc., Homestore.com, Inc., Intuit Inc., Martha Stewart Living Omnimedia, Inc. and Sun Microsystems, Inc. Dennis B. Gillings, Ph.D. was elected as a director of WebMD in accordance with an agreement we entered into with Quintiles Transnational Corp. in connection with our acquisition of Envoy from Quintiles and has served in that capacity since May 2000. Dr. Gillings founded Quintiles in 1982 and has served as Chairman of the Board of Directors since its inception. He also served as the Chief Executive Officer of Quintiles from its inception until April 2001. From 1972 to 1988, Dr. Gillings served as a professor in the Department of Biostatistics at the University of North Carolina at Chapel Hill. During his tenure as a professor, he was active in statistical consulting for the pharmaceutical industry. Dr. Gillings currently serves on the Dean's Advisory Council of the University of North Carolina School of Public Health. Dr. Gillings also serves as a director of Triangle Pharmaceuticals, Inc., a company engaged in the development of new drug candidates primarily in the antiviral area, and The Medicines Company, a company that acquires, develops and commercializes pharmaceutical products in late stages of development. James V. Manning has served as a director of WebMD since September 2000. He served as a director of CareInsite from 1999 until September 2000. Mr. Manning was Vice Chairman of the Board of Medical Manager and its predecessor, Synetic, from March 1998 to July 1999, was its Chief Executive Officer from January 1995 to March 1998, was its President from July 1996 to March 1998 and, until 3 5 March 1998, was an executive officer for more than five years. Until December 1994, Mr. Manning had been an executive officer of Medco for more than five years. Mr. Manning is also Chairman of the Board of Group 1 Software, Inc., a computer software company. Herman Sarkowsky has served as a director of WebMD since November 2000. Mr. Sarkowsky has been President of Sarkowsky Investment Corporation, a private investment company, for more than five years. Mr. Sarkowsky also served as a director of Medical Manager and its predecessor, Synetic, from 1989 until September 2000. Joseph E. Smith has served as a director of WebMD since September 2000. Mr. Smith was a director of CareInsite from 1999 until September 2000. Mr. Smith served in various positions with Warner-Lambert Company, a pharmaceutical company, from March 1989 to September 1997, most recently as Corporate Vice President and a member of the Office of the Chairman and the firm's Management Committee. Mr. Smith is a director of Boren, LePore and Associates, Inc., Claneil Enterprises, Inc., Shire Pharmaceuticals Group PLC and VIVUS, Inc. He also serves on the Board of Trustees of the International Longevity Center, a non-profit organization. Charles G. V. Stevens was elected as a director of WebMD in accordance with a May 1999 agreement we entered into with Microsoft Corporation in connection with our strategic alliance with Microsoft and has served in that capacity since May 2000. Mr. Stevens joined Microsoft in 1984 and has served as Vice President of Microsoft's Enterprise Partner Group since 1997. From 1994 until 1997, he served as Vice President, Far East of Microsoft. He served in various other capacities with Microsoft from 1984 until 1994. The terms of Dr. Adler and Messrs. Sarkowsky and Singer will expire at our annual meeting in 2001, the terms of Messrs. Doerr, Rich and Smith will expire at our annual meeting in 2002 and the terms of Mr. Brooke, Dr. Gillings and Messrs. Manning, Stevens and Wygod will expire at our annual meeting in 2003. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of these securities with the Securities and Exchange Commission. Officers, directors and greater than ten percent beneficial owners are required by applicable regulations to furnish us with copies of all Section 16(a) forms they file. We are required to describe in this report whether we have knowledge that any person required to file such a report may have failed to do so in a timely manner. In this regard, all of our directors and officers subject to the reporting requirements and each beneficial owner of more than ten percent of our common stock satisfied all applicable filing requirements except that Patricia Fili-Krushel failed to timely file an initial report upon becoming an executive officer in April 2000, which report has been filed. The foregoing is based upon reports furnished to us. 4 6 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation earned for services rendered to WebMD by the "named executive officers" in 2000 and 1999. The named executive officers are both individuals who served as our chief executive officer during 2000 and our four other most highly compensated executive officers who earned more than $100,000 in 2000 and were serving as executive officers at the end of 2000. Under the rules of the SEC, this table does not include certain perquisites and other benefits received by the named executive officers which do not exceed the lesser of $50,000 or 10% of any officer's salary and bonus disclosed in this table. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------ AWARDS ------------ ANNUAL COMPENSATION SECURITIES ------------------------ UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION - --------------------------- ---- ---------- --------- ------------ ------------ Martin J. Wygod............................ 2000 $ 300(1) $ -- --(2) $ -- Chairman of the Board of Directors and Chief Executive Officer Jeffrey T. Arnold(3)....................... 2000 197,917 -- 4,000,000 4,005,000(4)(5) Former Co-Chief 1999 41,667(6) -- --(7) 1,000(4) Executive Officer Marvin P. Rich............................. 2000 146,538(8) 500,000(8) --(9) 289,801(10) President Patricia Fili-Krushel...................... 2000 727,564(11) 363,014(11) 550,000 -- Chief Executive Officer, Consumer Sales and Services K. Robert Draughon......................... 2000 280,429 -- 350,000 6,000(4) Executive Vice President, 1999 26,425(12) -- --(13) 715(4) Business Development Jack D. Dennison(14)....................... 2000 272,596 -- 625,000 -- Former Executive Vice 1999 137,500 7,144 250,000 -- President, Co-General Counsel and Secretary
- --------------- (1) Mr. Wygod was not employed by us prior to our mergers with Medical Manager and CareInsite on September 12, 2000. As a result, only compensation that we paid to Mr. Wygod beginning on that date is reflected in this table. (2) Does not include options to purchase shares of Medical Manager common stock that we assumed in our merger with Medical Manager and that were converted in that merger into options to purchase 3,000,000 shares of our common stock at an exercise price of $12.75 per share, 25,000 shares of our common stock at an exercise price of $10.00 per share, 25,000 shares of our common stock at an exercise price of $14.80 per share, 25,000 shares of our common stock at an exercise price of $15.50 per share, 25,000 shares of our common stock at an exercise price of $22.90 per share and 585,000 shares of our common stock at an exercise price of $13.8462 per share. (3) Mr. Arnold served as our Chief Executive Officer until September 2000, when he became Co-Chief Executive Officer. Mr. Arnold resigned in October 2000. 5 7 (4) Consists of automobile allowance. (5) Includes $4,000,000 that we paid to Mr. Arnold pursuant to a letter agreement that we entered into with Mr. Arnold in connection with his resignation as our Co-Chief Executive Officer. For more information, see "Compensation arrangements with executive officers -- Arrangements with Mr. Arnold" below. (6) Mr. Arnold was not employed by us prior to our merger with WebMD, Inc. on November 12, 1999. As a result, only compensation that we paid to Mr. Arnold beginning on that date is reflected in this table. (7) Does not include options to purchase shares of WebMD, Inc. common stock that we assumed in our merger with WebMD, Inc. and that were converted in that merger into options to purchase 2,486,741 shares of our common stock at an exercise price of $6.04 per share. (8) Mr. Rich was not employed by us prior to our mergers with Medical Manager and CareInsite on September 12, 2000. As a result, only compensation that we paid to Mr. Rich beginning on that date is reflected in this table. In January 2001, we paid the entire amount of Mr. Rich's bonus for services rendered by him during 2000. (9) Does not include options to purchase shares of Medical Manager or CareInsite common stock that we assumed in our mergers with Medical Manager and CareInsite and that were converted in those mergers into options to purchase 1,125,000 shares of our common stock at an exercise price of $25.80 per share, 1,125,000 shares of our common stock at an exercise price of $11.55 per share, 750,000 shares of our common stock at an exercise price of $6.00 per share, 585,000 shares of our common stock at an exercise price of $52.4519 per share and 585,000 shares of our common stock at an exercise price of $16.8269 per share. (10) Consists of relocation expense reimbursement and an amount sufficient to pay the taxes payable by Mr. Rich as a result of that reimbursement. (11) Ms. Fili-Krushel was not employed by us prior to April 10, 2000. As a result, only compensation that we paid to Ms. Fili-Krushel beginning on that date is reflected in this table. The amount of Ms. Fili-Krushel's bonus reflects the portion attributable to 2000. (12) Mr. Draughon was not employed by us prior to our merger with WebMD, Inc. on November 12, 1999. As a result, only compensation that we paid to Mr. Draughon beginning on that date is reflected in this table. (13) Does not include options to purchase shares of WebMD, Inc. common stock that we assumed in our merger with WebMD, Inc. and that were converted in that merger into options to purchase 554,798 shares of our common stock at an exercise price of $0.81 per share, 136,770 shares of our common stock at an exercise price of $6.04 per share and 248,674 shares of our common stock at an exercise price of $8.05 per share. (14) Mr. Dennison served as our Executive Vice President, General Counsel and Secretary until September 2000, when he became Executive Vice President, Co-General Counsel and Secretary. Mr. Dennison resigned in January 2001. 6 8 The following table presents information concerning the options to purchase our common stock granted during the fiscal year ended December 31, 2000 to our named executive officers. OPTION GRANTS IN FISCAL 2000
INDIVIDUAL GRANTS -------------------------------------------------------------------- NUMBER OF PERCENT OF TOTAL SECURITIES OPTIONS MARKET UNDERLYING GRANTED TO EXERCISE OR PRICE ON GRANT DATE OPTIONS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION PRESENT NAME GRANTED 2000(1) PER SHARE GRANT DATE VALUE(2) - ---- ---------- ---------------- ----------- -------- ---------- ----------- Martin J. Wygod.................. --(3) --% $ -- $ -- -- $ -- Jeffrey T. Arnold................ 2,500,000(4) 6.04% 16.0625 16.0625 05/12/10 25,201,532 1,500,000(4) 3.62% 16.0625 16.0625 08/01/10 9,524,409 --------- ---- ----------- 4,000,000 9.66% 34,725,941 Marvin P. Rich................... --(5) --% -- -- -- -- Patricia Fili-Krushel............ 550,000(6) 1.33% 9.0625 16.0625 05/12/10 6,693,114 K. Robert Draughon............... 100,000(6) 0.24% 21.6875 21.6875 04/06/10 1,121,460 250,000(6) 0.60% 16.1250 16.1250 09/12/10 1,788,950 --------- ---- ----------- 350,000 0.84% 2,910,410 Jack D. Dennison................. 200,000(7) 0.48% 21.6875 21.6875 04/06/10 2,264,860 425,000(7) 1.03% 15.8750 15.8750 09/12/10 3,083,163 --------- ---- ----------- 625,000 1.51% 5,348,023
- --------------- (1) Based upon the total number of options that we granted to our employees during 2000. (2) The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (a) the respective option exercise prices, (b) the exercise of options within three and one-half years of the date that they become exercisable, (c) a risk-free interest rate of 5.29% per annum and (d) volatility of 1.0. The ultimate values of the options will depend on the future market price of our common stock which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of our common stock over the exercise price on the date the option is exercised. We cannot assure you that the value realized by an optionee will be at or near the value estimated by the Black-Scholes model or any other model applied to value the options. (3) Does not include options to purchase shares of Medical Manager common stock that we assumed in our merger with Medical Manager and that were converted in that merger into options to purchase 3,000,000 shares of our common stock at an exercise price of $12.75 per share, 25,000 shares of our common stock at an exercise price of $10.00 per share, 25,000 shares of our common stock at an exercise price of $14.80 per share, 25,000 shares of our common stock at an exercise price of $15.50 per share, 25,000 shares of our common stock at an exercise price of $22.90 per share and 585,000 shares of our common stock at an exercise price of $13.8462 per share. (4) Pursuant to a letter agreement that we entered into with Mr. Arnold on October 11, 2000 in connection with his resignation as our Co-Chief Executive Officer, these options became fully vested and exercisable on that date. For more information, see "Compensation arrangements with executive officers -- Arrangements with Mr. Arnold" below. (5) Does not include options to purchase shares of Medical Manager or CareInsite common stock that we assumed in our mergers with Medical Manager and CareInsite on September 12, 2000 and that were converted in those mergers into options to purchase 1,125,000 shares of our common stock at an exercise price of $25.80 per share, 1,125,000 shares of our common stock at an exercise price of $11.55 per share, 750,000 shares of our common stock at an exercise price of $6.00 per share, 585,000 7 9 shares of our common stock at an exercise price of $52.4519 per share and 585,000 shares of our common stock at an exercise price of $16.8269 per share. (6) 25% of these options vest and become exercisable on the first anniversary of the date of grant and the remainder vest and become exercisable at the rate of 1/48(th) per month thereafter for the next three years. These options were granted to Ms. Fili-Krushel on May 12, 2000 and to Mr. Draughon on April 6, 2000, with respect to options to purchase 100,000 shares, and on September 12, 2000, with respect to options to purchase 250,000 shares. (7) Pursuant to letter agreements that we entered into with Mr. Dennison on September 12, 2000 and October 11, 2000, these options became fully vested and exercisable when Mr. Dennison resigned on January 26, 2001. For more information, see "Compensation arrangements with executive officers -- Arrangements with Mr. Dennison" below. AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES The following table sets forth information with respect to the named executive officers concerning exercisable and unexercisable options held as of December 31, 2000. The values of in-the-money options are based on the year-end closing price of our common stock as of December 29, 2000 of $7.9375 and are net of the option exercise price.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT SHARES DECEMBER 31, 2000 DECEMBER 31, 2000 ACQUIRED ON VALUE --------------------------- ----------------------------------- NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($) - ---- ------------ ------------ ----------- ------------- --------------- ----------------- Martin J. Wygod......... 240,000 $385,512(1) 350,000 3,335,000 $ -- $ -- Jeffrey T. Arnold....... -- -- 4,486,741 -- 4,718,591 -- Marvin P. Rich.......... -- -- -- 4,170,000 -- 1,453,125 Patricia Fili-Krushel... -- -- -- 550,000 -- -- K. Robert Draughon...... -- -- 396,907 818,335 2,113,648 1,565,634 Jack D. Dennison........ -- -- 210,015 789,985 463,366 70,697
- --------------- (1) Value realized upon exercise on October 13, 2000 of options to purchase 240,000 shares of our common stock. DIRECTOR COMPENSATION Our directors do not receive any cash fees for their service on our board or any board committee, but they are entitled to reimbursement for all reasonable out-of-pocket expenses incurred in connection with their attendance at board and board committee meetings. All board members are eligible to receive stock options under our 2000 Long-Term Incentive Plan, and outside directors receive stock options pursuant to automatic grants of stock options under our 2000 Long-Term Incentive Plan annually on January 1. Prior to the adoption of our 2000 Long-Term Incentive Plan, board members were eligible to receive stock options under our 1996 Stock Plan, and outside directors received stock options pursuant to automatic grants under that plan. In January 2000, we granted to Mr. Doerr and to each of the four other outside directors at that time options to purchase 20,000 shares of our common stock under the 1996 Stock Plan with an exercise price equal to $37.50 per share. In November 2000, we granted to Dr. Adler and to each of Messrs. Brooke, Manning, Sarkowsky and Smith options to purchase 30,000 shares of our common stock under our 2000 Long-Term Incentive Plan with an exercise price equal to $8.1875 per share. 8 10 COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERS Arrangements with Martin J. Wygod Letter agreement. On June 18, 2000, we entered into a letter agreement with Martin J. Wygod, who at the time was serving as Medical Manager's and CareInsite's Chairman, which became effective upon the completion of our mergers with Medical Manager and CareInsite in September 2000. The letter agreement provides that if Mr. Wygod's employment with us terminates for any reason, or he ceases to serve as our Co-Chief Executive Officer or Chief Executive Officer for any reason, each option held by Mr. Wygod at the time of the mergers, other than the options granted pursuant to the option agreement described below, will continue to vest in accordance with the applicable schedule and will otherwise be treated as if he remained employed through the earlier of the first anniversary of the last scheduled vesting date for those options or the material breach by him of the restrictive covenants contained in the letter agreement, which are described below. The letter agreement provides that, except as otherwise permitted, until the earlier of the second anniversary of the date Mr. Wygod is neither a member of our board of directors nor our Co-Chief Executive Officer or Chief Executive Officer or September 2003, Mr. Wygod will not engage in business activities that are either substantially similar to, or competitive with, the businesses engaged in by Medical Manager and CareInsite at the time of the mergers. In addition, until the end of Mr. Wygod's noncompete period, Mr. Wygod is subject to nonsolicitation and confidentiality provisions. Option agreement. On August 21, 2000, Medical Manager entered into an amended and restated option agreement with Mr. Wygod, which we assumed upon completion of the Medical Manager merger. Mr. Wygod was granted options to purchase shares of Medical Manager common stock, which were converted in the Medical Manager merger into options to purchase 3,000,000 shares of our common stock at an exercise price of $12.75 per share. The options vest in equal monthly installments commencing on September 1, 2000, except that if Mr. Wygod's employment is terminated due to his death or disability, by us without "cause" or by Mr. Wygod for "good reason," as those terms are defined in the option agreement, all unvested options will become fully vested and exercisable on the date of termination. In addition, if Mr. Wygod's employment is terminated by us with cause or by Mr. Wygod without good reason, all unvested options will terminate and be cancelled on the date of termination. If a "change in control," as defined in the option agreement, occurs, all unvested options will become fully vested and exercisable on the date of the change in control. The options are not exercisable following the tenth anniversary of the date of grant. The option agreement contains a tax gross-up provision relating to any excise taxes that Mr. Wygod incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the tax code. Arrangements with Jeffrey T. Arnold In connection with Jeffrey T. Arnold's resignation as our Co-Chief Executive Officer in October 2000, we entered into a letter agreement with Mr. Arnold dated October 11, 2000. Pursuant to the October letter agreement, we paid Mr. Arnold $4,000,000 and agreed to continue his participation in our benefit plans until the earlier of the 18-month anniversary of the date of termination and the date on which Mr. Arnold becomes covered by another comparable plan. Mr. Arnold's resignation was treated as a 9 11 termination without cause and, as a result, all of his outstanding options became fully vested at the time of his resignation and will remain exercisable for ten years from the applicable date of grant. Mr. Arnold is subject to noncompetition, nonsolicitation and confidentiality provisions. Mr. Arnold is entitled to receive a tax gross-up payment to the extent of any excise taxes he incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the tax code. Arrangements with Marvin P. Rich On June 18, 2000, Medical Manager and CareInsite entered into an amended and restated employment agreement with Marvin P. Rich, which was subsequently modified by a letter agreement dated September 11, 2000. We assumed the obligations of Medical Manager under the employment agreement upon completion of the Medical Manager merger. The term of the agreement ends on January 4, 2005, subject to automatic monthly renewal. The employment agreement provides for Mr. Rich's appointment as President of Medical Manager and Chief Executive Officer of CareInsite. Upon completion of the mergers, Mr. Rich became our President. The employment agreement also provides that during the term of his employment, we will use our best efforts to include Mr. Rich in management's nominees for election, and recommend his election, as a member of our board of directors. The employment agreement provides for an annual aggregate base salary of $500,000, subject to increase at the discretion of the board or the compensation committee of the board, and an annual aggregate performance bonus of up to $500,000. Each of Medical Manager and CareInsite made a full recourse loan to Mr. Rich in the principal amount of $300,000, which loans, together with accrued interest of approximately $34,000 in the aggregate, were forgiven in full in September 2000 on the completion of the mergers. If Mr. Rich resigns for "good reason" or his employment is terminated by us without "cause," as those terms are defined in his employment agreement, he will be entitled to continuation of his base salary for three years, continued participation in our benefit plans for three years or, if earlier, until he is offered comparable coverage with a subsequent employer, and the aggregate bonus that would have been payable for three years, based on the highest bonus paid during the prior three years or, if shorter, during the term of his employment. In addition, all outstanding options granted to Mr. Rich prior to the completion of the mergers will become fully vested and immediately exercisable upon the date of such termination and remain exercisable through the tenth anniversary of the applicable date of grant. Notwithstanding the foregoing, if an event occurs prior to September 12, 2001 that would constitute good reason, Mr. Rich has agreed to remain employed until September 12, 2001, and he would be entitled to receive the severance benefits described above upon his resignation after that date, except that his outstanding options would become fully vested and immediately exercisable at the time such good reason event occurs. In the event that Mr. Rich is terminated for cause or resigns prior to September 12, 2001, he would forfeit his outstanding options and would be required to disgorge any gains realized upon prior exercise of such options. If Mr. Rich's employment is terminated due to his death or disability, he will be entitled to the same benefits described above, but for four years, and Mr. Rich's outstanding options granted to him prior to the completion of the mergers will remain outstanding and continue to vest as if he remained employed by us until the fourth anniversary of the date of termination. If Mr. Rich's employment agreement is terminated by us for cause, he will receive only base salary that was earned but unpaid as of the date of termination. The employment agreement contains confidentiality obligations, some of which survive indefinitely, and nonsolicitation and noncompetition obligations that end on the second anniversary of the date employment has ceased. The employment agreement contains a tax gross-up provision relating to any excise taxes that Mr. Rich incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the tax code. 10 12 Arrangements with Patricia Fili-Krushel Patricia Fili-Krushel, our Chief Executive Officer, Consumer Sales and Services, receives an annual base salary of $1,000,000, subject to annual increase in the discretion of the compensation committee of our board with the approval of our full board. In addition, Ms. Fili-Krushel will be entitled to an annual bonus based on performance criteria established from year to year by the compensation committee, but which will be at least $500,000 for each year during the term. We will also provide Ms. Fili-Krushel with term life insurance of not less than $5,000,000. Arrangements with K. Robert Draughon In connection with the WebMD, Inc. merger, we became party to an employment agreement effective February 1, 1998 with K. Robert Draughon which, as modified by a letter agreement dated September 12, 2000, is described below. The employment agreement provides for Mr. Draughon's appointment as our Executive Vice President, Business Development. Pursuant to the employment agreement, Mr. Draughon is to receive an annual base salary of $450,000 and is entitled to participate in any bonus program established by us for our senior executive officers. Upon termination of Mr. Draughon's employment due to his death or disability, by us without "cause" or by Mr. Draughon for "good reason," as those terms are defined in Mr. Draughon's employment agreement, he will be entitled to continuation of his base salary for twelve months and continuation of benefit plans for twelve months. In addition, all options granted to Mr. Draughon prior to December 31, 2000 which have not vested prior to the date of termination will be vested as of the date of termination and all such options will continue to be exercisable until the tenth anniversary of the applicable date of grant. If Mr. Draughon's employment is terminated by us for cause or by him without good reason, he is not entitled to any further compensation or benefits. In addition, any options granted to him prior to December 31, 2000 which have not vested prior to the date of termination will be forfeited, and any such options which have vested at that time will continue to be exercisable until the tenth anniversary of the applicable date of grant. The employment agreement contains confidentiality obligations, some of which survive indefinitely and some of which end on the first anniversary of the date employment has ceased, and nonsolicitation and noncompetition obligations that end on the second anniversary of the date employment has ceased. The employment agreement contains a tax gross-up provision relating to any excise taxes that Mr. Draughon incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the tax code. Arrangements with Jack D. Dennison On September 12, 2000, we entered into a letter agreement with Jack D. Dennison which was modified by a letter agreement dated October 11, 2000. Mr. Dennison resigned effective January 26, 2001 and, in accordance with the terms of the letter agreement, the resignation was mutually agreed to be for good reason. As a result, Mr. Dennison is entitled to continuation of his base salary of $450,000 for twelve months and continuation of benefit plans for twelve months. In addition, all options which were not vested prior to the date of termination became vested as of that date and all options will continue to be exercisable until the tenth anniversary of the applicable date of grant. The letter agreement contains nonsolicitation and noncompetition obligations that end on January 26, 2003. The letter agreement contains a tax gross-up provision relating to any excise taxes that Mr. Dennison incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the tax code. 11 13 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mark J. Adler, M.D., L. John Doerr and Joseph E. Smith are the members of our compensation committee. James H. Clark, Eric J. Gleacher and William W. McGuire, M.D. also served as members of our compensation committee during 2000. Mr. Gleacher, who resigned from our board in February 2001, is the Chief Executive Officer and Chairman of the Board of Gleacher & Co. LLC, which provided financial advisory services to us during 2000. For a more complete description of this relationship, see "Related Party Transactions" below. Mr. Clark, who served as our Chairman of the Board of Directors from December 1995 until November 1999, resigned from our board in October 2000. Dr. McGuire, who resigned from our board in January 2000, is the Chairman and Chief Executive Officer of UnitedHealth Group, which, with its affiliates, entered into service and license agreements with us. Although UnitedHealth Group was one of our principal stockholders, its holdings no longer constitute more than 5% of our common stock. For a more complete description of this relationship, see "Related Party Transactions" below. No interlocking relationship exists between our board or compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of our common stock as of April 9, 2001 by each person known by us to own beneficially more than 5% of our common stock, each of our directors and named executive officers and by all of our directors and executive officers as a group. The number and percentage of our shares of common stock owned is based on 357,047,843 shares outstanding as of April 9, 2001. Beneficial ownership is determined under the rules and regulations of the SEC. Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of April 9, 2001 are deemed to be outstanding and beneficially owned by the person holding the options or warrants for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person. The shares subject to options or warrants held by a person are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table, and subject to applicable community property laws, these persons have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Unless otherwise indicated, the address of each of the beneficial owners identified is c/o WebMD Corporation, 669 River Drive, Center 2, Elmwood Park, New Jersey 07407-1361.
