10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

669 River Drive, Center 2

Elmwood Park, New Jersey 07407-1361

(Address of principal executive offices)

(201) 703-3400

(Registrant’s telephone number, including area code)

     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 (the “Exchange Act”) 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 o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x     No o

As of August 8, 2003, there were 305,454,402 shares of the

registrant’s Common Stock outstanding.

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
PART I FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
	ITEM 4. Controls and Procedures
PART II OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-2.1 STOCK PURCHASE AGREEMENT
EX-3.2 AMENDED & RESTATED BYLAWS WEBMD CORPORATION
EX-4.1 INDENTURE WEBMD CORPORATION & BANK OF NY
EX-4.2 REGISTRATION RIGHTS AGREEMENT JUNE 25, 2003
EX-4.3 REGISTRATION RIGHTS AGREEMENT JULY 17, 2003
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

WEBMD CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the period ended June 30, 2003

TABLE OF CONTENTS

		Page
		Number
Cautionary Statement Regarding Forward-Looking Statements			3
Part I	Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002		4
	Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002		5
	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item 4.	Controls and Procedures		44
Part II	Other Information
Item 1.	Legal Proceedings		46
Item 2.	Changes in Securities and Use of Proceeds		47
Item 5.	Other Information		48
Item 6.	Exhibits and Reports on Form 8-K		49
Signatures			50
Exhibit Index			E-1

WebMD®, WebMD Health®, The Medical Manager®, ULTIA^TM, Intergy®, Envoy®, ExpressBill®, Medscape®, Optate®, WellMed® and POREX® are trademarks of WebMD Corporation or its subsidiaries.

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be, forward-looking statements. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events. These forward-looking statements generally can be identified by use of expressions such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. In addition to the risk factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Our Future Financial Condition or Results of Operations” beginning on page 29, the following important risks and uncertainties could affect future results, causing these results to differ materially from those expressed in our forward-looking statements:

•  the failure to achieve sufficient levels of customer utilization and market acceptance of new services or newly integrated services,

•  the inability to successfully deploy new applications or newly integrated applications,

•  difficulties in forming and maintaining mutually beneficial relationships with customers and strategic partners,

•  the inability to attract and retain qualified personnel, and

•  general economic, business or regulatory conditions affecting the healthcare, information technology, Internet and plastic industries being less favorable than expected.

      These factors and the risk factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Our Future Financial Condition or Results of Operations” beginning on page 29 are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report. We expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

3

PART I

FINANCIAL INFORMATION

ITEM 1.     Financial Statements

WEBMD CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

			June 30,			December 31,
			2003			2002
			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	461,530		$	179,541
	Short-term investments			216,060			10,888
	Accounts receivable, net			178,357			170,467
	Inventory			19,724			18,804
	Current portion of prepaid content and distribution services			24,944			25,406
	Other current assets			21,180			26,197
		Total current assets		921,795			431,303
Marketable debt securities				268,222			449,289
Marketable equity securities				7,504			7,427
Property and equipment, net				89,160			94,737
Prepaid content and distribution services				37,290			48,532
Goodwill				615,488			629,055
Intangible assets, net				50,051			79,536
Other assets				35,801			26,369
			$	2,025,311		$	1,766,248
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	13,880		$	11,494
	Accrued expenses			186,280			212,600
	Deferred revenue			86,588			81,179
	Current portion of long-term debt			—			6,546
		Total current liabilities		286,748			311,819
3 1/4% convertible subordinated notes due 2007				299,999			300,000
1.75% convertible subordinated notes due 2023				300,000			—
Other long-term liabilities				631			628
Commitments and contingencies
Stockholders’ equity:
	Common stock, $0.0001 par value; 600,000,000 shares authorized; 381,165,627 shares issued at June 30, 2003; 374,661,064 shares issued at December 31, 2002			38			37
	Additional paid-in capital			11,710,519			11,682,443
	Deferred stock compensation			(9,698	)		(17,805	)
	Treasury stock, at cost; 76,324,165 shares at June 30, 2003; 74,254,669 shares at December 31, 2002			(345,667	)		(327,542	)
	Accumulated deficit			(10,228,676	)		(10,195,048	)
	Accumulated other comprehensive income			11,417			11,716
		Total stockholders’ equity		1,137,933			1,153,801
			$	2,025,311		$	1,766,248

See accompanying notes.

4

WEBMD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2003			2002			2003			2002
Revenue		$	246,471		$	227,644		$	481,214		$	453,517
Costs and expenses:
	Cost of operations		143,582			135,648			277,962			274,179
	Development and engineering		10,490			11,113			21,502			21,981
	Sales, marketing, general and administrative		71,724			76,511			141,794			155,877
	Depreciation and amortization		16,016			33,033			43,992			65,792
	Impairment of long-lived assets		33,113			609			33,113			609
	Restructuring and integration charge (benefit)		—			1,160			—			(2,590	)
	Other income		1,118			5,866			1,301			5,866
	Interest income		4,994			6,022			10,049			9,162
	Interest expense		2,927			2,954			5,848			3,095
Loss before income tax provision			(25,269	)		(21,496	)		(31,647	)		(50,398	)
	Income tax provision		1,001			713			1,981			1,413
Net loss		$	(26,270	)	$	(22,209	)	$	(33,628	)	$	(51,811	)
Net loss per common share:
	Basic and diluted	$	(0.09	)	$	(0.07	)	$	(0.11	)	$	(0.17	)
Weighted-average shares outstanding:
	Basic and diluted		304,001			309,462			303,447			310,565

See accompanying notes.

5

WEBMD CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

					Six Months Ended
					June 30,
					2003			2002
Cash flows from operating activities:
	Net loss				$	(33,628	)	$	(51,811	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization				43,992			65,792
		Impairment of long-lived assets				33,113			609
		Amortization of debt issuance costs				774			374
		Non-cash content and distribution services				12,149			13,409
		Non-cash stock-based compensation				7,558			14,890
		Non-cash portion of restructuring and integration charge				—			617
		Gain on investments				(183	)		(5,866	)
		Changes in operating assets and liabilities:
			Accounts receivable			(5,262	)		2,097
			Inventory			(920	)		1,481
			Prepaid content and distribution services			(445	)		(938	)
			Accounts payable			1,827			(5,108	)
			Accrued expenses			(26,885	)		1,210
			Deferred revenue			478			10,871
			Other, net			4,751			(1,116	)
				Net cash provided by operating activities		37,319			46,511
Cash flows from investing activities:
	Proceeds from maturities and sales of available-for-sale securities					2,631			101,826
	Proceeds from maturities and redemptions of held-to-maturity securities					102,919			1,055
	Purchases of available-for-sale securities					(6,730	)		(201,565	)
	Purchases of held-to-maturity securities					(124,931	)		(246,072	)
	Purchases of property and equipment					(9,571	)		(14,370	)
	Cash paid in business combinations, net of cash acquired					(14,701	)		(2,924	)
				Net cash used in investing activities		(50,383	)		(362,050	)
Cash flows from financing activities:
	Proceeds from issuance of common stock					28,578			13,369
	Payments of notes payable and other					(6,563	)		(4,021	)
	Net proceeds from issuance of convertible debt					290,500			292,000
	Redemption of Series B Preferred Stock					—			(10,000	)
	Purchases of treasury stock					(18,125	)		(88,747	)
				Net cash provided by financing activities		294,390			202,601
Effect of exchange rates on cash						663			899
Net increase (decrease) in cash and cash equivalents						281,989			(112,039	)
Cash and cash equivalents at beginning of period						179,541			286,273
Cash and cash equivalents at end of period					$	461,530		$	174,234

See accompanying notes.

6

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data, unaudited)

1.  Summary of Significant Accounting Policies

Basis of Presentation

      The unaudited consolidated financial statements of WebMD Corporation (the “Company”) have been prepared by management and reflect all adjustments (consisting of only normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. The results of operations for the six months ended June 30, 2003 are not necessarily indicative of the results to be expected for any subsequent period or for the entire year ending December 31, 2003. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted under the Securities and Exchange Commission’s rules and regulations.

      Porex Corporation and the Company’s other Plastic Technologies subsidiaries (collectively referred to as “Porex”) had previously been reported as an asset held for sale during the period from September 12, 2000 to September 12, 2001, and as a discontinued operation from September 13, 2001 to September 30, 2002. During February 2003, the Company terminated its formal divestiture plan for Porex. Accordingly, the assets and operations of Porex have been reclassified within continuing operations since September 12, 2000, its date of acquisition. The operations of Porex have been included in a separate operating segment, “Plastic Technologies.” On August 1, 2003, the Company completed the sale of two operating units of its Plastic Technologies segment. See Note 2 below. Beginning in the quarter ending September 30, 2003, the historical results of these two operating units, including the loss related to the divestitures, will be reclassified as discontinued operations in the Company’s financial statements.

      The unaudited consolidated financial statements and notes included herein should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2002, which were included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Accounting Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from these estimates. Significant estimates and assumptions by management affect: the Company’s allowance for doubtful accounts, the carrying value of inventory, the carrying value of prepaid content and distribution services, the carrying value of long-lived assets (including goodwill and intangible assets), the amortization period of long-lived assets (excluding goodwill), the carrying value, capitalization and amortization of software development costs, the carrying value of short-term and long-term investments, the provision for taxes and related deferred tax accounts, certain accrued expenses, revenue recognition, restructuring costs and the value attributed to warrants issued for services.

Inventory

      Inventory is stated at the lower of cost or market value using the first-in, first-out basis. Cost includes raw materials, direct labor, and manufacturing overhead. Market value is based on current replacement

7

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

cost for raw materials and supplies and on net realizable value for work-in-process and finished goods. Inventory consisted of the following as of June 30, 2003 and December 31, 2002:

	June 30,		December 31,
	2003		2002
Raw materials and supplies	$	5,249	$	5,869
Work-in-process		2,099		1,481
Finished goods and other		12,376		11,454
	$	19,724	$	18,804

Accounting for Stock-Based Compensation

      The Company accounts for its stock-based employee compensation plans using the intrinsic value method under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations. No stock-based employee compensation cost is reflected in net loss with respect to options granted with an exercise price equal to the market value of the underlying common stock on the date of grant. Stock-based awards to non-employees are accounted for based on provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” In accordance with SFAS No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of FASB Statement No. 123,” the following table illustrates the effect on net loss and net loss per common share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2003			2002			2003			2002
Net loss as reported		$	(26,270	)	$	(22,209	)	$	(33,628	)	$	(51,811	)
Deduct: Stock-based employee compensation expense included in reported net loss			(3,801	)		(7,314	)		(7,558	)		(14,890	)
Add: Total stock-based employee compensation expense determined under fair value based method for all awards			19,421			35,328			37,379			68,110
Pro forma net loss		$	(41,890	)	$	(50,223	)	$	(63,449	)	$	(105,031	)
Net loss per common share:
	Basic and diluted – as reported	$	(0.09	)	$	(0.07	)	$	(0.11	)	$	(0.17	)
	Basic and diluted – pro forma	$	(0.14	)	$	(0.16	)	$	(0.21	)	$	(0.34	)

      The pro forma results above are not intended to be indicative of or a projection of future results. Pro forma information regarding net loss has been determined as if employee stock options granted subsequent to December 31, 1994 were accounted for under the fair value method of SFAS No. 123. The fair value for 2003 options was estimated at the date of grant using the Black-Scholes option pricing model employing weighted average assumptions consistent with the 2002 assumptions, which were included in Note 15 to the Consolidated Financial Statements contained in the Company’s 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

      The Company has elected to follow APB No. 25 and related interpretations in accounting for employee stock options because the alternative fair value accounting method provided for under SFAS No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. The Black-Scholes option valuation model was developed for use in estimating the fair value

8

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimates, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s employee stock options.

Reclassifications

      Certain reclassifications have been made to the prior period financial statements to conform with the current period presentation.

2.  Impairment of Long-Lived Assets

      On August 1, 2003, the Company completed the sale of two operating units of its Plastic Technologies segment, Porex Bio Products, Inc. (“Porex Bio”) and Porex Medical Products, Inc. (“Porex Medical”), in two separate transactions for an aggregate sales price of $46,500, subject to customary post-closing adjustments. The Company will record a loss of approximately $36,000 on the divestitures, of which $33,113 is reflected in the results for the quarter ended June 30, 2003 as an impairment charge to reduce the long-lived assets of the Company’s Porex Bio and Porex Medical operating units to fair value. The write-down consisted of $27,564 of goodwill, $4,162 of trade name intangibles and $1,387 of other long-lived assets consisting primarily of manufacturing equipment. The impairment charge was based on the fair value of the divested businesses as determined by the expected proceeds from disposition. The balance of the loss, representing certain costs related to the disposition transactions, will be reflected in the quarter ending September 30, 2003. Porex Bio and Porex Medical had revenues of $26,265 and $28,301 for the six months ended June 30, 2003 and 2002, respectively. They contributed $5,080 and $5,394 of income before restructuring, taxes, non-cash and other items and $(30,245) and $1,131 of net income (loss) for the six months ended June 30, 2003 and 2002, respectively. Beginning in the quarter ending September 30, 2003, the historical results of these two operating units, including the loss related to the divestiture, will be reclassified as discontinued operations in the Company’s financial statements.

      The impairment loss of $609 recorded during the three and six months ended June 30, 2002 related to equipment to be disposed of following the cessation of a product line within the Porex Medical operating unit of the Company’s Plastic Technologies segment.

3.  Business Combinations

2003 Acquisitions

      On May 29, 2003, the Company acquired a company which maintains a database containing practice information for over 380,000 physicians, and publishes a pocket-sized reference book containing physician information. The total purchase consideration for this company was approximately $10,550, comprised of $10,400 in cash and estimated acquisition costs of $150. Additionally, the Company will pay up to $2,500 if the acquired company meets certain financial milestones during the years ending December 31, 2003 and 2004. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their respective fair values. In connection with the preliminary allocation of the purchase price, goodwill of $8,811 and intangible assets subject to amortization of $2,815 were recorded. The Company expects that substantially all of the goodwill recorded will be deductible for tax purposes. The intangible assets are comprised of $1,787 relating to the trade name with an estimated useful life of seven years, $761 relating to customer relationships with estimated useful lives of five years and $267 relating to acquired technology with an estimated useful life of three years. The results of operations of the acquired

9

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

company have been included in the financial statements of the Company from May 29, 2003, the closing date of the acquisition, and its results of operations are included in the Portal Services segment.

      On April 30, 2003, the Company acquired the assets and assumed certain liabilities of a company which provides healthcare benefit decision support tools and solutions to its clients through online technology. The total purchase consideration for this acquisition was approximately $4,075, comprised of $4,000 in cash and estimated acquisition costs of $75. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their respective fair values. In connection with the preliminary allocation of the purchase price, goodwill of $4,083 and an intangible asset subject to amortization of $710 were recorded. The Company expects that substantially all of the goodwill recorded will be deductible for tax purposes. The intangible asset represents the fair value of customer relationships and has an estimated useful life of five years. The results of operations of the acquired business have been included in the financial statements of the Company from April 30, 2003, the closing date of the acquisition, and its results of operations are included in the Portal Services segment.

      During the six months ended June 30, 2003, the Company acquired four physician services companies for an aggregate cost of $782, which was paid in cash. These acquisitions were accounted for using the purchase method of accounting with the purchase prices being allocated to assets acquired and liabilities assumed based on their respective fair values. In connection with the preliminary allocation of the purchase prices, goodwill of $433 and intangible assets subject to amortization of $516 were recorded. The Company expects that substantially all of the goodwill recorded will be deductible for tax purposes. The intangible assets are comprised of $218 related to non-compete agreements with estimated useful lives of three years and $298 related to customer relationships with estimated useful lives of nine years. The results of operations of these companies have been included in the financial statements of the Company from the respective acquisition closing dates and are included in the Physician Services segment.

2002 Acquisitions

      On October 31, 2002, the Company acquired WellMed, Inc. (“WellMed”), which develops and markets healthcare information technology applications, including online healthcare decision support and health management tools for use by consumers. The total purchase consideration for WellMed was approximately $19,031, comprised of $18,781 in cash and estimated acquisition costs of $250. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their respective fair values. In connection with the preliminary allocation of the purchase price, goodwill of $17,973 and an intangible asset subject to amortization of $2,700 were recorded. The Company expects that substantially all of the goodwill recorded will be deductible for tax purposes. The intangible asset represents the fair value of acquired unpatented technology and has a useful life of three years. The results of operations of WellMed have been included in the financial statements of the Company from October 31, 2002, the closing date of the acquisition. WellMed’s results of operations are included in the Portal Services segment.

      In 2002, the Company acquired 21 physician services companies for an aggregate cost of $14,400, which was paid in cash. These acquisitions were accounted for using the purchase method of accounting with the purchase prices being allocated to assets acquired and liabilities assumed based on their respective fair values. In connection with the preliminary allocation of the purchase prices, goodwill of $11,784 and intangible assets subject to amortization of $4,049 were recorded. The Company expects that substantially all of the goodwill recorded will be deductible for tax purposes. The intangible assets are comprised of $1,281 related to non-compete agreements with estimated useful lives of one to five years and $2,768 related to customer relationships with estimated useful lives of nine years. The results of operations of

10

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

these companies have been included in the financial statements of the Company from the respective acquisition closing dates and are included in the Physician Services segment.

      The pro forma impact of the 2003 Acquisitions and the 2002 Acquisitions was not significant in any of the periods presented.

4.  Restructuring and Integration

      After the mergers with Medical Manager Corporation, CareInsite, Inc. and OnHealth Network Company in September 2000, the Company’s Board of Directors approved a restructuring and integration plan, with the objective of eliminating duplication and redundancies that resulted from these and certain prior acquisitions and consolidating the Company’s operational infrastructure into a common platform to more efficiently serve its customers. The Company’s restructuring and integration efforts continued in 2001, and a plan to include the impact of eliminating functions resulting from the Company’s acquisition of Medscape in December 2001 was initiated. Additionally, the Porex Medical operating unit consolidated a manufacturing facility in 2002 as part of a separate restructuring plan, resulting in a restructuring charge of $1,160 during the three and six months ended June 30, 2002.

      The Company has substantially completed its restructuring and integration efforts. The balance of the restructuring and integration accrual as of June 30, 2003 is primarily related to remaining lease payments of previously vacated facilities. The following table presents cash activity in the restructuring and integration related accrual:

Balance at December 31, 2002	$	33,857
Cash payments		(4,224	)
Balance at June 30, 2003.	$	29,633

5.  Stockholders’ Equity

Repurchase Program

      On March 29, 2001, the Company announced a stock repurchase program (the “Program”). Under the Program, as amended, the Company was authorized to use up to a total of $150,000 to purchase shares of its common stock from time to time, subject to market conditions. As of June 30, 2003, the Company had repurchased a total of 22,060,656 shares at a cost of approximately $104,167 under the Program, of which 2,058,496 shares and 2,069,496 shares were repurchased during the three and six months ended June 30, 2003 for an aggregate purchase price of $18,032 and $18,125, respectively. The Company repurchased 645,527 shares of its common stock for an aggregate purchase price of $4,006 during the three and six months ended June 30, 2002. These repurchased shares are reflected as treasury stock in the accompanying consolidated balance sheets. As of June 30, 2003, the Company had $45,833 available to repurchase shares of its common stock under the Program.

Cerner Corporation Repurchase

      During the three months ended June 30, 2002, the Company repurchased 14,100,000 shares of its common stock from Cerner Corporation at a purchase price of $6.01 per share, or an aggregate purchase price of $84,741. The repurchase of the shares was separately approved by the Executive Committee of the Company’s Board of Directors and, accordingly, was not part of the Program.

Series B Convertible Redeemable Preferred Stock

      In connection with the acquisition of CareInsite, the Company issued 100 shares of Series B Convertible Redeemable Preferred Stock in exchange for all the outstanding shares of CareInsite’s

11

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

preferred stock. In March 2002, the Company redeemed the outstanding Series B Convertible Redeemable Preferred Stock for $10,000 in accordance with its terms.

6.  Convertible Subordinated Notes

$350,000 1.75% Convertible Subordinated Notes due 2023

      On June 25, 2003, the Company issued $300,000 aggregate principal amount of 1.75% Convertible Subordinated Notes due 2023 (the “1.75% Notes”) in a private offering. On July 7, 2003, the Company issued an additional $50,000 aggregate principal amount of 1.75% Notes. Unless previously redeemed or converted, the 1.75% Notes will mature on June 15, 2023. Interest on the 1.75% Notes accrues at the rate of 1.75% per annum and is payable semiannually on June 15 and December 15 of each year, commencing December 15, 2003. The Company will also pay contingent interest of 0.25% per annum of the average trading price of the 1.75% Notes during specified six-month periods, commencing on June 20, 2010, if the average trading price of the 1.75% Notes for specified periods equals 120% or more of the principal amount of the 1.75% Notes.