COMMON NAME AND ADDRESS OF BENEFICIAL OWNER STOCK WARRANTS OPTIONS PERCENT - ------------------------------------ ---------- ---------- --------- ------- Quintiles Transnational Corp...................... 35,000,000 -- -- 9.80% 4709 Creekstone Drive Riverbirch Building, Suite 200 Durham, NC 27703-8411 Microsoft Corporation............................. 11,933,340 13,676,389 -- 6.91 One Microsoft Way -- Bldg. 8 North Office 2211 Redmond, WA 98052 Mark J. Adler, M.D................................ 22,000(1) -- 26,000 * Jeffrey T. Arnold................................. 6,303,457(2) -- 4,486,741 2.98 500 Peachtree Battle Atlanta, GA 30305 Paul A. Brooke.................................... 201,667(3) -- -- *
12 14
COMMON NAME AND ADDRESS OF BENEFICIAL OWNER STOCK WARRANTS OPTIONS PERCENT - ------------------------------------ ---------- ---------- --------- ------- Jack D. Dennison.................................. 69,630 -- 1,000,000 * 1900 Ringtail Ridge Austin, TX 78746 L. John Doerr(4).................................. 8,360,459 29,359 19,166 2.35 c/o Kleiner, Perkins, Caufield & Byers 2750 Sand Hill Road Menlo Park, CA 94025 K. Robert Draughon................................ 89,800 -- 955,106 * Patricia Fili-Krushel............................. -- -- 137,500 * Dennis B. Gillings, Ph.D.......................... --(5) -- -- * c/o Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 200 Durham, NC 27703-8411 James V. Manning.................................. 819,047(6) -- 13,000 * Marvin P. Rich.................................... -- -- 1,080,000 * Herman Sarkowsky.................................. 549,994(7) -- 300,000 * Michael A. Singer................................. 9,222,625(8) -- 1,906,250 3.10 Joseph E. Smith................................... 29,250 -- 26,000 * Charles G. V. Stevens............................. -- -- -- * c/o Microsoft Corporation One Microsoft Way -- Bldg. 8 North Office 2211 Redmond, WA 98052 Martin J. Wygod................................... 9,782,539(9) -- 662,500 2.92 All executive officers and directors as a group (21 persons).................................... 29,147,631 29,359 8,821,272 10.50
- --------------- * Less than 1%. (1) Represents 22,000 shares held by Adler Family Trust. (2) Represents 4,894,280 shares held by Mr. Arnold and his wife, 911,829 shares held by Arnold Family Irrevocable Trust and 497,348 shares held by JT Arnold Enterprises LLLP. (3) Represents 201,667 shares held by PMSV Holdings LLC, of which Mr. Brooke is the managing member. (4) Represents 214,677 shares held by Mr. Doerr, 6,469,957 shares held and 27,891 shares issuable upon the exercise of warrants held by Kleiner Perkins Caufield & Byers VII L.P., 1,275,736 shares held by KPCB Java Fund and 400,089 shares held and 1,468 shares issuable upon the exercise of warrants held by KPCB Life Sciences Zaibatsu Fund II. KPCB Life Sciences Zaibatsu Fund II and KPCB VII are wholly controlled by KPCB VII Associates. KPCB Java Fund is controlled by KPCB VIII. Mr. Doerr is a general partner of KPCB VIII and KPCB VII Associates. (5) Does not include 35,000,000 shares held by Quintiles, of which Dr. Gillings is the Chairman of the Board. (6) Represents 747,800 shares held by Mr. Manning and 71,247 shares held by Synetic Foundation, Inc., a charitable foundation of which Messrs. Wygod and Manning are trustees and share voting and dispositive power. 13 15 (7) Represents 441,662 shares held by Mr. Sarkowsky, 70,832 shares held by Sarkowsky Family L.P. and 37,500 shares held by a charitable foundation of which Mr. Sarkowsky is a director. (8) Represents 9,171,875 shares held by MAS 1997 Family Limited Partners, the general partner of which is a company controlled by Mr. Singer and the sole limited partner of which is Mr. Singer, and 50,750 shares held by MDDS Partnership Limited, the general partner of which is controlled by Mr. Singer and the limited partners of which are Mr. Singer and certain of his family members. (9) Represents 7,447,029 shares held by Mr. Wygod, 1,613,347 shares held by River Edge Resources, Inc., which is controlled by Mr. Wygod, 7,600 shares held by Mr. Wygod's spouse, 161,332 shares held by SYNC, Inc., which is controlled by Mr. Wygod, 71,247 shares held by Synetic Foundation, Inc., a charitable foundation of which Messrs. Wygod and Manning are trustees and share voting and dispositive power, and 481,984 shares held by the Rose Foundation, a private charitable foundation of which Messrs. Wygod and Mele are trustees and share voting and dispositive power. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Since January 1, 2000, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we or any of our subsidiaries was or is to be a party in which the amount involved exceeds $60,000 and in which any director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than the transactions described below. Microsoft We entered into a five-year strategic alliance with Microsoft in May 1999. In March 2001, we executed a non-binding letter of intent with Microsoft with respect to revisions to the relationship. In April 2001, we entered into definitive agreements with Microsoft to implement the revised relationship. The original and revised strategic relationships are described below. Original strategic relationship. Under the terms of the original strategic relationship, WebMD has been developing, hosting and maintaining on our servers a health channel for MSN and was required to pay Microsoft an aggregate of $162,000,000 in carriage fees for the distribution of that content. In addition, Microsoft and WebMD each committed co-marketing funds of $50,000,000 over the first two years of the term. As of December 31, 2000 and 1999, WebMD had recognized $30,562,000 and $3,950,000, respectively, as sales and marketing expense related to the carriage fees. Microsoft was required to remit to WebMD 100% of the net revenue over the term of the agreement from banner and other advertising and e-commerce transactions generated on the health channel or advertising that Microsoft placed on WebMD.com each year during the term until we received an amount equal to that year's carriage fees, including guaranteed minimum amounts of $22,500,000 in each of the first two years of the term, and was required to share revenue equally with us after that. We were required to pay Microsoft a 25% commission on the portion of the revenue received up to the annual guaranteed minimum amounts for all advertisements placed by Microsoft. We recognized this advertising revenue when Microsoft notified us that advertisements had been placed on the health channel and billed by Microsoft, not based on the guaranteed minimum amounts. During 2000 and 1999, we recognized $5,996,000 and $1,590,000, respectively, net of commissions, related to health channel advertising. Microsoft agreed to sponsor up to 5.0 million subscriber months, for $29.95 per month, of subscriptions to our physician Web site over the term of the agreement. We were required to pay a $5 per month commission on all subscriptions placed by Microsoft. During 2000 and 1999, WebMD recorded $16,114,000 and $1,845,000, respectively, as revenue, net of commissions, related to subscriptions sponsored by Microsoft. WebMD was required to share with Microsoft 50% of net revenue from banner and other advertising on our physician Web site generated by sponsored subscriptions until Microsoft received the amount it had 14 16 incurred for its sponsored subscriptions. Thereafter, WebMD was required to share 25% of this revenue with Microsoft. In addition, WebMD was required to share with Microsoft 15% of WebMD's net revenue from e-commerce transactions and additional services not included in the basic subscription to WebMD's physician Web site generated by these sponsored subscriptions. There were no obligations to Microsoft as of December 31, 2000 or 1999 relating to this provision. Revised strategic relationship. To implement the revised relationship, the parties entered into two definitive agreements. Under the first agreement: - Microsoft has agreed to provide performance-based funding tied to the roll-out of WebMD's new handheld solution for physicians, which operates on a wireless LAN and integrates with the physician's practice management system. - WebMD has agreed to adopt the PocketPC, Windows 2000 and SQL Server 2000 as the development platform for our handheld for physicians. - WebMD has agreed to make Intergy, our new physician practice management system, available to run on Windows 2000 and SQL Server 2000. - WebMD has agreed to continue to transition the WebMD.com portal to Windows 2000 and SQL Server 2000 when WebMD makes additional investments in its portal. - Microsoft has agreed to provide consulting services, support and other resources in connection with these undertakings. The term of this agreement is scheduled to expire on December 31, 2004. This agreement is subject to termination by either party beginning on May 18, 2001 in the event that the parties have not reached agreement on terms for an Application Services Agreement, or ASP Agreement, and related documents to govern deployments by WebMD of Microsoft software on an ASP basis. Under the second agreement, WebMD will program the majority of the MSN health channel, and will have a majority share of revenue derived from advertising, sponsorship and e-commerce on the MSN health channel site and will no longer pay carriage fees to Microsoft. The term of this agreement is scheduled to expire on June 30, 2004. As a result of the execution of these agreements, Microsoft will no longer be responsible for funding the sponsorship of subscriptions to WebMD's physician portal, and WebMD will not be required to share with Microsoft revenue generated by physician usage of WebMD's healthcare portals. Other. In connection with the original strategic relationship, Microsoft acquired shares of common stock and a warrant to purchase shares of common stock of WebMD, Inc. These securities were converted into securities of our company as a result of the merger of Healtheon Corporation and WebMD, Inc. in November 1999. As of April 9, 2001, Microsoft owned 11,933,340 shares of our common stock and a warrant to purchase an additional 13,676,389 shares of our common stock. The warrant is fully vested and expires on May 12, 2004. Microsoft has registration rights with respect to the shares that it owns and the shares issuable upon exercise of its warrant. Quintiles In connection with our acquisition of Envoy from Quintiles in May 2000, we entered into a Data Rights Agreement and an Internet Product Development and Marketing Agreement with Quintiles. Pursuant to the Data Rights Agreement, we provide certain data to Quintiles through Envoy, which Quintiles uses to provide market research and related products and services to third parties. The Data Rights Agreement does not require us to provide data to Quintiles if we are prohibited from doing so by our contracts with third parties or applicable law. Data elements that would make the data individually identifiable to a particular person are required to be removed before the data is provided to Quintiles. The Data Rights Agreement provides that we are to receive a royalty from Quintiles based upon the operating income generated from these products. During 2000, Quintiles did not make any payments to us pursuant 15 17 to the Data Rights Agreement. Disputes which have arisen with respect to the obligations of the parties under the Data Rights Agreement are described in detail in "Legal Proceedings -- Quintiles v. WebMD" on page 24 of our annual report on Form 10-K. The Internet Product Development and Marketing Agreement provides that we will engage in a collaborative effort with Quintiles to develop, market and commercialize a portfolio of Internet-based products and services for the pharmaceutical industry. Quintiles has agreed to pay $100,000,000 for our development activities and each of us has agreed to share revenue with the other from the sale of these products and services. During 2000, Quintiles paid us $929,000 for engineering services. Disputes have arisen with respect to the obligations of the parties under the Internet Product Development and Marketing Agreement and we have commenced the dispute resolution procedures provided for in the Internet Product Development and Marketing Agreement. News Corporation Pursuant to an agreement signed and publicly announced in December 1999 and closed in January 2000, WebMD entered into a strategic alliance with The News Corporation Limited, Fox Entertainment Group and certain of their affiliates, which we refer to collectively as News Corporation. On December 29, 2000, this strategic alliance was revised by the parties. The original and revised strategic relationships are described below. Original strategic relationship. In January 2000, WebMD entered into a strategic relationship with News Corporation. WebMD received from News Corporation $100,000,000 in exchange for a 50% interest in a newly formed international joint venture, WebMD International LLC, domestic and international advertising and promotion on News Corporation's various properties to be used over ten years, and a 50% interest in each of The Health Network LLC, a health-focused cable network, and in Health & Fitness, which operated a companion Web site, "thehealthnetwork.com." WebMD also entered into a five-year agreement with News Corporation to provide syndicated, daily broadcast content for use across various News Corporation properties for cash payments totaling $12,000,000 annually. In connection with the original strategic relationship, we issued News Corporation 155,951 shares of Series A convertible preferred stock, which were convertible into 21,282,645 shares of our common stock. In addition, News Corporation purchased 2,000,000 shares of our common stock for an aggregate purchase price of $100,000,000. Revised strategic relationship. Under the revised relationship, WebMD retained the right to receive $205,000,000 in domestic media services over ten years from News Corporation and will continue to provide content to News Corporation for use across News Corporation's media properties for the next four years. News Corporation transferred its 50% interest in WebMD International LLC to WebMD and was relieved of its commitment to provide any future capital to WebMD International LLC and its commitment to provide any international media services. WebMD transferred its interest in The Health Network and Health & Fitness to News Corporation. WebMD was also relieved of all future capital commitments to these entities. During 2000, WebMD recognized $21,324,000 in advertising expense related to the domestic media services provided by News Corporation and $12,000,000 in revenue for content license fees. In connection with the revisions to the relationship, News Corporation surrendered 155,951 shares of WebMD's Series A convertible preferred stock, which would have converted into 21,282,645 shares of our common stock. WebMD granted to News Corporation a warrant to acquire 3,000,000 shares of its common stock at an exercise price of $15 per share. News Corporation has registration rights with respect to the shares of common stock issuable upon exercise of the warrant. UnitedHealth Group We provide electronic data interchange, or EDI, services through our ProviderLink and WebMD Practice products to UnitedHealth Group's managed care providers and customers. We receive a monthly 16 18 fee for each user site enrolled and a fee per transaction for EDI and transaction processing services. During 2000, UnitedHealth Group paid us an aggregate of approximately $19,900,000 related to services, transaction and license fees. William W. McGuire, M.D., Chief Executive Officer and Chairman of UnitedHealth Group, was one of our directors until his resignation in January 2000. Gleacher & Co. Gleacher & Co., formerly Gleacher NatWest, Inc., provided financial advisory services to WebMD, Inc. prior to the WebMD, Inc. merger and to us after that merger pursuant to a two-year agreement relating to these services. Pursuant to that agreement, WebMD, Inc. issued to Gleacher & Co. a warrant to purchase 1,038,450 shares of its Series D common stock, which we assumed in connection with the WebMD, Inc. merger. As a result of transfers of portions of the warrant, Gleacher & Co. currently holds a fully vested warrant to purchase 545,366 shares of our common stock, Luna I Investors, LLC currently holds a fully vested warrant to purchase 144,231 shares of our common stock, and Eric J. Gleacher currently holds a fully vested warrant to purchase 418,627 shares of our common stock, in each case at an exercise price of $8.04 per share. Mr. Gleacher, who was a member of our board of directors until his resignation in January 2001, is Chairman and Chief Executive Officer of Gleacher & Co. and a member of Luna I Investors. iXL In 2000, we paid to iXL approximately $356,000 for web development services. U. Bertram Ellis, Jr., who was a member of our board of directors until his resignation in September 2000, is the Chairman, Chief Executive Officer and a stockholder of iXL. PTEK Holdings We lease space in Atlanta, Georgia from a subsidiary of PTEK Holdings, Inc. This lease expires in February 2002 and requires monthly payments to PTEK Holdings of approximately $38,000. We also lease equipment and other personal property used in our call center from a subsidiary of PTEK Holdings. This lease expires in February 2002 and requires monthly payments to PTEK Holdings of approximately $24,000. We provide our subscribers with the option of using PTEK Holdings' enhanced communications services through our physician portal. Our agreement with PTEK Holdings is effective until February 2003 and requires minimum annual payments to PTEK Holdings of $2,500,000 over the term of the agreement to license its enhanced communications services. The agreement also requires PTEK Holdings to pay us $1,000,000 per year for exclusivity rights on our physician portal. In connection with obtaining PTEK Holdings' agreement to vote for the WebMD, Inc. merger, WebMD, Inc. agreed to use its best efforts to cause us to honor WebMD, Inc.'s rights and obligations under this agreement, including provisions regarding exclusivity of telecommunications services. William P. Payne, who was one of our directors until his resignation in September 2000, was Vice Chairman of PTEK Holdings and an employee and the Chairman of the Board of Orchestrate.com, Inc., a subsidiary of PTEK Holdings. As Chairman of Orchestrate.com, one of Mr. Payne's principal duties was to assist us in the development of our business for the purpose of increasing revenue opportunities for PTEK Holdings. In connection with the WebMD, Inc. merger, we assumed an agreement between Mr. Payne and WebMD, Inc. effective until May 2000 pursuant to which, in consideration of Mr. Payne's devotion of up to 60% of his time directly to our business, we reimbursed PTEK Holdings $375,000 per year for Mr. Payne's salary, $125,000 per year for Mr. Payne's minimum bonus and $6,000 per year for Mr. Payne's automobile allowance. We also reimbursed Mr. Payne for any expenses he incurred prior to that time in discharging his duties to us. Officer loans On April 6, 2001, we loaned $1,450,000 to K. Robert Draughon, our Executive Vice President, Business Development. The funds were advanced pursuant to a promissory note bearing interest at the 17 19 fixed rate per annum of 4.63%. The loan is full recourse and is secured by a pledge by Mr. Draughon of all shares of our common stock, and all options to purchase shares of our common stock, owned by him. As of April 27, 2001, approximately $365,000 of the principal amount was outstanding. On September 11, 2000, Medical Manager loaned $500,000 to Kevin Cameron, our Executive Vice President, Business Development, which loan was assumed by us in our merger with Medical Manager. The funds were advanced pursuant to a promissory note bearing interest at the fixed rate per annum of 6.22%. The loan is secured by a pledge by Mr. Cameron of all shares of our common stock, and all options to purchase shares of our common stock, owned by him. As of April 27, 2001, the entire principal amount was outstanding. Other We were reimbursed approximately $135,000 by a corporation controlled by Martin J. Wygod, our Chairman of the Board of Directors and Chief Executive Officer, for the partial use of our office facilities and for services rendered by our employees during 2000. We lease property in Alachua, Florida that is owned by a corporation controlled by Michael A. Singer, Chief Executive Officer and President, Practice Management Sales and Services and a member of our board of directors, and a member of his family. We are responsible for all real estate taxes, insurance and maintenance relating to the property. The term of the lease is through March 31, 2004. During 2000, the amount of rent payable under the lease was approximately $630,000. 18 20 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(3) EXHIBITS See "Index to Exhibits" beginning on page E-1, which is incorporated by reference herein. 19 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereto duly authorized, on the 30th day of April, 2001. WEBMD CORPORATION By: /s/ LEWIS H. LEICHER ------------------------------------ Lewis H. Leicher Senior Vice President and Assistant General Counsel 20 22 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Agreement and Plan of Reorganization dated as of February 24, 1998 among Registrant, MedNet Acquisition Corp. and ActaMed Corporation (incorporated by reference to Exhibit 2.0 to Registrant's Registration Statement on Form S-1 (No. 333-70553) filed January 14, 1999) 2.2 Agreement and Plan of Reorganization dated as of April 20, 1999, as amended, among Registrant, Merc Acquisition Corp. and MedE America Corporation (incorporated by reference to Exhibit 2.2 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 17, 1999) 2.3 Agreement and Plan of Reorganization dated as of May 20, 1999, as amended, among Registrant, WebMD, Inc. and Water Acquisition Corp. (incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 17, 1999) 2.4 Agreement and Plan of Merger dated as of June 30, 1999, as amended, among Registrant, WebMD, Inc., Healtheon/WebMD Corporation, GNN Merger Corp. and Greenberg News Networks, Inc. (incorporated by reference to Exhibit 2.3 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 17, 1999) 2.5 Purchase Agreement dated as of December 20, 1999 among Electronic Data Systems Corporation, Eli Lilly and Company, Integrated Medical Systems, Inc., Kinetra LLC and Registrant (incorporated by reference to Exhibit 2.1 to Registrant's Report on Form 8-K filed February 10, 2000) 2.6 Agreement and Plan of Merger dated as of January 22, 2000 among Registrant, Envoy Corporation, Quintiles Transnational Corp. and QFinance, Inc. (incorporated by reference to Exhibit 2.1 to Registrant's Report on Form 8-K filed January 27, 2000) 2.7 Agreement and Plan of Merger dated as of February 13, 2000 between Registrant and Medical Manager Corporation (incorporated by reference to Exhibit 2.1 to Registrant's Report on Form 8-K/A filed February 24, 2000), as amended by Amendment No. 1 dated as of June 18, 2000 (incorporated by reference to Exhibit 2.1 to Registrant's Report on Form 8-K filed July 24, 2000) 2.8 Agreement and Plan of Merger dated as of February 13, 2000 among Registrant, Avicenna Systems Corporation and CareInsite, Inc. (incorporated by reference to Exhibit 2.2 to Registrant's Report on Form 8-K/A filed February 24, 2000), as amended by Amendment No. 1 dated as of June 18, 2000 (incorporated by reference to Exhibit 2.2 to Registrant's Report on Form 8-K filed July 24, 2000) 2.9 Agreement and Plan of Merger dated as of February 15, 2000 among Registrant, Tech Acquisition Corporation and OnHealth Network Company (incorporated by reference to Exhibit 2.1 to Registrant's Report on Form 8-K/A filed February 22, 2000) 3.1 Tenth Amended and Restated Certificate of Incorporation of Registrant, as currently in effect (incorporated by reference to Exhibit 3.1 to Registrant's Report on Form 8-K filed September 13, 2000) 3.2 Amended and Restated Bylaws of Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 to Registrant's Report on Form 8-K filed September 13, 2000) 4.1** Specimen Common Stock certificate 10.1 Form of Indemnification Agreement to be entered into by Registrant with each of its directors and officers (incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form S-1 (No. 333-70553) filed January 14, 1999)
E-1 23
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.2 Form of Series B Preferred Stock Purchase Warrant between Registrant and certain of Registrant's Investors (incorporated by reference to Exhibit 10.22 to Registrant's Registration Statement on Form S-1 (No. 333-70553) filed January 14, 1999) 10.3 Amended and Restated Investors' Rights Agreement dated as of January 28, 1998 among Registrant and certain of Registrant's Security Holders (incorporated by reference to Exhibit 10.10 to Registrant's Registration Statement on Form S-1 (No. 333-70553) filed January 14, 1999) 10.4 Services Agreement dated January 27, 1999 between WebMD, Inc. and Gleacher NatWest, Inc., currently known as Gleacher & Co. LLC (incorporated by reference to Exhibit 10.37 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 30, 1999) 10.5 Warrant to purchase shares of common stock of Registrant dated December 29, 2000 issued to Gleacher & Co. LLC (incorporated by reference to Exhibit 10.43 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999) 10.6 Warrant to purchase shares of common stock of Registrant dated March 9, 2000 issued to Eric J. Gleacher (incorporated by reference to Exhibit 10.44 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999) 10.7* Distribution and Cross Promotion Agreement dated May 6, 1999 among Microsoft Corporation, WebTV Networks, Inc., MSNBC Interactive News, L.L.C. and WebMD, Inc. (incorporated by reference to Exhibit 10.33 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 30, 1999) 10.8 Investment Agreement dated May 12, 1999 among WebMD, Inc., Microsoft Corporation and each of the other persons listed on Schedule I thereto (incorporated by reference to Exhibit 10.36 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 30, 1999) 10.9** Warrant to Purchase Shares of Common Stock of WebMD, Inc. dated May 12, 1999 issued to Microsoft Corporation 10.10* Agreement dated May 19, 1999 among Registrant, WebMD, Inc. and Microsoft Corporation (incorporated by reference to Exhibit 10.34 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 (No. 333-86685) filed September 30, 1999) 10.11 Letter Agreement dated March 27, 2000 between Registrant and Microsoft Corporation (incorporated by reference to Exhibit 10.29 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999) 10.12 Stock Purchase Agreement dated January 26, 2000 between Registrant and Janus Capital Corporation (incorporated by reference to Exhibit 10.10 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.13 Healtheon/WebMD Corporation Registration Rights Agreement dated January 26, 2000 between Registrant and Janus Capital Corporation (incorporated by reference to Exhibit 10.11 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.14 Healtheon/WebMD Corporation Registration Rights Agreement dated January 26, 2000 among Registrant, Eastrise Profits Limited, AHN/FIT Cable, LLC, AHN/FIT Internet, LLC, News America Incorporated and Fox Broadcasting Company (incorporated by reference to Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.15 Healtheon/WebMD Media Services Agreement dated January 26, 2000 among Registrant, Eastrise Profits Limited and Fox Entertainment Group, Inc. (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)
E-2 24
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.16 Content License Agreement dated January 26, 2000 between The News Corporation Limited and Registrant (incorporated by reference to Exhibit 10.6 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.17** Letter Agreement dated December 29, 2000 between Registrant and The News Corporation Limited 10.18** Data Rights Agreement dated as of May 26, 2000, as amended, between Registrant and Quintiles Transnational Corp. 10.19** Internet Product Development and Marketing Agreement dated as of May 26, 2000 between Registrant and Quintiles Transnational Corp. 10.20*** Letter Agreement dated June 18, 2000 between Registrant and Martin J. Wygod 10.21*** Amended and Restated Stock Option Agreement dated August 21, 2000 between Medical Manager Corporation and Martin J. Wygod 10.22*** Letter Agreement dated September 12, 2000 between Registrant and Jeffrey T. Arnold 10.23*** Letter Agreement dated October 11, 2000 between Registrant and Jeffrey T. Arnold 10.24*** Employment Agreement dated as of September 30, 1998 between WebMD, Inc. and Jeffrey T. Arnold (incorporated by reference to Exhibit 10.41 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999) 10.25*** Letter Agreement dated May 20, 1999 between Registrant and Jeffrey T. Arnold (incorporated by reference to Exhibit 10.42 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999) 10.26*** Amended and Restated Employment Agreement dated June 18, 2000 among Medical Manager Corporation, CareInsite, Inc. and Marvin P. Rich 10.27*** Healtheon Corporation 1996 Stock Plan and Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to Registrant's Registration Statement on Form S-1 (No. 333-70553) filed February 10, 1999) 10.28*** WebMD Corporation Amended and Restated 1998 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.27 to Registrant's Registration Statement on Form S-8 (No. 333-47250) filed October 4, 2000) 10.29*** WebMD Corporation 2000 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 (No. 333-39592) filed August 1, 2000) 10.30*** WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement on Form S-8 (No. 33-90795) filed November 12, 1999) 10.31*** Envoy Stock Plan (incorporated by reference to Exhibit 99.1 to Registrant's Registration Statement on Form S-8 (No. 333-42616) filed July 31, 2000) 10.32*** Amended and Restated 1989 Class A Non-Qualified Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 10.1 to Medical Manager Corporation's Registration Statement on Form S-1 (No. 333-28654) filed May 18, 1989) 10.33*** Amended and Restated 1989 Class B Non-Qualified Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 10.2 to Medical Manager Corporation's Registration Statement on Form S-1 (No. 333-28654) filed May 18, 1989) 10.34*** 1991 Director Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.2 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-46640) filed March 24, 1992)
E-3 25
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.35*** Amended and Restated 1991 Special Non-Qualified Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.3 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-36041) filed September 19, 1997) 10.36*** Form of Stock Option Agreement made as of December 7, 1994 between Medical Manager Corporation and certain individuals (incorporated by reference to Exhibit 4.5 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-21555) filed February 11, 1997) 10.37*** Medical Manager Corporation's 1996 Amended and Restated Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Medical Manager Corporation's (Commission File No. 0-29090) Quarterly Report on Form 10-Q for the quarter ended September 30, 1998) 10.38*** Medical Manager Corporation's 1996 Amended and Restated Non-Employee Director's Stock Plan (incorporated by reference to Exhibit 10.2 to Medical Manager Corporation's (Commission File No. 0-29090) Annual Report on Form 10-K for the fiscal year ended December 31, 1997) 10.39*** 1996 Class C Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.1 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-36041) filed September 19, 1997) 10.40*** 1997 Class D Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.2 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-36041) filed September 19, 1997) 10.41*** 1998 Class E Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.1 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-72517) filed March 15, 1999) 10.42*** The 1999 Medical Manager Corporation Stock Option Plan for Employees of Medical Manager Systems, Inc. (incorporated by reference to Exhibit 10.28 to Medical Manager Corporation's Annual Report on Form 10-K for the year ended June 30, 1999) 10.43*** Form of Stock Option Agreement between the Corporation and each of John H. Kang and Michael A. Singer (incorporated by reference to Exhibit 99.5 to Amendment No. 1 to Medical Manager Corporation's Registration Statement on Form S-4 (No. 333-81123) filed June 24, 1999) 10.44*** 1995 Avicenna NQ Stock Option Plan, as amended (incorporated by reference to Exhibits 4.1 and 4.2 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-19043) filed December 31, 1996) 10.45*** 1998 Porex Technologies Corp. Stock Option Plan of Medical Manager Corporation (incorporated by reference to Exhibit 4.2 to Medical Manager Corporation's Registration Statement on Form S-8 (No. 333-72517) filed March 15, 1999) 10.46*** CareInsite, Inc. 1999 Officer Stock Option Plan (incorporated by reference to Exhibit 10.18 to Amendment No. 6 to CareInsite, Inc.'s Registration Statement on Form S-1 (No. 333-75071) filed June 11, 1999) 10.47*** CareInsite, Inc. 1999 Employee Stock Option Plan. (incorporated by reference to Exhibit 10.17 to Amendment No. 6 to CareInsite, Inc.'s Registration Statement on Form S-1 (No. 333-75071) filed June 11, 1999) 10.48*** CareInsite, Inc. 1999 Director Stock Option Plan (incorporated by reference to Annex H to the Proxy Statement/Prospectus included in Registrant's Registration Statement on Form S-4 (No. 333-39592) filed June 19, 2000) 10.49*** Amendment to the Company Stock Option Plans of Medical Manager Corporation and CareInsite, Inc. (incorporated by reference to Exhibit 99.28 to Registrant's Registration Statement on Form S-8 (No. 333-47250) filed October 4, 2000)
E-4 26
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.50*** Letter Agreement dated September 11, 2000 between Medical Manager Corporation and Marvin P. Rich 10.51*** Employment Agreement dated February 1, 1998 between WebMD, Inc. and K. Robert Draughon 10.52*** Letter Agreement dated September 12, 2000 between Registrant and K. Robert Draughon 10.53*** Letter Agreement dated September 12, 2000 between Registrant and Jack D. Dennison 10.54*** Letter Agreement dated October 11, 2000 between Registrant and Jack D. Dennison 21** Subsidiaries of Registrant 23.1** Consent of Ernst & Young LLP, Independent Auditors 24.1** Power of Attorney