      The 1.75% Notes are convertible into 22,742,040 shares of the Company’s common stock, representing a conversion price of $15.39 per share, if the sale price of the Company’s common stock exceeds 120% of the conversion price for specified periods and in certain other circumstances. The 1.75% Notes are redeemable by the Company after June 15, 2008 and prior to June 20, 2010, subject to certain conditions, including the sale price of the Company’s common stock exceeding certain levels for specified periods. If the 1.75% Notes are redeemed by the Company during this period, the Company will be required to make additional interest payments. After June 20, 2010, the 1.75% Notes are redeemable at any time for cash at 100% of their principal amount. Holders of the 1.75% Notes may require the Company to repurchase their 1.75% Notes on June 15, 2010, June 15, 2013 and June 15, 2018, for cash at 100% of the principal amount of the 1.75% Notes, plus accrued interest. Upon a change in control, holders may require the Company to repurchase their 1.75% Notes for, at the Company’s option, cash or shares of the Company’s common stock, or a combination thereof, at a price equal to 100% of the principal amount of the 1.75% Notes being repurchased.

      The Company incurred issuance costs related to the 1.75% Notes of approximately $10,875, of which $9,500 are included in other assets in the accompanying consolidated balance sheets. Issuance costs of $1,375 were incurred in connection with the July 7, 2003 issuance and accordingly are not reflected in the accompanying balance sheet as of June 30, 2003. The issuance costs are being amortized to interest expense, using the effective interest method over the period from issuance through June 15, 2010, the earliest date on which holders can demand redemption.

$300,000 3 1/4% Convertible Subordinated Notes due 2007

      On April 1, 2002, the Company issued $300,000 aggregate principal amount of 3 1/4% Convertible Subordinated Notes due 2007 (the “3 1/4% Notes”) in a private offering. Interest on the 3 1/4% Notes accrues at the rate of 3 1/4% per annum and is payable semiannually on April 1 and October 1 of each year. Unless previously redeemed or converted, the 3 1/4% Notes will mature on April 1, 2007. The 3 1/4% Notes were convertible into an aggregate of approximately 32,386,916 shares of the Company’s common stock, subject to adjustment in certain circumstances. During the three months ended June 30, 2003, $1 principal amount of the 3 1/4% Notes were converted into 107 shares of the Company’s common stock in accordance with the provisions of the 3 1/4% Notes. As of June 30, 2003, the 3 1/4% Notes are convertible into an aggregate of approximately 32,386,808 shares of the Company’s common stock. The 3 1/4% Notes are redeemable at the Company’s option, at any time on or after April 5, 2005. The redemption price, as a percentage of principal amount, is 101.3% beginning April 5, 2005 and 100.65% beginning April 1, 2006. The Company incurred issuance costs related to the 3 1/4% Notes of $8,000, which are included in other

12

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assets in the accompanying consolidated balance sheets. The issuance costs are being amortized using the effective interest method over the term of the 3 1/4% Notes. The amortization of the issuance costs is included in interest expense.

7.  Segment Information

      Segment information has been prepared in accordance with the Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”). The accounting policies of the segments are the same as the accounting policies for the consolidated Company. Inter-segment revenues represent sales of Transaction Services products into the Physician Services customer base and are reflected at rates comparable to those charged to third parties for comparable services. The performance of the Company’s business is monitored based on income or loss before restructuring, taxes, non-cash and other items. Non-cash and other items include depreciation, amortization, gain on investments, other income, impairment charges, non-cash expenses related to content, advertising and distribution services acquired in exchange for the Company’s equity securities in acquisitions and strategic alliances, and stock compensation expense primarily related to stock options issued and assumed in connection with acquisitions.

      The Company has aligned its business into four operating segments as follows:

      Transaction Services or WebMD Envoy transmits transactions between healthcare payers and physicians, pharmacies, dentists, hospitals, laboratory companies and other healthcare providers using dial-up, Internet, and dedicated communication methods. This group provides connectivity and transaction services through an integrated electronic transaction processing system. These services assist the group’s customers in automating key administrative and clinical functions. In addition, this group provides automated patient billing services to providers, including statement printing and mailing services.

      Physician Services or WebMD Medical Manager develops and markets integrated physician practice management systems, including administrative, financial and clinical applications and services, under The Medical Manager, Intergy, ULTIA and Medical Manager Network Services brands. These systems and services allow physician offices to automate their scheduling, billing and other administrative tasks, to transmit transactions electronically, to maintain electronic medical records and to automate documentation of patient encounters.

      Portal Services or WebMD Health provides online healthcare information and related resources and services for consumers and healthcare professionals, both directly and through its relationships with leading general consumer Internet portals. The group also provides online content for use by media and healthcare partners on their Web sites. The group develops and sells online and offline programs for advertisers and sponsors, particularly those who are interested in influencing healthcare decisions.

      Plastic Technologies or Porex develops, manufactures and distributes proprietary porous and solid plastic products and components used in healthcare, industrial and consumer applications, as well as in finished products used in medical device, research, clinical laboratory and surgical markets.

13

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Summarized financial information for each of the Company’s operating segments and a reconciliation to net loss is presented below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2003			2002			2003			2002
Revenues
Transaction services	$	118,021		$	117,204		$	233,514		$	235,131
Physician services		76,797			66,068			148,808			132,157
Portal services		26,538			18,006			48,718			35,140
Plastic technologies		31,649			31,509			62,187			61,050
Inter-segment eliminations		(6,534	)		(5,143	)		(12,013	)		(9,961	)
	$	246,471		$	227,644		$	481,214		$	453,517
Income (loss) before restructuring, taxes, non-cash and other items
Transaction services	$	22,342		$	18,264		$	46,393		$	35,802
Physician services		6,359			6,234			12,656			12,486
Portal services		6,192			(2,219	)		10,210			(7,056	)
Plastic technologies		7,967			8,197			15,247			15,795
Corporate		(12,381	)		(12,641	)		(24,843	)		(27,248	)
Interest income		4,994			6,022			10,049			9,162
Interest expense		(2,927	)		(2,954	)		(5,848	)		(3,095	)
		32,546			20,903			63,864			35,846
Restructuring, taxes, non-cash and other items
Depreciation and amortization		(16,016	)		(33,033	)		(43,992	)		(65,792	)
Non-cash content and distribution services and stock compensation		(9,804	)		(13,463	)		(19,707	)		(28,299	)
Impairment of long-lived assets		(33,113	)		(609	)		(33,113	)		(609	)
Restructuring and integration (charge) benefit		—			(1,160	)		—			2,590
Other income		1,118			5,866			1,301			5,866
Income tax provision		(1,001	)		(713	)		(1,981	)		(1,413	)
Net loss	$	(26,270	)	$	(22,209	)	$	(33,628	)	$	(51,811	)

8. Fair Value of Financial Instruments

      The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments.” The estimated fair values have been determined using available market information. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in

14

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

		June 30, 2003				December 31, 2002
		Cost Basis		Fair Value		Cost Basis		Fair Value
Assets:
	Cash and cash equivalents	$	461,530	$	461,530	$	179,541	$	179,541
	Short-term investments		213,752		216,060		10,865		10,897
	Marketable securities — long-term		271,392		284,179		448,286		464,638
Liability:
	Convertible subordinated notes	$	599,999	$	690,692	$	300,000	$	348,000

      In accordance with the requirements of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” below is a summary of the fair value and unrealized gains relating to the Company’s investments in debt and equity securities:

				June 30, 2003						December 31, 2002
				Cost or		Gross				Cost or		Gross
				Amortized		Unrealized				Amortized		Unrealized
				Cost		Gains		Fair Value		Cost		Gains		Fair Value
Short-Term
	Held to maturity:
		Certificates of deposit and marketable debt securities		$	—	$	—	$	—	$	2,919	$	9	$	2,928
	Available for sale:
		Certificates of deposit and marketable debt securities			213,752		2,308		216,060		7,946		23		7,969
			Total	$	213,752	$	2,308	$	216,060	$	10,865	$	32	$	10,897
Long-Term
	Held to maturity:
		Marketable debt securities		$	268,222	$	8,453	$	276,675	$	243,475	$	7,922	$	251,397
	Available for sale:
		Marketable debt securities			—		—		—		201,641		4,173		205,814
		Equity securities			3,170		4,334		7,504		3,170		4,257		7,427
			Total	$	271,392	$	12,787	$	284,179	$	448,286	$	16,352	$	464,638

      As of June 30, 2003, the Company’s short-term investments consisted of certificates of deposit, U.S. Treasury Notes, municipal bonds and asset-backed securities, marketable debt securities consisted of Federal Agency Notes and U.S. Treasury Notes and marketable equity securities consisted of an equity investment in a publicly traded company. As of December 31, 2002, the Company’s short-term investments consisted of certificates of deposit, municipal bonds and asset-backed securities, marketable debt securities consisted of Federal Agency Notes and U.S. Treasury Notes and marketable equity securities consisted of an equity investment in a publicly traded company.

      The amortized cost and estimated fair value by maturity of securities are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal

15

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities.

		Cost or
		Amortized Cost		Fair Value
Held to maturity:
	Due after one year through five years	$	268,222	$	276,675
Available for sale:
	Due in one year or less	$	213,752	$	216,060

9. Net Loss Per Common Share

      Basic and diluted net loss per common share are presented in conformity with SFAS No. 128, “Earnings Per Share.” In accordance with SFAS No. 128, basic net loss per common share has been computed using the weighted-average number of shares of common stock outstanding during the period.

      The Company has excluded convertible subordinated notes and restricted stock as well as all outstanding warrants and stock options from the calculation of diluted loss per common share because such securities were either anti-dilutive or were not convertible to common stock in accordance with their terms during the periods presented. The following table presents the total number of shares that could potentially dilute basic income (loss) per common share in the future that were not included in the computation of diluted loss per common share during the periods presented:

	Three and Six Months Ended
	June 30,
	2003		2002
Options, warrants and restricted stock		129,370,218		149,999,191
Convertible notes		51,879,985		32,386,916
		181,250,203		182,386,107

10. Comprehensive Loss

      Comprehensive loss is comprised of net loss and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net loss, such as changes in unrealized holding gains on available-for-sale marketable securities and foreign currency translation adjustments. The following table presents the components of other comprehensive income (loss) during the three and six months ended June 30, 2003 and 2002:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2003			2002			2003			2002
Foreign currency translation gains		$	1,178		$	2,103		$	1,512		$	1,890
Unrealized holding gains (losses)			(2,695	)		1,193			(1,811	)		2,178
	Other comprehensive income (loss)		(1,517	)		3,296			(299	)		4,068
Net loss			(26,270	)		(22,209	)		(33,628	)		(51,811	)
Comprehensive loss		$	(27,787	)	$	(18,913	)	$	(33,927	)	$	(47,743	)

16

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. Goodwill and Other Intangible Assets

      The changes in the carrying amount of goodwill for the six months ended June 30, 2003 are as follows:

		Transaction		Physician		Portal		Plastic
		Services		Services		Services		Technologies			Total
Balance as of January 1, 2003		$	341,967	$	182,085	$	23,705	$	81,298		$	629,055
	Goodwill recorded during the period		—		433		12,894		—			13,327
	Adjustments to finalize purchase price allocations		—		—		472		—			472
	Impairment loss		—		—		—		(27,564	)		(27,564	)
	Effects of exchange rates		—		—		—		198			198
Balance as of June 30, 2003		$	341,967	$	182,518	$	37,071	$	53,932		$	615,488

      Intangible assets subject to amortization consist of the following:

		June 30, 2003							December 31, 2002
		Gross Carrying		Accumulated					Gross Carrying		Accumulated
		Amount		Amortization			Net		Amount		Amortization			Net
Customer lists		$	211,155	$	(202,956	)	$	8,199	$	209,386	$	(179,127	)	$	30,259
Trade names			28,316		(18,073	)		10,243		29,629		(14,318	)		15,311
Non-compete agreements			2,486		(567	)		1,919		2,268		(295	)		1,973
Technology and patents			175,427		(145,737	)		29,690		176,660		(144,667	)		31,993
	Total	$	417,384	$	(367,333	)	$	50,051	$	417,943	$	(338,407	)	$	79,536

      Amortization expense was $8,626 and $29,365 for the three and six months ended June 30, 2003, respectively, and $26,179 and $52,203 for the three and six months ended June 30, 2002, respectively. Aggregate amortization expense for intangible assets is estimated to be:

Year ending December 31,
2003 (July 1st to December 31st)	$	4,173
2004		6,931
2005		5,578
2006		2,766
2007		2,152
Thereafter		28,451

12. Recent Accounting Pronouncements

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”). SFAS No. 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and must be applied to the Company’s existing financial instruments effective July 1, 2003, the beginning of the first fiscal period after June 15, 2003. The adoption of SFAS No. 150 on June 1, 2003 did not have any effect on the Company’s financial position or results of operations.

17

WEBMD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of FASB Statement No. 123” (“SFAS No. 148”). The statement provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement requires the Company to disclose, in both annual and interim financial statements, the method of accounting for stock-based compensation and the effect of the method used on reported results. The statement is effective for annual periods ending after December 15, 2002 and interim periods beginning after December 15, 2002. The Company applies the intrinsic value method of accounting for stock-based employee compensation. The adoption of SFAS No. 148 did not have a material impact on the Company’s consolidated financial position or results of operations.

      In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The interpretation elaborates on the disclosures to be made in the Company’s interim and annual financial statements about obligations under certain guarantees. It also requires the Company to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002. The initial measurement and recognition provisions are required to be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have any impact on the Company’s consolidated financial position or results of operations.

      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”). SFAS No. 146 requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 will have an impact on the timing of the recording of any future restructuring charges.

13. Commitments and Contingencies

      In the normal course of business, the Company and its subsidiaries are involved in various claims and legal proceedings. While the ultimate resolution of these matters, including those discussed in Part II, Item 1 of this Quarterly Report and in the Company’s 2002 Annual Report on Form 10-K under the heading “Legal Proceedings,” has yet to be determined, the Company does not believe that their outcome will have a material adverse effect on the Company’s financial position or results of operations.

14. Subsequent Event

      On July 17, 2003, the Company completed its acquisition of Advanced Business Fulfillment, Inc. (“ABF”), a privately held company based in St. Louis, Missouri. ABF provides healthcare paid-claims communication services for third-party administrators and health insurers. During the fiscal year ended December 31, 2002, ABF’s revenues and pre-tax income were $63,294 and $8,238, respectively. The Company paid $110,000 in cash at closing for all of the outstanding capital stock of ABF and agreed to pay up to an additional $150,000 beginning in April 2004 if certain milestones are achieved. The additional payment may be made over a three-year period by issuing shares of the Company’s common stock or, at the Company’s option in certain circumstances, in cash. The additional payment may exceed $150,000 if all or a portion of the additional payment is made by issuing shares of the Company’s stock and if the value of the Company’s stock exceeds certain price levels at the time of payment. The results of operations of ABF will be included in the Company’s financial statements from the acquisition closing date and will be included in the Transaction Services segment.

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      This Item 2 contains forward-looking statements with respect to possible events, outcomes or results that are, and are expected to continue to be, subject to risks, uncertainties and contingencies, including those identified in this Item. See “Cautionary Statement Regarding Forward-Looking Statements” on page 3.

      The following discussion reflects our Plastic Technologies business, Porex, as a continuing operation since the date of its acquisition on September 12, 2000. Previously, Porex had been accounted for as an asset held for sale during the period from September 12, 2000 to September 12, 2001, and as a discontinued operation subsequent to September 12, 2001. During February 2003, we terminated our formal divestiture efforts relating to Porex. On August 1, 2003, we completed the sale of two operating units of our Plastic Technologies segment. Beginning in the quarter ending September 30, 2003, the historical results of these two operating units, including the loss related to the divestitures, will be reclassified as discontinued operations in our financial statements.

      All amounts are reflected in thousands, except share and per share data, unless otherwise noted.

Critical Accounting Policies and Estimates

      Our discussion and analysis of WebMD’s financial condition and results of operations are based upon our Consolidated Financial Statements and Notes to Consolidated Financial Statements, which were prepared in conformity with accounting principles generally accepted in the United States. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We base our estimates on historical experience, current business factors, and various other assumptions that we believe are necessary to form a basis for making judgments about the carrying values of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

      We evaluate our estimates on an ongoing basis, including those related to revenue recognition, short-term and long-term investments, deferred tax assets, income taxes, collectibility of customer receivables, prepaid content and distribution services, long-lived assets including goodwill and other intangible assets, software development costs, inventory valuation, certain accrued expenses, accruals related to our restructuring program, contingencies and litigation.

      We believe the following reflect our critical accounting policies and our more significant judgments and estimates used in the preparation of our consolidated financial statements:

•  Revenue. Our revenue recognition policies for each reportable segment are as follows:

Transaction Services or WebMD Envoy. Healthcare payers and providers pay us fees for our services, generally on a per transaction basis or monthly basis. We recognize revenue as we perform the service. Healthcare payers and providers also pay us one-time implementation and annual maintenance fees. We recognize revenue from these fees ratably over the term of the respective agreements.

Physician Services or WebMD Medical Manager. Healthcare providers pay us one-time fees for the purchase of our practice management systems. We recognize revenue from these one-time fees when we enter into noncancelable agreements with our customers, the products have been delivered and there are no uncertainties regarding product acceptance and delivery and no significant future performance obligations. Amounts received in advance of meeting these criteria are deferred until we meet these criteria. Revenue from multiple-element software arrangements is recognized using the residual method, as vendor specific objective evidence (“VSOE”) of fair value exists for the undelivered elements, but not for all of the delivered elements. The residual method requires revenue to be allocated to the undelivered elements based on the fair value of such elements, as indicated by VSOE. VSOE is based on the price charged when an element is sold separately. Healthcare providers also pay us fees for maintenance and support of their practice management

19

system, including the hardware and software. We recognize revenue from these fees ratably over the contract period, typically in one year or less. Healthcare providers also pay us fees for transmitting transactions to payers and patients. We recognize revenue from these fees, which are generally billed on a monthly or per transaction basis, as we provide the service.

Portal Services or WebMD Health. Customers pay us for advertising, sponsorship, healthcare management tools, continuing medical education (“CME”), content syndication and distribution, and e-commerce transactions related to our online distribution channels and the online and offline distribution channels of our strategic partners. Revenue from advertising is recognized as advertisements are delivered. Revenues from sponsorship arrangements and healthcare management tools are recognized ratably over the term of the applicable agreement. Revenue from CME arrangements is recognized over the period we satisfy the minimum credit hour requirements of the applicable agreements. Revenue from fixed fee content license or carriage fees is recognized ratably over the term of the applicable agreement. E-commerce revenue is recognized when a subscriber or consumer utilizes our Internet-based services or purchases goods or services through our Web site or a co-branded Web site with one of our strategic partners. Subscription revenue, including subscription revenue from sponsorship arrangements, is recognized over the subscription period. When contractual arrangements contain multiple elements, revenue is allocated to the elements based on their relative fair values, determined using prices charged when elements are sold separately.

Plastic Technologies or Porex. We develop, manufacture and distribute porous plastic products and components. For standard products, we recognize revenue upon shipment of product, net of sales returns and allowances. For sales of certain custom products, we recognize revenue upon completion and customer acceptance. Recognition of amounts received in advance of meeting these criteria is deferred until we meet these criteria.

•  Long-Lived Assets. Our long-lived assets consist of property and equipment, goodwill and other intangible assets. Goodwill and other intangible assets arise from the acquisitions we have made. The amount assigned to intangible assets is subjective and based on our estimates of the future benefit of the intangible asset using accepted valuation techniques, such as discounted cash flow and replacement cost models. Our long-lived assets are amortized over their estimated useful lives, which we determined based on the consideration of several factors, including the period of time the asset is expected to remain in service. We evaluate the carrying value and remaining useful lives of long-lived assets, excluding goodwill, whenever indicators of impairment are present. We evaluate the carrying value of goodwill annually. We use a discounted cash flow approach to determine the fair value of goodwill.