- --------------- * Confidential treatment was received with respect to certain portions of this document. ** Previously filed as an exhibit to this Annual Report on Form 10-K *** Agreement relates to executive compensation E-5 EX-10.20 2 g68745a1ex10-20.txt LETTER AGREEMENT DATED JUNE 18, 2000 1 EXHIBIT 10.20 Letter Agreement dated June 18, 2000 between Registrant and Martin J. Wygod 2 HEALTHEON/WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENOX BUILDING ATLANTA, GEORGIA 30326 June 18, 2000 Mr. Martin J. Wygod River Drive Center 2 669 River Drive Elmwood Park, New Jersey Re: AGREEMENT AND PLAN OF MERGER (THE "AGREEMENT") DATED FEBRUARY 13, 2000 BETWEEN HEALTHEON/WEBMD CORPORATION, A DELAWARE CORPORATION ("PARENT"), AND MEDICAL MANAGER CORPORATION, A DELAWARE CORPORATION, (THE "COMPANY"), AND AMENDMENT NO. 1 TO THE AGREEMENT, DATED AS OF JUNE 18, 2000, BETWEEN PARENT AND THE COMPANY (TOGETHER, THE "AMENDED AGREEMENT"); AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") DATED FEBRUARY 13, 2000 BETWEEN PARENT, AVICENNA SYSTEMS CORPORATION, A MASSACHUSETTS CORPORATION ("ASC"), AND CAREINSITE, INC., A DELAWARE CORPORATION ("CAREINSITE" AND COLLECTIVELY WITH THE COMPANY AND EACH OF THEIR DIRECT AND INDIRECT SUBSIDIARIES, THE "COMPANIES"), AND AMENDMENT NO. 1 TO THE MERGER AGREEMENT, DATED AS OF JUNE 18, 2000, BETWEEN PARENT, ASC AND CAREINSITE (TOGETHER, THE "AMENDED MERGER AGREEMENT" AND COLLECTIVELY WITH THE AMENDED AGREEMENT, THE "AGREEMENTS"). Dear Mr. Wygod: Parent is in negotiations to acquire the Companies pursuant to the above referenced Agreements which provide for the acquisition of the Company by Parent pursuant to the merger of the Company with and into Parent and the acquisition of CareInsite by Parent pursuant to the merger of CareInsite with and into ASC (the "Mergers"). Your execution of this letter agreement is an inducement to Parent entering into the Agreements providing for the Mergers as well as in consideration for appointing you as Co-Chief Executive Officer of Parent. In conjunction therewith, we request that you agree to become bound by the noncompetition, nonsolicitation and confidentiality provisions set forth on Exhibit A hereto effective upon the completion of the Mergers. As you know, the shares of Company common stock and CareInsite common stock which you own (the "Current Shares") will each be converted into shares of common stock of Parent at the Effective Time (as defined in the Agreements) based on the Exchange Ratios as set forth in the Agreements and the shares of Company common stock and CareInsite common stock which you have options to purchase (the "Current Options") will each be converted into options to acquire shares of the common stock of Parent at the Effective Time based on the Exchange Ratios in the Agreements. 3 By agreeing to the terms of this letter, you confirm to us that (i) you own 5,532,682 shares of the Company common stock, (ii) you own 39,000 shares of CareInsite common stock, (iii) you own 136,000 Company options, (iv) you own 450,000 CareInsite options, (v) there are no written agreements pertaining to your employment relationship with either the Company or CareInsite other than option agreements pursuant to which you were issued the Current Options, (vi) you will become bound by the noncompetition provisions described on Exhibit A upon the consummation of the Mergers, and (vii) you are a resident of the State of California. As additional consideration for your agreements set forth herein, Parent agrees that after the Effective Time, in the event of the cessation of your employment with Parent or the Co-Chief Executive Officer or Chief Executive of Parent for any reason, each Current Option held by you shall continue to vest in accordance with the applicable schedule, and shall otherwise be treated for purposes of the terms and conditions thereof, as if you remained employed through the earlier of (i) the first anniversary of the last scheduled vesting date for such Current Option or (ii) the material breach by you of the provisions of Exhibit A to this letter agreement. If you wish to accept our offer to serve as Co-Chief Executive Officer of Parent following the Merger and the other terms of this letter, please indicate by signing below and returning the signed copy to the undersigned at the address set forth above. If the Mergers are not consummated, this letter and Exhibit A hereto shall be null and void. We are excited about the future of our combined companies and value your role in making our efforts successful. This letter and Exhibit A hereto constitute the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the parties relating to the subject matter hereof, including without limitation, the letter agreement dated as of February 13, 2000 between you and Parent. Nothing contained in this letter shall be deemed to restrict any of Parent, the Company, CareInsite or Martin J. Wygod from taking any action that would otherwise be permitted pursuant to the terms of the Agreements and this letter. Sincerely, Healtheon/WebMD Corporation By: /s/ Jack Dennison ---------------------------------------- Authorized Representative Accepted and Agreed: /s/ Martin J. Wygod - -------------------------- Martin J. Wygod June 18, 2000 2 4 EXHIBIT A Noncompetition; Nonsolicitation Provisions 1. Background. Martin J. Wygod ("Wygod") acknowledges and agrees that: (a) Parent is currently negotiating to acquire the Companies in the Mergers pursuant to the Agreements. (b) The Companies are currently engaged in the following businesses: (i) development or provision of an Internet-based healthcare electronic commerce network that links physicians, payers, suppliers or patients, (ii) facilitating or processing administrative or clinical healthcare transactions, (iii) clinical and administrative healthcare related electronic commerce business, and (iv) development or provision of physician practice management information systems or other healthcare software systems relating to administrative and clinical functions, to physicians, practice associations, management service organizations, physician practice management organizations or other providers of healthcare services (collectively, the "Business"). The Business is conducted by the Companies throughout the United States. (c) Wygod holds a substantial equity interest in the Company and CareInsite in the form of common stock of both the Company and CareInsite as well as options to acquire the common stock of both the Company and CareInsite ("Target Equity"), which will be converted into common stock or options to acquire common stock of Parent upon the consummation of the Mergers ("Parent Equity"). (d) As a result of holding Target Equity, Wygod will benefit from the consummation of the Mergers because, among other things, the Exchange Ratios in the Agreements place significant value on Wygod's Target Equity and Parent Equity to be received in exchange for Target Equity. (e) In order to protect the Business (defined above) of the Company for which Parent is paying a substantial price, and as a condition to Parent's execution of the Agreements and the appointment of Wygod as Co-Chief Executive Officer, Parent is requiring Wygod to agree to become bound to the provision of this Exhibit A upon the consummation of the Mergers. (f) The provisions of this Exhibit A are reasonable in light of the substantial benefit that will accrue to Wygod through the exchange in the Mergers of his Target Equity for Parent Equity and are reasonably necessary to protect the Business that Parent is acquiring at a substantial price. 2. Noncompete. Effective as of the Effective Time and conditioned upon the Merger being consummated and Wygod being appointed to the officer position of Co-Chief Executive Officer (whether or not Wygod accepts such appointment), Wygod agrees that for a period ending on the earlier of (i) the second (2nd) anniversary of the later of the date (the "Termination Date") of 5 Wygod's resignation or removal as Co-Chief Executive Officer, Chief Executive Officer or as a director of Parent or any successor to its Business or (ii) the third (3rd) anniversary of the Effective Time (the "Restrictive Period"), without the prior written consent of Parent, Wygod shall not Compete (defined below) with the Business acquired by Parent, except as otherwise permitted under this Section 2. For purposes of this Agreement, "Compete" shall mean: (i) within the Territory (defined below), to engage in a business or business activities that are either (A) substantially similar to, or (B) competitive with, the Business, in each case as engaged in by the Companies on the Effective Time including changes in and expansions of such Business reasonably anticipated at the Effective Time which are implemented or substantial steps are taken to implement prior to the Termination Date (collectively, a "Competitive Business"); (ii) to assist any person or entity (whether in a managerial, financial, employment, advisory or other capacity or as a stockholder or owner, except as set forth in clause (iii) below) to engage in a Competitive Business; or (iii) to own any interest in or to organize a corporation, partnership or other business or organization which engages in a Competitive Business; provided, however, that nothing in clause (iii) above shall prohibit Wygod from acquiring or holding, for investment purposes only, less than five percent (5%) of the outstanding publicly traded securities of any corporation which may compete directly or indirectly with the Business; or less than five percent (5%) of the outstanding securities of any corporation, partnership or other business or organization, whether or not publicly traded, which competes directly or indirectly with the Business so long as he is not employed by and does not consult with, or become a director of or otherwise engage in activities for such competing company; provided further that this provision shall not apply in the event the Companies or Parent or Parent's direct or indirect subsidiaries or any person deriving title to the goodwill of the Business of the Companies being acquired or shares of the Companies being acquired ceases to carry on a business comparable to the Business (including anticipated changes in and expansions of the Business which are implemented or substantial steps are taken to implement prior to the Termination Date) within the Territory; provided further that this provision shall not prevent or impair Wygod from performing usual investment banking services for a person or entity engaged in a Competitive Business if such services do not materially relate to or involve such Competitive Business. "Territory" shall mean (a) the area within a 100 mile radius of that office of the Company from which Wygod performed the majority of his services during the one-year period ending on the earlier of his resignation or removal as a director of Parent, or the 3rd anniversary of the Effective Time (the "Applicable Date"), (b) the state in which Wygod is resident on the Applicable Date, and (c) any other state in the United States in which the Companies develop, distribute or provide their business services or products as of the date of the Effective Time. 3. Confidentiality. Wygod acknowledges that in the course of serving as Co-Chief Executive Officer of Parent and as a result of his relationship with the Companies prior to the Merger he has had and will continue to have access to and will learn information that is proprietary to, or confidential to Parent and the Companies and that concerns the Business including the operation, methodology and plans of Parent and the Companies and their Affiliates (as defined below), including without limitation, business strategy and plans, financial information, trade secrets, market information developments (as defined below), information regarding acquisition and other strategic partner candidates and customer information (collectively, "Proprietary 2 6 Information"). Wygod agrees that during the period beginning on the Effective Time and ending upon the later of (i) the end of the Restrictive Period or (ii) the first anniversary of the Termination Date, he will keep such Proprietary Information confidential and will not disclose directly or indirectly any such Proprietary Information to any third party and will not misuse, misappropriate or exploit such Proprietary Information in any way except as required by law or regulatory body. Upon his resignation or removal as Co-Chief Executive Officer or Chief Executive Officer of Parent, Wygod shall immediately return to Parent all copies of Proprietary Information in his possession (except his Rolodex). 4. Nonsolicitation. During the period beginning on the Effective Time and ending upon the end of the Restrictive Period, Wygod shall not directly or indirectly without the express written approval of the Board of Directors of Parent, solicit any customer, or any person or entity who is reasonably expected to become a customer of Parent, the Companies or any entity the equity of which is owned at least 40% by Parent or a Company (an "Affiliate") for any commercial pursuit which is a Competitive Business. During the period beginning on the Effective Time and ending upon the end of the Restrictive Period, Wygod shall not directly or indirectly solicit or induce, or attempt to induce, any employees, agents, or consultants of Parent, the Companies or their Affiliates to leave the employ of Parent, the Companies or their Affiliates or to do anything from which Wygod is restricted by reason of this letter agreement, nor shall Wygod, directly or indirectly, offer or aid others to offer employment to or interfere or attempt to interfere with any employees, agents or consultants of Parent, the Companies or their Affiliates. 5. Construction. Wygod hereby expressly acknowledges and agrees as follows: (A) the covenants set forth in Sections 2 through 4 above are reasonable in all respects and are necessary to protect the legitimate business and competitive interests of Parent in connection with Parent's acquisition of the Business pursuant to the Agreement; and (B) it is the intention that the provisions of this Exhibit A comply in all respects with California Business and Professional Code ss. 16601. In the event that any provision of this Exhibit A shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the geographic or business scope or the duration thereof of such covenant, or for any other reason, such invalidity or unenforceability shall attach only to the particular aspect of such provision found invalid or unenforceable as applied and shall not affect or render invalid or unenforceable any other provision of this Exhibit A and the provision shall be construed as if the geographic or business scope or the duration of such provision or other basis on which such provisions have been challenged had been more narrowly drafted so as not to be invalid or unenforceable. 6. Enforcement; Remedies. Wygod covenants, agrees and recognizes that because the breach of the covenants, or any of them, contained in Sections 2 through 4 hereof may result in immediate and irreparable injury to Parent, Parent shall be entitled to seek an injunction restraining Wygod from any violation of Sections 2 through 4 to the fullest extent allowed by law. Wygod further covenants and agrees that in the event of a material breach of any of the respective covenants and agreements contained in Sections 2 through 4 hereof, the period during 3 7 which Wygod is obligated to refrain from competing shall be extended for the entire period of such breach. Wygod further covenants, agrees and recognizes that, notwithstanding anything to the contrary contained herein, in the event of a material breach of any of the respective covenants and agreements contained in Sections 2 through 4 hereof, which remains uncured 30 days after written notice from Parent, further vesting with respect to the Current Options shall cease. Parent's entitlement to seek injunctive relief or ceasing any further Current Option vesting, as described in this Section 6, shall be Parent's sole and exclusive remedy in the event that Wygod breaches any covenant or agreement contained in this Exhibit A; provided, however, that in the case of any wilful material breach by Wygod of the covenants and agreements contained in Sections 2 through 4 hereof, nothing herein shall be construed as prohibiting Parent from pursuing any other legal or equitable remedies that may be available to it for any such breach, including the recovery of damages from Wygod. 4 EX-10.21 3 g68745a1ex10-21.txt AMENDED AND RESTATED STOCK OPTION AGREEMENT 1 EXHIBIT 10.21 Amended and Restated Stock Option Agreement dated August 21, 2000 between Medical Manager Corporation and Martin J. Wygod 2 AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of August 21, 2000 (the "Agreement") between MEDICAL MANAGER CORPORATION, a Delaware corporation (the "Company"), and MARTIN J. WYGOD (the "Participant"). WHEREAS, in light of the extraordinary services that will be required of the Participant in integrating the businesses of the companies following the merger of the Company and CareInsite, Inc., a Delaware corporation, with Healtheon/WebMD Corporation, a Delaware corporation ("Healtheon"), the Company has granted to the Participant nonqualified stock options to purchase 1,200,000 shares of common stock, $.01 par value, of the Company (the "Common Shares") upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. Confirmation of Grant of Options; Effectiveness. Pursuant to a determination by the Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board"), the Company hereby confirms that the Participant has been granted, effective as of the date hereof (the "Date of Grant"), and subject to the terms and conditions of this Agreement, the number of nonqualified stock options (the "Options") specified at the foot of the signature page hereof. Each such Option shall entitle the Participant to purchase, upon payment of the option price specified at the foot of the signature page hereof (the "Option Price"), one Common Share. The Options shall be exercisable as hereinafter provided. 2. Certain Restrictions. None of the Options may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of, except by will or the laws of descent and distribution; provided, however, that the Committee shall permit the transfer of an Option to the Participant's family members, to one or more trusts established in whole or in part for the benefit of one or more of such family members or to any other entity that is owned by such family members. During the Participant's lifetime, an Option shall be exercisable only by the Participant or by the Participant's guardian, legal representative or permitted transferee. Each transferee of an Option by will or the laws of descent and distribution or other permitted transferee shall, as a condition to the transfer thereof, execute an agreement pursuant to which it shall become a party to this Agreement. Any attempt to sell, transfer, assign, pledge or otherwise encumber or dispose of any Option contrary to the provisions of this Agreement, and any levy, attachment or similar process upon any Option shall be null and void and without effect. 3. Terms and Conditions of Options. The Options evidenced hereby are subject to the following terms and conditions: (a) Vesting. Subject to Section 3(b), the Options shall vest and become exercisable ("Vested Options") as follows: 2.0833% of the Options shall vest and become exercisable on the first day of each month following the Date of Grant, commencing September 1, 2000, with 100% of the Options being vested and exercisable on August 1, 2004. 3 (b) Option Period. (i) The Options shall not be exercisable following the tenth anniversary of the Date of Grant, and shall be subject to earlier termination as provided in Section 3(b)(iii). (ii) In the event that the Participant's employment with the Company and its subsidiaries is terminated (A) as a result of the Participant's death or the Participant becoming Disabled (as defined below), (B) by the Company without Cause (as defined below) or (C) by the Participant for Good Reason (as defined below), the Options shall be fully vested and exercisable as of the date on which such employment terminates. (iii) In the event that the Participant's employment with the Company and its subsidiaries is terminated by the Company for Cause or by the Participant without Good Reason, any Options which have not become Vested Options as of the date of termination shall terminate and be cancelled without any consideration being paid therefor; provided, however, that a change in the Participant's status with the Surviving Corporation (as defined in the Agreement and Plan of Merger dated February 13, 2000 between Healtheon and the Company, as amended by Amendment No. 1 thereto dated as of June 18, 2000 (the "Merger Agreement")) from Co-Chief Executive Officer or Chief Executive Officer to any other position (including Chairman) with the consent of the Surviving Corporation and the Participant shall not be treated as a termination of the Participant's employment for purposes of this Agreement. (iv) In the event that the Participant's employment with the Company and its subsidiaries terminates for any reason, the Participant (or the Participant's estate) shall be entitled to exercise any Options which have become Vested Options as of the date of termination until the tenth anniversary of the Date of Grant. (v) In the event of a Change in Control (as defined below), the Options shall be fully vested and exercisable as of the date on which such Change in Control occurs. For purposes of this Agreement, a "Change in Control" means a transaction (other than the transactions contemplated by the Merger Agreement) that occurs after the Effective Time (as defined in the Merger Agreement), if: 1. Any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of the Surviving Corporation; or 2. The sale of all or substantially all of the assets of the Surviving Corporation to a person, entity or group occurs in a transaction (except for a sale-leaseback transaction) where the Surviving Corporation or the holders of the common stock of the Surviving Corporation do not receive (i) voting securities representing a majority of the voting power entitled to vote on a regular basis for the board of directors of the acquiring entity or of an affiliate which controls the acquiring entity, or (ii) securities representing a majority of the equity interest in the acquiring entity or of an affiliate that controls the acquiring entity, if other than a corporation; or 3. A complete liquidation or dissolution of the Surviving Corporation shall have occurred; 2 4 provided, however, that the provisions of this clause (v) shall be subject to any necessary approvals by the Committee. (c) Certain Definitions. (i) For purposes of this Agreement, "Cause" means a final, non-appealable court adjudication in a civil or criminal proceeding that the Participant has during his employment committed a fraud or felony directed against the Company relating to or adversely affecting his employment. (ii) For purposes of this Agreement, the Participant shall be "Disabled" if the Participant becomes incapacitated by bodily injury or disease (including as a result of mental illness) so as to be unable to regularly perform the duties of his position for a period in excess of 180 days in any consecutive twelve-month period. (iii) For purposes of this Agreement, "Good Reason" means any of the following conditions or events: 1. a reduction in the Participant's title or responsibilities with the Company or the Surviving Corporation, or if he is required to report to any person other than the full Board (following the Effective Time, the full Board of Directors of the Surviving Corporation); 2. any reduction in any compensation or fringe benefits provided by the Company; 3. any breach by the Company of this Agreement or any other material agreement between the Company and the Participant; 4. the failure of the Surviving Corporation to assume the obligations of the Company hereunder and agree to be bound by the terms hereof; or 5. a change in the location from which the Participant performs his services for the Company or the Surviving Corporation from his residence in the San Diego, California area. (d) Notice of Exercise. Subject to Sections 3(e) and 5(a) hereof, the Participant may exercise any or all of the Vested Options by giving written notice to the Chief Financial Officer of the Company at its principal business office. The date of exercise of a Vested Option shall be the later of (i) the date on which the Chief Financial Officer of the Company receives such written notice or (ii) the date on which the conditions provided in Sections 3(e) and 5(a) hereof are satisfied. (e) Payment. Prior to the issuance of a certificate pursuant to Section 3(h) hereof evidencing Common Shares, the Participant shall have paid to the Company the Option Price of all Common Shares purchased pursuant to exercise of such Options, in cash or by certified or official bank check, and all applicable tax withholding obligations as provided in Section 5(a) of this Agreement. The Option Price may also be payable by a customary "cashless" exercise procedure through a broker or in such other form as the Committee may approve. 3 5 (f) Shareholder Rights. The Participant shall have no rights as a shareholder with respect to any Common Shares issuable upon the exercise of an Option until a certificate or certificates evidencing such shares shall have been issued to the Participant, and, except as provided in Section 6, no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date upon which the Participant shall become the holder of record thereof. (g) Compliance with Securities Laws. The Company shall, on or prior to the date on which an Option becomes exercisable, use its best efforts to (A) file a registration statement with the Securities and Exchange Commission on Form S-8 with respect to the Common Shares subject to such Option and cause such registration statement to be declared effective and remain effective for so long as any Option remains outstanding and (B) qualify such Common Shares under applicable state "blue sky" laws (or determine that an exemption under such blue sky laws is available) and cause such Common Shares to remain so qualified (or exempt) for so long as any Option remains outstanding. (h) Issuance of Certificate. As soon as practicable following the exercise of any Options, a certificate evidencing the number of Common Shares issued in connection with such exercise shall be issued in the name of the Participant. 4. Representations and Warranties. The Company and the Participant represent that this Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding agreement of such party, enforceable against such party in accordance with its terms, except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and by general principles of equity. 5. Miscellaneous. (a) Tax Withholding. The Company and its subsidiaries shall have the right to require the Participant to remit to the Company, prior to the delivery of any certificates evidencing Common Shares pursuant to the exercise of an Option, any amount sufficient to satisfy any minimum federal, state or local tax withholding requirements. Prior to the Company's determination of such withholding liability, the Participant shall have the right to make an irrevocable election to satisfy, in whole or in part, such obligation to remit taxes by directing the Company to withhold Common Shares that would otherwise be received by the Participant. (b) No Restriction on Right of Company to Effect Corporate Changes. Subject to Section 6, this Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital structure or business of the Company, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Shares or the rights thereof or which are convertible into or exchangeable for Common Shares, or the dissolution or liquidation of the Company, or any sale 4 6 or transfer of all or any part of the assets or business of the Company, or any other corporate act or proceeding, whether of a similar character or otherwise. 6. Adjustment. The number and price per Common Share covered by any Option, and any other rights under any Option, shall be appropriately adjusted by the Board or the Committee, as the case may be, to reflect any subdivision (stock split) or consolidation (reverse split) of the issued Common Shares, or any other recapitalization of the Company, or any business combination or other transaction involving the Company (including, without limitation, rights offerings and issuances of securities for consideration that is less than the fair market value thereof), which shall affect the rights of holders of Common Shares. The Committee or the Board, as the case may be, shall provide for appropriate adjustment of the Options in the event of stock dividends or distributions of assets or securities owned by the Company to its stockholders. Without limiting the foregoing, any adjustment pursuant to this Section 6 shall (i) be on terms that are no less favorable to the Participant than those applicable to any other holder of stock options or convertible securities issued by the Company and (ii) entitle the Participant to receive, upon exercise of the Options, in addition to the Common Shares that remain subject to such Options, such stock, securities, other property and rights that the Participant, as a holder of Common Shares, would have received if such Options had been exercised prior to the date of the applicable event or transaction described in this Section 6. 7. Survival; Assignment. All agreements, representations and warranties made herein and in any certificates delivered pursuant hereto shall survive the issuance to the Participant of the Options and the Common Shares and, notwithstanding any investigation heretofore or hereafter made by the Participant or the Company or on the Participant's or the Company's behalf, shall continue in full force and effect. Without the prior written consent of the Company, the Participant may not assign any of his rights hereunder except as permitted by Section 2. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the heirs and permitted successors and assigns of such party; and all agreements herein by or on behalf of the Company, or by or on behalf of the Participant, shall bind and inure to the benefit of the heirs and permitted successors and assigns of such parties hereto. 8. Gross-Up Payment. (i) Anything in this Agreement to the contrary or any termination of the Options notwithstanding, in the event it shall be determined that any payment or distribution or benefit received or to be received by the Participant pursuant to the terms of this Agreement or any other payment or distribution or benefit made or provided by the Company, or any of its subsidiaries and affiliates, to or for the benefit of the Participant (whether pursuant to this Agreement or otherwise and determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes 5 7 (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions actually disallowed under Section 68 of the Code solely as a direct result of the inclusion of the Gross-Up Payment in the Participant's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (ii) Subject to the provisions of Sections 8(i) and 8(iii), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's certified public accounting firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Participant or the Company that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Participant within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8(iii) and the Participant thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant. (iii) The Participant shall notify the Company in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Participant is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which the Participant gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Participant in writing prior to the expiration of such period that it desires to contest such claim, the Participant shall: 6 8 (a) give the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; and (c) cooperate with the Company in good faith in order effectively to contest such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Participant shall agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Participant, on an interest-free basis and shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income and employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Participant shall be entitled to settle or contest, as the case may be, any other issue (an "Other Issue") raised by the IRS or any other taxing authority; provided, however, that if, solely as a result of any contest by the Company pursuant to this Section 8(iii), the Participant's ability to settle or otherwise resolve any such Other Issue is delayed, then the Company will reimburse the Participant, on an after-tax basis, for any additional interest incurred by the Participant as a result of such delay. (iv) If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8(iii), the Participant becomes entitled to receive any refund with respect to such claim, the Participant shall (subject to the Company's complying with the requirements of Section 8(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8(iii), a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Participant in writing of its intent to contest such 7 9 denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Consulting Engagement. In the event that the Participant terminates his employment with the Company and its subsidiaries without Good Reason after the six-month anniversary of the Effective Time but prior to the third anniversary of the Effective Time, the Participant shall, at the request of the Company, make himself available to provide consulting and advisory services (the "Consulting Services") to the Company during the period beginning on the date of termination and ending on the third anniversary of the Effective Time; provided, however, that such Consulting Services shall be performed at such times and places as are acceptable to the Participant in his sole discretion. The Participant shall not be entitled to receive any additional compensation for the Consulting Services. 10. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail, return receipt requested, postage prepaid, addressed, if to the Participant, to his attention at the most recent mailing address that the Company has on record and, if to the Company, to it at River Drive Center 2, 669 River Drive, Elmwood Park, New Jersey 07407-1361, Telecopier No.: (201) 703-3401, Attention: Chief Financial Officer. All such notices shall be conclusively deemed to be received and shall be effective, if sent by hand delivery, upon receipt, or if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11. Waiver. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 12. Source of Rights. This Agreement shall be the sole and exclusive source of any and all rights which the Participant, and the Participant's personal representatives or heirs at law, may have in respect of the Options as granted hereunder. 13. Captions. The captions contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 14. Entire Agreement; Governing Law; Jurisdiction. This Agreement sets forth the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof (including, without limitation, the Stock Option Agreement dated as of August 21, 2000 between the Company and the Participant). The Participant and the Company acknowledge and agree that the terms and conditions of the letter agreement dated June 18, 2000 between Healtheon and the Participant shall not apply to the Options granted pursuant to this Agreement. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of this Agreement. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey (without 8 10 reference to the choice of law provisions of New Jersey law) applicable to contracts executed and to be wholly performed within such State, and the State or Federal court sitting in San Diego County, California shall have exclusive jurisdiction of the Company and the Participant for purposes of adjudicating any disputes under this Agreement. The Participant and the Company hereby consent to personal jurisdiction and venue in the State or Federal court sitting in San Diego County, California and hereby waive any claim or defense that the party lacks minimum contacts with the forum, that such State or Federal court lacks personal jurisdiction of the parties, or that such State or Federal court is an improper or inconvenient venue. 9 11 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Participant has executed this Agreement, both as of the day and year first above written. MEDICAL MANAGER CORPORATION By: /s/ CHARLES A. MELE -------------------------------------------------- Name: Charles A. Mele Title: Executive Vice President - General Counsel PARTICIPANT /s/ MARTIN J. WYGOD ----------------------------------------------------- Martin J. Wygod Number of Options: 1,200,000 Option Price: $31.875 10 EX-10.22 4 g68745a1ex10-22.txt LETTER AGREEMENT DATED SEPTEMBER 12, 2000 1 EXHIBIT 10.22 Letter Agreement dated September 12, 2000 between Registrant and Jeffrey T. Arnold 2 HEALTHEON/WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENNOX BUILDING ATLANTA, GEORGIA 30326 September 12, 2000 Mr. Jeffrey T. Arnold 3399 Peachtree Street NE 400 The Lennox Building Atlanta, Georgia 30326 Dear Mr. Arnold: Healtheon/WebMD Corporation (the "COMPANY") granted to you options to acquire 500,000 shares of our common stock under the Company's 1996 Stock Plan and options to acquire 1,500,000 shares of our common stock under the Company's 2000 Long-Term Incentive Plan (the "NEW OPTIONS"), as evidenced by the Non-Qualified Stock Option Notice dated May 12, 2000 and August 1, 2000, respectively, from the Company to you. We have agreed to modify certain aspects of your New Options as reflected in the Amended and Restated Option Agreement attached hereto as Exhibit A (the "AMENDED OPTION AGREEMENT"). Your execution of this letter agreement is an inducement to the Company entering into the Amended Option Agreement. In conjunction therewith, we request that you agree to become bound by the noncompetition, nonsolicitation and confidentiality provisions set forth on Exhibit B hereto effective upon the execution of the Amended Option Agreement. By agreeing to the terms of this letter, you confirm to us that (i) in addition to the New Options, you currently own options to acquire 2,486,741 shares of the Company (together with the New Options, the "CURRENT OPTIONS") and (ii) you will become bound by the noncompetition provisions described on Exhibit B upon the execution of the Amended Option Agreement. As additional consideration for your agreements set forth herein, the Company agrees as follows: 1. The provisions of Section 3(c)(ii) of the Amended Option Agreement (providing for vesting in the case of death, disability, termination without cause or termination for good reason) apply to all of your Current Options. 2. In the event of the cessation of your employment with the Company for any reason or the cessation of your service in the officer position of Co-Chief Executive Officer or Chief Executive Officer of the Company for any reason, Current Options held by you to acquire the Applicable Amount of shares of common stock that would not otherwise be vested shall continue to vest in accordance with the applicable schedule, and shall otherwise be treated for purposes of the terms and conditions thereof, as if you remained employed through the earlier of (a) the first anniversary of the last scheduled vesting date for such Current Options or, (b) the material breach by you of the provisions of Exhibit B to this letter 3 agreement. For purposes of this paragraph 2., the Applicable Amount shall mean 585,000 if such cessation occurs on or prior to December 15, 2001, 351,000 if such cessation occurs after December 15, 2001 and on or before December 15, 2002, 234,000 if such cessation occurs after December 15, 2002 but on or before December 15, 2003, 117,000 if such cessation occurs after December 15, 2003 but on or before December 15, 2004. In the event cessation occurs after December 15, 2004, this paragraph 2. shall not apply. In the event that on the date of such cessation, Current Options to acquire more than the Applicable Amount of shares are not yet vested and would not be vested as a result of such cessation, you shall be entitled to select which of the Current Options the vesting schedules for which shall continue under this paragraph. 3. You shall be entitled to exercise your Current Options which become vested until the tenth anniversary of the date of grant of such Current Option, regardless of the date of the cessation of your employment with the Company. In addition to agreeing to the provisions of Exhibit B, you agree that neither the Company's acquisition of Medical Manager Corporation pursuant to the terms of the merger agreement with respect to that acquisition, as amended, nor the Company's acquisition of CareInsite pursuant to the terms of the merger agreement with respect to that acquisition, as amended, shall constitute a Change of Control for purposes of your Employment Agreement dated September 30, 1998, as amended by that letter agreement dated May 20, 1999 (the "Employment Agreement") and your service as the Company's Co-CEO as provided in the Medical Manager merger agreement shall not constitute a change in duties or position for purposes of Section 3.2(b)(i) of your Employment Agreement. This letter, the Amended Option Agreement and Exhibit B hereto shall apply regardless of whether or not the Company acquires Medical Manager Corporation and CareInsite, Inc. and constitute the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the parties relating to the subject matter hereof, including without limitation, your Employment Agreement. 2 4 If you wish to accept the terms of this letter, please indicate by signing below and returning the signed copy to the undersigned at the address set forth above. Sincerely, Healtheon/WebMD Corporation By: /s/ Jack Dennison ---------------------------------------- Authorized Representative Accepted and Agreed: /s/ Jeff Arnold - ------------------------------- Jeffrey T. Arnold September 12, 2000 3 5 EXHIBIT A AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of September 12, 2000 (the "Agreement") between HEALTHEON/WEBMD Corporation, a Delaware corporation (the "Company"), and JEFFREY T. ARNOLD (the "Participant"). WHEREAS, the Company granted to the Participant nonqualified stock options to purchase 500,000 shares of common stock, $.0001 par value, of the Company (the "Common Shares") on May 12, 2000 under the Company's 1996 Stock Plan, as evidenced by the Non-Qualified Stock Option Notice dated May 12, 2000 (the "May Option Agreement") from the Company to the Participant; WHEREAS, the Company granted to the Participant nonqualified stock options to purchase 1,500,000 Common Shares on August 1, 2000 under the Company's 2000 Long-Term Incentive Plan, as evidenced by the Non-Qualified Stock Option Notice dated August 1, 2000 (the "August Option Agreement") from the Company to the Participant; WHEREAS, the Company and Participant desire to amend and restate the May Option Agreement and the August Option Agreement, and to that end such agreements are hereby amended and replaced with this Agreement, upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. Confirmation of Grant of Options; Effectiveness. Pursuant to a determination by the Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board"), the Company hereby confirms that the Participant has been granted (i) effective as of May 12, 2000 (a "Date of Grant"), and subject to the terms and conditions of this Agreement, nonqualified stock options (the "May Options") to acquire 500,000 Common Shares and (ii) effective as of August 1, 2000 (a "Date of Grant"), and subject to the terms and conditions of this Agreement, nonqualified stock options (the "August Options, and together with the May Options, the "Options") to acquire 1,500,000 Common Shares. Each such Option shall entitle the Participant to purchase, upon payment of $16.03 (the "Option Price"), one Common Share. The Options shall be exercisable as hereinafter provided. 2. Certain Restrictions. None of the Options may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of, except by will or the laws of descent and distribution; provided, however, that the Committee shall permit the transfer of an Option to the Participant's family members, to one or more trusts established in whole or in part for the benefit of one or more of such family members or to any other entity that is owned by such family members. During the Participant's lifetime, an Option shall be exercisable only by the Participant or by the Participant's guardian, legal representative or permitted transferee. Each transferee of an Option by will or the laws of descent and distribution or other permitted transferee shall, as a condition to the transfer thereof, execute an agreement pursuant to which it shall become a party to this Agreement. Any attempt to sell, transfer, assign, pledge or otherwise encumber or dispose of any Option contrary to the provisions of this Agreement, and any levy, attachment or similar process upon any Option shall be null and void and without effect. 3. Terms and Conditions of Options. The Options evidenced hereby are subject to the following terms and conditions: 6 (a) Vesting. Subject to Section 3(c), the Options shall vest (the "Vested Options") as to one forty-eighth (1/48th) of the Options on the first day of each month after the Date of Grant for 48 consecutive months until fully vested (i.e., The Participant will become fully vested with respect to the May Options on May 1, 2004 and with respect to the August Options on August 1, 2004) (the "Vesting Date"). (b) Exercisability. Subject to Section 3(c), the Participant may exercise Vested Options, in whole or in part, to purchase a whole number of Common Shares. (c) Option Period. (i) The Vested Options shall not be exercisable following the tenth anniversary of the Date of Grant, and shall be subject to earlier termination as provided in Section 3(c)(iii). (ii) In the event that the Participant's employment with the Company and its subsidiaries is terminated (A) as a result of the Participant's death or the Participant becoming Disabled (as defined below), (B) by the Company without Cause (as defined below) or (C) by the Participant for Good Reason (as defined below), the Options shall be fully vested and exercisable as of the date on which such employment terminates. (iii) In the event that the Participant's employment with the Company and its subsidiaries is terminated by the Company for Cause or by the Participant without Good Reason, all unvested Options shall terminate and be cancelled without any consideration being paid therefor; provided, however, that a change in the Participant's status with the Company from Co-Chief Executive Officer or Chief Executive Officer to any other position (including Chairman) with the consent of the Company and the Participant shall not be treated as a termination of the Participant's employment for purposes of this Agreement. (iv) In the event that the Participant's employment with the Company and its subsidiaries terminates for any reason, the Participant (or the Participant's estate) shall be entitled to exercise the Options which have become Vested Options as of the date of termination until the tenth anniversary of the Date of Grant. (v) In the event of a Change in Control (as defined below), the Options shall be fully vested and exercisable as of the date on which such Change in Control occurs. For purposes of this Agreement, a "Change in Control" means a transaction (other than the transactions contemplated by the Merger Agreement between Medical Manager Corporation and the Company) that occurs after the Effective Time (as defined in that Merger Agreement), if: 1. Any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of the surviving corporation; or 2. The sale of all or substantially all of the assets of the surviving corporation to a person, entity or group occurs in a transaction (except for a sale-leaseback transaction) where the surviving corporation or the holders of the common stock of the surviving corporation do not receive (i) voting securities representing a majority of the voting power entitled to vote on a regular basis for the board of directors of the acquiring entity or of an affiliate which controls the acquiring entity, or (ii) securities representing a 2 7 majority of the equity interest in the acquiring entity or of an affiliate that controls the acquiring entity, if other than a corporation; or 3. A complete liquidation or dissolution of the surviving corporation shall have occurred; provided, however, that the provisions of this clause (v) shall be subject to any necessary approvals by the Committee. (d) Certain Definitions. (i) For purposes of this Agreement, "Cause" means a final, non-appealable court adjudication in a civil or criminal proceeding that the Participant has during his employment committed a fraud or felony directed against the Company relating to or adversely affecting his employment. (ii) For purposes of this Agreement, the Participant shall be "Disabled" if the Participant becomes incapacitated by bodily injury or disease (including as a result of mental illness) so as to be unable to regularly perform the duties of his position for a period in excess of 180 days in any consecutive twelve-month period. (iii) For purposes of this Agreement, "Good Reason" means any of the following: 1. a reduction in the Participant's title or responsibilities with the Company, or if he is required to report to any person other than the full Board; 2. any reduction in any compensation or fringe benefits provided by the Company; 3. any breach by the Company of this Agreement or any other material agreement between the Company and the Participant; 4. any requirement that the Participant, without his consent, be based at any office or location other than in Atlanta, Georgia. (e) Notice of Exercise. Subject to Sections 3(f) and 5(a) hereof, the Participant may exercise any or all of the Vested Options by giving written notice to the Chief Financial Officer of the Company at its principal business office. The date of exercise of a Vested Option shall be the later of (i) the date on which the Chief Financial Officer of the Company receives such written notice or (ii) the date on which the conditions provided in Sections 3(f) and 5(a) hereof are satisfied. (f) Payment. Prior to the issuance of a certificate pursuant to Section 3(i) hereof evidencing Common Shares, the Participant shall have paid to the Company the Option Price of all Common Shares purchased pursuant to exercise of such Options, in cash or by certified or official bank check, and all applicable tax withholding obligations as provided in Section 5(a) of this Agreement. The Option Price may also be payable by a customary "cashless" exercise procedure through a broker or in such other form as the Committee may approve. (g) Shareholder Rights. The Participant shall have no rights as a shareholder with respect to any Common Shares issuable upon the exercise of an Option until a certificate or 3 8 certificates evidencing such shares shall have been issued to the Participant, and, except as provided in Section 6, no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date upon which the Participant shall become the holder of record thereof. (h) Compliance with Securities Laws. The Company shall, on or prior to the date on which an Option becomes exercisable, use its best efforts to (A) file a registration statement with the Securities and Exchange Commission on Form S-8 with respect to the Common Shares subject to such Option and cause such registration statement to be declared effective and remain effective for so long as any Option remains outstanding and (B) qualify such Common Shares under applicable state "blue sky" laws (or determine that an exemption under such blue sky laws is available) and cause such Common Shares to remain so qualified (or exempt) for so long as any Option remains outstanding. (i) Issuance of Certificate. As soon as practicable following the exercise of any Options, a certificate evidencing the number of Common Shares issued in connection with such exercise shall be issued in the name of the Participant. 4. Representations and Warranties. The Company and the Participant represent that this Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding agreement of such party, enforceable against such party in accordance with its terms, except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and by general principles of equity. 5. Miscellaneous. (a) Tax Withholding. The Company and its subsidiaries shall have the right to require the Participant to remit to the Company, prior to the delivery of any certificates evidencing Common Shares pursuant to the exercise of an Option, any amount sufficient to satisfy any minimum federal, state or local tax withholding requirements. Prior to the Company's determination of such withholding liability, the Participant shall have the right to make an irrevocable election to satisfy, in whole or in part, such obligation to remit taxes by directing the Company to withhold Common Shares that would otherwise be received by the Participant. (b) No Restriction on Right of Company to Effect Corporate Changes. Subject to Section 6, this Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital structure or business of the Company, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Shares or the rights thereof or which are convertible into or exchangeable for Common Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the assets or business of the Company, or any other corporate act or proceeding, whether of a similar character or otherwise. 6. Adjustment. 4 9 The number and price per Common Share covered by any Option, and any other rights under any Option, shall be appropriately adjusted by the Board or the Committee, as the case may be, to reflect any subdivision (stock split) or consolidation (reverse split) of the issued Common Shares, or any other recapitalization of the Company, or any business combination or other transaction involving the Company (including, without limitation, rights offerings and issuances of securities for consideration that is less than the fair market value thereof), which shall affect the rights of holders of Common Shares. The Committee or the Board, as the case may be, shall provide for appropriate adjustment of the Options in the event of stock dividends or distributions of assets or securities owned by the Company to its stockholders. Without limiting the foregoing, any adjustment pursuant to this Section 6 shall (i) be on terms that are no less favorable to the Participant than those applicable to any other holder of stock options or convertible securities issued by the Company and (ii) entitle the Participant to receive, upon exercise of the Options, in addition to the Common Shares that remain subject to such Options, such stock, securities, other property and rights that the Participant, as a holder of Common Shares, would have received if such Options had been exercised prior to the date of the applicable event or transaction described in this Section 6. 7. Survival; Assignment. All agreements, representations and warranties made herein and in any certificates delivered pursuant hereto shall survive the issuance to the Participant of the Options and the Common Shares and, notwithstanding any investigation heretofore or hereafter made by the Participant or the Company or on the Participant's or the Company's behalf, shall continue in full force and effect. Without the prior written consent of the Company, the Participant may not assign any of his rights hereunder except as permitted by Section 2. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the heirs and permitted successors and assigns of such party; and all agreements herein by or on behalf of the Company, or by or on behalf of the Participant, shall bind and inure to the benefit of the heirs and permitted successors and assigns of such parties hereto. 8. Gross-Up Payment(i) Anything in this Agreement to the contrary or any termination of the Options notwithstanding, in the event it shall be determined that any payment or distribution or benefit received or to be received by the Participant pursuant to the terms of this Agreement or any other payment or distribution or benefit made or provided by the Company, or any of its subsidiaries and affiliates, to or for the benefit of the Participant (whether pursuant to this Agreement or otherwise and determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions actually disallowed under Section 68 of the Code solely as a direct result of the inclusion of the Gross-Up Payment in the Participant's adjusted gross income and the highest applicable marginal rate of federal income taxation for the 5 10 calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (ii) Subject to the provisions of Sections 8(i) and 8(iii), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's certified public accounting firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Participant or the Company that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Participant within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8(iii) and the Participant thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant. (iii) The Participant shall notify the Company in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Participant is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which the Participant gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Participant in writing prior to the expiration of such period that it desires to contest such claim, the Participant shall: (a) give the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; and (c) cooperate with the Company in good faith in order effectively to contest such claim; 6 11 provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Participant shall agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Participant, on an interest-free basis and shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income and employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Participant shall be entitled to settle or contest, as the case may be, any other issue (an "Other Issue") raised by the IRS or any other taxing authority; provided, however, that if, solely as a result of any contest by the Company pursuant to this Section 8(iii), the Participant's ability to settle or otherwise resolve any such Other Issue is delayed, then the Company will reimburse the Participant, on an after-tax basis, for any additional interest incurred by the Participant as a result of such delay. (iv) If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8(iii), the Participant becomes entitled to receive any refund with respect to such claim, the Participant shall (subject to the Company's complying with the requirements of Section 8(iii) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8(iii), a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Participant in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Severance; Consulting Engagement. In the event that the Participant terminates his employment with the Company and its subsidiaries with Good Reason or the Company terminates the employment of the Participant without Cause, the Company shall pay to the Participant, in lieu of any other cash severance provided for in any other agreement, an amount equal to 12 months of his then-current base salary, if any, less applicable withholding taxes pursuant to the Company's customary payroll practices, which amount shall be due in full within 5 days of such termination. In the event that the Participant terminates his employment with the Company and its subsidiaries without Good Reason after March 12, 2000 but prior to September 12, 2003, the Participant shall, at the request of the Company, make himself available 7 12 to provide consulting and advisory services (the "Consulting Services") to the Company during the period beginning on the date of termination and ending on September 12, 2003; provided, however, that such Consulting Services shall be performed at such times and places as are acceptable to the Participant in his sole discretion. The Participant shall not be entitled to receive any additional compensation for the Consulting Services. 10. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail, return receipt requested, postage prepaid, addressed, if to the Participant, to his attention at the most recent mailing address that the Company has on record and, if to the Company, to it at 3399 Peachtree Street NE, 400 The Lennox Building, Atlanta, Georgia 30326, Attention: General Counsel. All such notices shall be conclusively deemed to be received and shall be effective, if sent by hand delivery, upon receipt, or if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11. Waiver. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 12. Source of Rights. This Agreement shall be the sole and exclusive source of any and all rights which the Participant, and the Participant's personal representatives or heirs at law, may have in respect of the Options as granted hereunder. 13. Captions. The captions contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 14. Entire Agreement; Governing Law; Jurisdiction. This Agreement sets forth the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of this Agreement. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without reference to the choice of law provisions of Delaware law) applicable to contracts executed and to be wholly performed within such State, and the State or Federal court sitting in Fulton County, Georgia shall have exclusive jurisdiction of the Company and the Participant for purposes of adjudicating any disputes under this Agreement. The Participant and the Company hereby consent to personal jurisdiction and venue in the State or Federal court sitting in Fulton County, Georgia and hereby waive any claim or defense that the party lacks minimum contacts with the forum, that such State or Federal court lacks personal jurisdiction of the parties, or that such State or Federal court is an improper or inconvenient venue. 8 13 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Participant has executed this Agreement, both as of the day and year first above written. HEALTHEON/WEBMD CORPORATION By: ------------------------------------- Name: Title: PARTICIPANT ----------------------------------------- Jeffrey T. Arnold 9 14 EXHIBIT B NONCOMPETITION; NONSOLICITATION PROVISIONS 1. Background. Jeffrey T. Arnold ("Arnold") acknowledges and agrees that: (a) Healtheon/WebMD Corporation and each of its direct and indirect subsidiaries (collectively, the "Companies") are currently engaged in the following businesses: (i) development or provision of an Internet-based healthcare electronic commerce network that links physicians, payers, suppliers or patients, (ii) facilitating or processing administrative or clinical healthcare transactions, (iii) clinical and administrative healthcare related electronic commerce business, and (iv) development or provision of physician practice management information systems or other healthcare software systems relating to administrative and clinical functions, to physicians, practice associations, management service organizations, physician practice management organizations or other providers of healthcare services (collectively, the "Business"). The Business is conducted by the Companies throughout the United States. (c) In order to protect the Business (defined above) of the Company, and as a condition to the Company's execution of the Amended Option Agreement, the Company is requiring Arnold to agree to become bound to the provision of this Exhibit B. (f) The provisions of this Exhibit B are reasonable in light of the substantial benefit that will accrue to Arnold through the Amended Option Agreement and are reasonably necessary to protect the Business of the Company. 2. Noncompete. Arnold agrees that for the period ending on the earlier of (i) the second (2nd) anniversary of the later of the date (the "Termination Date") of Arnold's resignation or removal as Co-Chief Executive Officer, Chief Executive Officer or as a director of the Company or any successor to its Business or (ii) September 12, 2003 (the "Restrictive Period"), without the prior written consent of the Company, Arnold shall not Compete (defined below) with the Business of the Companies, except as otherwise permitted under this Section 2. For purposes of this Agreement, "Compete" shall mean: (i) within the Territory (defined below), to engage in a business or business activities that are either (A) substantially similar to, or (B) competitive with, the Business, in each case as engaged in by the Companies on the date hereof including changes in and expansions of such Business reasonably anticipated on the date hereof (collectively, a "Competitive Business"); (ii) to assist any person or entity (whether in a managerial, financial, employment, advisory or other capacity or as a stockholder or owner, except as set forth in clause (iii) below) to engage in a Competitive Business; or (iii) to own any interest in or to organize a corporation, partnership or other business or organization which engages in a Competitive Business; provided, however, that nothing in clause (iii) above shall prohibit Arnold from acquiring or holding, for investment purposes only, less than five percent (5%) of the outstanding publicly traded securities of any corporation which may compete directly or indirectly with the Business; or less than five percent (5%) of the outstanding securities of any corporation, partnership or other business or organization, whether or not publicly traded, which competes directly or indirectly with the Business so long as he is not employed by and does not consult with, or become a director of or otherwise engage in activities for such competing 15 company; provided further that this provision shall not apply in the event the Company or the Company's direct or indirect subsidiaries or any person deriving title to the goodwill of the Business of the Companies being acquired or shares of the Companies being acquired ceases to carry on a business comparable to the Business of the Companies within the Territory; provided further that this provision shall not prevent or impair Arnold from performing usual investment banking services for a person or entity engaged in a Competitive Business if such services do not materially relate to or involve such Competitive Business. "Territory" shall mean (a) the area within a 100 mile radius of that office of the Company from which Arnold performed the majority of his services during the one-year period ending on the earlier of his resignation or removal as a director of the Company, or the 3rd anniversary of the date hereof (the "Applicable Date"), (b) the state in which Arnold is resident on the Applicable Date, and (c) any other state in the United States in which the Companies develop, distribute or provide their business services or products as of the Applicable Date. 3. Confidentiality. Arnold acknowledges that in the course of serving as Chief Executive Officer of the Company and as a result of his relationship with the Companies he has had and will continue to have access to and will learn information that is proprietary to, or confidential to the Companies and that concerns the Business including the operation, methodology and plans of the Companies and their Affiliates (as defined below), including without limitation, business strategy and plans, financial information, trade secrets, market information developments (as defined below), information regarding acquisition and other strategic partner candidates and customer information (collectively, "Proprietary Information"). Arnold agrees that during the period beginning on the date hereof and ending upon the later of (i) the end of the Restrictive Period or (ii) the first anniversary of the Termination Date, he will keep such Proprietary Information confidential and will not disclose directly or indirectly any such Proprietary Information to any third party and will not misuse, misappropriate or exploit such Proprietary Information in any way except as required by law or regulatory body. Upon his resignation or removal as Co-Chief Executive Officer or Chief Executive Officer of the Company, Arnold shall immediately return to the Company all copies of Proprietary Information in his possession (except his Rolodex). 4. Nonsolicitation. During the period beginning on the date hereof and ending upon the end of the Restrictive Period, Arnold shall not directly or indirectly without the express written approval of the Board of Directors of the Company, solicit any customer, or any person or entity who is reasonably expected to become a customer of the Companies or any entity the equity of which is owned at least 40% by the Company or any of the Companies (an "Affiliate") for any commercial pursuit which is a Competitive Business. During the period beginning on the date hereof and ending upon the end of the Restrictive Period, Arnold shall not directly or indirectly solicit or induce, or attempt to induce, any employees, agents, or consultants of the Company, the Companies or their Affiliates to leave the employ of the Company, the Companies or their Affiliates or to do anything from which Arnold is restricted by reason of this letter agreement, nor shall Arnold, directly or indirectly, offer or aid others to offer employment to or interfere or attempt to interfere with any employees, agents or consultants of the Companies or their Affiliates. 2 16 5. Construction. Arnold hereby expressly acknowledges and agrees as follows: (A) the covenants set forth in Sections 2 through 4 above are reasonable in all respects and are necessary to protect the legitimate business and competitive interests of the Company; and (B) The provisions of this Exhibit B shall be governed by the laws of the state of Delaware (other than the choice of law provisions of Delaware law). In the event that any provision of this Exhibit B shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the geographic or business scope or the duration thereof of such covenant, or for any other reason, such invalidity or unenforceability shall attach only to the particular aspect of such provision found invalid or unenforceable as applied and shall not affect or render invalid or unenforceable any other provision of this Exhibit B and the provision shall be construed as if the geographic or business scope or the duration of such provision or other basis on which such provisions have been challenged had been more narrowly drafted so as not to be invalid or unenforceable. 