•  Investments. Our investments, at June 30, 2003, consist principally of certificates of deposit, municipal bonds, asset-backed securities, Federal Agency Notes, U.S. Treasury Notes and an equity investment in a publicly traded company. For each reporting period, we evaluate the carrying value of our investments and record a loss on investments when we believe an investment has experienced a decline in value that is other than temporary. We do not recognize gains on an investment until sold. Our carrying value is not necessarily indicative of the underlying value of an investment. Future changes in market or economic conditions or operating results of our investments could result in gains or losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s carrying value.

•  Deferred Tax Assets. Our deferred tax assets are comprised primarily of net operating loss carryforwards. These loss carryforwards may be used to offset taxable income in future periods reducing the amount of taxes we might otherwise be required to pay. Due to a lack of a history of generating taxable income, we record a valuation allowance equal to 100% of our net deferred tax assets. In the event that we are able to generate taxable earnings in the future and determine it is more likely than not that we can realize our deferred tax assets, an adjustment to the valuation

20

allowance would be made which may increase income in the period that such determination was made.

•

Restructuring and Integration. In connection with our restructuring and integration efforts, modifications to our strategic relationship with News Corporation resulted in a change in the carrying value of advertising services we have the rights to, classified as prepaid content and distribution services. We estimated the fair value of our rights under the new agreement using a discounted cash flow approach. This estimate also affects the amortization of this asset in future periods over the contractual term. Also, in connection with our restructuring and integration efforts, we recorded charges for estimated future lease obligations and lease cancellation penalties related to exited facilities based on many different variables, such as the term to expiration, contractual rights under the lease agreement and current real estate market conditions. Future changes in any of these variables, such as a change in real estate market conditions, could have an impact on these estimates.

Restructuring and Integration Initiatives

      After the mergers with Medical Manager Corporation, CareInsite, Inc. and OnHealth Network Company in September 2000, our Board of Directors approved a restructuring and integration plan, with the objective of eliminating duplication and redundancies that resulted from these and certain prior acquisitions and consolidating our operational infrastructure into a common platform to more efficiently serve our customers.

      Our restructuring and integration efforts continued in 2001, and a plan to include the impact of eliminating functions resulting from our acquisition of Medscape in December 2001 was initiated. Additionally, our Porex Medical operating unit consolidated a manufacturing facility in 2002 as part of a separate restructuring plan.

      We have substantially completed our restructuring and integration efforts, with the primary exception being remaining lease payments of previously vacated facilities.

Results of Operations

      Revenue is derived from our four business segments: Transaction Services, Physician Services, Portal Services and Plastic Technologies. Our Transaction Services include administrative services, such as transaction processing for medical, dental and pharmacy claims, automated patient statements and clinical lab and reporting services, such as lab test orders and results. A significant portion of Transaction Services revenues is generated from the country’s largest national and regional healthcare payers. Our Physician Services include sales of practice management systems, including administrative, financial and clinical applications and services, under The Medical Manager, Intergy, ULTIA and Medical Manager Network Services brands. Portal Services include advertising, sponsorship, continuing medical education, content syndication and distribution, and e-commerce transactions through our online distribution channels and the online and offline distribution channels of our strategic partners. The majority of Portal Services revenues are derived from a small number of customers. Our customers include pharmaceutical companies, biotech companies, medical device companies and media companies. Our Plastic Technologies revenue includes the sale of porous plastic components used to control the flow of fluids and gases, disposable plastic components including pipette tips, test tubes and closure devices, injection-molded medical components and finished medical devices, and sterile surgical products.

      Cost of operations consists of costs related to services and products we provide to customers and costs associated with the operation and maintenance of our networks. These costs include salaries and related expenses for network operations personnel and customer support personnel, telecommunication costs, maintenance of network equipment, cost of hardware related to the sale of practice management systems, a portion of facilities expenses, leased personnel and facilities costs, sales commissions paid to certain distributors of our Transaction Services products, and non-cash expenses related to content and distribution services. In addition, cost of operations includes raw materials, direct labor and manufacturing overhead,

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such as fringe benefits, indirect labor and product development related to our Plastic Technologies segment.

      Development and engineering expense consists primarily of salaries and related expenses associated with the development of applications and services. Expenses include compensation paid to development and engineering personnel, fees to outside contractors and consultants, and the maintenance of capital equipment used in the development process.

      Sales, marketing, general and administrative expense consists primarily of advertising, product and brand promotion, salaries and related expenses for sales, administrative, finance, legal, information technology, human resources and executive personnel. These expenses include items related to account management and marketing personnel, commissions, costs and expenses for marketing programs and trade shows, and fees for professional marketing and advertising services, as well as fees for professional services, costs of general insurance and costs of accounting and internal control systems to support our operations. Also included are non-cash expenses related to content and distribution services acquired in exchange for our equity securities and stock compensation expense primarily related to the amortization of deferred compensation. Content and distribution services consist of advertising, promotion and distribution services from our arrangements with News Corporation, Microsoft, AOL and other partners. Stock compensation is primarily related to deferred compensation associated with the intrinsic value of the unvested portion of stock options issued in exchange for outstanding stock options of companies we acquired in 2000, and the excess of the market price over the exercise price of certain options granted to employees.

      The following discussion includes a comparison of the results of operations for the three and six months ended June 30, 2003 to the three and six months ended June 30, 2002.

Consolidated

Revenues

      Revenues for the three months ended June 30, 2003 were $246,471, compared to $227,644 for the three months ended June 30, 2002. The Physician Services, Portal Services, Transaction Services and Plastic Technologies segments were responsible for $10,729, $8,532, $817 and $140, respectively, of the revenue increase for the quarter, which was partially offset by an increase of $1,391 in inter-segment eliminations.

      Revenues for the six months ended June 30, 2003 were $481,214, compared to $453,517 for the six months ended June 30, 2002. Physician Services, Portal Services and Plastic Technologies segments were responsible for $16,651, $13,578 and $1,137, respectively, of the revenue increase for the six month period, which was partially offset by a decrease in revenue of $1,617 in Transaction Services and an increase of $2,052 in inter-segment eliminations.

Costs and Expenses

      Cost of Operations. Cost of operations was $143,582 and $277,962 for the three and six months ended June 30, 2003, compared to $135,648 and $274,179 in the prior year periods. Our cost of operations represented 58.3% and 57.8% of revenues for the three and six months ended June 30, 2003, compared to 59.6% and 60.5% for the three and six months ended June 30, 2002. This decrease was primarily due to the elimination of costs related to certain terminated products and relationships, such as hospital and laboratory connectivity relationships and consolidation of duplicate product offerings exited in May of 2002, as well as lower data communication costs in our Transaction Services segment, which were partially offset by higher consulting and personnel costs related to our HIPAA efforts. Included in cost of operations were non-cash expenses related to content and distribution services of $827 and $827 during the three and six months ended June 30, 2003 and $750 and $1,724 during the three and six months ended June 30, 2002, respectively.

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      Development and Engineering. Development and engineering expense was $10,490 and $21,502 for the three and six months ended June 30, 2003, which reflects a slight decrease from $11,113 and $21,981 in the prior year periods.

      Sales, Marketing, General and Administrative. Sales, marketing, general and administrative expense decreased 6.3% and 9.0% to $71,724 and $141,794 for the three and six months ended June 30, 2003, compared to $76,511 and $155,877 in the prior year periods. Included in sales, marketing, general and administrative expense are non-cash expenses related to content and distribution services and stock compensation. Non-cash expenses related to content and distribution services were $5,176 and $11,322 for the three and six months ended June 30, 2003, compared to $5,399 and $11,685 for the prior year periods. Non-cash stock compensation was $3,801 and $7,558 for the three and six months ended June 30, 2003, compared to $7,314 and $14,890 for the prior year periods. The decrease in non-cash stock compensation is primarily related to the vesting schedules of options issued and assumed in connection with our 2000 acquisitions. Sales, marketing, general and administrative expense, excluding the non-cash expenses discussed above, decreased to $62,747 and $122,914, or 25.5% and 25.5% of revenue, for the three and six months ended June 30, 2003, compared to $63,798 and $129,302, or 28.0% and 28.5% of revenue, for the prior year periods. This decrease is primarily due to a combination of lower marketing costs in our Transaction Services and Portal Services segments and lower costs related to outside services in our Corporate segment.

      Depreciation and Amortization. Depreciation and amortization expense decreased to $16,016 and $43,992 for the three and six months ended June 30, 2003, compared to $33,033 and $65,792 in the prior year periods. The decrease was the result of intangible assets relating to certain acquisitions made in 1999 and 2000 becoming fully amortized since the beginning of the prior year periods.

      Impairment of Long-Lived Assets. We recorded an impairment loss of $33,113 during the three and six months ended June 30, 2003 to reduce certain long-lived assets of our Plastic Technologies segment to fair value. The impairment was determined in connection with the August 1, 2003 sale of Porex Bio Products, Inc. and Porex Medical Products, Inc., two operating units within our Plastic Technologies segment. We determined the fair value of these operating units using the expected proceeds from disposition. The impairment resulted in a writedown of $27,564 of goodwill, $4,162 of trade name and other intangibles, and $1,387 of manufacturing equipment. The impairment loss of $609 recorded during the three and six months ended June 30, 2002 related to equipment to be disposed of following the cessation of a product line within the Porex Medical Products operating unit.

      Restructuring and Integration Charge (Benefit). There was no restructuring and integration activity recorded during the six months ended June 30, 2003. During the six months ended June 30, 2002, the Company recorded a benefit of $3,750 related to a payment received in settlement of certain contractual obligations which was partially offset by a restructuring charge of $1,160 recorded by the Porex Medical operating unit.

      Other Income. Other income during the three and six months ended June 30, 2003 includes a benefit of $1,118, related to a state tax refund which applied to a pre-acquisition tax year of a company we acquired. Also included in other income during the six months ended June 30, 2003 is a gain of $183, primarily related to two of our investments in held-to-maturity securities that were called for early redemption during the quarter ended March 31, 2003. During the three months ended June 30, 2002, other income includes a gain on investments of $5,866 related to the sale of an available-for-sale security.

      Interest Income. Interest income was $4,994 and $10,049 during the three and six months ended June 30, 2003, compared to $6,022 and $9,162 in the prior year periods. The decrease in interest income during the three months ended June 30, 2003 compared to the three months ended June 30, 2002 reflects lower rates of return on our investment portfolio. The increase in interest income during the six months ended June 30, 2003 compared to the six months ended June 30, 2002 reflects the lower rates of return on our investment portfolio, offset by a higher average investment balance in 2003 as a result of the April 1, 2002 issuance of our $300,000 3 1/4% Convertible Subordinated Notes.

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      Interest Expense. Interest expense was $2,927 and $5,848 for the three and six months ended June 30, 2003, compared to $2,954 and $3,095 for the prior year periods. Interest expense was relatively consistent for the three months ended June 30, 2003 and 2002; however, interest expense during the six months ended June 30, 2003 was higher when compared to the six months ended June 30, 2002 reflecting a full six months of interest expense and amortization of debt issuance costs related to the 3 1/4% Convertible Subordinated Notes issued on April 1, 2002.

      Income Tax Provision. Income tax provision represents tax expense for operations that are profitable in certain states and foreign countries. We provided for $1,001 and $1,981 of state, local and foreign income taxes for the three and six months ended June 30, 2003, respectively, and $713 and $1,413 for the three and six months ended June 30, 2002.

Segments

      We have aligned our business into four operating segments as follows:

•  Transaction Services or WebMD Envoy. We transmit transactions between healthcare payers and physicians, pharmacies, dentists, hospitals, laboratory companies and other healthcare providers using dial-up, Internet and dedicated communication methods. We provide connectivity and transaction services through an integrated electronic transaction processing system. These services assist the group’s customers in automating key administrative and clinical functions. In addition, Transaction Services provides automated patient billing services to providers, including statement printing and mailing services.

•  Physician Services or WebMD Medical Manager. We develop and market integrated physician practice management systems, including administrative, financial and clinical applications and services, under The Medical Manager, Intergy, ULTIA and Medical Manager Network Services brands. These systems and services allow physician offices to automate their scheduling, billing and other administrative tasks, to transmit transactions electronically, to maintain electronic medical records and to automate documentation of patient encounters.

•  Portal Services or WebMD Health. We provide online healthcare information and related resources and services for consumers and healthcare professionals, both directly and through our relationships with leading general consumer Internet portals. We also provide online content for use by media and healthcare partners in their Web sites. We develop and sell online and offline programs for advertisers and sponsors, particularly those who are interested in influencing healthcare decisions.

•  Plastic Technologies or Porex. We develop, manufacture and distribute proprietary porous plastic products and components used in healthcare, industrial and consumer applications, as well as in finished products used in medical device, research, clinical laboratory and surgical markets.

      We evaluate the performance of our business segments based upon income or loss before restructuring, taxes, non-cash and other items. Non-cash and other items include depreciation, amortization, impairment charges, gain on investments, other income, non-cash expenses related to content, advertising and distribution services acquired in exchange for our equity securities in acquisitions and strategic alliances, and stock compensation primarily related to stock options issued and assumed in connection with acquisitions. The accounting policies of the segments are the same as the accounting policies for the consolidated company. We record inter-segment revenues at rates comparable to those charged to third parties for comparable services.

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      Results for the three and six months ended June 30, 2003 and 2002 for each of our segments and a reconciliation to net loss is presented below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2003			2002			2003			2002
Revenues
Transaction services	$	118,021		$	117,204		$	233,514		$	235,131
Physician services		76,797			66,068			148,808			132,157
Portal services		26,538			18,006			48,718			35,140
Plastic technologies		31,649			31,509			62,187			61,050
Inter-segment eliminations		(6,534	)		(5,143	)		(12,013	)		(9,961	)
	$	246,471		$	227,644		$	481,214		$	453,517
Income (loss) before restructuring, taxes, non-cash and other items
Transaction services	$	22,342		$	18,264		$	46,393		$	35,802
Physician services		6,359			6,234			12,656			12,486
Portal services		6,192			(2,219	)		10,210			(7,056	)
Plastic technologies		7,967			8,197			15,247			15,795
Corporate		(12,381	)		(12,641	)		(24,843	)		(27,248	)
Interest income		4,994			6,022			10,049			9,162
Interest expense		(2,927	)		(2,954	)		(5,848	)		(3,095	)
		32,546			20,903			63,864			35,846
Restructuring, taxes, non-cash and other items
Depreciation and amortization		(16,016	)		(33,033	)		(43,992	)		(65,792	)
Non-cash content and distribution services and stock compensation		(9,804	)		(13,463	)		(19,707	)		(28,299	)
Impairment of long-lived assets		(33,113	)		(609	)		(33,113	)		(609	)
Restructuring and integration (charge) benefit		—			(1,160	)		—			2,590
Other income		1,118			5,866			1,301			5,866
Income tax provision		(1,001	)		(713	)		(1,981	)		(1,413	)
Net loss	$	(26,270	)	$	(22,209	)	$	(33,628	)	$	(51,811	)

      The following discussion is a comparison of the results of operations for each of our operating segments for the three and six months ended June 30, 2003 to the three and six months ended June 30, 2002.

      Transaction Services. Revenues were $118,021 and $233,514 for the three and six months ended June 30, 2003, compared to $117,204 and $235,131 for the prior year periods. Revenues during the three and six months ended June 30, 2002 include $1,887 and $7,460, respectively, of revenues associated with terminated laboratory connectivity products and relationships exited in May 2002. Excluding the impact of the terminated products and relationships, revenues during the three and six months ended June 30, 2003 increased by $2,704 and $5,843 compared to the prior year periods, reflecting a postal rate increase that went into effect on July 1, 2002 and higher transaction revenue.

      Income before restructuring, taxes, non-cash and other items was $22,342 and $46,393 for the three and six months ended June 30, 2003, an increase of $4,078 or 22.3% and $10,591 or 29.6% compared to the prior year periods. As a percentage of revenue, income before restructuring, taxes, non-cash and other items improved to 18.9% and 19.9% for the three and six months ended June 30, 2003, compared to 15.6% and 15.2% for the prior year periods. The improvement was due to lower data communication costs, lower sales and marketing costs and the elimination of costs associated with the terminated products and relationships discussed above, partially offset by higher consulting and personnel costs related to our HIPAA efforts. We expect to continue to incur costs related to our HIPAA initiatives through early 2004.

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      Physician Services. Revenues were $76,797 and $148,808 for the three and six months ended June 30, 2003, an increase of $10,729 and $16,651 compared to the prior year periods. The increase is primarily attributable to higher Network Services revenues as well as higher maintenance revenue and systems revenue. Additionally, revenue from customers acquired through the 2002 Acquisitions and 2003 Acquisitions contributed $3,038 and $5,510 to the increase in Physician Services revenue for the three and six months ended June 30, 2003.

      Income before restructuring, taxes, non-cash and other items was $6,359 and $12,656 for the three and six months ended June 30, 2003, a slight increase compared to $6,234 and $12,486 in the prior year periods. As a percentage of revenue, income before restructuring, taxes, non-cash and other items was 8.3% and 8.5% for the three and six months ended June 30, 2003, compared to 9.4% and 9.4% for the prior year periods. This decrease in income as a percentage of revenue was primarily attributable to roll-out costs related to our new products, primarily our all payer/all transaction network services.

      Portal Services. Revenues were $26,538 and $48,718 for the three and six months ended June 30, 2003, an increase of $8,532 or 47.4% and $13,578 or 38.6% compared to the prior year periods. The increase was primarily attributable to growth in advertising and sponsorship revenues on our consumer and professional sites and, to a lesser extent, an increase in revenues from health plans and employers. Revenues from customers acquired through the 2002 Acquisitions and 2003 Acquisitions contributed $2,566 and $4,045 to the increase in Portal Services revenue for the three and six months ended June 30, 2003.

      Income before restructuring, taxes, non-cash and other items was $6,192 and $10,210 for the three and six months ended June 30, 2003, compared to a loss of $(2,219) and $(7,056) for the prior year periods. As a percentage of revenue, the income (loss) before restructuring, taxes, non-cash and other items improved to 23.3% and 21.0% for the three and six months ended June 30, 2003, compared to (12.3)% and (20.1)% for the prior year periods. This improvement was the result of fixed cost leverage related to the increased revenues discussed above and reduced content and marketing related costs during the six months ended June 30, 2003 compared to the six months ended June 30, 2002.

      Plastic Technologies. Revenues were $31,649 and $62,187 for the three and six months ended June 30, 2003, an increase of $140 and $1,137 compared to the prior year periods. The increase for both the three and six month periods was primarily due to higher sales of our porous products such as medical original equipment manufacturer components, computer consumables and writing instruments, as well as an increase in our surgical products, partially offset by lower sales of our custom molding and tooling products.

      Income before restructuring, taxes, non-cash and other items was $7,967 and $15,247 for the three and six months ended June 30, 2003, a decrease of $230 and $548 compared to the prior year periods. As a percentage of revenue, income before restructuring, taxes, non-cash and other items was 25.2% and 24.5% for the three and six months ended June 30, 2003, compared to 26.0% and 25.9% for the prior year periods. This decrease was due to higher sales and marketing and product development expenses in our porous and surgical product groups.

      Corporate includes expenses shared across all segments, such as executive personnel, corporate finance, legal, human resources and risk management costs. Corporate expenses decreased to $12,381 and $24,843 during the three and six months ended June 30, 2003 from $12,641 and $27,248 in the prior year periods, primarily as a result of reduced outside services expenses, partially offset by higher insurance expenses.

      Inter-Segment Eliminations. The increase in inter-segment eliminations for the three and six months ended June 30, 2003, compared to the prior year periods, resulted from higher sales of Transaction Services products into the Physician Services customer base.

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Liquidity and Capital Resources

      We have incurred significant operating and net losses since we began operations and, as of June 30, 2003, we had an accumulated deficit of $10.2 billion. We plan to continue to invest in acquisitions, strategic relationships, infrastructure and product development.

      As of June 30, 2003, we had approximately $677,590 in cash and cash equivalents and short-term investments and working capital of $635,047. Additionally, we had long-term investments of $268,222 in marketable debt securities and $7,504 in marketable equity securities. We invest our excess cash principally in certificates of deposit, U.S. Treasury obligations and Federal Agency Notes and expect to do so in the future. Subsequent to June 30, 2003, we invested approximately $311,710 of our cash and cash equivalents in long-term marketable debt securities, primarily Federal Agency Notes.

      Cash provided by operating activities was $37,319 for the six months ended June 30, 2003 compared to $46,511 for the six months ended June 30, 2002. The cash provided from operating activities was primarily a result of the net loss of $33,628 for the six months ended June 30, 2003, offset by non-cash charges of $97,586 and net changes in operating assets and liabilities of $(26,456). The negative impact of changes in operating assets and liabilities may reverse in future periods, depending on the timing of each period end in relation to items such as internal payroll and billing cycles, payments from customers, payments to vendors, interest payments relating to our 3 1/4% Convertible Subordinated Notes and our 1.75% Convertible Subordinated Notes and interest receipts relating to our investments in marketable securities. The cash provided by operating activities for the six months ended June 30, 2002 was primarily attributable to a net loss of $51,811, offset by non-cash charges of $95,691 and net changes in operating assets and liabilities of $8,497. The non-cash charges consist of depreciation and amortization, non-cash expenses related to content and distribution services and stock compensation, impairment of long-lived assets, non-cash restructuring charges and amortization of debt issuance costs.

      Cash used in investing activities was $50,383 for the six months ended June 30, 2003, compared to cash used in investing activities of $362,050 for the six months ended June 30, 2002. Cash used in investing activities for the six months ended June 30, 2003 primarily related to $105,550 of proceeds from the maturities, sales and redemptions of available-for-sale and held-to-maturity securities, partially offset by $131,661 of purchases of held-to-maturity and available-for-sale securities. Additionally, the 2003 Acquisitions consumed cash of $14,701, net of cash acquired. Cash used in investing activities for the six months ended June 30, 2002 primarily related to purchases of held-to-maturity and available-for-sale securities, partially offset by maturities of available-for-sale securities. Investments in property and equipment were $9,571 and $14,730 for the six months ended June 30, 2003 and 2002, respectively. Subsequent to June 30, 2003, we paid $110 million in cash for all of the outstanding capital stock of Advanced Business Fulfillment, Inc. (“ABF”).

      Cash provided by financing activities was $294,390 for the six months ended June 30, 2003, compared to cash provided by financing activities of $202,601 for the six months ended June 30, 2002. Cash provided by financing activities for the six months ended June 30, 2003 principally relates to net proceeds of $290,500 from the issuance of the 1.75% Convertible Subordinated Notes on June 25, 2003 and $28,578 related to exercises of employee stock options. Cash provided by financing activities for the six months ended June 30, 2002 primarily related to $292,000 of net proceeds related to the issuance of our 3 1/4% Convertible Subordinated Notes on April 1, 2002. During the six months ended June 30, 2003 and 2002, $18,125 and $88,747, respectively, was used for repurchases of our common stock. Subsequent to June 30, 2003 we received net proceeds of $48,625 related to an additional issuance of our 1.75% Convertible Subordinated Notes.

      As of June 30, 2003, we did not have any material commitments for capital expenditures. Our principal commitments, at June 30, 2003, consisted primarily of our commitments related to the $300 million of 3 1/4% Convertible Subordinated Notes due in April 2007 and the $300 million of 1.75% Convertible Subordinated Notes due in June 2023, obligations under operating leases and guaranteed payments under our strategic agreements and potential earnout payments related to our National Physicians Datasource (“NPD”) acquisition. Additionally, subsequent to June 30, 2003, our commitments

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related to the 1.75% Convertible Subordinated Notes due in June 2023 increased to $350 million as a result of the additional issuance of $50 million of these notes in July 2003, and our July 17, 2003 acquisition of ABF obligated us to a potential earnout payment of $150 million. We have entered into agreements that provide for us to make aggregate guaranteed payments in the following estimated amounts, net of sublease income, under operating leases and our strategic relationships. The lease amounts include leases identified in our restructuring and integration efforts.

			Strategic
Year Ending December 31,	Leases		Relationships		Total
2003		26,000		2,501		28,501
2004		22,943		1,262		24,205
2005		19,054		754		19,808
2006		15,672		500		16,172
2007		13,850		125		13,975
Thereafter		45,280		—		45,280

      We believe that, for the foreseeable future, we will have sufficient cash resources to meet our obligations related to the $300 million of 3 1/4% Convertible Subordinated Notes due 2007, the $350 million of 1.75% Convertible Subordinated Notes due 2023, our potential earnout payments related to the NPD and ABF acquisitions, and our currently anticipated working capital and capital expenditure requirements, including the capital requirements related to the roll-out of our new products in 2003. Our future liquidity and capital requirements will depend upon numerous factors, including the success of the integration of our businesses, retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, potential future acquisitions and additional repurchases of our common stock. In addition, we have been incurring, and expect to continue to incur, costs relating to our own compliance with the Healthcare Insurance Portability and Accountability Act of 1996, or HIPAA, and for assistance we provide to our customers in their compliance efforts. Our ability to perform our services in compliance with HIPAA and the cost to us of doing so will depend on, among other things, the status of the compliance efforts of our payer and provider customers and the extent of the need to adjust our systems and procedures in response to changes in their systems and procedures. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. There can be no assurance that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders.

Recent Accounting Pronouncements

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”). SFAS No. 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and must be applied to our existing financial instruments effective July 1, 2003, the beginning of the first fiscal period after June 15, 2003. The adoption of SFAS No. 150 on June 1, 2003 did not have any effect on our financial position or results of operations.

      In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (“SFAS No. 148”), “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of FASB Statement No. 123.” The statement provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement requires us to disclose, in both annual and interim financial statements, the method of

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accounting for stock-based compensation and the effect of the method used on our reported results. The statement is effective for annual periods ending after December 15, 2002 and interim periods beginning after December 15, 2002. We apply the intrinsic value method of accounting for stock-based employee compensation. The adoption of SFAS No. 148 did not have a material impact on our consolidated financial position or results of operations.

      In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The interpretation elaborates on the disclosures to be made in our interim and annual financial statements about obligations under certain guarantees. It also requires us to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002. The initial measurement and recognition provisions are required to be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have any impact on our consolidated financial position or results of operations.

      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”). SFAS No. 146 requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 will have an impact on the timing of the recording of any future restructuring charges.

Factors That May Affect Our Future Financial Condition or Results of Operations

      This section describes circumstances or events that could have a negative effect on our financial results or operations or that could change, for the worse, existing trends in some or all of our businesses. The occurrence of one or more of the circumstances or events described below could have a material adverse effect on our financial condition, results of operations and cash flows or on the trading prices of the common stock and convertible notes that we have issued. The risks and uncertainties described below are not the only ones facing WebMD. Additional risks and uncertainties that are not currently known to us or that we currently believe are immaterial may also adversely affect our business and operations.

Risks Related to Our Relationships with Customers and Strategic Partners

WebMD Envoy’s transaction volume and financial results could be adversely affected if we do not maintain relationships with practice management system vendors and large submitters of healthcare electronic data interchange, or EDI, transactions

      We have developed relationships with practice management system vendors and large submitters of healthcare claims to increase the usage of our WebMD Envoy transaction services. WebMD Medical Manager is a competitor of these practice management system vendors. These vendors, as a result of our ownership of WebMD Medical Manager or for other reasons, may choose in the future to diminish or terminate their relationships with WebMD Envoy. Some other large submitters of claims compete with, or may have significant relationships with entities that compete with, WebMD Envoy or WebMD Health. To the extent that we are not able to maintain mutually satisfactory relationships with the larger practice management system vendors and large submitters of healthcare EDI transactions, WebMD Envoy’s transaction volume and financial results could be adversely affected.

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WebMD Envoy’s transaction volume and financial results could be adversely affected if payers and providers conduct EDI transactions without using a clearinghouse

      There can be no assurance that healthcare payers and providers will continue to use WebMD Envoy and other independent companies to transmit healthcare transactions. Some payers currently offer electronic data transmission services to healthcare providers that establish a direct link between the provider and payer, bypassing third-party EDI service providers such as WebMD Envoy. We cannot provide assurance that we will be able to maintain our existing links to payers and providers or develop new connections on satisfactory terms, if at all. The standardization of formats and data standards required by HIPAA may facilitate additional use of direct EDI links, allowing transmission of transactions between a greater number of healthcare payers and providers without use of a clearinghouse. Any significant increase in the utilization of direct links between healthcare providers and payers could have a material adverse effect on WebMD Envoy’s transaction volume and financial results.

Loss of a small number of advertisers and sponsors could have a material adverse effect on WebMD Health’s revenues

      A substantial portion of WebMD Health’s revenues come from a relatively small number of advertisers and sponsors. We expect this to continue in the future. Thus, the loss of one or a small number of relationships with advertisers and sponsors or reduction of their purchases could have a material adverse effect on our Portal Services revenues. We may lose such relationships or experience a reduction in purchases if customers decide not to renew their commitments or renew at lower levels, which may occur if we fail to meet our customers’ expectations or needs or fail to keep up with our competition or for reasons outside our control, including changes in economic and regulatory conditions affecting the healthcare industry or changes specific to the businesses of particular customers. For more information, see “Risks Related to Providing Products and Services to the Healthcare Industry — Developments in the healthcare industry could adversely affect our business” below and “Business — Government Regulation” in our 2002 Annual Report on Form 10-K.

Third parties may bring claims as a result of the activities of our strategic partners

      We could be subject to claims by third parties, and to liability, as a result of the activities, products or services of our strategic partners. We state on our Web sites that we do not control or endorse the products or services of our strategic partners. However, there can be no assurance that the statements made on our Web sites will be found to be sufficient to ensure that we are not held responsible for such activities, products or services. Furthermore, even if these claims do not result in liability to us, investigating and defending these claims could be expensive, time-consuming and result in adverse publicity that could harm our business.

Risks Related to the Performance of Our

Healthcare Information Services and Technology Solutions

Our ability to generate revenue could suffer if we do not continue to update and improve our existing products and services and develop new ones

      We must introduce new healthcare information services and technology solutions and improve the functionality of our existing products and services in a timely manner in order to retain existing customers and attract new ones. However, we may not be successful in responding to technological developments and changing customer needs. The pace of change in the markets we serve is rapid, and there are frequent new product and service introductions by our competitors and by vendors whose products and services we use in providing our own products and services. If we do not respond successfully to technological changes and evolving industry standards, our products and services may become obsolete. Technological changes may also result in the offering of competitive products and services at lower prices than we are charging for our products and services, which could result in our losing sales unless we lower the prices we charge.

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      We rely on a combination of internal development, strategic relationships, licensing and acquisitions to develop our products and services. The cost of developing new healthcare information services and technology solutions is inherently difficult to estimate. Our development of proposed products and services may take longer than originally expected, require more testing than originally anticipated and require the acquisition of additional personnel and other resources. In addition, there can be no assurance that the products we develop or license will be able to compete with the alternatives available to our customers. For more information about the competition we face, see “Business — Healthcare Information Services and Technology Solutions — Competition for Our Healthcare Information Services and Technology Solutions” in our 2002 Annual Report on Form 10-K.

      We have been incurring, and expect to continue to incur, significant expenses relating to implementation of the HIPAA electronic transaction and code sets standards. Implementation of the HIPAA transaction standards requires us, among other things, to make significant changes to the software WebMD Envoy uses internally, to engage in testing with its customers and to implement additional quality assurance processes. If our reprogramming and testing are not completed on a timely basis, we could lose customers and revenues.

New or newly integrated products and services will not become profitable unless they achieve sufficient levels of market acceptance

      There can be no assurance that healthcare providers and payers will accept from us new products and services or products and services that result from integrating existing and/or acquired products and services.

      Even providers and payers who are already our customers may not purchase new or newly integrated products or services, especially when they are initially offered. Providers using our existing products and services may refuse to adopt new or newly integrated products and services when they have made extensive investments in hardware, software and training relating to those existing products and services. Similarly, other healthcare participants may not accept new or newly integrated products and services that we develop for their use. In addition, there can be no assurance that any pricing strategy that we implement for any such products and services will be economically viable or acceptable to the target markets. Failure to achieve broad penetration in target markets with respect to new or newly integrated products and services could have a material adverse effect on our business prospects.

Achieving market acceptance of new or newly integrated products and services is likely to require significant efforts and expenditures

      Achieving market acceptance for new or newly integrated products and services is likely to require substantial marketing efforts and expenditure of significant funds to create awareness and demand by participants in the healthcare industry. In addition, deployment of new or newly integrated products and services may require the use of additional resources for training our existing sales force and customer service personnel and for hiring and training additional salespersons and customer service personnel. There can be no assurance that the revenue opportunities from new or newly integrated products and services will justify amounts spent for their development, marketing and roll-out.

We could be subject to breach of warranty claims if our software products, information technology systems or transmission systems contain errors, experience failures or do not meet customer expectations

      We could face breach of warranty or other claims or additional development costs if the software and systems we sell or license to customers or use to provide services contain undetected errors, experience failures, do not perform in accordance with their documentation, or do not meet the expectations that our customers have for them. These software and systems are inherently complex and, despite testing and quality control, we cannot be certain that errors will not be found in prior versions, current versions or future versions or enhancements. In particular, during times when we are making significant changes or

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improvements to our products and services, such as those required to implement the HIPAA electronic transaction and code sets standards, there is increased risk of error.

      Undetected errors in the software and systems we provide or those we use to provide services could cause serious problems for which our customers may seek compensation from us. For example, errors in our transaction processing systems can result in healthcare payers paying the wrong amount or making payments to the wrong payee. We attempt to limit, by contract, our liability for damages arising from negligence, errors or mistakes. However, contractual limitations on liability may not be enforceable in certain circumstances or may otherwise not provide sufficient protection to us from liability for damages. Even if these claims do not result in liability to us, investigating and defending against them could be expensive and time consuming and could divert management’s attention away from our operations. In addition, negative publicity caused by these events may delay market acceptance of our products and services, including unrelated products and services.

We could be subject to product liability claims if our products malfunction or provide inaccurate information

      We provide products and services that assist in healthcare decision-making, including some that relate to patient medical histories and treatment plans. If these products malfunction or fail to provide accurate and timely information, we could be subject to product liability claims. Even if these claims do not result in liability to us, investigating and defending against them could be expensive and time consuming and could divert management’s attention away from our operations. In addition, negative publicity caused by these events may delay market acceptance of our products and services, including unrelated products and services.

      We attempt to limit, by contract, our liability for damages arising from negligence, errors or mistakes. However, contractual limitations on liability may not be enforceable in certain circumstances or may otherwise not provide sufficient protection to us from liability for damages. We maintain general liability insurance coverage, including coverage for errors and omissions. However, it is possible that claims could exceed the amount of our applicable insurance coverage or that this coverage may not continue to be available on acceptable terms or in sufficient amounts.

We could lose customers and revenues if we fail to meet the performance standards in our contracts

      Many of our customer contracts contain performance standards. If we fail to meet these standards, our customers may seek to terminate their agreements with us, withhold payments due to us, seek refunds from us of part or all of the fees charged under those agreements or initiate litigation or other dispute resolution procedures. Despite testing and quality control, we cannot be certain that we will meet these performance standards. To the extent we fail to achieve these standards, our revenues and customer relationships could be adversely affected. During times when we are making significant changes or improvements to our products and services, such as those required to implement the HIPAA electronic transaction and code sets standards, there is increased risk of failing to meet these performance standards.

If our systems or the Internet experience security breaches or are otherwise perceived to be insecure, our business could suffer

      A security breach could damage our reputation or result in liability. We retain and transmit confidential information, including patient health information, in our processing centers and other facilities. It is critical that these facilities and infrastructure remain secure and be perceived by the marketplace as secure. We may be required to expend significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by breaches. Despite the implementation of security measures, this infrastructure or other systems that we interface with, including the Internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, attacks by third parties or similar disruptive problems. Any

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compromise of our security, whether as a result of our own systems or systems that they interface with, could reduce demand for our services.

Performance problems with WebMD Envoy’s systems or system failures could adversely affect our business

      Our payer and provider customer satisfaction and our business could be harmed if WebMD Envoy experiences delays, failures or loss of data in its systems. During times when we are making significant changes or improvements to these systems, such as those required to implement the HIPAA electronic transaction and code sets provisions, there is increased risk of performance problems.

      We currently process our payer and provider transactions and data at our facilities and at a data center in Tampa, Florida that is operated by an independent third party. We have contingency plans for emergencies with our systems; however, we have limited backup facilities to process information if these facilities are not functioning. The occurrence of a major catastrophic event or other system failure at any of our facilities or at the third-party facility could interrupt data processing or result in the loss of stored data, which could have a material adverse impact on our business.

WebMD Envoy’s ability to provide transaction services depends on services provided by telecommunications companies

      WebMD Envoy relies on a limited number of suppliers to provide some of the telecommunications services necessary for its transaction services. The telecommunications industry has been subject to significant changes as a result of changes in technology, regulation and the underlying economy. Recently, many telecommunications companies have experienced financial problems and some have sought bankruptcy protection. Some of these companies have discontinued telecommunications services for which they had contractual obligations to WebMD Envoy. WebMD Envoy’s inability to source telecommunications services at reasonable prices due to a loss of competitive suppliers could affect its ability to maintain its margins until it is able to raise its prices to its customers and, if it is not able to raise its prices, could have a material adverse effect on its financial results.

Risks Related to Providing Products and Services to the Healthcare Industry

Developments in the healthcare industry could adversely affect our business

      Almost all of the revenues of WebMD Health, WebMD Envoy and WebMD Medical Manager come from customers in various parts of the healthcare industry. In addition, a significant portion of Porex’s revenues come from products used in healthcare or related applications. Developments that result in a reduction of expenditures by customers or potential customers in the healthcare industry could have a material adverse effect on our business. General reductions in expenditures by healthcare industry participants could result from, among other things:

•  government regulation or private initiatives that affect the manner in which healthcare providers interact with patients, payers or other healthcare industry participants, including changes in pricing or means of delivery of healthcare products and services (for additional discussion of the potential effects of regulatory matters on our business and on participants in the healthcare industry, see the other “Risks Related to Providing Products and Services to the Healthcare Industry” described below in this section, “Business — Government Regulation” in our 2002 Annual Report on Form 10-K and Part II, Item 5 of this Quarterly Report on Form 10-Q);

•  consolidation of healthcare industry participants;

•  reductions in governmental funding for healthcare; and

•  adverse changes in business or economic conditions affecting healthcare payers or providers, pharmaceutical companies, medical device manufacturers or other healthcare industry participants.

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      Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending on information technology and services or in some or all of the specific segments of that market we serve or are planning to serve. For example, use of our products and services could be affected by:

•  changes in the billing patterns of healthcare providers;

•  changes in the design of health insurance plans;

•  changes in the contracting methods payers use in their relationships with providers; and

•  decreases in marketing expenditures by pharmaceutical companies or medical device manufacturers, including as a result of governmental regulation or private initiatives that discourage or prohibit promotional activities by pharmaceutical or medical device companies.

      In addition, expectations of our customers regarding pending or potential industry developments may also affect their budgeting processes and spending plans with respect to products and services of the types we provide.

      The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. However, the timing and impact of developments in the healthcare industry are difficult to predict. We cannot provide assurance that the markets for our products and services will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, creates risks and challenges with respect to our compliance efforts and our business strategies

      As more fully described under “Business — Government Regulation” and “WebMD Envoy — HIPAA” in our 2002 Annual Report on Form 10-K and Part II, Item 5 of this Quarterly Report on Form 10-Q, the effect of HIPAA on our business is difficult to predict and there can be no assurances that we will adequately address the risks created by HIPAA and its implementation or that we will be able to take advantage of any resulting opportunities. Furthermore, we are unable to predict what changes to HIPAA, or the regulations issued pursuant to HIPAA, might be made in the future or how those changes could affect our business or the costs of compliance with HIPAA.

      Risks Relating to the HIPAA Transaction Standards. October 16, 2003 is the deadline for covered entities to comply with HIPAA’s electronic transaction and code sets provisions (which we refer to as the Transaction Standards). Failure to comply with the Transaction Standards may subject WebMD Envoy to civil monetary penalties. As discussed in Part II, Item 5 of this Quarterly Report, on July 24, 2003, the Centers for Medicare & Medicaid Services, or CMS, released its “Guidance on Compliance with HIPAA Transaction and Code Sets After the October 16, 2003 Implementation Deadline” (which we refer to as the CMS Guidance). The CMS Guidance makes clear that CMS expects each party to every transaction to be accountable for compliance with the new standards as of October 16, 2003. However, the CMS Guidance provides for a flexible, complaint-driven enforcement strategy. We believe that the CMS Guidance may assist in reducing disruptions in the flow of electronic transactions that otherwise could have occurred. However, one short-term effect of the CMS Guidance and related transition matters may be that, as a result of the extended period of testing and implementation, there could be fewer electronic transactions for us to process in late 2003 than would otherwise have been the case.