6. Enforcement; Remedies. Arnold covenants, agrees and recognizes that because the breach of the covenants, or any of them, contained in Sections 2 through 4 hereof may result in immediate and irreparable injury to the Company, the Company shall be entitled to seek an injunction restraining Arnold from any violation of Sections 2 through 4 to the fullest extent allowed by law. Arnold further covenants and agrees that in the event of a material breach of any of the respective covenants and agreements contained in Sections 2 through 4 hereof, the period during which Arnold is obligated to refrain from competing shall be extended for the entire period of such breach. Arnold further covenants, agrees and recognizes that, notwithstanding anything to the contrary contained herein, in the event of a material breach of any of the respective covenants and agreements contained in Sections 2 through 4 hereof, which remains uncured 30 days after written notice from the Company, further vesting with respect to the Current Options shall cease. The Company's entitlement to seek injunctive relief or ceasing any further Current Option vesting, as described in this Section 6, shall be the Company's sole and exclusive remedy in the event that Arnold breaches any covenant or agreement contained in this Exhibit A; provided, however, that in the case of any willful material breach by Arnold of the covenants and agreements contained in Sections 2 through 4 hereof, nothing herein shall be construed as prohibiting the Company from pursuing any other legal or equitable remedies that may be available to it for any such breach, including the recovery of damages from Arnold. 3 EX-10.23 5 g68745a1ex10-23.txt LETTER AGREEMENT DATED OCTOBER 11, 2000 1 EXHIBIT 10.23 Letter Agreement dated October 11, 2000 between Registrant and Jeffrey T. Arnold 2 WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENOX BUILDING ATLANTA, GEORGIA 30326 October 11, 2000 Mr. Jeffrey T. Arnold 500 Peachtree Battle Ave. Atlanta, Georgia 30305 Dear Mr. Arnold: This letter agreement (the "Agreement") sets forth our mutual agreement concerning your resignation as a director, executive officer and employee of WebMD Corporation, a Delaware corporation (the "Company"). 1. Resignation. Your employment with the Company and its subsidiaries and affiliates will terminate in all capacities on October 11, 2000 (the "Effective Time"). This Agreement has been duly authorized by the Company's Board of Directors (the "Board"). In that regard, you hereby resign, effective as of the Effective Time, from your positions as Co-Chief Executive Officer and a director of the Company and from all other officerships, directorships and positions that you currently hold with the Company or any of its subsidiaries or affiliates. 2. Severance Benefits. The Company will provide you with the following severance payments and benefits: (a) Severance. The Company will pay you an amount equal to $4,000,000, payable on or before October 12, 2000 by wire transfer to an account to be designated by you. (b) Continuation of Insurance Coverage. The Company will continue (or provide comparable substitute coverage) your health, dental, disability and life insurance coverage, and continue to pay the employer portion of the applicable premiums, until the earlier of the 18-month anniversary of the Effective Time and the date on which you are covered under another comparable plan. You agree to promptly notify the Company in writing in the event that you obtain coverage under another such plan. (c) 401(k) Plan. You will be entitled to receive your vested accrued benefits under the Company's 401(k) plan in accordance with the terms and conditions of such plan. (d) No Other Compensation or Benefits. Except as otherwise specifically provided herein, you will not be entitled to any compensation or benefits or to participate in any past, present or future employee benefit programs or arrangements of the Company or any of its subsidiaries or affiliates after the Effective Time. 3. Company Stock Options. Your options (the "Options") (i) to purchase 2,000,000 shares of the Company's common stock ("Common Stock"), as evidenced by the 3 Amended and Restated Stock Option Agreement dated as of September 12, 2000 (the "Amended Option Agreement") between the Company and you, and (ii) to purchase an additional 2,486,741 shares of Common Stock will remain subject to, and will be exercisable in accordance with, the terms and conditions thereof (including, without limitation, the Letter Agreement dated September 12, 2000 between the Company and you (the "Letter Agreement") but without regard to the Employment Agreement dated as of September 30, 1998 (the "Employment Agreement") between the Company and you). It is hereby expressly agreed that the termination of your employment will be treated as a termination without "cause" for purposes of the Options (including, without limitation, for purposes of Sections 1 and 3 of the Letter Agreement and Section 3(c)(ii) of the Amended Option Agreement), and all of your Options shall, upon the Effective Time of this Agreement, become fully vested and remain exercisable for ten years from their respective dates of grant. 4. Restrictive Covenants. (i) The provisions of Exhibit B to the Letter Agreement are incorporated herein by reference as if such provisions were set forth herein in full. (ii) The first paragraph of Section 2 of Exhibit B to the Letter Agreement is hereby amended to add the following to the end thereof: "provided, further, that this provision shall not prevent or impair Arnold from engaging in raising donations for public charitable purposes for existing not-for-profit nationally recognized charitable organizations engaged in a Competitive Business so long as (i) he is not employed by, and does not become an officer, director or trustee or serve in a similar capacity of or receive compensation or other profit from such not-for-profit charitable organization and (ii) such activities do not relate to or involve such Competitive Business other than to the extent such raising of donations presents consumer-oriented health and wellness information in furtherance with the not-for-profit charitable organization's mission." 5. Cooperation. From and after the date hereof through the third anniversary of the Effective Time you will (i) cooperate in all reasonable respects (after taking into account any employment obligations you may have) with the Company and its affiliates and their respective directors, officers, attorneys and experts in connection with the conduct of any action, proceeding, investigation or litigation brought by a third party other than the Company, involving the Company or any of its affiliates, including any such action, proceeding, investigation or litigation in which you are called to testify relating to matters involving facts or events relating to the Company that arose during your employment with the Company and (ii) promptly respond to all reasonable requests by the Company and its affiliates relating to information concerning actual customers of the Company during your employment which may be in your possession, and that you received during your employment with the Company. The Company will, as a condition to your obligations under this Section 5, reimburse you for any reasonable out of pocket expenses incurred as a result of such cooperation, provided that such expenses have been approved in writing in advance by the Chief Executive Officer or Chief Financial Officer of the Company. 2 4 6. Return of Property. Within 10 days after the Effective Time, you will surrender to the Company all property of the Company and its affiliates in your possession and all property made available to you in connection with your employment by the Company, including, without limitation, any and all records, manuals, customer lists, notebooks, computers, computer programs and files, papers, electronically stored information and documents kept or made by you in connection with your employment; provided, however, that you will be permitted to retain the property listed on Annex A hereto. You will be given reasonable access to Company premises through October 18, 2000 to retrieve your personal property. Notwithstanding the foregoing, the Company shall have the right to retrieve any electronically stored information which is found or stored in any of the computer equipment listed on Annex A which is otherwise property owned by the Company or any of its subsidiaries or affiliates and take any action necessary to delete all such information from the computer equipment's hard-drive or other memory device. 7. Communications. You and the Company agree that the press release and related statement regarding your termination of employment will be in the form attached hereto as Annex B, and that no subsequent comments should be made to the media or through other public statements by either party or by any subsidiary, officer or director of the Company regarding your termination of employment that are inconsistent with such statement. From and after the Effective Time, you will refrain from taking actions or making public statements, written or oral, which denigrate, disparage or defame the goodwill or reputation of the Company and its subsidiaries and their former and current executive officers and directors. From and after the Effective Time, the Company will refrain, and will cause its executive officers and directors to refrain, from taking actions or making public statements, written or oral, which denigrate, disparage or defame your reputation. The restrictions set forth in this Section 7 will be subject to such exceptions as are required by law or in connection with a judicial proceeding. 8. Release. (a) General Release. In consideration of the Company's obligations under this Agreement and for other valuable consideration, you hereby release and forever discharge the Company, its subsidiaries and affiliates and each of their respective officers, employees, directors and agents (the "Company Releasees") from any and all claims, actions and causes of action (collectively, "Claims"), including, without limitation, any Claims arising under any applicable federal, state, local or foreign law, that you may have, or in the future may possess, arising out of (x) your employment relationship with and service as a director, employee or officer of the Company or any of its subsidiaries or affiliates, and the termination of such relationship or service, or (y) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that the release set forth in this Section 8(a) will not apply to (A) the obligations of the Company under this Agreement, (B) the obligations of the Company and its subsidiaries to continue to provide director and officer indemnification pursuant to the agreement dated as of April 22, 1998 (the "Indemnification Agreement") between Endeavor Technologies Inc., a predecessor to the Company, and you, which Indemnification Agreement is hereby assumed by the Company, and Section 10 of this Agreement and (C) your right or ability to assert in good faith any facts by way of defense (or counterclaim arising from the same set of facts) against any Claim asserted against you by the Company pursuant to clause (B) of the proviso to Section 8(b). You further agree that the payments and benefits described in this Agreement will be in full satisfaction of any and all claims for payments or benefits, whether express or implied, that you may have 3 5 against the Company or any of its subsidiaries or affiliates arising out of your employment relationship, your service as a director, employee or officer of the Company or any of its subsidiaries or affiliates and the termination thereof. You hereby acknowledge and confirm that you are providing the release and discharge set forth in this Section 8(a) only in exchange for consideration in addition to anything of value to which you are already entitled. You acknowledge and agree that if you should hereafter make any claim or demand or commence or threaten to commence any action, claim or proceeding against the Company Releasees with respect to any cause, matter or thing which is the subject of this Section 8(a), this Agreement may be raised as a complete bar to any such action, claim or proceeding, and the applicable Company Releasee may recover from you all costs incurred in connection with such action, claim or proceeding, including attorneys' fees. (b) Company Release. The Company and its subsidiaries and affiliates (the "Company Releasors") hereby release and forever discharge you, your estate and your legal representatives (the "Individual Releasees") from any and all Claims, including, without limitation, any Claims arising under any applicable federal, state, local or foreign law, that it may have, or in the future may possess, arising out of (x) your employment relationship with and service as a director, employee or officer of the Company or any of its subsidiaries or affiliates or predecessors, and the termination of such relationship or service, or (y) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that the release set forth in this Section 8(b) will not apply to (A) your obligations under this Agreement and the plans and agreements referred to herein and (B) any Claim which the Company has against you arising out of fraudulent conduct by you. The Company acknowledges and agrees that if it or any other Company Releasor should hereafter make any claim or demand or commence or threaten to commence any action, claim or proceeding against you or the Individual Releasees with respect to any cause, matter or thing which is the subject of this Section 8(b), this Agreement may be raised as a complete bar to any such action, claim or proceeding, and you or the applicable Individual Releasee may recover from the Company Releasors all costs incurred in connection with such action, claim or proceeding, including attorneys' fees. 9. Consulting Engagement. (i) In consideration of the payments and benefits provided to you hereunder, you agree to serve as a consultant to the Company for the period (the "Consulting Period") beginning at the Effective Time and ending on the fourth anniversary thereof. Your services hereunder during the Consulting Period will consist of such consulting and advisory services, and will be provided at such times, as may be reasonably requested (after taking into account any obligations you may have to another employer) from time to time by W. Michael Long; provided, however, that such services will not be required for more than 4 days during any one-month period; provided further, however, that you will not be required to perform such services at the request of any person other than W. Michael Long, and that such services may be performed at the location of your choice. The Company will reimburse you for any reasonable out-of-pocket expenses incurred by you in connection with the performance of such consulting and advisory services, provided that such expenses shall not be required to be incurred by you, and shall not be reimbursed, unless such expenses have been approved in writing in advance by the Chief Executive Officer or Chief Financial Officer of the Company. 4 6 (ii) You will have no authority to bind, or make any commitments or otherwise act on behalf of, or conduct or participate in any discussions on behalf of, the Company or any of its subsidiaries or affiliates in any manner whatsoever after the Effective Time without the prior written authorization of the Board. You agree not to take any action which would cause any third party to assume that you have such authority. 10. Indemnification. The Company shall continue to provide, and shall cause its subsidiaries to continue to provide you with indemnification, expense advancement, exculpation of liabilities and directors and officers liability insurance, with respect to actions or inactions by you as an officer or director of the Company (or any of its subsidiaries) prior to the Effective Time to the fullest extent permitted by law. 11. No Set-Off or Mitigation. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against you or others. Except as specifically provided in this Agreement, in no event shall you be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to you under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not you obtain other employment. 12. Miscellaneous. (a) Entire Agreement. This Agreement, the Amended Option Agreement (including, without limitation, Section 8 thereof), the Letter Agreement and the related Option plans and award documents and the Indemnification Agreement (collectively, the "Applicable Agreements") set forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby and supersede and replace any express or implied prior agreement with respect to the terms of your employment and the termination thereof which you may have had with the Company or any of its subsidiaries or affiliates (including, without limitation, (i) the Employment Agreement and (ii) the first sentence of Section 9 of the Amended Option Agreement). This Agreement may be amended only by a written document signed by the parties hereto. (b) Governing Law. This Agreement and, notwithstanding any provision to the contrary contained therein, the other Applicable Agreements, will be governed by, and construed in accordance with, the laws of the State of Delaware (without reference to the choice of law provisions of Delaware law) applicable to contracts executed and to be wholly performed within such State, and the State or Federal court sitting in New Castle County, Delaware will have exclusive jurisdiction of the Company and you for purposes of adjudicating any disputes under any Applicable Agreement. The Company and you hereby consent to personal jurisdiction and venue in the State or Federal court sitting in New Castle County, Delaware and hereby waive any claim or defense that the party lacks minimum contacts with the forum, that such State or Federal court lacks personal jurisdiction of the parties, or that such State or Federal court is an improper or inconvenient venue. (c) Withholding Taxes. Any payments made or benefits provided to you under this Agreement will be reduced by any applicable withholding taxes. 5 7 (d) Notices. Any notices required or made pursuant to this Agreement will be in writing and will be deemed to have been given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, as follows: if to Jeffrey T. Arnold 500 Peachtree Battle Ave. Atlanta, Georgia 30305 with a copy to: Michael S. Katzke, Esq. Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019-6150 if to the Company: Jack Dennison, Esq. WebMD Corporation 3399 Peachtree Street NE 400 The Lenox Building Atlanta, Georgia 30326 with a copy to: Jeffrey P. Crandall, Esq. Shearman & Sterling 599 Lexington Avenue New York, NY 10022 or to such other address as either party may furnish to the other in writing in accordance with this Section 12(d). Notices of change of address will be effective only upon receipt. (e) Expenses. The Company will reimburse you for any unreimbursed reasonable business expenses incurred by you prior to the Effective Time (including airfare from New York City to Atlanta, Georgia on October 12, 2000), pursuant to the Company's reimbursement policies, following your presentation of an expense report to the Company. In addition, the Company shall reimburse you for reasonable fees and expenses of your legal and tax accounting advisors incurred in connection with the negotiation and execution of this Agreement not to exceed $75,000 in the aggregate. (f) Enforceability/Severability. The parties hereto affirmatively acknowledge that this Agreement, and each of its provisions, is enforceable, and expressly agree not to challenge nor raise any defense against the enforceability of this Agreement or any of its provisions in the future. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. In the event that any provision or portion of this Agreement shall be determined to be invalid or 6 8 unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. (g) Successors. This Agreement shall be binding on you and the Company and your's and the Company's respective heirs, successors and assigns, including without limitation any corporation or other entity into which the Company may be merged, reorganized or liquidated. Your obligations under this Agreement may not be assigned. The obligations of the Company under this Agreement may not be assigned except to a successor to all or substantially all of the business or assets of the Company or by operation of law. In the event of your death, all future payments hereunder will be made to your estate or designated beneficiary. WEBMD CORPORATION By /s/ Charles A. Mele -------------------------------------- Name: Charles A. Mele Title: Executive Vice President -- Co-General Counsel Accepted and Agreed: /s/ Jeffrey T. Arnold - ------------------------- Jeffrey T. Arnold Dated: October 11, 2000 7 EX-10.26 6 g68745a1ex10-26.txt AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.26 Amended and Restated Employment Agreement dated June 18, 2000 among Medical Manager Corporation, CareInsite, Inc. and Marvin P. Rich 2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") dated as of June 18, 2000, by and among MEDICAL MANAGER CORPORATION, a Delaware corporation (the "Company"), CAREINSITE, INC., a Delaware corporation and a majority-owned subsidiary of the Company ("CareInsite"), and MARVIN P. RICH ("Executive"). WHEREAS, Executive is employed by the Company and CareInsite pursuant to an Employment Agreement dated as of January 4, 2000 (the "Prior Agreement"); WHEREAS, the Company has entered into an Agreement and Plan of Merger dated February 13, 2000 with Healtheon/WebMD Corporation, a Delaware corporation ("Healtheon") as amended by Amendment No. 1 thereto, dated as of June 18, 2000 (collectively, the "Medical Manager Agreement") pursuant to which the Company will merge with and into Healtheon (the "Surviving Corporation"), and Avicenna Systems Corporation, a Massachusetts corporation, and CareInsite, have entered into an Agreement and Plan of Merger dated February 13, 2000 with Healtheon as amended by Amendment No. 1 thereto, dated as of June 18, 2000 (together with the Medical Manager Agreement, the "Amended Merger Agreement"); and WHEREAS, in connection with the Amended Merger Agreement, the Company, CareInsite and Executive desire to amend and restate the Prior Agreement in its entirety as set forth herein; NOW, THEREFORE, in consideration of the mutual covenants in this Agreement, the parties agree as follows: 1. Effectiveness of Agreement and Employment of Executive. 1.1. Effectiveness of Agreement. This Agreement shall become effective, and shall supersede the Prior Agreement, as of the date first written above (the "Effective Date"). 1.2 Employment by the Company and CareInsite. (a) The Company hereby employs Executive as its President and CareInsite hereby employs Executive as its Chief Executive Officer and Executive hereby accepts such employment with each of the Company and CareInsite. Executive shall report to, and perform such duties and services for the Company, CareInsite, and their respective subsidiaries and affiliates (such subsidiaries and affiliates, collectively, "Affiliates") commensurate with such positions as may be designated from time to time by, the Chairman of the Board of Directors of the Company (the "Board") and of the Board of Directors of CareInsite (the "CareInsite Board"), as the case may be. During the Employment Period (as defined in Section 3 below), each of the Company and CareInsite shall, subject to its fiduciary duties, use its best efforts to include Executive in management's nominees for election, and recommend the election of Executive, as a member of the Board and of the CareInsite Board. 3 In the event that the employment of Executive with the Company or CareInsite (or both) is terminated for any reason, Executive agrees that he will promptly resign from the Board or the CareInsite Board (or both), as the case may be. (b) Executive shall perform his duties hereunder at the Company's and CareInsite's headquarters at 669 River Drive, Elmwood Park, New Jersey; provided, however, that Executive shall be required to travel on business on a reasonable basis in connection with the performance of his duties hereunder. Executive shall use his best and most diligent efforts to promote the interests of the Company, CareInsite and the Affiliates, and shall devote all of his business time and attention to his employment under this Agreement. 2. Compensation and Benefits. 2.1. Salary. The Company shall pay Executive for services during his employment under this Agreement a base salary at the annual rate of $250,000 (as it may be increased pursuant to this Section 2.1, the "Company Base Salary"). In addition, CareInsite shall pay Executive for services during his employment under this Agreement a base salary at the annual rate of $250,000 (as it may be increased pursuant to this Section 2.1, the "CareInsite Base Salary"). Such Company Base Salary or CareInsite Base Salary may be increased (but not decreased) from time to time in the sole discretion of (i) the Board or Compensation Committee of the Board in the case of the Company Base Salary or (ii) the CareInsite Board or Compensation Committee of the CareInsite Board in the case of the CareInsite Base Salary. The Company Base Salary and CareInsite Base Salary shall be payable in equal installments, no less frequently than monthly, pursuant to the Company's or CareInsite's, as the case may be, customary payroll policies in force at the time of payment, less any required or authorized payroll deductions. 2.2. Benefits. During the Employment Period, Executive shall be entitled to participate, on the same basis and at the same level as other senior officers of the Company in any group insurance, hospitalization, medical, health and accident, disability, fringe benefit and tax-qualified retirement plans or programs of the Company now existing or hereafter established to the extent that he is eligible under the general provisions thereof. 2.3. Expenses. Pursuant to the Company's or CareInsite's customary policies in force at the time of payment, Executive shall be promptly reimbursed, against presentation of vouchers or receipts therefor, for all authorized expenses properly and reasonably incurred by him on behalf of the Company, CareInsite or their Affiliates in the performance of his duties hereunder. 2.4 Relocation. (a) Upon the presentation of invoices, the Company shall reimburse, on an after tax basis, Executive's reasonable out-of-pocket expenses related to the relocation of him and his family from New Canaan, Connecticut to New York City. In addition, the Company shall reimburse Executive for his rental payment for his temporary residence until such time as he has purchased a new residence, but in no event for a period of more than six months. 2 4 (b) Following the Effective Time (as defined in the Medical Manager Agreement), Executive agrees to relocate to an area convenient to the corporate headquarters of the Surviving Corporation, provided that he shall be reimbursed for such relocation in a manner substantially similar to that set forth in clause (a) of this Section 2.4. In addition, the Company shall reimburse, upon the presentation of invoices, Executive for reasonable temporary living arrangements (either a temporary residence or hotel accommodations) following the Effective Time for a period of up to 6 months. (c) For purposes of this Agreement, any relocation by Executive pursuant to this Section 2.4 shall not constitute Good Reason (as defined below). 2.5 Vacation. Executive shall be entitled to vacation time consistent with the Company's vacation policies. The date or dates of such vacations shall be selected by Executive having reasonable regard to the business needs of the Company and CareInsite. 2.6 Car Allowance. During the Employment Period, the Company shall provide Executive with a car allowance in accordance with Company policy. 2.7 Bonus. With respect to each 12 month period (the "Performance Period") during the Employment Period (provided that the first such Performance Period shall commence January 4, 2000, and each successive Performance Period shall commence on the following January 1), Executive shall be entitled to receive (i) a bonus (the "Company Bonus") of up to $250,000 in the event that the Company has attained certain specified performance goals and (ii) a bonus (the "CareInsite Bonus") of up to $250,000 in the event that CareInsite has attained certain specified performance goals. The performance goals shall be established by the Compensation Committee of the Board or the Compensation Committee of the CareInsite Board, as applicable, and shall be communicated to Executive prior to the commencement of each Performance Period. The determination as to whether the performance goals have been attained shall be made by the Compensation Committee of the Board or the Compensation Committee of the CareInsite Board, as the case may be, (i) in its sole and absolute discretion to the extent the performance goals are not quantifiable and (ii) on the basis of a report prepared by the Chief Financial Officer of the Company or CareInsite, as applicable, to the extent the performance goals are quantifiable. Such report shall be presented to the applicable Compensation Committee within 30 days of the last day of the Performance Period. Payment of the Company Bonus and the CareInsite Bonus, if any, shall be made as soon as practicable following the presentation by the Chief Financial Officer, but in no event more than 30 days thereafter, provided that, except as set forth in Section 5 below, Executive remains in the employ of the Company or CareInsite on the payment date. In the event that the Company or CareInsite reasonably determines that the Company Bonus or the CareInsite Bonus may be subject to the limitation on deductible compensation set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the Company or CareInsite may defer the payment of the Company Bonus or CareInsite Bonus (or portion thereof) until the limitation no longer applies to such payment (or portion thereof). Notwithstanding the foregoing, but subject to Executive's remaining in the employ of the Company and CareInsite (except as set forth in Sections 5.2, 5.3 and 5.5 below), the Company Bonus of $250,000 and the CareInsite Bonus of $250,000 for the Performance Period ending on December 31, 2000 shall be paid in full, within 30 days of the last day of such Performance Period without regard to the attainment of any applicable performance goals. 3 5 2.8 Loan. The Company and CareInsite has each previously made a full recourse loan (the "Loan") to Executive in the principal amount of $300,000, for an aggregate amount of $600,000. The Loan is evidenced by two promissory notes executed by Executive in favor of each of the Company and CareInsite and is secured by any options to purchase shares of the Company's or CareInsite's common stock held by Executive. Notwithstanding the foregoing, the Loan (and any interest accrued thereon) shall be forgiven in its entirety as of the Effective Time. 3. Employment Period. Executive's employment under this Agreement shall commence as of the Effective Date, and shall terminate January 4, 2005, unless terminated earlier pursuant to Section 5 (the "Employment Period"). Unless written notice of either party's desire to terminate the Employment Period has been given to the other party at least 30 days prior to the expiration of the Employment Period (or any one-month renewal thereof contemplated by this sentence), the term of this Agreement shall be automatically renewed for successive one-month periods. 4. Stock Options. 4.1 Executive has been granted (i) an option (the "Company Class A Stock Option") to purchase 250,000 shares of the Company's common stock pursuant to the Company's Amended and Restated 1989 Class A Stock Option Plan (the "Class A Plan") and the terms of a stock option agreement entered into between the Company and Executive (the "Company Class A Stock Option Agreement") and (ii) an option (the "Company Class B Stock Option" and collectively with the Company Class A Stock Option, the "Company Stock Options") to purchase 200,000 shares of the Company's common stock pursuant to the Company's Amended and Restated 1989 Class B Stock Option Plan (the "Class B Plan") and the terms of a stock option agreement entered into between the Company and Executive (the "Company Class B Stock Option Agreement" and together with the Company Class A Stock Option Agreement, the "Company Stock Option Agreements"). Subject to Executive's remaining in the employ of the Company or CareInsite (except as set forth in Sections 5.2, 5.3 and 5.5 below), the Company Stock Options shall be exercisable in accordance with the following schedule:
Anniversary of % of Stock Date of Grant Options Exercisable -------------- ------------------- 1st 20% 2nd 40% 3rd 60% 4th 80% 5th 100%
Executive will be eligible to receive future grants of options to purchase shares of the Company's common stock at the discretion of the Stock Option Committee of the Board. 4 6 4.2 Executive has also been granted an option (the "CareInsite Stock Option", collectively with the Company Stock Options, the "Stock Options") to purchase 450,000 shares of the common stock of CareInsite pursuant to the terms of CareInsite's 1999 Officer Stock Option Plan (the "CareInsite Plan") and a stock option agreement entered into between CareInsite and Executive (the "CareInsite Stock Option Agreement" and, together with the Company Stock Option Agreements, the "Stock Option Agreements"). Subject to Executive's remaining in the employ of CareInsite or the Company (except as set forth in Sections 5.2, 5.3 and 5.5 below), the CareInsite Stock Option shall be exercisable in accordance with the following schedule:
Anniversary of % of Date of Grant Stock Option Exercisable ------------- ------------------------ 1st 20% 2nd 40% 3rd 60% 4th 80% 5th 100%
; provided, however, that, subject to Section 5.2, 5.3 and 5.5 below, no portion of the CareInsite Stock Option shall become vested and exercisable prior to December 15, 2001 (on such date, the portion of the CareInsite Stock Option shall become vested and exercisable to the extent that such portion would have become exercisable by virtue of the above vesting schedule). Executive will be eligible to receive future grants of options to purchase shares of CareInsite's common stock at the discretion of the Compensation Committee of the CareInsite Board. 4.3 New Stock Option Grants. Executive has been granted (i) an option (the "New Company Stock Option") to purchase 450,000 shares of the Company's common stock at an exercise price equal to the fair market value of the Company's common stock (as determined by the Stock Option Committee of the Board) on the date of grant and (ii) an option (the "New CareInsite Stock Option" and collectively with the New Company Stock Option, the "New Stock Options") to purchase 450,000 shares of CareInsite's common stock at an exercise price equal to the fair market value of CareInsite's common stock (as determined by the Stock Option Committee of the CareInsite Board) on the date of grant. The New Company Stock Option shall be evidenced by one or more stock option agreements (the "New Company Stock Option Agreement") containing the terms described in this Agreement and such additional terms and conditions that are not any less favorable than those applicable to other executive officers of the Company. The New CareInsite Stock Option shall be evidenced by a stock option agreement (the "New CareInsite Stock Option Agreement" and collectively with the New Company Stock Option Agreement, the "New Stock Option Agreements") containing the terms described in this Agreement and such additional terms and conditions that are not any less favorable than those applicable to other executive officers of CareInsite. Subject to Executive's remaining in the employ of the Company or CareInsite (except as set forth in Sections 5.2, 5.3 and 5.5 below), the New Stock Options shall be exercisable in accordance with the following schedule: 5 7