      We cannot provide assurance regarding how CMS will apply the CMS Guidance to clearinghouses in general or to WebMD Envoy in particular. In addition, even though the CMS Guidance may assist in avoiding major disruptions in the flow of electronic transactions, we expect that there will still be some problems during the period directly before and after October 16, 2003 while healthcare industry participants are adjusting to implementation of the Transaction Standards. We may not have enough technicians, programmers and customer service personnel to meet the demands placed on those functions

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by our customers and partners during that adjustment period, which could adversely affect our relationships with them.

      We have been incurring, and expect to continue to incur, significant expenses relating to compliance with HIPAA. Implementation of the Transaction Standards requires us, among other things, to make significant changes to the software WebMD Envoy uses internally, to engage in testing with its customers and to implement additional quality assurance processes. If our reprogramming and testing are not completed on a timely basis, we could lose customers and revenues. In addition, our ability to perform our transaction services in compliance with HIPAA and the cost to us of doing so will depend on, among other things, the status of the compliance efforts of our payer and provider customers and the extent of the need to adjust our systems and procedures in response to changes in their systems and procedures. We cannot control when or how payers, providers, practice management system vendors or other healthcare participants will comply with the Transaction Standards or predict how their compliance efforts will affect their relationships with us, including the volume of transactions for which they use our services. Some of our customers may delay implementation of HIPAA-ready solutions until near the applicable deadline, which may leave insufficient time to implement our solutions for all who are then seeking them, which could adversely affect our relationships with them. In addition, our technological and strategic responses to HIPAA may result in conflicts with, or other adverse changes in our relationships with, some healthcare industry participants, including some who are existing or potential customers for our products and services or existing or potential strategic partners.

      The standardization of formats and data standards required by HIPAA also creates risks for WebMD Envoy by potentially facilitating use of direct EDI links, allowing transmission of transactions between some healthcare payers and providers without use of a clearinghouse. Any significant increase in the utilization of direct links between healthcare providers and payers could have a material adverse effect on WebMD Envoy’s transaction volume and financial results.

      Risks Relating to the HIPAA Privacy Standards. The HIPAA Standards for Privacy of Individually Identifiable Health Information rule, which we refer to as the Privacy Standards, establishes a set of basic national privacy standards and fair information practices for the protection by health plans, healthcare clearinghouses, healthcare providers and their business associates of individually identifiable health information. This rule became effective on April 14, 2001 and the compliance date for most entities was April 14, 2003. The Privacy Standards apply to the portions of our business that process healthcare transactions and provide technical services to other participants in the healthcare industry, and certain of our portal services may be affected through contractual relationships. This rule provides for civil and criminal liability for its breach and requires us, our customers and our partners to use health information in a highly restricted manner, to establish policies and procedures to safeguard the information, to obtain individual authorizations for some activities, and to provide certain access rights to individuals. This rule may require us to incur significant costs to change our products and services, may restrict the manner in which we transmit and use the information, and may adversely affect our ability to generate revenue from the provision of de-identified information to third parties. The effect of the Privacy Standards on our business is difficult to predict and there can be no assurances that we will adequately address the risks created by the Privacy Standards and its implementation or that we will be able to take advantage of any resulting opportunities. In addition, we are unable to predict what changes to the Privacy Standards rule might be made in the future or how those changes could affect our business.

      Risks Relating to the HIPAA Security Standards. On February 20, 2003, the United States Department of Health and Human Services published the final HIPAA security standards regulations, which we refer to as the Security Standards. The Security Standards establish detailed requirements for safeguarding patient information that is electronically transmitted or electronically stored. The Security Standards establish 42 implementation specifications, 20 of which are “required,” meaning they must be implemented as specified in the rule. Twenty-two are “addressable.” Complying with addressable implementation specifications requires a business to assess whether these specifications constitute a reasonable and appropriate safeguard for the particular business; if not, an alternative approach must be designed and implemented to achieve the particular standard. The Security Standards apply to the portions

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of our business that process healthcare transactions, that provide technical services to other participants in the healthcare industry, and that enable electronic communications of patient information among healthcare industry participants, and certain of our portal services may be affected through contractual relationships. Most participants in the healthcare industry must be in compliance with the Security Standards by April 21, 2005. Some of the Security Standards are technical in nature, while others may be addressed through policies and procedures for using information systems. The security rule may require us to incur significant costs in evaluating our products and in establishing that our systems meet the 42 specifications. We are unable to predict what changes might be made to the Security Standards prior to the 2005 implementation deadline or how those changes might help or hinder our business. The effect of the Security Standards on our business is difficult to predict and there can be no assurances that we will adequately address the risks created by the Security Standards and its implementation or that we will be able to take advantage of any resulting opportunities.

Other government regulation of healthcare and healthcare information technology creates risks and challenges with respect to our compliance efforts and our business strategies

      General. The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operations of healthcare organizations. Federal and state legislatures and agencies periodically consider programs to reform or revise the United States healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. Healthcare industry participants may respond by reducing their investments or postponing investment decisions, including investments in our applications and services. We are unable to predict future proposals with any certainty or to predict the effect they would have on our business. Existing laws and regulations also could create liability, cause us to incur additional costs or restrict our operations.

      Healthcare Relationships. A federal law commonly known as the Federal Healthcare Programs anti-kickback law and several similar state laws prohibit payments that are intended to induce healthcare providers either to refer patients or to acquire or arrange for or recommend the acquisition of healthcare products or services. These laws are broad and may apply to some of our activities or our relationships with our customers, advertisers or strategic partners. Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, or are for items or services that were not provided as claimed. Since we provide transaction services to healthcare providers, we cannot provide assurance that the government will regard errors in transactions processed by us as inadvertent and not in violation of these laws. Many anti-kickback and false claims laws prescribe civil and criminal penalties for noncompliance that can be substantial. Even an unsuccessful challenge by regulatory authorities of our practices could cause us adverse publicity and be costly for us to respond to.

      Regulation of Medical Devices. Certain of Porex’s products are medical devices regulated by the Food and Drug Administration, or FDA, such as plastic and reconstructive surgical implants, intravenous administration sets, blood filters, and tissue expanders. These products are subject to comprehensive government regulation under the Food, Drug and Cosmetic Act and implementing regulations. In addition, the FDA regulates WebMD Medical Manager’s DIM_DX System as a medical image management device. If the FDA were to find that we have not complied with required procedures, it can bring a wide variety of enforcement actions that could result in severe civil and criminal sanctions. Porex is also subject to similar regulation in international markets, with similar risks. Future products that we wish to bring to market may require clearances or approvals from governmental authorities, which may be expensive, time-consuming and burdensome to obtain or which may never be obtained.

      For more information regarding healthcare regulation to which we are or may be subject, see “Business — Government Regulation” in our 2002 Annual Report on Form 10-K.

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Risks Related to Our Web Sites and Our Use of the Internet

Government regulation of the Internet could adversely affect our business

      The Internet and its associated technologies are subject to government regulation. Our failure, or the failure of our business partners, to accurately anticipate the application of applicable laws and regulations, or any other failure to comply, could create liability for us, result in adverse publicity, or negatively affect our business. In addition, new laws and regulations, or new interpretations of existing laws and regulations, may be adopted with respect to the Internet or other online services covering user privacy, patient confidentiality, consumer protection and other issues, including pricing, content, copyrights and patents, distribution, and characteristics and quality of products and services. We cannot predict whether these laws or regulations will change or how such changes will affect our business. Government regulation of the Internet could limit the effectiveness of the Internet for services that we are providing or developing or even prohibit particular services.

      For more information regarding government regulation of the Internet to which we are or may be subject, see “Business — Government Regulation” in our 2002 Annual Report on Form 10-K.

We face potential liability related to the privacy and security of personal information we collect on our Web sites

      Internet user privacy has become a controversial issue both in the United States and abroad. We have privacy policies posted on our consumer portal and our professional portal that we believe comply with applicable laws requiring notice to users about our information collection, use and disclosure practices. However, whether and how existing privacy and consumer protection laws in various jurisdictions apply to the Internet is still uncertain and may take years to resolve. Any legislation or regulation in the area of privacy of personal information could affect the way we operate our Web sites and could harm our business. Further, we can give no assurance that the statements on our portals, or our practices, will be found sufficient to protect us from liability or adverse publicity in this area.

      Some of our portal services may, through contractual relationships, be affected by the HIPAA Privacy Standards and Security Standards. See “Risks Related to Providing Products and Services to the Healthcare Industry — The Health Insurance Portability and Accountability Act of 1996, or HIPAA, creates risks and challenges with respect to our compliance efforts and our business strategies” above.

      For more information regarding regulation of the collection, use and disclosure of personal information to which we may be subject, see “Business — Government Regulation” in our 2002 Annual Report on Form 10-K.

We must demonstrate the value of the WebMD Medscape Health Network to advertisers and sponsors in order to generate revenue from it

      We generate WebMD Health revenues from advertising and sponsorships on the WebMD Medscape Health Network, with a majority of these revenues coming from a small number of customers. The Internet advertising and sponsorship market is new and continues to evolve, and no standards have been widely accepted to measure its effectiveness as compared to traditional media advertising. We cannot provide assurance that we will be able to continue to generate sufficient advertising or sponsorship revenue from the WebMD Medscape Health Network to operate it profitably.

      We sometimes enter into relationships with advertisers and sponsors in which we agree to be compensated based on specific negotiated criteria designed to demonstrate the value of our portal services. The amount of compensation that we receive from such arrangements may be less than we believed it would be at the time of entering into such arrangements and at the time of performing the services.

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Implementation of changes in hardware and software platforms used to deliver our Web sites may result in performance problems

      From time to time, we implement changes to the hardware and software platforms we use for creating and delivering our Web sites. During and after the implementation of those changes, a platform may not perform as expected, which could result in interruptions in the operation of our Web sites, an increase in response time of those sites or an inability to track performance metrics.

      Any significant interruption in our ability to operate our Web sites could have an adverse effect on our relationship with users and sponsors and, as a result, on our financial results.

Our Internet-based services rely on third-party service providers

      Our Web sites are designed to operate 24 hours a day, seven days a week, without interruption. To do so, we rely on communications and hosting services provided by third parties. We do not maintain redundant systems or facilities for some of these services. To operate without interruption, both we and our service providers must guard against:

•  damage from fire, power loss and other natural disasters;

•  communications failures;

•  software and hardware errors, failures or crashes;

•  security breaches, computer viruses and similar disruptive problems; and

•  other potential interruptions.

      We have experienced periodic system interruptions in the past, and we cannot guarantee that they will not occur again. In addition, our Web sites may, at times, be required to accommodate higher than usual volumes of traffic. At those times, our Web sites may experience slower response times or system failures. Any sustained or repeated interruptions or disruptions in these systems or increase in their response times could result in reduced usage of our Web sites and could damage our relationships with strategic partners, advertisers and sponsors. Although we maintain insurance for our business, we cannot guarantee that our insurance will be adequate to compensate us for all losses that may occur or to provide for costs associated with business interruptions.

Our Internet-based services are dependent on the development and maintenance of the Internet infrastructure

      Our ability to deliver our Internet-based services is dependent on the development and maintenance of the infrastructure of the Internet by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as timely development of complementary products such as high-speed modems, for providing reliable Internet access and services. The Internet has experienced, and is likely to continue to experience, significant growth in the number of users and the amount of traffic. If the Internet continues to experience increased usage, the Internet infrastructure may be unable to support the demands placed on it. In addition, the performance of the Internet may be harmed by increased usage.

      The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage as well as the availability of the Internet to us for delivery of our Internet-based services. In addition, our customers who utilize our Web-based services depend on Internet service providers, online service providers and other Web site operators for access to our Web site. All of these providers have experienced significant outages in the past and could experience outages, delays and other difficulties in the future due to system failures unrelated to our systems. Any significant interruptions in our services or increases in response time could result in a loss of potential or existing users of and

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advertisers and sponsors on our Web site and, if sustained or repeated, could reduce the attractiveness of our services.

Third parties may challenge the enforceability of our online agreements

      The law governing the validity and enforceability of online agreements and other electronic transactions is evolving. We could be subject to claims by third parties that our online agreements with consumers and physicians that provide the terms and conditions for use of our portal services are unenforceable. A finding by a court that these agreements are invalid could harm our business and require costly changes to our portals.

Third parties may bring claims against us as a result of content provided on our Web sites, which may be expensive and time consuming to defend

      We could be subject to third-party claims based on the nature and content of information supplied on our Web sites by us or third parties, including content providers, medical advisors or users. We could also be subject to liability for content that may be accessible through our Web sites or third-party Web sites linked from our Web sites or through content and information that may be posted by users in chat rooms, bulletin boards or on Web sites created by professionals using our Web site application. Even if these claims do not result in liability to us, investigating and defending against these claims could be expensive and time consuming and could divert management’s attention away from our operations.

Risks Related to Porex’s Business and Industry

Porex’s success depends upon demand for its products, which in some cases ultimately depends upon end-user demand for the products of its customers

      Demand for our Porex products may change materially as a result of economic or market conditions and other trends that affect the industries in which Porex participates. In addition, because a significant portion of our Porex products are components that are eventually integrated into or used with products manufactured by customers for resale to end-users, the demand for these product components is dependent on product development cycles and marketing efforts of these other manufacturers, as well as variations in their inventory levels, which are factors that we are unable to control. Accordingly, the amount of Porex’s sales to manufacturer customers can be difficult to predict and subject to wide quarter-to-quarter variances.

Porex’s success may depend upon satisfying rapidly changing customer requirements

      A significant portion of our Porex products are integrated into end products used in various industries, some of which are characterized by rapidly changing technology, evolving industry standards and practices and frequent new product introductions. Accordingly, Porex’s success will depend to a substantial degree on our ability to develop and introduce in a timely manner products that meet changing customer requirements and to differentiate our offerings from those of our competitors. If we do not introduce new Porex products in a timely manner and make enhancements to existing products to meet the changing needs of our Porex customers, some of our products could become obsolete over time, in which case our customer relationships, revenue and operating results would be negatively impacted.

Potential new or enhanced Porex products may not achieve sufficient sales to be profitable or justify the cost of their development

      We cannot be certain, when we engage in Porex research and development activities, whether potential new products or product enhancements will be accepted by the customers for which they are intended. Achieving market acceptance for new or enhanced products may require substantial marketing efforts and expenditure of significant funds to create awareness and demand by potential customers. In addition, sales and marketing efforts with respect to these products may require the use of additional

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resources for training our existing Porex sales forces and customer service personnel and for hiring and training additional salespersons and customer service personnel. There can be no assurance that the revenue opportunities from new or enhanced products will justify amounts spent for their development and marketing. In addition, there can be no assurance that any pricing strategy that we implement for any new or enhanced Porex products will be economically viable or acceptable to the target markets.

Porex may not be able to source the raw materials it needs or may have to pay more for those raw materials

      Some of Porex’s products require high-grade plastic resins with specific properties as raw materials. While Porex has not experienced any material difficulty in obtaining adequate supplies of high-grade plastic resins that meet its requirements, it relies on a limited number of sources for some of these plastic resins. If Porex experiences a reduction or interruption in supply from these sources, it may not be able to access alternative sources of supply within a reasonable period of time or at commercially reasonable rates, which could have a material adverse effect on its business and financial results.

      Porex also uses a variety of plastic resins that are generally available from a number of suppliers. However, the raw materials for these plastic resins are petroleum based and may be subject to significant and rapid price increases based on factors affecting the pricing of petroleum products in general, which could have a material adverse effect on the margins of some of our plastic products.

Disruptions in Porex’s manufacturing operations could have a material adverse effect on its business and financial results

      Any significant disruption in Porex’s manufacturing operations, including as a result of fire, power interruptions, equipment malfunctions, labor disputes, material shortages, earthquakes, floods, computer viruses, sabotage, terrorist acts or other force majeure, could have a material adverse effect on Porex’s ability to deliver products to customers and, accordingly, its financial results.

The nature of Porex’s products exposes it to product liability claims that may not be adequately covered by indemnity agreements or insurance

      The products sold by Porex, whether sold directly to end-users or sold to other manufacturers for inclusion in the products that they sell, expose it to potential risk of product liability claims, particularly with respect to Porex’s life sciences, clinical, surgical and medical products. Some of Porex’s products are designed to be permanently implanted in the human body. Design defects and manufacturing defects with respect to such products sold by Porex or failures that occur with the products of Porex’s manufacturer customers that contain components made by Porex could result in product liability claims and/or a recall of one or more of Porex’s products. Porex also manufactures products that are used in the processing of blood for medical procedures and the delivery of medication to patients. Porex believes that it carries adequate insurance coverage against product liability claims and other risks. We cannot assure you, however, that claims in excess of Porex’s insurance coverage will not arise. In addition, Porex’s insurance policies must be renewed annually. Although Porex has been able to obtain adequate insurance coverage at an acceptable cost in the past, we cannot assure you that Porex will continue to be able to obtain adequate insurance coverage at an acceptable cost.

      In most instances, Porex enters into indemnity agreements with its manufacturing customers. These indemnity agreements generally provide that these customers would indemnify Porex from liabilities that may arise from the sale of their products that incorporate Porex components to, or the use of such products by, end-users. While Porex generally seeks contractual indemnification from its customers, any such indemnification is limited, as a practical matter, to the creditworthiness of the indemnifying party. If Porex does not have adequate contractual indemnification available, product liability claims, to the extent not covered by insurance, could have a material adverse effect on its business, operating results and financial condition.

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      Since March 1991, Porex has been named as one of many co-defendants in a number of actions brought by recipients of mammary implants distributed by Porex in the United States. For a description of these actions, see the information under “Legal Proceedings — Porex Mammary Implant Litigation” in our 2002 Annual Report on Form 10-K.

Economic, political and other risks associated with Porex’s international sales and geographically diverse operations could adversely affect Porex’s operations and results

      Since Porex sells its products worldwide, its business is subject to risks associated with doing business internationally. In addition, Porex has manufacturing assets in the United Kingdom, Germany and Malaysia. Accordingly, Porex’s operations and financial results could be harmed by a variety of factors, including:

•  changes in foreign currency exchange rates;

•  changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets;

•  trade protection measures and import or export licensing requirements;

•  potentially negative consequences from changes in tax laws;

•  difficulties in managing international and geographically diverse operations;

•  differing protection of intellectual property; and

•  unexpected changes in regulatory requirements.

Environmental regulation could adversely affect Porex’s business

      Porex is subject to foreign and domestic environmental laws and regulations and is subject to scheduled and random checks by environmental authorities. Porex’s business involves the handling, storage and disposal of materials that are classified as hazardous. Although Porex’s safety procedures for handling, storage and disposal of these materials are designed to comply with the standards prescribed by applicable laws and regulations, Porex may be held liable for any environmental damages that result from Porex’s operations. Porex may be required to pay fines, remediation costs and damages, which could have a material adverse effect on its results of operations.

Risks Applicable to Our Entire Company

We face significant competition for our products and services

      The markets in which we operate are intensely competitive, continually evolving and, in some cases, subject to rapid technological change. Many of our competitors have greater financial, technical, product development, marketing and other resources than we do. These organizations may be better known than we are and have more customers than we do. We cannot provide assurance that we will be able to compete successfully against these organizations or any alliances they have formed or may form. For more information about the competition we face, see “Business — Healthcare Information Services and Technology Solutions — Competition for Our Healthcare Information Services and Technology Solutions” and “Business — Porex — Competition” in our 2002 Annual Report on Form 10-K.

The performance of our businesses depends on attracting and retaining qualified executives and employees

      Our performance depends on attracting and retaining key personnel, including executives, product managers, software developers and other technical personnel and sales and marketing personnel. Failure to

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do so could have a material adverse effect on the performance of our business and the results of our operations.

We may not be successful in protecting our intellectual property and proprietary rights

      Our intellectual property is important to all of our businesses. We rely on a combination of trade secret, patent and other intellectual property laws and confidentiality procedures and non-disclosure contractual provisions to protect our intellectual property. We believe that our non-patented proprietary technologies and business and manufacturing processes are protected under trade secret, contractual and other intellectual property rights. However, those rights do not afford the statutory exclusivity provided by patented processes. In addition, the steps that we take to protect our intellectual property, proprietary information and trade secrets may prove to be inadequate and, whether or not adequate, may be expensive.

      There can be no assurance that we will be able to detect potential or actual misappropriation or infringement of our intellectual property, proprietary information or trade secrets. Even if we detect misappropriation or infringement by a third party, there can be no assurance that we will be able to enforce our rights at a reasonable cost, or at all. In addition, our rights to intellectual property, proprietary information and trade secrets may not prevent independent third-party development and commercialization of competing products or services.

Third parties may claim that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products or services

      We could be subject to claims that we are misappropriating or infringing intellectual property or other proprietary rights of others. These claims, even if not meritorious, could be expensive to defend and divert management’s attention from our operations. If we become liable to third parties for infringing these rights, we could be required to pay a substantial damage award and to develop non-infringing technology, obtain a license or cease selling the products or services that use or contain the infringing intellectual property. We may be unable to develop non-infringing products or services or obtain a license on commercially reasonable terms, or at all. We may also be required to indemnify our customers if they become subject to third-party claims relating to intellectual property that we license or otherwise provide to them, which could be costly.

We have incurred and may continue to incur losses

      We began operations in January 1996 and have incurred net losses from operations in each year since our inception and, as of June 30, 2003, we had an accumulated deficit of $10.2 billion. Although we generated net income, determined in accordance with generally accepted accounting principles, in the quarter ended September 30, 2002, we incurred a net loss for the year ended December 31, 2002 and the three- and six-month periods ended June 30, 2003. We currently intend to continue to invest in infrastructure development, applications development, sales and marketing, and acquisitions and whether we continue to incur losses in a particular period will depend on, among other things, the amount of such investments and whether those investments lead to increased revenues.

We may be subject to litigation

      Our business and operations may subject us to claims, litigation and other proceedings brought by private parties and governmental authorities. For information regarding certain proceedings to which we are currently a party, see “Legal Proceedings” in our 2002 Annual Report on Form 10-K and Part II, Item 1 of this Quarterly Report.

Business combinations and other transactions may be difficult to complete and, if completed, may have negative consequences for our business and our securityholders

      We intend to seek to acquire or to engage in business combinations with companies engaged in complementary businesses. In addition, we may enter into joint ventures, strategic alliances or similar

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arrangements with third parties. These transactions may result in changes in the nature and scope of our operations and changes in our financial condition. Our success in completing these types of transactions will depend on, among other things, our ability to locate suitable candidates and negotiate mutually acceptable terms with them, as well as the availability of financing. Significant competition for these opportunities exists, which may increase the cost of and decrease the opportunities for these types of transactions. Financing for these transactions may come from several sources, including:

•  cash and cash equivalents on hand and marketable securities,

•  proceeds from the incurrence of indebtedness, and

•  proceeds from the issuance of additional common stock, preferred stock, convertible debt or other securities.

      Our issuance of additional securities could:

•  cause substantial dilution of the percentage ownership of our stockholders at the time of the issuance,

•  cause substantial dilution of our earnings per share, and

•  adversely affect the prevailing market price for our outstanding securities.

      We do not intend to seek securityholder approval for any such acquisition or security issuance unless required by applicable law or regulation or the terms of existing securities.

Our business will suffer if we fail to successfully integrate acquired businesses and technologies or to assess the risks in particular transactions

      We have in the past acquired, and may in the future acquire, businesses, technologies, services, product lines and other assets. The successful integration of the acquired businesses and assets into our operations, on a cost-effective basis, can be critical to our future performance. The amount and timing of the expected benefits of any acquisition are subject to significant risks and uncertainties. These risks and uncertainties include, but are not limited to, those relating to:

•  our ability to maintain relationships with the customers of the acquired business;

•  our ability to cross-sell products and services to customers with which we have established relationships and those with which the acquired businesses have established relationships;

•  our ability to retain or replace key personnel;

•  potential conflicts in payer, provider, strategic partner, sponsor or advertising relationships;

•  our ability to coordinate organizations that are geographically diverse and may have different business cultures; and

•  compliance with regulatory requirements.

      We cannot guarantee that any acquired businesses will be successfully integrated with our operations in a timely or cost-effective manner, or at all. Failure to successfully integrate acquired businesses or to achieve anticipated operating synergies, revenue enhancements or cost savings could have a material adverse effect on our business, financial condition and results of operations.

      Although our management attempts to evaluate the risks inherent in each transaction and to value acquisition candidates appropriately, we cannot assure you that we will properly ascertain all such risks or that acquired businesses and assets will perform as we expect or enhance the value of our company as a whole. In addition, acquired companies or businesses may have larger than expected liabilities that are not covered by the indemnification, if any, we are able to obtain from the sellers.

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We may not be able to raise additional funds when needed for our business or to exploit opportunities

      Our future liquidity and capital requirements will depend upon numerous factors, including the success of the integration of our businesses, our existing and new applications and service offerings, competing technologies and market developments, potential future acquisitions and additional repurchases of our common stock. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. There can be no assurance that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders.

ITEM 3.      Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

      The primary objective of our investment activities is to preserve principal and maintain adequate liquidity, while at the same time maximizing the yield we receive from our investment portfolio. This objective is accomplished by adherence to our investment policy, which establishes the list of eligible securities and credit requirements for each investment.

      Changes in prevailing interest rates will cause the principal amount of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents, short-term investments and marketable securities in commercial paper, non-government debt securities, money market funds and highly liquid United States Treasury notes. We view these high grade securities within our portfolio as having similar market risk characteristics.

      Principal amounts expected to mature are $8.1 million, $203.8 million, $23.0 million, $141.1 million and $102.0 million during the remainder of 2003, 2004, 2005, 2006 and 2007, respectively. These include investments totaling $180.0 million in federal agency notes that are callable subjecting us to interest rate risk on the reinvestment of these securities. We believe that the impact of any call and resulting reinvestment of proceeds would not have a material effect on our financial condition or results of operations.

      We have not utilized derivative financial instruments in our investment portfolio.

Exchange Rate Sensitivity

      Currently, substantially all of our sales and expenses are denominated in United States dollars; however, Porex is exposed to fluctuations in foreign currency exchange rates, primarily the rate of exchange of the United States dollar against the Euro. This exposure arises primarily as a result of translating the results of Porex’s foreign operations to the United States dollar at exchange rates that have fluctuated from the beginning of the accounting period. Porex has not engaged in foreign currency hedging activities to date. Foreign currency translation gains were $1.2 million and $1.5 million, during the three and six month periods ended June 30, 2003, and $2.1 million and $1.9 million during the three and six month period ended June 30, 2002, respectively.

ITEM 4.      Controls and Procedures

      As required by Exchange Act Rule 13a-15(b), WebMD management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of WebMD’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of June 30, 2003. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that WebMD’s disclosure controls and procedures provided reasonable assurance that all material information required to be filed in this Quarterly Report has been made known to them in a timely fashion.

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      As required by Exchange Act Rule 13a-15(d), WebMD management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of WebMD’s internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, WebMD’s internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter ended June 30, 2003.

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PART II

OTHER INFORMATION

Item 1.     Legal Proceedings

Envoy Securities Litigation

      Several years prior to our acquisition of Envoy Corporation, Envoy and some of its officers were named as defendants in three identical lawsuits filed in the United States District Court for the Middle District of Tennessee, Nashville Division. In 1998, the District Court ordered the three cases consolidated under the caption In re Envoy Corporation Securities Litigation.

      Plaintiffs alleged that the defendants made material misrepresentations and omissions in Envoy’s public filings and public statements concerning Envoy’s financial statements and Envoy’s accounting for some charges taken in connection with acquisitions. In addition, plaintiffs alleged that, as a result of defendants’ alleged actions, Envoy’s reported earnings during the class period were overstated and the price for Envoy’s common stock was artificially inflated.

      In April 2002, the court certified a class of plaintiffs consisting of all persons, other than defendants, who purchased shares of Envoy common stock between February 27, 1997 and August 18, 1998.

      On July 11, 2003, Envoy entered into a Memorandum of Understanding regarding the settlement in principle of this litigation. The Memorandum of Understanding and the settlement are subject to the execution of additional settlement documents (including a definitive stipulation of settlement), preliminary and final approval of the District Court, and other customary conditions. The Memorandum of Understanding provides that defendants will pay to plaintiffs the sum of $11 million in settlement of the claims asserted in the action and that plaintiffs will release defendants and the action will be dismissed with prejudice. The settlement amount will be funded entirely by proceeds of Envoy’s insurance policy. Defendants have denied and continue to deny the allegations asserted in this lawsuit and have agreed to the Memorandum of Understanding and the settlement contemplated therein to eliminate the burden and expense of further litigation. It is anticipated that the stipulation of settlement and other settlement documents will be presented to the District Court for preliminary approval on or before September 2, 2003 and that, following preliminary Court approval, the settlement will be presented to the Court for final approval and dismissal of the action with prejudice within 45 to 90 days thereafter.

      As has been previously disclosed, the Agreement and Plan of Merger among WebMD, Pine Merger Corp., Envoy, Quintiles Transnational Corp. and QFinance, Inc., dated as of January 22, 2000, provides that Quintiles will indemnify WebMD with respect to this litigation. As a result of this indemnification, Envoy’s insurer has filed suit in its and Envoy’s name against Quintiles to recover monies paid for attorney’s fees in defense of this action and the amount of the settlement fund being paid by the insurer pursuant to the Memorandum of Understanding.

Litigation Regarding Distribution of Shares in Healtheon Initial Public Offering

      In the summer and fall of 2001, seven purported class action lawsuits were filed against Morgan Stanley & Co. Incorporated and Goldman Sachs & Co., underwriters of the initial public offering of the Company (then known as Healtheon) in the United States District Court for the Southern District of New York. Three of these suits also named WebMD and certain former officers and directors of WebMD as defendants. These suits were filed in the wake of reports of governmental investigations of the underwriters’ practices in the distribution of shares in certain initial public offerings. Similar suits were filed in connection with over 300 other initial public offerings that occurred in 1999, 2000 and 2001.

      The complaints against WebMD and its former officers and directors alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 under that Act and Section 11 of the Securities Act of 1933 because of failure to disclose certain practices alleged to have occurred in connection with the distribution of shares in the Healtheon IPO. Claims under Section 12(a)(2) of the

46

Securities Act of 1933 were also brought against the underwriters. These claims were consolidated, along with claims relating to over 300 other initial public offerings, in the Southern District of New York.

      The plaintiffs have dismissed the claims against the four former officers and directors of WebMD without prejudice, pursuant to Reservation of Rights and Tolling Agreements with those individuals.

      On July 15, 2002, the issuer defendants in the consolidated action, including WebMD, filed a joint motion to dismiss the consolidated complaints. On February 18, 2003, the District Court denied, with certain exceptions not relevant to WebMD, the issuer defendants’ motion to dismiss.

      After a lengthy mediation under the auspices of former United States District Judge Nicholas Politan, the issuer defendants in the consolidated actions (including WebMD), the affected insurance companies and the plaintiffs reached an agreement on a settlement to resolve the matter among the participating issuer defendants, their insurers and the plaintiffs. The settlement is embodied in a Memorandum of Understanding and a number of related agreements that together set out a comprehensive framework for settlement of the consolidated actions among these parties. The settlement calls for the participating issuers’ insurers jointly to guarantee that plaintiffs recover a certain amount in the IPO litigation and certain related litigation from the underwriters and other non-settling defendants. Accordingly, in the event that the guarantee becomes payable, the agreement calls for WebMD’s insurance carriers, not WebMD, to pay WebMD’s pro rata share.

      WebMD has approved the settlement, and we understand that virtually all of the approximately 260 other issuer defendants who are eligible have also elected to participate in the settlement. Although WebMD believes that the claims alleged in the lawsuits were primarily directed at the underwriters and, as they relate to WebMD, were without merit, we believe that the settlement is beneficial to WebMD because it reduces the time, expense and risks of further litigation, particularly since virtually all of the other issuer defendants will participate and our insurance carriers strongly support the settlement.

      In order for the settlement to become final, the Memorandum of Understanding must be reduced to a separate settlement agreement as to each issuer, each of which must be approved by the court. Accordingly, we anticipate, though we cannot guarantee, that this settlement will resolve the IPO allocation securities litigation between the plaintiffs and WebMD.

Item 2. Changes in Securities and Use of Proceeds

      On May 2, 2003, WebMD issued 17,935 shares of WebMD common stock to Nationwide Medical Services, Inc. in a transaction exempt from registration under Section 3(a)(9) of the Securities Act. The shares were issued upon exercise of an outstanding warrant.

      On June 17, 2003, WebMD issued 9,676 shares of WebMD common stock to RBS Equity Corporation, as nominee for NatWest Finance Inc., in a transaction exempt from registration under Section 3(a)(9) of the Securities Act. The shares were issued upon exercise of an outstanding warrant.

      On June 17, 2003, WebMD issued 30,894 shares of WebMD common stock to BoS (USA) Inc. in a transaction exempt from registration under Section 3(a)(9) of the Securities Act. The shares were issued upon exercise of an outstanding warrant.

      During the three months ended June 30, 2003, WebMD issued an aggregate of 39,524 shares of WebMD common stock to eleven individuals in twelve transactions exempt from registration under Section 3(a)(9) of the Securities Act. The shares were issued upon exercise of outstanding warrants originally issued to Gleacher & Co. and transferred by it to the individuals. The number of shares and date for each of these transactions are: 1,369 shares on April 7, 2003; 4,764 shares on April 23, 2003; 1,218 shares on April 24, 2003; 5,950 shares on May 2, 2003; 471 shares on May 5, 2003; 440 shares on May 28, 2003; 16,004 shares on June 5, 2003; 2,513 shares on June 6, 2003; 4,043 shares on June 16, 2003; 486 shares on June 17, 2003; 394 shares on June 18, 2003; and 1,872 shares on June 19, 2003.

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Item 5.     Other Information

Regulatory Developments with Respect to the HIPAA Transaction Standards

      The following information is intended to supplement the information contained in WebMD’s Annual Report on Form 10-K regarding the transaction and code set provisions (which we refer to as the Transaction Standards) promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996, or HIPAA.

      Under HIPAA, Congress mandated a package of interlocking administrative simplification rules to establish standards and requirements for the electronic transmission of certain health information. The HIPAA Transaction Standards establish format and data content standards for eight of the most common healthcare transactions, using technical standards promulgated by recognized standards publishing organizations. These transactions include healthcare claims, enrollment, payment and eligibility. The intent of the Transaction Standards was to promulgate new standards, under which any party transmitting or receiving any of these eight healthcare transactions electronically would send and receive data in a single format, rather than the large number of different data formats currently used. The Transaction Standards are applicable to that portion of our business involving the processing of healthcare transactions among physicians, payers, patients and other healthcare industry participants, including WebMD Envoy and Medical Manager Network Services. We are committed to facilitating our customers’ compliance with the HIPAA Transaction Standards and are building the necessary infrastructure to accommodate HIPAA-standard transactions.

      October 16, 2003 is the deadline for covered entities to comply with the Transaction Standards. Failure to comply with the Transaction Standards may subject covered entities, including our WebMD Envoy clearinghouse, to civil monetary penalties. However, the ability of each covered entity to comply is dependent on compliance efforts by numerous other covered entities. The Centers for Medicare & Medicaid Services, or CMS, is responsible for enforcing the Transaction Standards. On July 24, 2003, in response to concerns communicated to CMS regarding the readiness of a significant portion of the covered entities for the October 16 deadline and the consequences to the healthcare industry if significant claim processing problems occur at that time, CMS released its “Guidance on Compliance with HIPAA Transaction and Code Sets After the October 16, 2003 Implementation Deadline” (which we refer to as the CMS Guidance). In addition, CMS officials participated in a teleconference during which they provided additional clarification on planned enforcement practices.

      The CMS Guidance makes clear that CMS expects each party to every transaction to be accountable for compliance with the new standards as of October 16, 2003. However, the CMS Guidance provides for a flexible, complaint-driven enforcement strategy. CMS indicated that it will respond to complaints regarding non-compliant transactions submitted to it in writing and that, upon receipt of a complaint, CMS will notify the entity that a complaint has been filed and provide an opportunity for the entity to demonstrate compliance or to document its good faith effort to comply with the standards. In evaluating good faith efforts, CMS stated that it will consider not only the entity’s efforts on behalf of itself, but its efforts — through outreach and testing — to ensure that its trading partners are also in compliance. CMS also noted that its expectations regarding compliance efforts will vary with the size and type of covered entity. We understand that CMS expects that larger organizations will have more sophisticated compliance efforts and outreach to their smaller trading partners.

      We believe that the CMS Guidance may assist in reducing disruptions in the flow of electronic transactions that otherwise could have occurred beginning on or before October 16, 2003 and that a smoother transition would benefit our company and the entire healthcare industry. However, one short-term effect of the CMS Guidance and related transition matters may be that, as a result of the extended period of testing and implementation, there could be fewer electronic transactions for us to process in late 2003 than would otherwise have been the case.

      We continue to work with payers, providers, practice management system vendors and other healthcare participants to ready their and our systems for the new Transaction Standards. Transaction

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clearinghouses can provide a great deal of support for the healthcare industry in addressing the requirements of the Transaction Standards and in overcoming other connectivity challenges that HIPAA does not eliminate. Healthcare payers and providers who are unable to exchange data in the required standard formats can achieve Transaction Standards compliance by contracting with a clearinghouse, like WebMD Envoy, to translate between standard and non-standard formats. As a result, use of a clearinghouse allows numerous providers and payers to move to the Transaction Standards independently and at different times, reducing transition costs and risks. As various healthcare entities are in different stages of migration during transition, WebMD Envoy is preparing to translate claim information from non-standard to standard formats and vice versa.

      We cannot provide assurance regarding how CMS will apply the CMS Guidance to clearinghouses in general or to WebMD Envoy in particular. In addition, even though the CMS Guidance may assist in avoiding major disruptions in the flow of electronic transactions, we expect that there will still be some problems during the period directly before and after October 16, 2003 while healthcare industry participants are adjusting to implementation of the Transaction Standards. We may not have enough technicians, programmers and customer service personnel to meet the demands placed on those functions by our customers and partners during that adjustment period, which could adversely affect our relationships with them.

Item 6.      Exhibits and Reports on Form 8-K

      (a) The exhibits listed in the accompanying Exhibit Index on page E-1 are filed as part of this Quarterly Report, other than Exhibits 32.1 and 32.2, which are being furnished to accompany this Quarterly Report solely for the purpose of complying with Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and shall not be deemed filed as part of this Quarterly Report.

      (b) The following Current Reports on Form 8-K were filed during the quarter ended June 30, 2003:

•  Amendment, filed April 11, 2003, to add certain cash flow information to the Current Report on Form 8-K, filed March 14, 2003, regarding announcement of results for the quarter and year ended December 31, 2002.

•  Current Report on Form 8-K, filed May 5, 2003, regarding announcement of results for the quarter ended March 31, 2003.

•  Current Report on Form 8-K, filed June 17, 2003, regarding announcement of agreement to acquire Advanced Business Fulfillment, Inc.

•  Current Report on Form 8-K, filed June 20, 2003 and amended on July 8, 2003, regarding issuance of 1.75% Convertible Subordinated Notes due 2023.