Anniversary of % of Date of Grant New Stock Options Exercisable -------------- ----------------------------- 1st 25% 2nd 50% 3rd 75% 4th 100%
; provided, however, that effective as of the Effective Time, the New Stock Options shall instead be exercisable in accordance with the following schedule: Anniversary of % of Date of Grant New Stock Options Exercisable -------------- ----------------------------- 1st 50% 2nd 75% 3rd 100%
4.4 Special Stock Option. Effective immediately prior to the Effective Time, Executive shall be granted an option (the "Special Stock Option" and together with the New Company Stock Option, the "New Company Options", and together with the New Stock Options, the "New Options") to purchase 300,000 shares of the Company's common stock at an exercise price of $15 per share. The Special Stock Option shall be evidenced by a stock option agreement (the "Special Stock Option Agreement") containing the terms described in this Agreement and such additional terms and conditions that are not any less favorable than those applicable to other executive officers of the Company. Subject to Executive's remaining in the employ of the Company (except as set forth in Sections 5.2, 5.3 and 5.5 below), the Special Stock Option shall be exercisable in accordance with the following schedule:
Anniversary of % of Effective Time Stock Option Exercisable -------------- ------------------------ 1st 50% 2nd 75% 3rd 100%
provided, however, that in the event that the Effective Time does not occur, this Section 4.4, and any rights of Executive to receive the Special Stock Option, shall be null and void. 4.5 Future Equity Grants. In the event that either the Company or CareInsite effects a public offering of the securities of a subsidiary thereof, Executive shall receive equity in such subsidiary on a basis which is substantially similar to the equity participation of other senior executive officers of the Company or CareInsite, as applicable (other than the Chairman of the Board or of the CareInsite Board), as applicable. 6 8 5. Termination. 5.1 Termination by the Company for Cause. (a) The Employment Period may be terminated at any time by the Company or CareInsite for Cause (as defined below). Upon such a termination, the Company and CareInsite shall have no obligation to Executive other than (i) the payment of Executive's earned and unpaid Company Base Salary and CareInsite Base Salary to the effective date of such termination and (ii) Executive shall not be entitled to any additional rights or vesting with respect to the Stock Options or the New Options following the effective date of such termination. (b) For purposes of this Agreement, the term "Cause" shall mean any of the following: 1. A willful failure of Executive to perform his duties hereunder in any material respect which failure is not cured by Executive within 30 days following written notice from the Company or CareInsite detailing such failure; 2. Any willful misconduct by Executive relating, directly or indirectly, to the Company, CareInsite or any of their Affiliates, which misconduct, if susceptible to cure, is not cured by Executive within 30 days following written notice from the Company or CareInsite detailing such misconduct; 3. Any material breach by Executive of this Agreement, including, without limitation, Section 6 hereof, which breach, if susceptible to cure, is not cured by Executive within 30 days following written notice from the Company or CareInsite detailing such breach; or 4. Executive's commission of a common law fraud against the Company, CareInsite or any of their Affiliates or conviction of a felony. 5.2 Death and Disability. (a) The Employment Period may be deemed terminated by the Company and CareInsite upon the death of Executive or Executive becoming Disabled (as defined below), and the Company and CareInsite shall have the following obligations to Executive or Executive's estate (but no other obligation to Executive or Executive's estate pursuant to this Agreement): (i) a continuation of the Company Base Salary and CareInsite Base Salary for a period (the "Applicable Period") commencing on the date of termination and ending on the fourth anniversary of the date of termination, payable in accordance with the fourth sentence of Section 2.1, (ii) a continuation of the benefits to which Executive is entitled pursuant to the Welfare Plans (as defined in Section 5.3(a)(ii) below) for the Applicable Period, 7 9 (iii) the Company Bonus and CareInsite Bonus that would have been payable to Executive pursuant to Section 2.7 for each year (or portion thereof) during the Applicable Period, payable at the time that such bonuses are required to be paid pursuant to Section 2.7, such Company Bonus and CareInsite Bonus to be equal (subject to the last sentence of Section 2.7, if applicable) to the highest Company Bonus and CareInsite Bonus paid to Executive for any of the prior three years or, if shorter, during the Employment Period, and (iv) the Stock Options and the New Options shall remain outstanding and continue to vest, and shall otherwise be treated for purposes of the terms and conditions thereof, as if Executive remained in the employ of the Company or CareInsite during the Applicable Period; provided, however, that the continuation of such salary, welfare benefits and the continuation of vesting and exercisability of the Stock Options and the New Options shall cease on the occurrence of a material breach of the covenants contained in Section 6 below; and provided further, however, that Executive's eligibility to continue to participate in the Welfare Plans shall cease at such time as Executive is offered comparable coverage with a subsequent employer. Any payments that may be required to be made by the Company or CareInsite pursuant to this Section 5.2 shall first be applied to the repayment of the principal amount of and interest on the Loan (if any). (b) For purposes of this Agreement, Executive shall be "Disabled" if (i) Executive becomes incapacitated by bodily injury or disease (including as a result of mental illness) so as to be unable to regularly perform the duties of his position for a period in excess of 180 days in any consecutive twelve-month period, (ii) a qualified independent physician mutually acceptable to the Company, CareInsite and Executive determines that Executive is mentally or physically disabled so as to be unable to regularly perform the duties of his position and such condition is expected to be of a permanent duration or (iii) he is deemed "disabled" for purposes of the long term disability insurance policy maintained by the Company for Executive. 5.3 Termination by the Company or CareInsite Without Cause. (a) The Employment Period may be terminated at any time by the Company or CareInsite without Cause. If the Company or CareInsite (or both) terminates the Employment Period without Cause, the Company or CareInsite, as the case may be, shall have the following obligations to Executive (but excluding any other obligation to Executive pursuant to this Agreement): (i) a continuation of the Company Base Salary or CareInsite Base Salary, as the case may be, for a period (the "Severance Period") commencing on the date of termination and ending on the third anniversary of the date of termination, payable in accordance with the fourth sentence of Section 2.1, (ii) Executive shall be eligible to continue to participate during the Severance Period on the same terms and conditions that would have applied had he 8 10 remained in the employ of the Company or CareInsite during the Severance Period in all health, medical, dental and other welfare plans provided to Executive pursuant to Section 2.2 at the time of such termination and which are provided by the Company or CareInsite to its employees following the date of termination ("Welfare Plans"), (iii) the Company Bonus and CareInsite Bonus that would have been payable to Executive pursuant to Section 2.7 for each year (or portion thereof) during the Severance Period, payable at the time that such bonuses are required to be paid pursuant to Section 2.7, such Company Bonus and CareInsite Bonus to be equal (subject to the last sentence of Section 2.7, if applicable) to the highest Company Bonus and CareInsite Bonus paid to Executive for any of the prior three years or, if shorter, during the Employment Period, and (iv) (x) the Company Stock Options and the New Company Options or (y) the CareInsite Stock Option and the New CareInsite Stock Option, as the case may be, shall become fully vested and exercisable as of the date of termination and remain exercisable until the first anniversary of the date of termination; provided, however, that the continuation of such salary and welfare benefits and the exercisability of such options shall cease on the occurrence of any material breach of the covenants contained in Section 6 below; provided further, however, that Executive's eligibility to participate in the Welfare Plans shall cease at such time as Executive is offered comparable coverage with a subsequent employer. If Executive is precluded from participating in any Welfare Plan by its terms or applicable law, the Company or CareInsite shall provide Executive with benefits that are reasonably equivalent in the aggregate to those which Executive would have received under such plan had he been eligible to participate therein. Anything to the contrary herein notwithstanding in Section 5.2 or this Section 5.3, the Company shall have no obligation to continue to maintain any Welfare Plan solely as a result of the provisions of this Agreement. Any payments that may be required to be made by the Company or CareInsite pursuant to this Section 5.3 shall first be applied to the repayment of the principal amount of and interest on the Loan (if any). (b) Notwithstanding anything to the contrary in this Agreement, in the event that the Company determines that it is in the best interest of the Company and its stockholders to terminate Executive's employment with the Company due to a corporate transaction or the potential for a conflict of interest with CareInsite, such a termination shall not constitute a termination without Cause so long as CareInsite assumes the Company's obligations to pay the Company Base Salary and Company Bonus and to provide the other benefits contemplated in Section 2 in accordance with its plans and policies. 5.4 Liquidated Damages. Executive acknowledges that the payment of all amounts and benefits due to him under Section 5.3 or Section 5.5 resulting from a termination of 9 11 the Employment Period by the Company or CareInsite without Cause or by Executive for Good Reason (as defined below) are in lieu of any and all claims that Executive may have against the Company, CareInsite or any of their Affiliates (other than benefits under the Company's or CareInsite's employee benefit plans that by their terms survive termination of employment, benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and rights to indemnification under certain indemnification arrangements for officers of the Company), and represent liquidated damages (and not a penalty). The Company may request that Executive confirm such acknowledgment in writing prior to the receipt of such benefits. 5.5 Termination by Executive for Good Reason. (a) Executive may terminate his employment with the Company or CareInsite (and the Employment Period with respect to the Company or CareInsite will be terminated) for Good Reason. If Executive terminates his employment with the Company or CareInsite for Good Reason, Executive shall be entitled to the same salary and welfare benefit continuation, bonus, and the acceleration of vesting and continued exercisability of the Stock Options and the New Options that he would have been entitled to receive under Section 5.3 if the Employment Period were terminated by the Company or CareInsite without Cause. (b) For purposes of this Agreement, the term "Good Reason" shall mean any of the following conditions or events which condition(s) or event(s) remain in effect 30 days after written notice is provided by Executive to the Company or CareInsite, as the case may be, detailing such condition or event: 1. a material reduction in Executive's title or responsibilities with CareInsite or the Company, or if he is required to report to any person other than Martin J. Wygod (other than as a result of the health of Mr. Wygod or his death) provided that Executive shall not have Good Reason if the Company determines that as a result of a corporate transaction or potential conflicts of interest with CareInsite, it is not in the best interests of the Company and its stockholders that Executive continue to serve as the President of the Company or having the responsibilities associated with such position so long as CareInsite assumes the Company's obligations to pay the Company Base Salary and Company Bonus and to provide the other benefits contemplated in Section 2 in accordance with its plans and policies; 2. any reduction in the Company Base Salary or CareInsite Base Salary or material fringe benefits provided by the Company; 3. any material breach by the Company or CareInsite of this Agreement (which shall not include the circumstance described in the proviso in clause 1 above); 4. a reduction in Executive's authority following the Effective Time in certain targeted areas agreed to in writing by the Company, CareInsite and the Executive; 5. the occurrence of a Change in Control (as defined below); or 6. the failure of the Surviving Corporation to assume the obligations of the Company hereunder and agree to be bound by the terms hereof; 10 12 provided, however, that Executive ceasing to be the Chief Executive Officer of CareInsite in connection with or following any appointment of Executive as President of the Surviving Corporation and Executive's reporting to the Co-Chief Executive Officers of the Surviving Corporation, one of whom is Martin J. Wygod, shall not constitute Good Reason. Notwithstanding the foregoing, following the Effective Time, in the event that one of the foregoing conditions or events occurs (and is not cured during the applicable cure period) during the first year following the Effective Time (a "Good Reason Event"), Executive agrees that he will remain employed by the Surviving Corporation and/or CareInsite for the remainder of such one year period and that he may not terminate his employment for any reason until the expiration of such one year period, except that at the time of such Good Reason Event, but subject to the following sentence, the Stock Options and New Options shall immediately become fully vested and exercisable and, if the Executive terminates for Good Reason following the expiration of such one-year period, he shall be entitled to receive the other benefits described in Section 5.3. In the event that Executive resigns or is terminated by the Surviving Corporation or CareInsite for Cause prior to the expiration of such one-year period, (i) such resignation will not be treated as a termination for Good Reason and (ii) Executive shall forfeit the Stock Options and New Options and shall be required to disgorge to the Surviving Corporation any gains realized on the exercise of such Stock Options or New Options (except to the extent that such Stock Options or New Options were already vested prior to the acceleration referred to in the preceding sentence). 5.6 Change in Control. (a) For purposes of this Agreement, the Stock Option Agreements, the New Stock Option Agreements and the Special Stock Option Agreement, a "Change in Control" of the Company or CareInsite, as the case may be, shall be deemed to have occurred, in the case of any transaction that occurs prior to the Effective Time, if: 1. Both (i) any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of the Company, excluding Martin J. Wygod and his affiliates, and (ii) following such acquisition of 50 percent voting power, Martin J. Wygod shall no longer be the Chairman of the Board of the Company or CareInsite or a senior executive officer of the acquiring company of 50 percent voting power, in each case with duties and responsibilities greater than or substantially equivalent to those prior to such acquisition of 50 percent voting power; or 2. Only in the event that CareInsite has assumed all of the obligations under this Agreement, both (i) any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of CareInsite, excluding Martin J. Wygod and his affiliates, and (ii) following such acquisition of 50 percent voting power, Martin J. Wygod shall no longer be the Chairman of the Board of CareInsite or a senior executive officer of the acquiring company of 50 percent voting power, in each case with duties and responsibilities greater than or substantially equivalent to those prior to such acquisition of 50 percent voting power; or 11 13 3. The sale of all or substantially all of the assets of the Company or, if CareInsite assumes all of the obligations under this Agreement, the sale of all or substantially all of the assets of CareInsite (including, without limitation, by way of merger, consolidation, lease or transfer) to a person, entity or group other than Martin J. Wygod or his affiliates in a transaction (except for a sale-leaseback transaction) (x) where the Company, CareInsite or the holders of the common stock of the Company or CareInsite, as the case may be, do not receive (i) voting securities representing a majority of the voting power entitled to vote on a regular basis for the board of directors of the acquiring entity or of an affiliate which controls the acquiring entity, or (ii) securities representing a majority of the equity interest in the acquiring entity or of an affiliate that controls the acquiring entity, if other than a corporation and (y), following such sale of assets, Martin J. Wygod shall no longer be the Chairman of the Board of the Company or CareInsite or a senior executive officer of the acquiring entity, in each case with duties and responsibilities greater than or substantially equivalent to those prior to such sale of assets; or 4. A complete liquidation or dissolution of the Company or, if CareInsite assumes all of the obligations under this Agreement, CareInsite shall have occurred. (b) In the case of any transaction that occurs after the Effective Time, the definition of "Change in Control" set forth in this Section shall be as set forth below: 1. Any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of the Surviving Corporation; or 2. Only in the event that CareInsite has assumed all of the obligations under this Agreement, any person, entity or group shall have acquired, in one or more transactions, the beneficial ownership of at least 50 percent of the voting power of the outstanding voting securities of CareInsite; or 3. The sale of all or substantially all of the assets of the Surviving Corporation or, if CareInsite assumes all of the obligations under this Agreement, the sale of all or substantially all of the assets of CareInsite (including, without limitation, by way of merger, consolidation, lease or transfer) to a person, entity or group in a transaction (except for a sale-leaseback transaction) where the Surviving Corporation, CareInsite or the holders of the common stock of the Surviving Corporation or CareInsite, as the case may be, do not receive (i) voting securities representing a majority of the voting power entitled to vote on a regular basis for the board of directors of the acquiring entity or of an affiliate which controls the acquiring entity, or (ii) securities representing a majority of the equity interest in the acquiring entity or of an affiliate that controls the acquiring entity, if other than a corporation; or 4. A complete liquidation or dissolution of the Surviving Corporation or, if CareInsite assumes all of the obligations under this Agreement, CareInsite shall have occurred. 12 14 (c) The parties acknowledge and agree that the transactions contemplated by the Amended Merger Agreement shall not constitute a "Change in Control." 5.7 Inconsistent Plan Provisions. In the event of a Change in Control of the Company, the Surviving Corporation or CareInsite, notwithstanding anything to the contrary contained in the Class A Plan , the Class B Plan or the CareInsite Plan, the Stock Options and the New Stock Options shall be treated in the manner described in Section 5.5, if applicable. 6. Covenants of Executive 6.1 Confidentiality. (a) Executive understands and acknowledges that in the course of his employment, he will have access to and will learn information that is proprietary to, or confidential to the Company, CareInsite and their Affiliates that concerns the operation, methodology and plans of the Company, CareInsite and their Affiliates, including, without limitation, business strategy and plans, financial information, protocols, proposals, manuals, clinical procedures and guidelines, technical data, computer source codes, programs, software, know-how and specifications, copyrights, trade secrets, market information, Developments (as defined in Section 6.4 below), information regarding acquisition and other strategic partner candidates, and customer information (collectively, "Proprietary Information"). Executive agrees that, (i) at all times (including following termination of his employment with the Company or CareInsite) with respect to Proprietary Information that is not financial information of the Company or CareInsite and (ii) during his employment with the Company or CareInsite and for three years thereafter, with respect to financial information of the Company and CareInsite, he will keep confidential and will not disclose directly or indirectly any such Proprietary Information to any third party, except as required to fulfill his duties hereunder, and will not misuse, misappropriate or exploit such Proprietary Information in any way. The restrictions contained herein shall not apply to any information which Executive can demonstrate (i) was already available to the public at the time of disclosure, or subsequently becomes available to the public, otherwise than by breach of this Agreement by Executive, (ii) was the subject of a court order for Executive to disclose or (iii) was known by Executive prior to January 4, 2000. Upon any termination of Executive's employment, Executive shall immediately return to the Company or CareInsite, as applicable, all copies of any Proprietary Information in his possession. (b) Executive agrees that at no time during his employment by the Company, CareInsite or thereafter, shall he make, or cause or assist any other person to make, any statement or other communication to any third party which falsely impugns or falsely attacks, or is otherwise critical of, the reputation, business or character of the Company, CareInsite or their Affiliates or any of their respective officers or employees. 6.2. Restrictions on Solicitation. During the period beginning on January 4, 2000 and ending on the second anniversary of the date of cessation of the employment of Executive for any reason whatsoever (the "Restricted Period"), Executive shall not, directly or 13 15 indirectly, without the prior written approval of the Company, solicit or contact any customer, or any prospective customer, of the Company, CareInsite or any of their Affiliates for any commercial pursuit which is in competition with the Company, CareInsite or any of their Affiliates, or that is contemplated by the Business Plan (as defined below) at the time of termination or take away or interfere or attempt to interfere with any custom, trade, business or patronage of the Company, CareInsite or any of their Affiliates. During the Restricted Period, Executive shall not, directly or indirectly, without the prior written approval of the Company, solicit or induce, or attempt to induce, any employees, agents or consultants of or to the Company, CareInsite or any of their Affiliates to leave the employ of the Company, CareInsite or such Affiliate or do anything from which Executive is restricted by reason of this Agreement nor shall Executive, directly or indirectly, offer or aid others to offer employment to or interfere or attempt to interfere with any employees, agents or consultants of the Company, CareInsite or any of their Affiliates. For purposes of this Agreement, "Business Plan" shall mean, at any point in time, the then current business plan of the Company, CareInsite or any of their Affiliates and any business plans of the Company, CareInsite or any of their Affiliates in effect during the prior 18 months. 6.3. Restrictions on Competitive Employment. (a) During the Restricted Period, Executive shall not, anywhere in the United States, directly or indirectly, without the prior written approval of the Company, own an interest in or, as principal, agent, employee, consultant or otherwise, engage in activities for or render services to, any firm or business (i) engaged in competition with the Company, CareInsite or any of their Affiliates, (ii) conducting a business of the type and character engaged in by (or contemplated by the Business Plan of) the Company, CareInsite or any of their Affiliates at the time of termination, or (iii) developing products or services competitive with those of the Company, CareInsite or any of their Affiliates (all of the businesses in clauses (i), (ii) and (iii) collectively, "Competitive Business"). Notwithstanding the foregoing, Executive may have an interest consisting of publicly traded securities constituting less than 1 percent of any class of publicly traded securities in any public company engaged in a Competitive Business so long as he is not employed by and does not consult with, or become a director of or otherwise engage in any activities for, such company. (b) For purposes of the covenant not to compete set forth in paragraph (a) above, Executive acknowledges that the Company, CareInsite and their Affiliates presently conduct their businesses throughout the United States. Executive agrees that the Restricted Period and the geographical areas encompassed by such covenant are necessary and reasonable in order to protect the Company, CareInsite and their Affiliates in the conduct of their businesses. The parties intend that the foregoing covenant of Executive shall be construed as a series of separate covenants, one for each geographic area specified. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant set forth in paragraph (a) above. To the extent that the foregoing covenant or any provision of this Section 1.5 shall be deemed illegal or unenforceable by a court or other tribunal of competent jurisdiction with respect to (i) any geographic area, (ii) any part of the time period covered by such covenant, (iii) any activity or capacity covered by such covenant or (iv) any other term or provision of such covenant, such determination shall not affect such covenant with respect to any 14 16 other geographic area, time period, activity or other term or provision covered by or included in such covenant. 6.4. Assignment of Developments. All Developments that are at any time made, conceived or suggested by Executive, whether acting alone or in conjunction with others, arising out of or as a result of Executive's employment with the Company or CareInsite shall be the sole and absolute property of the Company, CareInsite and the Affiliates, free of any reserved or other rights of any kind on Executive's part. During Executive's employment and, if such Developments were made, conceived or suggested by Executive during or as a result of Executive's employment under this Agreement or any other employment with the Company, CareInsite or the Affiliates, thereafter, Executive shall promptly make full disclosure of any such Developments to the Company or CareInsite, as applicable, and, at the Company's or CareInsite's cost and expense, do all acts and things (including, among others, the execution and delivery under oath of patent and copyright applications and instruments of assignment) deemed by the Company or CareInsite to be necessary or desirable at any time in order to effect the full assignment to the Company, CareInsite and the Affiliates of Executive's right and title, if any, to such Developments. For purposes of this Agreement, the term "Developments" shall mean all data, discoveries, findings, reports, designs, inventions, improvements, methods, practices, techniques, developments, programs, concepts, and ideas, whether or not patentable, relating to the present or planned activities, or future activities, or the products and services of the Company, CareInsite or any of the Affiliates. 6.5. Remedies. Executive acknowledges and agrees that damages for a breach or threatened breach of any of the covenants set forth in this Section 6 will be difficult to determine and will not afford a full and adequate remedy, and therefore agrees that the Company or CareInsite, in addition to seeking actual damages in connection therewith and the termination of the Company's or CareInsite's obligations in Sections 5.3 or 5.5, may seek specific enforcement of any such covenant in any court of competent jurisdiction, including, without limitation, by the issuance of a temporary or permanent injunction. 7. Notices. Any notice or communication given by either party hereto to the other shall be in writing and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the following addresses: (a) if to the Company: Medical Manager Corporation River Drive Center 2 669 River Drive Elmwood Park, New Jersey 07407-1361 Telecopier No.: (201) 703-3401 Attention: General Counsel with a copy to CareInsite at the address in subparagraph (b) below. (b) if to CareInsite: 15 17 CareInsite, Inc. River Drive Center 2 669 River Drive Elmwood Park, New Jersey 07407-1361 Telecopier No.: (201) 703-3401 Attention: General Counsel with a copy to the Company at the address in subparagraph (a) above. (c) if to Executive at the address set forth on the signature page of this Agreement. Any notice shall be deemed given when actually delivered to such address, or three days after such notice has been mailed or sent by Federal Express, whichever comes earliest. Any person entitled to receive notice may designate in writing, by notice to the other, such other address to which notices to such person shall thereafter be sent. 8. Certain Additional Payments By The Company 8.1 Gross-Up Payment. Anything in this Agreement to the contrary or any termination of this Agreement notwithstanding, in the event it shall be determined that any payment or distribution or benefit received or to be received by Executive pursuant to the terms of this Agreement or any other payment or distribution or benefit made or provided by the Company, CareInsite, or any of their Affiliates, to or for the benefit of Executive (whether pursuant to this Agreement or otherwise and determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions actually disallowed under Section 68 of the Code solely as a direct result of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 8.2 Gross-Up Payment Calculation. Subject to the provisions of Sections 8.1 and 8.3, all determinations required to be made under this Section 8, including whether and 16 18 when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's certified public accounting firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive or the Company that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8.3 and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. 8.3 Claim by the IRS. Executive shall notify the Company in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; and (iii) cooperate with the Company in good faith in order effectively to contest such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8.3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, 17 19 proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive shall agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income and employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority. 8.4 Entitlement to Refund. If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 8.3, Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 8.3) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 8.3, a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Miscellaneous. 9.1. Representations and Covenants. In order to induce the Company to enter into this Agreement, Executive makes the following representations and covenants to the Company and CareInsite and acknowledges that the Company and CareInsite are relying upon such representations and covenants: (a) No agreements or obligations exist to which Executive is a party or otherwise bound, in writing or otherwise, that in any way interfere with, impede or preclude him from fulfilling all of the terms and conditions of this Agreement. (b) Executive, during his employment, shall use his best efforts to disclose to the Chairman of the Board of the Company or CareInsite in writing or by other effective method any bona fide information known by him and not known to the Chairman of the Board of the Company or CareInsite that he reasonably believes would have any material negative impact on the Company, CareInsite or any of their Affiliates. 18 20 9.2. Entire Agreement. This Agreement, the Stock Option Agreements, the New Stock Option Agreements and the Special Stock Option Agreement contain the entire understanding of the parties in respect of their subject matter and supersede upon their effectiveness all other prior agreements and understandings between the parties with respect to such subject matter. 9.3 Amendment; Waiver. This Agreement may not be amended, supplemented, canceled or discharged, except by written instrument executed by the party against whom enforcement is sought. No failure to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof. No waiver of any breach of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision. 9.4. Binding Effect; Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company or CareInsite by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's or CareInsite's business and properties. At the Effective Time, each reference in this Agreement to the Company shall automatically be deemed to refer to the Surviving Corporation. The Company or CareInsite may assign its rights and obligations under this Agreement to any of its Affiliates without the consent of Executive so long as the Company or CareInsite remains responsible for the payment of the obligations hereunder; provided that after the Effective Time, the Surviving Corporation may not assign its obligations hereunder to CareInsite without the consent of Executive. Executive's rights or obligations under this Agreement may not be assigned by Executive, except that the rights specified in Section 5.2 shall pass upon Executive's death to Executive's executor or administrator. 9.5. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 9.6. Governing Law; Interpretation. This Agreement shall be construed in accordance with and governed for all purposes by the laws and public policy (other than conflict of laws principles) of the State of New Jersey applicable to contracts executed and to be wholly performed within such State. 