•  Current Report on Form 8-K, filed June 27, 2003, regarding announcement of date of Annual Meeting of Stockholders.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WEBMD CORPORATION

By:  /s/ KIRK G. LAYMAN

Kirk G. Layman

Executive Vice President, Administration

and Acting Chief Financial Officer

Date: August 13, 2003

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EXHIBIT INDEX

Exhibit No.		Description
	2.1	Stock Purchase Agreement dated as of June 15, 2003 between WebMD Corporation and Joseph Q. DiMartini, individually and as Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002, Eric J. Schaefer, an individual, Daniel A. Schmitt, individually and as Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999, and as Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002, and Dru A. Schmitt, individually and as Trustee U/A dated October 20, 1997 f/b/o Dru A. Schmitt
	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), as amended by Certificate of Change of Registered Agent and Location of Registered Office (incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001)
	3.2	Amended and Restated Bylaws of Registrant, as currently in effect
	4.1	Indenture, dated as of June 25, 2003, between WebMD Corporation and The Bank of New York
	4.2	Registration Rights Agreement dated as of June 25, 2003 between WebMD Corporation and Banc of America Securities LLC
	4.3	Registration Rights Agreement dated as of July 17, 2003 between WebMD Corporation and Joseph Q. DiMartini, individually and as Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002, Eric J. Schaefer, an individual, Daniel A. Schmitt, individually and as Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999, and as Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002, and Dru A. Schmitt, individually and as Trustee U/A dated October 20, 1997 f/b/o Dru A. Schmitt
	31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant
	31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant
	32.1	Section 1350 Certification of Chief Executive Officer of Registrant
	32.2	Section 1350 Certification of Chief Financial Officer of Registrant

E-1 EX-2.1 3 g84264exv2w1.htm EX-2.1 STOCK PURCHASE AGREEMENT

Exhibit 2.1

STOCK PURCHASE AGREEMENT

by and among

WebMD Corporation,

as Buyer

and

Joseph Q. DiMartini, individually and as Trustee U/A dated February 6, 1998
f/b/o Joseph Q. DiMartini, and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable
Trust dated October 14, 2002,

Eric J. Schaefer,

Daniel A. Schmitt, individually and as Trustee of the Daniel A. Schmitt
Revocable Trust dated March 26, 1999, and as Trustee of the Daniel Schmitt 2002
Irrevocable Trust dated September 24, 2002,

and

Dru A. Schmitt, individually and as Trustee U/A dated October 20, 1997 f/b/o Dru A.
Schmitt,

as Sellers

Dated as of June 15, 2003

TABLE OF CONTENTS

			Page
ARTICLE 1		DEFINITIONS		1
1.1	General Rules of Construction			1
1.2	Definitions			2
ARTICLE 2		PURCHASE AND SALE OF SHARES; THE CLOSING		16
2.1	Purchase and Sale			16
2.2	Purchase Price			17
2.3	Adjustments to Base Closing Price			17
2.4	Contingent Payments			20
2.5	The Closing			27
2.6	Closing Deliveries			27
ARTICLE 3		REPRESENTATIONS AND WARRANTIES OF SELLERS		28
3.1	Organization and Good Standing			28
3.2	Authority; Validity; Consents			28
3.3	No Conflict			29
3.4	Capitalization			29
3.5	Books and Records			30
3.6	Subsidiaries; Other Equity Interests			30
3.7	Bank Accounts, Power, Etc			30
3.8	Financial Statements			30
3.9	No Undisclosed Liabilities			31
3.10	Dividends and Other Distributions			31
3.11	Accounts Receivable			31
3.12	Absence of Certain Changes and Events			31
3.13	Inventory			33
3.14	Legal Compliance			33
3.15	Tax Matters			33
3.16	Employee Benefits			35

i

			Page
3.17	Labor Relations			38
3.18	Transferred Employees			38
3.19	Legal Proceedings			38
3.20	Insurance			38
3.21	Material Contracts			39
3.22	Personal Property; Sufficiency of Assets			41
3.23	Real Property			41
3.24	Environmental Matters			42
3.25	Intellectual Property			42
3.26	Affiliate Transactions			45
3.27	Affiliate Assets and Services			45
3.28	Significant Persons			45
3.29	Investment Representation			46
3.30	Sophistication			46
3.31	Powers of Attorney			47
3.32	Key Man Insurance			47
3.33	Postage Deposits			47
3.34	Brokers or Finders			47
3.35	No Representation re Memorandum; Disclaimer of Projections			47
ARTICLE 4		REPRESENTATIONS AND WARRANTIES OF BUYER		47
4.1	Organization and Good Standing			48
4.2	Authority; Validity; Consents			48
4.3	No Conflict			48
4.4	Certain Proceedings			48
4.5	Investment Representation			48
4.6	Financing			49
4.7	Buyer Shares			49
4.8	Brokers or Finders			49
4.9	SEC Filings			49
4.10	Absence of Buyer Material Adverse Effect			49

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			Page
ARTICLE 5		PRE-CLOSING COVENANTS OF SELLERS		50
5.1	Access and Investigation			50
5.2	Operation of Company’s Business			50
5.3	Negative Covenants			50
5.4	Exclusivity			52
5.5	Required Approvals			53
5.6	Employee Issues			53
5.7	S Corporation Status			54
5.8	Implementation of MCDS Software			54
ARTICLE 6		PRE-CLOSING COVENANT OF BUYER		54
6.1	Required Approvals			54
ARTICLE 7		CONTINUING COVENANTS		54
7.1	Further Assurances			54
7.2	Section 338(h)(10) Election			55
7.3	Noncompetition; Antisolicitation; Continuing Confidentiality			56
7.4	Transfer Taxes			58
7.5	Certain Expenses			58
7.6	Seller Releases			59
7.7	Certain Material Contract Termination and Security Releases			59
7.8	Continuing Access and Audit Cooperation			60
7.9	Prevailing Party; Attorneys’ Fees			60
7.10	Coverage in Buyer Benefit Plans			60
7.11	Reservation of Buyer Shares			61
7.12	Performance of Transfer Agreement			61
7.13	Intellectual Property Licenses			62
7.14	Lease			62
7.15	Shareholders Agreement			63
ARTICLE 8		CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE		63
8.1	Accuracy of Representations			63
8.2	Sellers’ Performance			63

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			Page
8.3	No Order			63
8.4	Governmental Authorizations and Approvals			64
8.5	No Seller Material Adverse Effect			64
8.6	Resignations			64
8.7	Opinion of Counsel			64
8.8	Employment Agreements			64
8.9	Transition Services Agreement			64
8.10	Transfer Agreement			64
8.11	Escrow Agreement			65
8.12	Landlord Estoppel Certificate			65
8.13	Sublease			65
8.14	AIM Estoppel Certificate			65
8.15	Powers of Attorney			65
8.16	Shareholders Agreement			65
8.17	Teralogix Amendment			65
8.18	Other Documents			65
ARTICLE 9		CONDITIONS PRECEDENT TO SELLERS’ OBLIGATION TO CLOSE		65
9.1	Accuracy of Representations			65
9.2	Buyer’s Performance			66
9.3	No Order			66
9.4	Governmental Authorizations and Approvals			66
9.5	Opinions of Counsel			66
9.6	Registration Rights Agreement			66
9.7	Escrow Agreement			66
9.8	Other Documents			66
ARTICLE 10		TERMINATION		67
10.1	Termination Events			67
10.2	Effect of Termination			67
ARTICLE 11		SURVIVAL; INDEMNIFICATION; REMEDIES		68
11.1	Survival			68

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			Page
11.2	Indemnification by Sellers			68
11.3	Indemnification by Buyer			71
ARTICLE 12		ADDITIONAL TAX MATTERS		73
12.1	Liability For Taxes			73
12.2	Tax Returns			74
12.3	Contest Provisions			74
12.4	Assistance and Cooperation			75
ARTICLE 13		GENERAL PROVISIONS		75
13.1	Expenses			75
13.2	Publicity and Reports			75
13.3	Notices			75
13.4	Waiver			77
13.5	Entire Agreement; Amendment			77
13.6	Assignment			77
13.7	Severability			77
13.8	Governing Law; Consent to Jurisdiction and Venue; Jury Trial Waiver			78
13.9	Right of Set-Off			78
13.10	Counterparts			79
13.11	Sellers Representative			79
13.12	No Third Party Beneficiaries			79
13.13	Successors and Assigns			79
13.14	Representation by Counsel; Interpretation			79

Schedules

Schedule 7.2
Schedule 7.3(b)

Sellers Disclosure Letter

Schedule 1.2	Existing Breaches
Schedule 3.2	Sellers’ Approvals
Schedule 3.4	Capitalization

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Schedule 3.5	Books and Records
Schedule 3.7	Bank Accounts, Power, Etc.
Schedule 3.8	Financial Statements
Schedule 3.9	No Undisclosed Liabilities
Schedule 3.10	Dividends and Other Distributions
Schedule 3.11	Accounts Receivable
Schedule 3.12	Absence of Certain Changes and Events
Schedule 3.14	Legal Compliance
Schedule 3.15	Tax Returns
Schedule 3.16(a)(i)	Employee Benefit Plans
Schedule 3.16(a)(ii)	List of Past and Current Employees
Schedule 3.16(a)(iii)	Employee Benefit Plan Documents
Schedule 3.16(a)(iv)	Employee Benefit Plan Compliance
Schedule 3.16(a)(v)	Termination of Employee Benefit Plans
Schedule 3.16(b)(i)	Qualified Plan Compliance
Schedule 3.16(b)(ii)	Delivery of Form 5500s and Determination Letters
Schedule 3.16(e)	Fines and Penalties
Schedule 3.18	Transferred Employees
Schedule 3.19	Legal Proceedings
Schedule 3.20	Insurance
Schedule 3.21(a)(i)	Material Contracts under Section 3.21(a)(i)
Schedule 3.21(a)(ii)	Material Contracts under Section 3.21(a)(ii)
Schedule 3.21(a)(iii)	Material Contracts under Section 3.21(a)(iii)
Schedule 3.21(a)(iv)	Material Contracts under Section 3.21(a)(iv)
Schedule 3.21(a)(v)	Material Contracts under Section 3.21(a)(v)
Schedule 3.21(a)(vi)	Material Contracts under Section 3.21(a)(vi)
Schedule 3.21(a)(vii)	Material Contracts under Section 3.21(a)(vii)
Schedule 3.21(a)(viii)	Material Contracts under Section 3.21(a)(viii)
Schedule 3.21(a)(x)	Material Contracts under Section 3.21(a)(x)
Schedule 3.21(a)(xi)	Material Contracts under Section 3.21(a)(xi)
Schedule 3.21(a)(xiii)	Material Contracts under Section 3.21(a)(xiii)
Schedule 3.21(a)(xv)	Material Contracts under Section 3.21(a)(xv)
Schedule 3.21(a)(xvi)	Material Contracts under Section 3.21(a)(xvi)
Schedule 3.21(a)(xvii)	Material Contracts under Section 3.21(a)(xvii)
Schedule 3.21(a)(xviii)	Material Contracts under Section 3.21(a)(xviii)
Schedule 3.21(a)(xx)	Material Contracts under Section 3.21(a)(xx)
Schedule 3.21(c)	Payments, Adjustments and Credits
Schedule 3.22	Personal Property; Sufficiency of Assets
Schedule 3.23	Real Property
Schedule 3.25	Intellectual Property

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Schedule 3.25(a)(ii)	Negotiated Software
Schedule 3.25(b)	URLs; Websites
Schedule 3.25(d)	Works for Hire
Schedule 3.25(h)	Public Software
Schedule 3.26	Affiliate Transactions
Schedule 3.27	Affiliate Assets and Services
Schedule 3.30	Sophistication
Schedule 3.31	Powers of Attorney
Schedule 3.33	Postage Deposits

Exhibits

Exhibit A	Form of Transfer Agreement
Exhibit B	Form of Registration Rights Agreement
Exhibit C	Form of Payment Guaranty
Exhibit D	Form of Transition Services Agreement
Exhibit E	Form of Opinion of Lewis, Rice & Fingersh, L.C.
Exhibit F	Form of Opinions of Buyer’s General Counsel (or any Assistant General Counsel) and O’Melveny & Myers LLP
Exhibit G	Budget
Exhibit H	Form of Sublease
Exhibit I	Form of Escrow Agreement
Exhibit J	Accounting Policies
Exhibit K	Purchase Price Components and Calculation
Exhibit L	Closing Condition Approvals
Exhibit M	Applicable Consideration Percentages
Exhibit N	Form of ABF License Agreement
Exhibit O	Covered Business Loss
Exhibit P	Current Platform Software and MCDS Software
Exhibit Q	Form of Teralogix Amendment
Exhibit R	Earn-Out Multiple
Exhibit S	Significant Persons
Exhibit T	Transaction Expenses
Exhibit U	Electronic Services Adjustment
Exhibit V	Minimum Pre-Tax Hurdle

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STOCK PURCHASE AGREEMENT

          This Stock Purchase Agreement is dated as of June 15, 2003 (the “Effective Date”) by and among WebMD Corporation, a Delaware corporation (“Buyer”), Joseph Q. DiMartini, individually and as Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002, Eric J. Schaefer, Daniel A. Schmitt, individually and as Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999, and as Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002, and Dru A. Schmitt, individually and as Trustee U/A dated October 20, 1997 f/b/o Dru A. Schmitt (“Sellers”). Capitalized terms not otherwise defined herein have the meanings set forth in Article 1.

RECITALS

          A. Transferring Sellers collectively own, and at the Closing will own, all of the issued and outstanding Equity Interests (the “Shares”) in Advanced Business Fulfillment, Inc., a Missouri corporation (“Company”).

          B. Sellers desire that Transferring Sellers sell and Buyer desires to purchase the Shares on the terms and conditions set forth in this Agreement.

          C. The parties intend for the purchase and sale of the Shares to be treated as a taxable purchase for tax purposes.

AGREEMENT

          In consideration of the mutual promises contained in this Agreement and intending to be legally bound, the parties hereby agree as follows:

ARTICLE 1
DEFINITIONS

          1.1 General Rules of Construction. For all purposes of this Agreement: (i) the terms defined in this Agreement include the plural as well as the singular; (ii) all references in this Agreement to designated “Articles,” “Schedules,” “Sections,” “Exhibits,” and other subdivisions are to the designated Articles, Schedules, Sections, Exhibits, and other subdivisions of the body of this Agreement; (iii) pronouns of either gender or neuter include, as appropriate, the other pronoun forms; (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (v) “or” is not exclusive; (vi) “including” and “includes” will be deemed to be followed by “but not limited to” and “but is not limited to,” respectively; (vii) any definition of or reference to any Legal Requirement, agreement, instrument or other document herein will be construed as referring to such Legal Requirement, agreement, instrument or other document as from time to time amended, supplemented or otherwise modified; and (viii) any definition of or reference to any statute will be construed as referring also to any rules and regulations promulgated thereunder.

          1.2 Definitions. For purposes of this Agreement, the following terms have the meanings specified or referenced below.

          “AAQ” means Anthony, Allan & Quinn, Inc., f/k/a Anthony, Allan and Quinn’s Advantage, Inc., a Missouri corporation.

          “ABF License” means the license agreement to be entered into by and between Company and AAQ as of the Closing Date, in the form attached as Exhibit N.

          “Acceleration Event” means the occurrence of any of the following events: (i) the consummation of a transaction that results in the sale or other disposition of all or a majority of the Equity Interests or assets of Company to a Person that is not an Affiliate of Buyer, unless either (A) (1) the acquiring Person expressly assumes in writing all obligations of Buyer hereunder related to Contingent Payments (including all obligations under Section 2.4) from and after the date of consummation of such transaction, except that the acquiring Person will only be obligated to pay such Contingent Payments in cash, and (2) Buyer delivers a payment guaranty, in the form of Exhibit C, for the cash amount of any unpaid Contingent Payments finally determined to be owed by such acquiring Person to Sellers (whether due as of the date of consummation of such transaction or thereafter payable in accordance with the terms of this Agreement), or (B) (1) the acquiring Person expressly assumes in writing all obligations of Buyer under Section 2.4 related to any unpaid Contingent Payments from and after the date of consummation of such transaction, other than the obligation to pay such Contingent Payments, and (2) Buyer expressly reaffirms in writing its obligation to pay all Contingent Payments (whether due as of the date of consummation of such transaction or thereafter payable in accordance with the terms of this Agreement); (ii) the consummation of an Event specified in clause (C) of Section 2.4(b)(iii), unless the Acquiror (or such Acquiror’s parent corporation if the Acquiror is a wholly-owned Subsidiary) expressly assumes in writing all obligations of Buyer hereunder related to all Contingent Payments (including all obligations under Section 2.4) whether due as of the date of consummation of such transaction or thereafter payable in accordance with the terms of this Agreement; or (iii) Buyer (A) commences any case, action or proceeding before any court or other Governmental Body with respect to itself relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding up or relief of debtors, or (B) enters into any general assignment for the benefit of creditors, or composition, marshaling of assets for creditors, undertaken under federal, state or foreign law, including the Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.) (each, an “Insolvency Proceeding”) with respect to itself, or (C) takes any action to effectuate or authorize any of the forgoing; or (iv) (A) any involuntarily Insolvency Proceeding is commenced or filed against Buyer, or any writ, judgment, warrant of attachment, or execution, is issued or levied against all or substantially all of Buyer’s properties, and any such proceeding or petition is not dismissed, or such writ, judgment, warrant of attachment, execution or similar process is not released, vacated or fully bonded within 60 days after commencement, filing or levy, (B) Buyer admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding, or (C) Buyer consents to the appointment of a receiver, trustee, custodian, conservator, liquidator, or mortgagee in possession (or agent therefor) for itself or a all or substantially all of its property or business.

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          “Accounting Policies” means the accounting policies, principles, procedures, and methods set forth on Exhibit J.

          “Accounts Receivable” is defined in Section 3.11.

          “Adjusted Pre-Tax Income” for any calendar year, means the sum of (i) Pre-Tax Income for such calendar year, plus (ii) the amount of any adjustment for such calendar year calculated pursuant to Exhibit U.

          “Acquired Person” means any Person engaged in a business substantially identical to the Business that is acquired by or otherwise combined with Company or Buyer or any other Affiliate of Buyer after the Closing, regardless of the form of such acquisition or combination (e.g., by stock purchase, merger, consolidation, or otherwise).

          “Acquiror” is defined in Section 2.4.

          “Acquisition Notice” is defined in Section 2.4.

          “Acquisition Proposal” is defined in Section 5.4.

          “Affiliate” with respect to any specified Person, means a Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such specified Person. For this definition, “control” (and its derivatives) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting Equity Interests, as trustee or executor, by Contract or credit arrangements or otherwise.

          “Agreement” means this agreement, together with its Exhibits, Schedules, Sellers Disclosure Letter and Buyer Disclosure Letter.

          “AIM” means Advantage Integrated Marketing, Inc., a Missouri corporation.

          “Applicable Consideration Percentage” means the percentage of Purchase Price and other payments (including Contingent Payments) to be paid to each Transferring Seller as set forth on Exhibit M and, if the payment is in cash, to the accounts specified by each Transferring Seller in writing at least three Business Days prior to the Closing Date.

          “Approval” means any approval, authorization, consent, qualification or registration, or any waiver of the foregoing, required to be made or obtained from, or any notice, statement or other communication required to be filed with or delivered to, any Governmental Body or any other Person.

          “Balance Sheet” is defined in Section 3.8.

          “Balance Sheet Date” means the date of the Balance Sheet.

          “Base Closing Price” is defined in Section 2.2.

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          “Budget” means the budget for calendar years 2003 through 2007 of Company previously delivered to Buyer and attached as Exhibit G.

          “Business” means paid medical claims communication services as provided by Company on behalf of healthcare payers as of the Effective Date, which consists of the distribution of the following paper-based documents: negotiable checks, explanation of patient benefits (EOB) forms, explanation of provider payment statements, letters regarding pending claims, denial of claims and credibility of coverage, HIPAA certificates relating to coverage of pre-existing conditions of an insured, claims forms, informational forms and other forms related to insurance coverage and other similar systems letters, insurance premium claim billing statements, and COBRA notifications. As of the Effective Date, Company conducts the following functions and activities in order to facilitate the distribution of such documents on behalf of payers: (i) development, implementation and use of pre-integrated payer service vendor interfaces, standard payer interfaces, and alternate file format and a Web-based payer document access system; (ii) document development and design consulting services (e.g., “ABF Forms Designer”); (iii) production, printing, insertion and mailing of such documents; (iv) output aggregation of such documents, including enhanced mail consolidation through Company’s “Healthpayers USA” program; and (v) storage, retrieval and delivery of such documents, including access through PDF storage center wherein payers can link to such stored documents using a secure Web Application Programming Interface (API). For purposes of clarification, electronic medical claims communication services (e.g., electronic remittance advice, electronic funds transfer) will not be included in the definition of Business.

          “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in the City of New York, New York are required or authorized by law to be closed.

          “Buyer” is defined in the preamble to this Agreement.

          “Buyer Disclosure Letter” is defined in Article 4. The Schedules of Buyer Disclosure Letter will be numbered to correspond to the applicable Section of this Agreement and, together with all matters under such heading, will be deemed to apply only to that Schedule.

          “Buyer Employee Plans” is defined in Section 7.10.

          “Buyer Indemnification Notice” is defined in Section 11.2.

          “Buyer Indemnified Party” is defined in Section 11.2.