9.7. Further Assurances. Each of the parties agrees to execute, acknowledge, deliver and perform, and cause to be executed, acknowledged, delivered and performed, at any time and from time to time, as the case may be, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary to carry out the provisions or intent of this Agreement. 9.8. Severability. The parties have carefully reviewed the provisions of this Agreement and agree that they are fair and equitable. However, in light of the possibility of differing interpretations of law and changes in circumstances, the parties agree that if any one or more of the provisions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions of this Agreement shall, to the extent permitted by law, remain in full force and effect and shall in no 19 21 way be affected, impaired or invalidated. Moreover, if any of the provisions contained in this Agreement are determined by a court of competent jurisdiction to be excessively broad as to duration, activity, geographic application or subject, it shall be construed, by limiting or reducing it to the extent legally permitted, so as to be enforceable to the extent compatible with then applicable law. 9.9. Withholding Taxes. All payments hereunder shall be subject to any and all applicable federal, state, local and foreign withholding taxes. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. MEDICAL MANAGER CORPORATION By: /s/ James R. Love ----------------------------------------- Name: James R. Love Title: EVP- Finance & Admin., CFO CAREINSITE, INC. By: /s/ James R. Love ----------------------------------------- Name: /s/ James R. Love Title: EVP- Finance & Admin., CFO EXECUTIVE /s/ Marvin P. Rich -------------------------------------------- Marvin P. Rich 20 EX-10.50 7 g68745a1ex10-50.txt LETTER AGREEMENT DATED SEPTEMBER 11, 2000 1 EXHIBIT 10.50 Letter Agreement dated September 11, 2000 between Medical Manager Corporation and Marvin P. Rich 2 MEDICAL MANAGER CORPORATION 669 RIVER DRIVE, CENTER 2 ELMWOOD PARK, NEW JERSEY 07407-1361 September 11, 2000 Mr. Marvin P. Rich c/o Medical Manager Corporation 669 River Drive, Center 2 Elmwood Park, New Jersey 07407-1361 Dear Marv: Reference is made to the Amended and Restated Employment Agreement dated as of June 18, 2000 (the "Employment Agreement"), by and between Medical Manager Corporation, a Delaware corporation, CareInsite, Inc., a Delaware corporation, and you. The first sentence of Section 5.3(a)(iv) of the Employment Agreement is hereby amended to delete the words "and remain exercisable until the first anniversary of the date of termination" and replace them with "and remain exercisable until such options would otherwise expire under the terms thereof". The foregoing amendment to the Employment Agreement shall be effective as of the date hereof. All other provisions of the Employment Agreement shall continue in full force and effect. MEDICAL MANAGER CORPORATION By: /s/ Charles Mele ----------------------------------------- Name: Charles A. Mele Title: Executive Vice President - General Counsel Accepted and Agreed: /s/ Marvin P. Rich CAREINSITE, INC. - --------------------------- Marvin P. Rich By: /s/ David C. Amburgey ----------------------------------------- Name: David C. Amburgey Title: SVP - General Counsel EX-10.51 8 g68745a1ex10-51.txt EMPLOYMENT AGREEMENT DATED FEBRUARY 1, 1998 1 EXHIBIT 10.51 Employment Agreement dated February 1, 1998 between WebMD, Inc. and K. Robert Draughon 2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 1st day of February, 1998, by and between ENDEAVOR TECHNOLOGIES INC., a Georgia corporation ("ETI"), and K. ROBERT DRAUGHON, an individual (the "Executive"), and is effective as of the date hereof. WHEREAS, Executive is expected to make a significant contribution to the success and development of ETI in his role as a Director and the Chief Financial Officer of ETI; and WHEREAS, Executive is willing to render services to ETI on the terms and subject to the conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by Executive and ETI including, without limitation, the promises and covenants described herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I EMPLOYMENT Section 1.1 Term of Employment. The term of Executive's employment hereunder shall commence on or before February 2, 1998 and continue for a period of two (2) years, unless earlier terminated as provided in this Agreement. At the end of the second year of the initial two-year term, this Agreement shall automatically be extended for an additional one-year term unless either party hereto shall give written notice of its or his intent to terminate one hundred eighty (180) days prior to the end of the second year of the initial two-year term. Section 1.2 Duties and Responsibilities of Executive. Executive is hereby employed full time as the Chief Financial Officer of ETI, shall do and perform all services and acts necessary or advisable to fulfill the duties of such offices, and shall conduct and perform such additional services and activities as may be determined from time to time by the Board of Directors or the CEO of ETI, as applicable. During the term of this Agreement, Executive shall devote his full time, energy and skill to the business of ETI and to the promotion of ETI's interests, and Executive acknowledges that he has a duty of loyalty to ETI and shall not engage in, directly and indirectly, any other business or activity that could materially and adversely affect ETI's business or the Executive's ability to perform his duties under this Agreement. In his capacity as an officer of ETI, Executive shall report to the CEO of ETI. Executive's authority and responsibility in ETI shall at all times be subject to the review and discretion of the Board of Directors, who shall have the final authority to make decisions regarding the business of ETI. 3 Section 1.3 Compensation. For all services to be rendered by Executive under this Agreement, ETI shall pay Executive as follows: (a) Base Salary. Executive shall be paid an annual gross salary of One Hundred Seventy-Five Thousand Dollars ($175,000) payable bi-weekly. At the sole discretion of the Board of Directors of ETI, Executive's annual gross salary may be increased, from time to time, throughout the term of this Agreement, the amount of any such increase to be determined by the Board of Directors (or by a compensation committee thereof). (b) Annual Bonus. Executive may be paid an annual bonus in an amount recommended by the CEO of ETI and approved by the Board of Directors of ETI (or a compensation committee thereof). Section 1.4 Benefits. (a) Vacation. Executive shall be entitled to three weeks paid vacation annually during the first three calendar years of his employment by ETI and four weeks paid vacation during each calendar year thereafter. Any vacation not used during any calendar year shall be forfeited except that one week's unused vacation may be carried forward to the year following the year in which such vacation entitlement accrued. (b) Life, Disability and Retirement Programs. Executive shall be entitled to participate in any life, disability and retirement programs that are generally offered to or provided for the senior management personnel of ETI, said programs to be approved by the Board of Directors. (c) Group Insurance. Executive shall be entitled to participate in such group health and dental insurance programs (including family coverage) as may from time to time be offered generally to all of the other members of the senior management personnel of ETI and its subsidiaries. Executive's participation shall be on the same basis (including cost provisions) as such other members of senior management. Section 1.5 Stock Options. ETI shall grant Executive options to purchase 265,000 shares of Common Stock, Series D of ETI (the "Options"), such Options to be subject to the terms and conditions set forth below. The Options shall be adjusted for any change in the total issued common shares of ETI (of any class) due to stock splits and stock dividends so that after the change, the number of shares subject to the then outstanding Options bears the same proportion to the total number of issued common shares of ETI (of all classes) as borne prior to the change. (a) Grant, Vesting and Exercise. Options to purchase 265,000 shares of Common Stock, Series D shall be granted as of the effective date of this Agreement and at the exercise price of Two Dollars ($2.00) per each share of Common Stock, Series D acquired upon exercise (subject to customary adjustments). It is agreed that Two Dollars ($2.00) is the fair market value of a share as of the effective date hereof. Said Options shall vest and become exercisable in accordance with the following schedule and shall remain exercisable through the fourth anniversary of the effective - 2 - 4 date of this Agreement, at which time such Options shall expire unless earlier terminated in accordance with the provisions hereof. Such Options shall include a provision requiring Executive to execute and deliver a copy of the Restated Shareholders Agreement (as it may be amended from time to time) among ETI and all of its current shareholders (the "Restated Shareholders Agreement").
Option for Number of Date Vested Shares and Exercisable ---------- ---------------- 88,333 February 2, 1998 44,167 February 2, 1999 44,167 February 2, 2000 88,333 February 2, 2001
At the effective time and date of a registration statement filed under the 1993 Act for a public offering of any series of ETI's shares, one-half (1/2) of the Options held by Executive which then have not vested and become exercisable under the above vesting schedule will immediately vest and become exercisable. All Options shall vest and become exercisable upon a Change of Control of ETI which occurs subsequent to the effective time and date of a registration statement filed under the Securities Act of 1933 ("1933 Act") for a public offering of any series of ETI's shares. For purposes of this Section 1.5(a), a "Change of Control" shall mean a change of the possession, direct or indirect, of the power to direct or cause the direction of management and policies of ETI, whether through ownership of voting securities, by contract (other than a commercial contract for goods or non-management services), or otherwise. Without limitation, a Change of Control shall be deemed to have occurred if any person or entity that is not on the date hereof the beneficial owner of any securities of ETI becomes the beneficial owner, directly or indirectly, of 20% or more of the combined voting power of ETI's outstanding voting securities ordinarily having the right to vote for the election of directors of ETI. (b) Return of Options and Repurchase of Shares. (i) In the event that Executive voluntarily resigns his employment with ETI prior to February 2, 2000, all then outstanding Options that have been issued to Executive shall be canceled as of the date of Executive's notice of voluntary resignation. In the event that Executive voluntarily resigns his employment with ETI after February 1, 2000, all then outstanding and exercisable options shall remain exercisable in full for a period of 120 days after the date of such notice of voluntary resignation. ETI shall have the option at its sole discretion to purchase any unexercised Options from the Executive at a price per share equal to the difference between the exercise price of such Options and the per share - 3 - 5 Fair Market Value of the shares of Common Stock underlying such Options determined as of or before the thirtieth (30th) day following the date such notice of voluntary resignation was given, with the Fair Market Value of such shares of Common Stock to be determined in the manner set forth in clause (iv) of this Subsection 1.5(b) set forth below. Furthermore, in the event Executive voluntarily resigns his employment with ETI and no registration statement filed under the 1933 Act for a public offering of any series of ETI's shares has become effective, then ETI in its sole discretion may purchase any shares of Common Stock previously obtained by Executive upon his exercise of any Options for an amount equal to the Fair Market Value of such shares of Common Stock. Any such repurchase of shares by ETI shall be accomplished within 180 days after ETI's receipt of such notice of resignation. (ii) In the event that Executive's employment with ETI shall be terminated by ETI for Cause after February 1, 1999 or at any time without Cause, all then outstanding and unexercised Options shall become exercisable in full as of the date such notice of termination was given by ETI and shall remain exercisable in full for a period of 120 days after the date such notice of termination was given. ETI shall have the option at its sole discretion to purchase any unexercised Options from the Executive at a price per share equal to the difference between the exercise price of such Options and the per share Fair Market Value of the shares of Common Stock underlying such Options determined as of or before the thirtieth (30th) day following the date such notice of termination was given by ETI, with the Fair Market Value of such shares of Common Stock to be determined in the manner set forth in clause (iv) of Subsection 1.5(b) appearing below. Furthermore, if no registration statement filed under the 1933 Act for a public offering of any series of ETI's Common Stock has become effective, then ETI in its sole discretion may repurchase any shares of Common Stock previously obtained by Executive upon the exercise of any Options for an amount equal to the Fair Market Value of such shares of the shares of Common Stock. Any such repurchase of the shares of Common Stock shall be accomplished within 180 days after the date such notice of termination was given by ETI. (iii) In the event Executive's employment with ETI shall be terminated by ETI for Cause on or before February 1, 1999, all then outstanding Options will be canceled, and, if no registration statement filed under the 1933 Act for a public offering of any series of ETI's Common Stock has become effective, then ETI in its sole discretion may repurchase any shares of Common Stock previously obtained by Executive upon his exercise of any Options for an amount equal to the aggregate amount paid by Executive to ETI in connection with the exercise price of such Options plus interest at eight percent per annum for the period Executive owned the Common Stock. Any such repurchase of the shares of Common Stock shall be accomplished within 180 days after such notice of termination. (iv) The Fair Market Value of a share of Common Stock, Series D on the date specified by ETI shall mean (i) the closing sales price of the Common Stock of ETI on such date on the national securities exchange (treating the NASDAQ National Market System as a national securities exchange) having the greatest volume of trading in the Common Stock during the thirty (30) day period preceding the day the value is to - 4 - 6 be determined or, if such exchange was not open for trading on such date, the next preceding date on which it was open; (ii) if the Common Stock is not traded on any national securities exchange, the average of the closing high bid and low asked prices of the Common Stock on the over-the-counter market, in arms-length transactions not involving an affiliate of ETI, on the day such value is to be determined, or in the absence of closing bids on such day, the closing bids on the next preceding day on which there were bids; (iii) if the Common Stock also is not traded on the over-the-counter market, the average net proceeds per share received or the price paid by ETI with respect to shares of Common Stock of any series sold or purchased by ETI in arms length transactions during the ninety (90) days preceding the day the value is to be determined; or (iv) if no such purchase or sale transactions by ETI have occurred within such ninety (90) day period, the fair market value as determined in good faith by the Board of Directors of ETI based on (a) such relevant facts as may be available to such Board, which may include opinions of independent experts, the price at which recent purchases or sales have been made by third parties, the book value of the per share, and the ETI's current and future earnings or (b) an independent appraisal, conducted at ETI's expense, by a qualified financial appraiser who is reasonably satisfactory to both ETI and Executive, provided that the selection of method (a) or (b) shall be by mutual agreement of the Board and Executive. (c) Initial Public Offering. In the event that ETI shall undertake an initial public offering ("IPO") of any series of its stock, pursuant to which it files a registration statement in accordance with the 1933 Act, notice of the filing of such registration statement shall be provided to Executive, and upon the effective date of such registration statement (i) pursuant to and in accordance with the Restated Shareholders Agreement, each one (1) outstanding share of Common Stock, Series D will become one (1) share of Common Stock with all rights of a share of Common Stock, Series A, (ii) pursuant to and in accordance with Section 1.5(a) above, one-half (1/2) of the Executive's then unvested Option shall immediately vest and become exercisable, and (iii) ETI shall have no right to repurchase any shares of Common Stock obtained by his exercise of any Options. Section 1.6 Member of Board. Executive will be elected to the Board of Directors of ETI at the first regularly scheduled Board meeting following the effective date hereof. Section 1.7 Business Expenses. Executive shall be entitled to reimbursement of all ordinary and necessary business expenses reasonably incurred for business travel, communications (including cell phone and pager), entertainment and meals in connection with the performance of Executive's duties under this Agreement in accordance with ETI's established policies for reimbursement of business expenses including an automobile allowance of Five Hundred Dollars ($500) per month. ETI will also pay the initiation fees, membership dues and assessments for Executive's family membership in a club in the Atlanta area acceptable to ETI and Executive which would permit Executive to engage in business entertainment for the benefit of ETI. ETI expects Executive to attend and participate in continuing education seminars and courses with respect to the health industry and business management related to his - 5 - 7 duties, and ETI will reimburse all ordinary and necessary expenses of such attendance and participation. Such continuing education courses and seminars will be scheduled in consultation with the CEO of ETI to ensure coordination of schedules. ARTICLE II COVENANTS OF EXECUTIVE Section 2.1 Confidentiality. Executive recognizes the interest of ETI in maintaining the confidential nature of its proprietary and other business and commercial information. In connection therewith, Executive covenants that during the term of his employment with Company under this Agreement, and for a period of one (1) year thereafter, Executive shall not, directly or indirectly, except as authorized by the Board of Directors, publish, disclose or use for his own benefit or for the benefit of a business or entity other than ETI or otherwise, any secret or confidential matter, or proprietary or other information not in the public domain that was acquired by Executive during his employment, relating to ETI, or any of its subsidiaries' businesses, operations, customers, suppliers, products, employees, financial affairs or industrial practices, technology, know-how or intellectual property or other similar information (the "Proprietary Information"). Executive will abide by ETI's policies and regulations, as established from time to time, for the protection of its Proprietary Information. Executive acknowledges that all records, files, data, documents and the like relating to suppliers, customers, costs, prices, systems, methods, personnel, technology and other materials relating to ETI or its affiliated entities shall be and remain the sole property of ETI and/or such affiliated entity and shall, upon the request of ETI, turn over all copies of such Proprietary Information to ETI (together with a written statement certifying as to his compliance with the foregoing). Section 2.2 Non-Solicitation of Customers and Non-Competition. During the term of his employment with ETI, and for a period of one (1) year thereafter, Executive shall not directly or indirectly, through one or more intermediaries or otherwise, solicit, direct or appropriate, or attempt to solicit, direct or appropriate any individual or entity which was, at the time of termination of Executive's employment, a customer or client of ETI for the purpose of providing a service or product to such customer or client which is the same type of service or product offered or provided by ETI at the time of termination of Executive's employment, with ETI. During the Executive's employment with ETI, and for the one (1) year period following the termination of Executive's employment with ETI for any reason, Executive shall not, without the prior written consent of the Board of Directors, which consent may be withheld at the sole discretion of the Board of Directors, engage or participate in, as a business executive or equity owner, the management or conduct of any business or enterprise that directly competes in any geographical area with any line of business in which ETI was engaged in at the time of termination of Executive's employment with ETI; provided, however, that nothing in this Section 2.2 shall prohibit Executive from - 6 - 8 acquiring or holding, for investment purposes only, less than five percent (5%) of the outstanding publicly traded securities of any corporation which may compete directly or indirectly with ETI. Section 2.3 Non-Solicitation of Employees. During the term of Executive's employment with ETI, and for a period of one (1) year thereafter (the "Non-solicitation Period"), Executive shall not, directly or indirectly, through one or more intermediaries or otherwise, employ, induce, solicit for employment, or assist others in employing, inducing or soliciting for employment any individual who is at any time during the Non-solicitation Period an employee of ETI for the purpose of providing services that are the same or similar to the types of services offered or engaged in by ETI at the time of termination of Executive's employment with ETI. Section 2.4 Trade Secrets. The Executive shall not, at any time, either during the term of his employment or after any termination of employment, use or disclose any Trade Secrets (as defined under applicable law) of ETI or its subsidiaries, except in fulfillment of his duties as the Executive during his employment, for so long as the pertinent information or data remain Trade Secrets, whether or not the Trade Secrets are in written or tangible form. ARTICLE III TERMINATION OF EMPLOYMENT Section 3.1 Termination by Company. Executive's employment may be terminated by ETI by giving notice during the term of this Agreement upon the occurrence of one or more of the following events: (a) Executive's death or disability which renders Executive incapable of performing his duties for more than one hundred twenty (120) calendar days in one calendar year or within consecutive calendar years (termination under this Section 3.1(a) shall be deemed termination without Cause); (b) for any reason following a determination by the Board of Directors of ETI to terminate Executive's employment (termination under this Section 3.1(b) shall be deemed termination without Cause); or (c) "for Cause," which for purposes of this Agreement shall mean that the Executive shall have committed or engaged in: (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with ETI; (ii) any intentional wrongful damage to any material assets of ETI; (iii) any intentional wrongful disclosure of Proprietary Information or Trade Secrets of ETI or its affiliates; - 7 - 9 (iv) a felony or any similar crime involving dishonesty or moral turpitude; (v) the habitual and debilitating use of alcohol or drugs; or (vi) the failure of the Executive to meet performance expectations, as determined and articulated by a majority of the members of ETI's Board of Directors other than Executive; provided, however, that in the event of this clause (vi) being the sole reason for a termination for Cause, Executive shall have the cure provisions and rights provided for in Section 3.1(d) hereof and clause (ii) of Section 3.2(c) hereof. (d) In the event of a determination by ETI's Board of Directors to terminate Executive's employment under clause (vi) of Section 3.1(c) based solely on the failure of Executive to meet performance expectations, then ETI shall furnish to Executive in writing a notice of proposed termination setting forth a specific statement of the deficiencies in his performance. Executive shall then have a period of ninety (90) days after the giving of such written notice of proposed termination by ETI in which to attempt to effect a cure of the specified deficiencies. If at the end of such ninety (90) day period no such cure has been effected to the reasonable satisfaction of the Board of Directors of ETI, then Executive's employment shall be terminated as of the end of such ninety (90) day period. ETI shall be obligated to provide to Executive only one such notice of proposed termination, and if subsequent to effecting a cure of specified deficiencies the Executive is determined by the Board of Directors to have again failed to meet performance expectations, then his employment may be terminated immediately upon ETI's giving of notice of termination to Executive which specifies his deficiencies in performance. Section 3.2 Severance. For purposes of this Agreement, Executive's entitlement to any severance payments upon termination of his employment shall be as set forth below: (a) Termination Without Cause. Executive shall be entitled to 12 months salary continuation, payable in bi-weekly installments, and continued participation in ETI's group health and dental insurance program upon the timely periodic payment of the amount required by ETI for employees to maintain family coverage for such programs, as severance pay in the event that the Executive's employment is terminated without Cause, commencing as of the date of Executive's death or disability for purposes of Section 3.1(a), or the date specified in a notice given under Section 3.1(b). (b) Voluntary Termination. Executive shall not receive any severance pay in the event that he voluntarily resigns his employment with ETI unless such severance pay is approved by the Board of Directors of ETI in its sole discretion. Executive shall provide a minimum of thirty (30) days prior notice to the CEO of his resignation. In the event Executive shall provide thirty (30) days prior written notice of his intent to resign, ETI may accept such resignation effective as of any date during such thirty (30) day period as ETI deems appropriate, provided that Executive shall receive from ETI his salary and be entitled to participate at ETI's expense in any Company sponsored - 8 - 10 benefit programs in which he was a participant as of the effective date of his resignation for the duration of such thirty (30) day period. (c) For Cause. Executive shall not be entitled to any severance pay whatsoever in the event that his employment is terminated "for Cause" pursuant to Section 3.1 (c) of this Agreement, unless (i) severance pay is approved by the Board of Directors of ETI in its sole discretion, or (ii) Executive's employment is terminated based solely on nonperformance pursuant to clause (vi) of Section 3.1(c), in which event Executive shall be entitled to three (3) months salary continuation and continued participation in ETI's group health and dental insurance program upon timely periodic payment of the amount required by ETI for employees to maintain family coverage for such programs. ARTICLE IV GENERAL PROVISIONS Section 4.1 Withholding of Taxes. ETI may withhold from any amounts payable under this Agreement all federal, state, city or other taxes and withholdings as shall be required pursuant to any applicable law, rule or regulation. Section 4.2 Notice. For purposes of this Agreement, all communications including, without limitation, notices, consents, requests or approvals, provided for herein shall be in writing and shall be deemed to have been duly given (i) when personally delivered, (ii) on the day of transmission when given by facsimile transmission with confirmation of receipt, (iii) on the following day if submitted to a nationally recognized courier service, or (iv) five (5) business days after having been mailed by United States registered mail or certified mail, return receipt requested, postage prepaid, addressed to ETI (to the attention of the Secretary of ETI) at its principal executive office or to Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except the notices of change of address shall be effective only upon receipt. Section 4.3 Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of Georgia, without giving effect to the principles of conflict of laws of such State. Section 4.4 Validity. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it valid, enforceable and legal; provided, however, if the provision so held to be invalid, unenforceable or otherwise illegal constituted a material inducement to a party's execution and delivery of this Agreement, such provision shall not be reformed unless prior to any reformation that party agrees to be bound by the reformation. - 9 - 11 Section 4.5 Entire Agreement. This Agreement supersedes any other agreements, oral or written, between the parties with respect to the subject matter hereof, and contains all of the agreements and understandings between the parties with respect to the employment of Executive by ETI. Any waiver or modification of any term of this Agreement shall be effective only if it is set forth in a writing signed by all parties hereto. Section 4.6 Successors and Binding Agreement. (a) This Agreement shall be binding upon and inure to the benefit of ETI and any Successor of or to ETI, but shall not be otherwise be assignable or delegable by ETI. "Successor" shall mean any successor in interest, including, without limitation, any entity, individual or group of persons acquiring directly or indirectly all or substantially all of the business or assets of ETI, whether by sale, merger, consolidation, reorganization or otherwise. (b) ETI shall require any Successor to agree at the time of becoming a Successor to perform this Agreement to the same extent as the original parties would be required if no succession had occurred. (c) This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, heirs, distributees and legatees. (d) This Agreement is personal in nature and neither of the parties shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in this Section 4.6. Section 4.7 Captions. The captions in this Agreement are solely for convenience of reference and shall not be given any effect in the construction or interpretation of this Agreement. Section 4.8 Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by Executive and ETI. No waiver by a party hereto at any time of any breach by another party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. Section 4.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same Agreement. - 10 - 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. ENDEAVOR TECHNOLOGIES INC. By: /s/ Jeffrey T. Arnold ------------------------------------- Jeffrey T. Arnold Chief Executive Officer EXECUTIVE /s/ K. Robert Draughon ------------------------------------- K. Robert Draughon - 11 - EX-10.52 9 g68745a1ex10-52.txt LETTER AGREEMENT DATED SEPTEMBER 12, 2000 1 EXHIBIT 10.52 Letter Agreement dated September 12, 2000 between Registrant and K. Robert Draughon 2 HEALTHEON/WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENOX BUILDING ATLANTA, GEORGIA 30326 September 12, 2000 Mr. K. Robert Draughon Healtheon/WebMD Corporation 3399 Peachtree Street NE 400 The Lenox Building Atlanta, Georgia 30326 Dear Rob: The purpose of this letter is to evidence the agreement between you and Healtheon/WebMD Corporation (the "Company") concerning changes to your employment arrangements with the Company. This letter is intended as an amendment to your existing employment arrangement, whether or not in writing, with the Company or its subsidiaries. To the extent this letter is inconsistent with those arrangements, this letter will govern. 1. DUTIES AND RESPONSIBILITIES. (a) IN GENERAL. You shall have all of the responsibilities, duties, powers and authorities which are consistent with your position as Executive Vice President, Business Development of the Company, and in this regard shall be responsible for all business development affairs of the Company and its subsidiaries, and shall have such other reasonable and lawful responsibilities commensurate with your position as shall be assigned to you by the Chief Executive Officer of the Company (or Co-Chief Executive Officers, if there are more than one), all of which shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. (b) REPORTING RELATIONSHIPS. You will report directly and solely to the Chief Executive Officer of the Company or Co-Chief Executive Officers if there shall be more than one. All other employees of the Company and its subsidiaries whose principal function is the performance of business development will report directly to you. (c) BASE OF OPERATIONS; RESIDENCE. Your base of operations shall be in Atlanta, Georgia. 2. BASE SALARY; BONUS. Effective on the date hereof your annual base salary is increased to $450,000, which amount shall be subject to increase upon periodic review by the 3 Company. You shall also be entitled to participate in any bonus program established for the benefit of senior executive officers of the Company. 3. ADDITIONAL OPTION GRANTS. On September 12, 2000, the Compensation Committee of the Board of Directors of the Company granted to you additional stock options to acquire 250,000 shares of the common stock of the Company at an exercise price of $16.125 per share (the "New Options"). The New Options were granted under the Company's 2000 Long-Term Incentive Plan (the "Plan"), which together with the terms contained in this letter, sets forth the terms and conditions of the New Options and is incorporated herein by reference. The New Options are non-qualified stock options and have a term of ten years from the date of grant. The New Options will vest and become exercisable as to 1/48th of the shares covered thereby on the 12th day each month from October 2000 to and including September 2004, subject to Section 4 below. 4. ACCELERATED VESTING AND SEVERANCE COMPENSATION FOLLOWING TERMINATION. Upon the termination of your employment as a result of the event described in the first column below, your Equity Compensation (defined below) shall vest as set forth in the corresponding second column (vesting to include the waiver of repurchase rights with respect to any restricted stock) and you shall become entitled to severance compensation and benefits as set forth in the corresponding third column, except that to the extent that the provisions of the plans or written agreements under which Equity Compensation has previously been awarded to you currently provide for vesting, post-termination exercisability, or severance compensation and benefits more favorable to you than those described in this Section 4, those provisions shall apply.
- ------------------------------ --------------------------------- --------------------------------- EVENT VESTING OF EQUITY COMPENSATION SEVERANCE COMPENSATION - ------------------------------ --------------------------------- --------------------------------- Termination by the Company for Any Equity Compensation that has No further compensation or Cause (defined below) not already vested shall be benefits except as currently forfeited; any vested Equity provided in your existing written Compensation shall continue to be employment arrangement, if any. exercisable until the 10th anniversary of the date of grant. - ------------------------------ --------------------------------- ---------------------------------
- 2 - 4
- ---------------------- -------------------------------- -------------------------------------------- EVENT VESTING OF EQUITY COMPENSATION SEVERANCE COMPENSATION - ---------------------- -------------------------------- -------------------------------------------- Termination by the All Equity Compensation shall (1) Base salary (less applicable Company without Cause become immediately vested and withholding) shall continue to be paid for exercisable and shall continue 12 months following termination; and to paid for 12 months following be exercisable until the 10th (2) The Company shall continue benefits to termination; and anniversary of you and/or your family for 12 months the date of grant. following termination at least equal to the benefits that would have been provided under the health and welfare benefit plans and programs of the Company in effect on the date of your termination. - ---------------------- -------------------------------- -------------------------------------------- Resignation by you for Same as termination by the Same as termination by the Good Reason (defined Company without Cause. Company without Cause. below) - ---------------------- -------------------------------- -------------------------------------------- Resignation by you Same as termination by the Same as termination by the without Good Reason Company with Cause. Company with Cause. (defined below) - ---------------------- -------------------------------- -------------------------------------------- Your death or Same as termination by the Same as termination by the Disability (defined Company without Cause. Company without Cause. below) - ---------------------- -------------------------------- --------------------------------------------
For purposes of this Section 4, the following definitions shall apply: (a) "Cause" shall mean (i) your willful and continued failure to perform substantially your duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to you by the Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which the Chief Executive Officer or the Board believes that you have not substantially performed your duties, or (ii) your willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, shall be considered "willful" unless - 3 - 5 it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. (b) "Good Reason" shall mean any of the following, without your written consent, (i) a diminution in your position, authority, duties or responsibilities, (ii) a requirement that you report to any person other than the Chief Executive Officer, or Co-Chief Executive Officers if there are more than one, of the Company, (iii) a reduction in your compensation or fringe benefits, (iv) a breach by the Company of this letter or any other material agreement between you and the Company, or (v) a change in the location from which you are required to perform your services to the Company. If you believe any of the above events or circumstances has occurred, you shall give the Company notice of such event or circumstance. The Company shall have 30 days after such notice to cure any claimed event or circumstance of Good Reason. The Company shall notify you of the timely cure of any claimed event or circumstance of Good Reason and the manner in which such cure was effected, and upon receipt of such written notice of cure from the Company and implementation of an effective cure by the Company within such 30 day period, any notice by you of termination based on such claimed Good Reason shall be deemed withdrawn. (c) "Equity Compensation" shall mean all of your outstanding options to acquire common and other stock of the Company (including without limitation the New Options), all of your restricted stock of the Company, and all of your other contingent compensation subject to vesting, in each case whether currently owned or hereafter acquired by you. 5. GROSS-UP PAYMENT. (i) Anything in this letter to the contrary or any termination of the Equity Compensation notwithstanding, in the event it shall be determined that any payment or distribution or benefit received or to be received by you pursuant to the terms of this letter or any other payment or distribution or benefit made or provided by the Company, or any of its subsidiaries and affiliates, to or for your benefit (whether pursuant to this letter or otherwise and determined without regard to any additional payments required under this Paragraph 5) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by you with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the "Excise Tax"), then you shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by you of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions actually disallowed under Section 68 of the Code solely as a direct result of the inclusion of the Gross-Up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to (i) pay federal income taxes at the highest marginal rates of - 4 - 6 federal income taxation for the calendar year in which the Gross-Up Payment is to be made and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (ii) Subject to the provisions of Paragraphs 5(i) and 5(iii), all determinations required to be made under this Paragraph 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's certified public accounting firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and you within 15 business days of the receipt of notice from you or the Company that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Paragraph 5, shall be paid by the Company to you within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Paragraph 5(iii) and you thereafter are required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for your benefit. (iii) You shall notify the Company in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after you are informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you gave such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (a) give the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; and (c) cooperate with the Company in good faith in order effectively to contest such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall - 5 - 7 indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Paragraph 5(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you shall agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you, on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or income and employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue (an "Other Issue") raised by the IRS or any other taxing authority; provided, however, that if, solely as a result of any contest by the Company pursuant to this Paragraph 5(iii), your ability to settle or otherwise resolve any such Other Issue is delayed, then the Company will reimburse you, on an after-tax basis, for any additional interest incurred by you as a result of such delay. (iv) If, after the receipt by you of an amount advanced by the Company pursuant to Paragraph 5(iii), you becomes entitled to receive any refund with respect to such claim, you shall (subject to the Company's complying with the requirements of Paragraph 5(iii) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Company pursuant to Paragraph 5(iii), a determination is made that you shall not be entitled to any refund with respect to such claim and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 6. RESTRICTIONS ON YOUR CONDUCT. (a) GENERAL. You understand and agree that the purpose of the provisions of this Paragraph 6 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate your post-employment competition with the Company per se, nor is it intended to impair or infringe upon your right to work, earn a living, or acquire and possess property from the fruits of your labor. You hereby acknowledge that the post-employment restrictions set forth in this Paragraph 6 are reasonable and that they do not, and will not, unduly impair your ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, you shall be subject to the restrictions set forth in this Paragraph 6. - 6 - 8 (b) DEFINITIONS. The following capitalized terms used in this Paragraph 6 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "COMPETITIVE SERVICES" means the delivery of information and communications services to the healthcare industry. "DETERMINATION DATE" means the date of termination of your employment with the Company for any reason whatsoever or any earlier date (during your employment) of an alleged breach of the Restrictive Covenants by you. "PERSON" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise. "PRINCIPAL OR REPRESENTATIVE" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "PROTECTED CUSTOMERS" means any Person to whom the Company has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date; provided, however, that Protected Customer shall not include any Person with which you can reasonably demonstrate that you had a pre-existing professional relationship prior to the commencement of your employment with the Company. "PROTECTED EMPLOYEES" means employees of the Company who were employed by the Company at any time within six months prior to the Determination Date and with whom you had direct, personal and continuing dealings on behalf of the Company or whom you directly supervised. "RESTRICTED PERIOD" means the Employment Period and a period extending two years from the termination of your employment with the Company. "RESTRICTIVE COVENANTS" means the restrictive covenants contained in Paragraph 6(c) hereof. (c) RESTRICTIVE COVENANTS. (i) Nonsolicitation of Protected Employees. You understand and agree that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agree that during the Restricted Period you shall not directly or indirectly on your own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. - 7 - 9 (ii) Restriction on Relationships with Protected Customers. You understand and agree that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agrees that, during the Restricted Period, you shall not, without the prior written consent of the Company, directly or indirectly, on your own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom you had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of your employment. For purposes of this Agreement, you had "MATERIAL CONTACT" with a Protected Customer if (a) you had direct business dealings with the Protected Customer on the Company's behalf or (b) you were responsible for supervising or coordinating the dealings between the Company and the Protected Customer. (d) ENFORCEMENT OF RESTRICTIVE COVENANTS. (i) Rights and Remedies Upon Breach. In the event you breach, or threaten to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the right and remedy to enjoin, preliminarily and permanently, you from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such right and remedy shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. In addition, the Restricted Period shall be extended for the period of any such breach or threatened breach. (ii) Severability of Covenants. You acknowledge and agree that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and you in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 7. MISCELLANEOUS. This letter constitutes the entire agreement of the parties and shall supercede any and all previous contracts, arrangements or understandings between the parties relating to the subject matter hereof, and shall not be amended except in writing signed by each of the parties. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. - 8 - 10 Sincerely, Healtheon/WebMD Corporation By: /s/ W. Michael Long ------------------------------ Authorized Representative Accepted and agreed: /s/ K. Robert Draughon - ------------------------------ K. Robert Draughon September 12, 2000 - 9 - EX-10.53 10 g68745a1ex10-53.txt LETTER AGREEMENT DATED SEPTEMBER 12, 2000 1 EXHIBIT 10.53 Letter Agreement dated September 12, 2000 between Registrant and Jack Dennison 2 HEALTHEON/WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENOX BUILDING ATLANTA, GEORGIA 30326 September 12, 2000 Mr. Jack Dennison Healtheon/WebMD Corporation 3399 Peachtree Street NE 400 The Lenox Building Atlanta, Georgia 30326 Dear Jack: This purpose of this letter is to evidence the agreement between you and Healtheon/WebMD Corporation (the "Company") concerning changes to your employment arrangements with the Company. You are currently employed as Executive Vice President, General Counsel and Secretary of the Company without a written employment agreement. Your employment arrangements are modified as of the date hereof as follows: 1. DUTIES AND RESPONSIBILITIES. (a) IN GENERAL. You shall have all of the responsibilities, duties, powers and authorities which are consistent with your position as Executive Vice President, General Counsel and Secretary of the Company, and in this regard shall be responsible for all legal affairs of the Company and its subsidiaries, and shall have such other reasonable and lawful responsibilities commensurate with your position as shall be assigned to you by the Chief Executive Officer of the Company (or Co-Chief Executive Officers, if there are more than one), all of which shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. (b) REPORTING RELATIONSHIPS. You will report directly and solely to the Chief Executive Officer of the Company or Co-Chief Executive Officers if there shall be more than one. All other employees of the Company and its subsidiaries whose principal function is the performance of legal services will report to you, either directly or indirectly through other persons reporting to you. (c) BASE OF OPERATIONS; RESIDENCE. Your base of operations shall be in Atlanta, Georgia, but you shall be entitled to reside in Austin, Texas, and the Company shall pay your reasonable commuting expenses between Atlanta and Austin and living expenses in Atlanta. 3 2. BASE SALARY; BONUS. Effective on the date hereof your annual base salary is increased to $450,000, which amount shall be subject to increase upon periodic review by the Company. You shall also be entitled to participate in any bonus program established for the benefit of senior executive officers of the Company. 3. ADDITIONAL OPTION GRANTS. On September 12, 2000, the Compensation Committee of the Board of Directors of the Company granted to you additional stock options to acquire 425,000 shares of the common stock of the Company at an exercise price of $16.125 per share (the "New Options"). The New Options were granted under the Company's 2000 Long-Term Incentive Plan (the "Plan"), which together with the terms contained in this letter, sets forth the terms and conditions of the New Options and is incorporated herein by reference. The New Options are non-qualified stock options and have a term of ten years from the date of grant. The New Options will vest and become exercisable as to 1/48th of the shares covered thereby on the 12th day each month from October 2000 to and including September 2004, subject to Paragraph 3 below. 4. ACCELERATED VESTING AND SEVERANCE COMPENSATION FOLLOWING TERMINATION. Upon the termination of your employment as a result of the event described in the first column below, your Equity Compensation (defined below) shall vest as set from in the corresponding second column (vesting to include the waiver of repurchase rights with respect to any restricted stock) and you shall become entitled to severance compensation and benefits as set forth in the corresponding third column, except that the provisions of the plans or agreements under which Equity Compensation has previously been awarded to you currently provide for vesting, post-termination exercisability or severance compensation and benefits more favorable to you than those described in this paragraph 4., those provisions shall apply.
EVENT VESTING OF EQUITY COMPENSATION SEVERANCE COMPENSATION - ------------------------------------------------------------------------------------------------------------- Termination by the Company for Any Equity Compensation that has No further compensation or Cause (defined below) not already vested shall be benefits except as currently forfeited; any vested Equity provided in your existing written Compensation shall continue to be employment arrangement, if any. exercisable until the 10th anniversary of the date of grant.
-2- 4
EVENT VESTING OF EQUITY COMPENSATION SEVERANCE COMPENSATION - ------------------------------------------------------------------------------------------------------------- Termination by the Company without All Equity Compensation shall (1) Base salary (less applicable Cause become immediately vested and withholding) shall continue to be exercisable and shall continue to paid for 12 months following be exercisable until the 10th termination; and anniversary of the date of grant. (2) The Company shall continue benefits to you and/or your family for 12 months following termination at least equal to the benefits that would have been provided under the health and welfare benefit plans and programs of the Company in effect on the date of your termination. - ------------------------------------------------------------------------------------------------------------- Resignation by you for Good Reason Same as termination by the Same as termination by the (defined below) Company without Cause. Company without Cause. - ------------------------------------------------------------------------------------------------------------- Resignation by you without Good Same as termination by the Same as termination by the Reason (defined below) Company with Cause. Company with Cause. - ------------------------------------------------------------------------------------------------------------- Your death or Disability (defined Same as termination by the Same as termination by the below) Company without Cause. Company without Cause.
For purposes of this paragraph 4., the following definitions shall apply: a. "Cause" shall mean (i) the willful and continued failure to perform substantially your duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to you by the Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which the Chief Executive Officer or the Board believes that you have not substantially performed your duties, or (ii) willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, shall be considered "willful" unless it is done, or -3- 5 omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. b. "Good Reason" shall mean any of the following, without your written consent, (i) a diminution in your position, authority, duties or responsibilities, (ii) a requirement that you report to any person other than the Chief Executive Officer, or Co-Chief Executive Officers if there are more than one, of the Company, (iii) a reduction in your compensation or fringe benefits, (iv) a breach by the Company of this letter or any other material agreement between you and the Company, or (v) a change in the location from which you are required to perform your services to the Company. If you believe any of the above events or circumstances has occurred, you shall give the Company notice of such event or circumstance. The Company shall have 30 days after such notice to cure any claimed event or circumstance of Good Reason. The Company shall notify you of the timely cure of any claimed event or circumstance of Good Reason and the manner in which such cure was effected, and upon receipt of such written notice of cure from the Company and implementation of an effective cure by the Company within such 30 day period, any notice by you of termination based on such claimed Good Reason shall be deemed withdrawn. c. "Equity Compensation" shall mean all of your outstanding options to acquire common and other stock of the Company (including without limitation the New Options), all of your restricted stock of the Company, and all of your other contingent compensation subject to vesting, in each case whether currently owned or hereafter acquired by you. 5. GROSS-UP PAYMENT. (i) Anything in this letter to the contrary or any termination of the Equity Compensation notwithstanding, in the event it shall be determined that any payment or distribution or benefit received or to be received by you pursuant to the terms of this letter or any other payment or distribution or benefit made or provided by the Company, or any of its subsidiaries and affiliates, to or for your benefit (whether pursuant to this letter or otherwise and determined without regard to any additional payments required under this Paragraph 5) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by you with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the "Excise Tax"), then you shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by you of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions actually disallowed under Section 68 of the Code solely as a direct result of the inclusion of the Gross-Up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to (i) pay federal income taxes at the highest marginal rates of -4- 6 federal income taxation for the calendar year in which the Gross-Up Payment is to be made and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (ii) Subject to the provisions of Paragraphs 5(i) and 5(iii), all determinations required to be made under this Paragraph 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's certified public accounting firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and you within 15 business days of the receipt of notice from you or the Company that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Paragraph 5, shall be paid by the Company to you within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Paragraph 5(iii) and you thereafter are required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for your benefit. (iii) You shall notify the Company in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after you are informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you gave such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (a) give the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; and (c) cooperate with the Company in good faith in order effectively to contest such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall -5- 7 indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Paragraph 5(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you shall agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you, on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or income and employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue (an "Other Issue") raised by the IRS or any other taxing authority; provided, however, that if, solely as a result of any contest by the Company pursuant to this Paragraph 5(iii), your ability to settle or otherwise resolve any such Other Issue is delayed, then the Company will reimburse you, on an after-tax basis, for any additional interest incurred by you as a result of such delay. (iv) If, after the receipt by you of an amount advanced by the Company pursuant to Paragraph 5(iii), you becomes entitled to receive any refund with respect to such claim, you shall (subject to the Company's complying with the requirements of Paragraph 5(iii) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Company pursuant to Paragraph 5(iii), a determination is made that you shall not be entitled to any refund with respect to such claim and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 6. RESTRICTIONS ON YOUR CONDUCT. (a) GENERAL. You understand and agree that the purpose of the provisions of this Paragraph 6 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate your post-employment competition with the Company per se, nor is it intended to impair or infringe upon your right to work, earn a living, or acquire and possess property from the fruits of your labor. You hereby acknowledge that the post-employment restrictions set forth in this Paragraph 6 are reasonable and that they do not, and will not, unduly impair your ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, you shall be subject to the restrictions set forth in this Paragraph 6. -6- 8 (b) DEFINITIONS. The following capitalized terms used in this Paragraph 6 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "COMPETITIVE SERVICES" means the delivery of information and communications services to the healthcare industry. "DETERMINATION DATE" means the date of termination of your employment with the Company for any reason whatsoever or any earlier date (during your employment) of an alleged breach of the Restrictive Covenants by you. "PERSON" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise. "PRINCIPAL OR REPRESENTATIVE" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "PROTECTED CUSTOMERS" means any Person to whom the Company has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date; provided, however, that Protected Customer shall not include any Person with which you can reasonably demonstrate that you had a pre-existing professional relationship prior to the commencement of your employment with the Company. "PROTECTED EMPLOYEES" means employees of the Company who were employed by the Company at any time within six months prior to the Determination Date and with whom you had direct, personal and continuing dealings on behalf of the Company or whom you directly supervised. "RESTRICTED PERIOD" means the Employment Period and a period extending two years from the termination of your employment with the Company. "RESTRICTIVE COVENANTS" means the restrictive covenants contained in Paragraph 6(c) hereof. (c) RESTRICTIVE COVENANTS. (i) Nonsolicitation of Protected Employees. You understand and agree that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agree that during the Restricted Period you shall not directly or indirectly on your own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. -7- 9 (ii) Restriction on Relationships with Protected Customers. You understand and agree that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agrees that, during the Restricted Period, you shall not, without the prior written consent of the Company, directly or indirectly, on your own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom you had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of your employment. For purposes of this Agreement, you had "MATERIAL CONTACT" with a Protected Customer if (a) you had direct business dealings with the Protected Customer on the Company's behalf or (b) you were responsible for supervising or coordinating the dealings between the Company and the Protected Customer. (d) ENFORCEMENT OF RESTRICTIVE COVENANTS. (i) Rights and Remedies Upon Breach. In the event you breach, or threaten to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the right and remedy to enjoin, preliminarily and permanently, you from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such right and remedy shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. In addition, the Restricted Period shall be extended for the period of any such breach or threatened breach. (ii) Severability of Covenants. You acknowledge and agree that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and you in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 7. MISCELLANEOUS. This letter constitutes the entire agreement of the parties and shall supercede any and all previous contracts, arrangements or understandings between the parties relating to the subject matter hereof, and shall not be amended except in writing signed by each of the parties. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. -8- 10 Sincerely, Healtheon/WebMD Corporation By: /s/ W. Michael Long ------------------------------------ Authorized Representative Accepted and agreed: /s/ Jack Dennison - ------------------------------- Jack Dennison September 12, 2000 -9- EX-10.54 11 g68745a1ex10-54.txt LETTER AGREEMENT DATED OCTOBER 11, 2000 1 EXHIBIT 10.54 Letter Agreement dated October 11, 2000 between Registrant and Jack Dennison 2 HEALTHEON/WEBMD CORPORATION 3399 PEACHTREE STREET NE 400 THE LENOX BUILDING ATLANTA, GEORGIA 30326 October 11, 2000 Jack Dennison Healtheon/WebMD Corporation 3399 Peachtree Street NE 400 The Lenox Building Atlanta, Georgia 30326 Dear Mr. Draughton: This letter confirms the understanding between WebMD Corporation, a Delaware corporation (the "Company"), and you that, in order to induce you to remain in your capacity as Executive Vice President and Co-General Counsel of the Company for a period of 90 days after the date hereof, the Company agrees that in the event of your subsequent resignation from your employment after such 90-day period for any reason, such resignation shall be treated as a resignation for "good reason" within the meaning of any employment and option agreements between you and the Company. The Company hereby waives the 30-day notice and opportunity to cure provision in your employment agreement for "good reason" termination. Very truly yours, WEBMD CORPORATION By /s/ Charles A Mele ---------------------------------- Name: Charles A. Mele Title: Executive Vice President Co-General Counsel -----END PRIVACY-ENHANCED MESSAGE-----