          “Buyer Material Adverse Effect” means any change or effect that (i) is materially adverse when compared to the business, properties, assets, results of operations or condition (financial or otherwise) of Buyer and Buyer Subsidiaries, taken as a whole, as reflected in Buyer’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003; provided, however, that any adverse change, event, development, or effect resulting from any the following will not be deemed to constitute, and will not be taken into account in determining whether there has been, a Buyer Material Adverse Effect: (A) any decline in the trading price or volume of Buyer’s common stock or failure to meet any analyst’s expectations, (B) general business or economic conditions, including such conditions generally related to the industries in which

4

Buyer and Buyer Subsidiaries operate, except to the extent that Buyer is disproportionately affected, (C) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (D) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (E) changes in GAAP, or (F) changes in Legal Requirements generally applicable to the industries in which Buyer and Buyer Subsidiaries operate, except to the extent that Buyer is disproportionately affected, or (ii) would be reasonably likely to prevent or materially burden or materially impair the ability of Buyer to consummate the transactions contemplated by the Transaction Documents.

          “Buyer SEC Reports” is defined in Section 4.9.

          “Cash” means the sum of any and all cash and cash equivalents (including liquid debt instruments purchased with maturity of three months or less) of Company, calculated in accordance with GAAP and in a manner consistent with the Accounting Policies.

          “Cash Option” is defined in Section 2.4.

          “Closing” is defined in Section 2.5.

          “Closing Date” is defined in Section 2.5.

          “Closing Date Working Capital” means, as of the Closing Date and giving effect to the consummation of the purchase and sale of the Shares hereunder, the excess of Company’s total current assets (including Accounts Receivable, Prepaid Supplies, prepaid expenses, and Net Cash), minus total current liabilities (including any liability for customer postage deposits, but excluding the current amount of any Debt), determined in accordance with GAAP in a manner consistent with the Accounting Policies.

          “Closing Payment” is defined in Section 2.2.

          “COBRA” is defined in Section 5.6.

          “Code” means the Internal Revenue Code of 1986 or any successor code.

          “Commitment” means (i) any option, warrant, convertible security, exchangeable security, subscription right, conversion right, exchange right, or other Contract that could require a Person to issue any of its capital stock or to sell any capital stock it owns in another Person; (ii) any other security convertible into, exchangeable or exercisable for, or representing the right to subscribe for any capital stock of a Person or owned by a Person; (iii) any statutory pre-emptive right or pre-emptive right granted under a Person’s Organizational Documents; and (iv) any stock option, stock appreciation right, phantom stock, profit participation, or other similar right with respect to a Person.

          “Company” is defined in the Recitals to this Agreement.

5

          “Company Intellectual Property” is defined in Section 3.25.

          “Company Owned Software” means Software in which Company owns all Intellectual Property rights, including Current Platform Software and MCDS Software.

          “Company Person” means any of AAQ, Company, any Seller, Teralogix, or any of their respective Affiliates.

          “Company Print-and-Mail Customer” means a healthcare payer who uses Company to print and mail its checks and/or explanation of provider payment statements.

          “Competitive Business” is defined in Section 7.3.

          “Confidential Information” is defined in Section 7.3.

          “Consideration Unit” is defined in Section 2.4.

          “Consideration Unit Value” is defined in Section 2.4.

          “Contingent Payment” is defined in Section 2.2.

          “Contingent Payment Calculation Date” is defined in Section 2.4.

          “Contingent Payment Ceiling” is defined in Section 2.4.

          “Contingent Payment Period” means the period commencing on the Closing Date and ending on December 31, 2005.

          “Contingent Payment Statement” is defined in Section 2.4.

          “Continued Employee” is defined in Section 7.10.

          “Contract” means any agreement, contract, indenture, obligation, promise or understanding (whether written or oral), including any amendment, extension, renewal, guarantee and other supplement with respect thereto.

          “Copyright” means each and every registered and unregistered copyright to any original work of authorship which is fixed in any tangible medium of expression.

          “Covered Business Loss Threshold Amount” is defined in Section 11.2.

          “Current Platform Software” means individually each, and collectively all, of the computer programs (whether in object code or source code form) described in Exhibit P attached hereto, including any enhancement or later versions of the Current Platform Software, additional programs, load instructions, installation scripts, support tools, migration utilities to facilitate implementation of the Current Platform Software, source code documentation and programmer lists, lists of third party products including third party system utilities which have been incorporated or embedded in the Current Platform Software, all user guides, flow charts, plans, designs, notes, support manuals, troubleshooting guides, and other related written and

6

software materials, all updates thereto, such as will permit a reasonably skilled computer programmer to maintain, modify and improve the Current Platform Software.

          “Debt” means the sum of (i) all obligations of Company for borrowed money, including principal, accrued interest and prepayment penalties (to the extent actually incurred as a result of its satisfaction and discharge of such obligations), (ii) the net amount due to Affiliates (other than amounts relating to AIM arising in the ordinary course under the agreement between Company and AIM for the provision of printing services) and (iii) all lease obligations of Company required to be capitalized in accordance with GAAP. For the purposes of clarification, Debt includes any negative cash and bank overdraft and any unpaid portion of the purchase price under the Transfer Agreement, but does not include accounts payable, postage deposits, customer deposits or similar ordinary course amounts.

          “Deemed Closing Price” means $12.50.

          “Effective Date” is defined in the preamble to this Agreement.

          “Elections” is defined in Section 7.2.

          “Employment Agreement” is defined in Section 8.8.

          “Encumbrance” means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restrictions on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

          “Environmental Law” means (a) any Legal Requirement or Governmental Authorization relating to (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as amended, and (b) any common law or equitable doctrine (including injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Substance. The term Environmental Law includes the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of 1970.

          “E&O Policy” means that certain Multimedia Professional Liability Policy issued by American International Specialty Lines Insurance Company to AAQ and covering Company as an additional insured, Policy Number 279-97-17.

7

           “Equity Interest” means (i) with respect to a corporation, any and all shares of capital stock and any Commitments with respect thereto, (ii) with respect to a partnership, limited liability company, trust or similar Person, any and all units, interests or other partnership/limited liability company interests, and any Commitments with respect thereto, and (iii) any other equity ownership, participation or security in a Person.

          “ERISA” means the Employee Retirement Income Security Act of 1974 or any successor law.

          “Escrow Agent” means Wilmington Trust Company, a Delaware banking corporation.

          “Escrow Agreement” means the Escrow Agreement to be entered into by and among Buyer, Sellers and the Escrow Agent as of the Closing Date, in the form attached as Exhibit I.

          “Escrow Amount” means $11,000,000.

          “Estimated Net Debt” is defined in Section 2.3.

          “Estimated Net Debt Adjustment” is defined in Section 2.3.

          “Estimated Working Capital” is defined in Section 2.3.

          “Estimated Working Capital Adjustment” is defined in Section 2.3.

          “Event” is defined in Section 2.4.

          “Event Date” is defined in Section 2.4.

          “Exchange Act” means the Securities Exchange Act of 1934, or any successor law.

          “Final Balance Sheet” is defined in Section 2.3.

          “Final Net Debt ” is defined in Section 2.3.

          “Final Net Debt Adjustment” is defined in Section 2.3.

          “Final Working Capital” is defined in Section 2.3.

          “Final Working Capital Adjustment” is defined in Section 2.3.

          “Financial Statements” is defined in Section 3.8.

          “First Notice” is defined in Section 2.4.

          “GAAP” means generally accepted United States accounting principles.

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          “General Threshold Amount” is defined in Section 11.2.

          “Governmental Authorization” means any approval, consent, decree, judgment, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

          “Governmental Body” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign, or other government, (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, or entity and any court or other tribunal), (iv) multi-national organization or body, and (v) body entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

          “Hazardous Substance” means any waste or other substance that is presently or hereafter listed, defined, designated or classified as, or otherwise determined to be, hazardous, toxic, radioactive or dangerous, or a pollutant or a contaminant or otherwise regulated, under or pursuant to any Environmental Law, whether by type or by quantity, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials, or any substance containing any such substance as a component. Hazardous Substance includes any special waste, industrial substance and any derivative or by-product thereof, radon, urea formaldehyde foam insulation, lead, and polychlorinated biphenyl.

          “HIPAA” is defined in Section 3.14.

          “HIPAA Commitments” is defined in Section 3.14.

          “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successor law.

          “Incremental Pre-Tax Income” for any calendar year, means the amount by which Adjusted Pre-Tax Income (which for calendar year 2003 will include the entire calendar year of 2003) exceeds the dollar amount determined pursuant to Exhibit V with respect to such calendar year.

          “Independent Accountants” is defined in Section 2.3.

          “Individual Seller” means any of Joseph Q. DiMartini, Eric J. Schaefer, Daniel A. Schmitt, and Dru A. Schmitt.

          “Intellectual Property” means all Copyrights, Marks, Patents, Trade Secrets, Software, domain names and URLs, moral rights, and any other proprietary rights or intangible assets recognized under any laws or international conventions, and in any country or jurisdiction in the world, as intellectual creations to which rights of ownership accrue, all applications, disclosures, renewals, extensions, continuations or reissues thereof, all licenses with respect thereto and all rights arising thereunder (including the right to sue for past infringement).

          “Intellectual Property Contract” is defined in Section 3.25.

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          “IRS” means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

          “Knowledge” is defined as follows:

          (i) with respect to Sellers, “Knowledge” means the actual knowledge of each Seller and each of Patrick Coughlin, Peter Hinden, Richard Jewell, and Cindy Schmitt, after reasonable inquiry of those employees of Company Persons who have primary or supervisory responsibility for the matter at issue; and

          (ii) with respect to Buyer, “Knowledge” means the actual knowledge of each of David Amburgey, Robert Draughon, Roger Holstein, Charles Mele, and Kirk Layman, after reasonable inquiry of those employees of Buyer who have primary or supervisory responsibility for the matter at issue.

          “Lease” means any lease, sublease, license, concession, or Contract, including all amendments, extensions, renewals, guaranties and other agreements with respect thereto relating to Real Property.

          “Legal Requirement” means any Order, constitution, law, ordinance, regulation, rule, statute, or treaty of any Governmental Body.

          “Liabilities” is defined in Section 3.9.

          “Loss” of a Person means any and all loss, liability, damage, award, judgment, deficiency, diminution in value, action, order, decree, penalty, fine, amount paid in settlement, cost and expense (including reasonable attorney’s fees) suffered or incurred by such Person. For the purposes of calculating the amount of any Loss required to be paid by a party under Section 11.2 or 11.3, the amount of such Loss will be reduced to the extent of any amounts that any Seller or Buyer Indemnified Party, as applicable, actually receives pursuant to the terms of the insurance policies (if any) covering such indemnification claim; provided that nothing in this Agreement will be deemed to obligate any Seller or Buyer Indemnified Party to pursue any claim against any insurer or third party, except as provided in Section 11.2(c)(iii).

          “MCDS Software” means individually each, and collectively all, of the computer programs (whether in object code or source code form) described in Exhibit P attached hereto, including any enhancement or later versions of the MCDS Software, additional programs, load instructions, installation scripts, support tools, migration utilities to facilitate implementation of the MCDS Software, source code documentation and programmer lists, lists of third party products including third party system utilities which have been incorporated or embedded in the MCDS Software, all user guides, flow charts, plans, designs, notes, support manuals, troubleshooting guides, and other related written and software materials, all updates thereto, such as will permit a reasonably skilled computer programmer to maintain, modify and improve the MCDS Software.

          “Mark” means each and every word, slogan, design, picture or any other symbol used to identify any good and/or service including each and every registered and unregistered trademark and service mark anywhere in the world and each corresponding application and

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“intent to use” application related thereto, together with the goodwill and the business appurtenant thereto.

          “Master Lease” means that certain Lease dated as of November 3, 1997, by and between H W Development, L.L.C., as landlord, and AAQ, as tenant, as previously and hereafter assigned from time to time.

          “Material Contract” is defined in Section 3.21.

          “Measurement Period” is defined in Section 2.4.

          “Negotiated Software” means Software used by Company in connection with its business with respect to which Company has negotiated a license from a third party supplier to display, perform, copy, modify, create derivative works, manufacture, distribute, license, use or otherwise exploit in accordance with the terms of such license.

          “Net Cash” means the amount, if any, by which the amount of Cash as of the Closing Date exceeds the amount of Debt as of the Closing Date.

          “Net Debt” is defined in Section 2.3.

          “Net Revenue” means the sum of (i) revenue generally referred to as “print”, “insert”, “PDF Imaging” and “ABF processing” charges in Company’s agreements with its Company Print-and-Mail Customers, which for purposes of clarification does not include postage, materials and other pass-through charges revenue, and (ii) Healthpayers USA revenue.

          “Noncompetition Covenants” is defined in Section 7.3.

          “Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Body or by any arbitrator.

          “Organizational Documents” means the trust documentation, articles of incorporation, certificate of incorporation, charter, bylaws, articles of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto.

          “Patent” means each and every United States patent, patent application, patent disclosure, provisional application, and any utility patent resulting therefrom, certificate of invention, or application for certificate of invention, together with each and every extension, revision, registration, confirmation, reissue, division, continuation or continuation-in-part, re-examination, or renewal thereof, and any corresponding foreign filing claiming priority from any of the foregoing, each and every patent issuing or reissuing from any of the foregoing, and the inventions described and claimed in any of the foregoing.

          “Permit” means any license, permit, franchise, certificate of authority or order of, or registration with, or any waiver of any of the foregoing by any Governmental Body.

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           “Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

          “Plans” is defined in Section 3.16.

          “Power of Attorney” is defined in Section 3.31.

          “Pre-Closing Tax Period” means any period (including the portion of any Straddle Period) ending on or prior to the Closing Date.

          “Preexisting Code” means all computer programming source code incorporated into software that was not specifically written or developed for use in such software, including: (i) code from toolkits; (ii) code written by employees of Company outside the scope of their employment; and (iii) third party software.

          “Pre-Tax Income” for any calendar year, means the sum of (i) the net income for Company (as shown on the books of Company as determined in accordance with GAAP and in a manner consistent with the Accounting Policies), plus (ii) income Tax for Company (determined on a book basis rather than a tax basis), but excluding, for purposes of any such calculation, each of the following adjustments or other amounts (without duplication): (1) any gain or loss realized upon the sale or other disposition of any asset of Company or its consolidated Subsidiaries (including pursuant to any sale and leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business; (2) any gain or loss realized upon the sale or other disposition of any Equity Interest of any Person; (3) any other extraordinary gain or loss (as defined under APB 30 and as clarified under FAS 145); (4) the effect of any change in GAAP during the Contingent Payment Period; (5) the transaction expenses to be paid by Buyer pursuant to Section 7.5; or (6) any amount or expense attributable to options to purchase shares of Buyer’s common stock granted on or after the Closing Date to employees of Company in connection with the transactions contemplated by this Agreement. For the purposes of clarification, in determining “Pre-Tax Income”, the following expenses will be included among the expenses of Company: (A) fees and other costs under the Transition Services Agreement; (B) expenses, such as selling, general and administrative expenses, incurred by Buyer or any of its Affiliates with respect to Company, its operations and/or its employees (e.g., salary, bonuses and related employment expenses for any personnel of Buyer or its Affiliates attributable to Company, and insurance coverage obtained with respect to Company under policies maintained by Buyer or any of its Affiliates), except for general corporate overhead which will be allocated to Company in accordance with the Accounting Policies; and (C) 100% of each Individual Seller’s salary, bonus and related employment expenses under their respective Employment Agreements (except for 40% of Joseph Q. DiMartini’s salary, bonus and related employment expenses under his Employment Agreement). For the purposes of further clarification: (a) the Contingent Payments made by Buyer to Sellers will not be considered expenses of Company or otherwise allocated to Company in any manner; and (b) indemnification payments under this Agreement made by Buyer to Sellers or by any Seller to Buyer will not be considered expenses of Company, provided that the financial impact of the facts or circumstances underlying any indemnification claim will be considered an expense of Company to the extent such impact would be considered an expense of Company pursuant to GAAP.

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           “Prime Rate” means the reference rate of Bank of America from time to time.

          “Pro-Forma Balance Sheet” is defined in Section 3.8.

          “Proceeding” means any action, arbitration, audit, complaint, hearing, investigation, litigation, petition, suit or other proceeding (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

          “Public Software” means any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software, open source software (e.g., Linux) or similar licensing or distribution models, including software licensed or distributed under any of the following licenses or distribution models, or licenses or distribution models similar to any of the following: (i) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL); (iii) the Mozilla Public License; (iv) the Netscape Public License; (v) the Sun Community Source License (SCSL); (vi) the Sun Industry Standards License (SISL); (vii) the BSD License; and (viii) the Apache License.

          “Purchase Price” is defined in Section 2.2.

          “Purchase Price Allocation” is defined in Section 7.2.

          “Real Property” means all land, together with all buildings, structures, improvements, and fixtures located thereon, and all easements and other rights and interests appurtenant thereto.

          “Registered Company Intellectual Property” means all Company Intellectual Property formally registered (or with respect to which a formal registration is pending) with the appropriate Governmental Body or private agency.

          “Registration Rights Agreement” means the Registration Rights Agreement to be entered into by and between Buyer and Sellers as of the Closing Date, in the form attached as Exhibit B.

          “Releasees” is defined in Section 7.6.

          “Representative” means with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants and financial advisors.

          “Retail Software” means Software used by Company in connection with its business that is generally available to any Person under a fixed use license agreement, including computer software that is commercially available in the retail market, downloadable or otherwise available under non-negotiable terms and conditions generally provided with a software product not considered open source.

          “SEC” means the Securities and Exchange Commission.

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           “Second Notice” is defined in Section 2.4.

          “Securities Act” means the Securities Act of 1933, or any successor law.

          “Seller Group” means any Individual Seller together with each Transferring Seller of which such Individual Seller is the trustee.

          “Sellers” is defined in the preamble to this Agreement.

          “Seller Material Adverse Effect” means any change or effect that (i) is materially adverse to the business, properties, assets, prospects, results of operations or condition (financial or otherwise) of Company; provided, however, that any adverse change, event, development, or effect resulting from any the following will not be deemed to constitute, and will not be taken into account in determining whether there has been, a Seller Material Adverse Effect: (A) general business or economic conditions, including such conditions generally related to the industry in which Company operates, except to the extent that Company is disproportionately affected; (B) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States; (C) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (D) changes in GAAP; or (E) changes in Legal Requirements generally applicable to the industry in which Company operates, except to the extent that Company is disproportionately affected, or (ii) would be reasonably likely to prevent or materially burden or materially impair the ability of any Seller or any other party to a Transaction Document (other than Buyer) to consummate the transactions contemplated by the Transaction Documents.

          “Sellers Disclosure Letter” is defined in Article 3. The Schedules of Sellers Disclosure Letter will be numbered to correspond to the applicable Section of this Agreement and, together with all matters under such heading, will be deemed to apply only to that Schedule.

          “Sellers Indemnification Notice” is defined in Section 11.3.

          “Sellers Representative” is defined in Section 13.11.

          “Share Delivery Date” is defined in Section 2.4.

          “Shareholders Agreement” means the Second Amended and Restated Shareholders’ Agreement dated as of September 24, 2002 by and among Sellers and Company.

          “Shares” is defined in the Recitals to this Agreement.

          “Significant Person” is defined in Section 3.28.

          “Simon License” means the Software License Agreement entered into on or prior to the Closing Date by and among Teralogix as licensor and Company as customer with respect to Teralogix’ SIMON software and related support services.

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           “Software” means any and all computer software, including Current Platform Software and MCDS Software, that has been developed (or is in the process of being developed) by or on behalf of Company through the Closing Date, and, in the case of MCDS Software whether before or after the Closing Date, including all underlying programs, source code, object code, operating manuals, user manuals, technical manuals and data set up guides for aiding the use of the Software and Intellectual Property rights related thereto or arising therefrom.

          “Straddle Period” is defined in Section 12.1.

          “Stub Period” is defined in Section 7.8.

          “Sublease” means the sublease, in the form attached as Exhibit H, between AAQ and Company pursuant to which Company subleases from AAQ a portion of the premises currently being leased by AAQ from LJP Investments-II, L.L.C. (as successor-in-interest to H W Development, L.L.C.) pursuant to the Master Lease.

          “Subsidiary” means any entity with respect to which a specified Person (or a Subsidiary thereof) owns 50% or more of the outstanding Equity Interests or has the power, through the ownership of Equity Interests or otherwise, to elect a majority of the directors, or similar managing body or to direct the business and policies of such entity.

          “Target Working Capital” is defined in Section 2.3.

          “Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs, ad valorem, duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, and will include any liability in respect of Taxes as a transferee or under any Tax sharing agreement, Tax indemnity agreement, or other contract, arrangement, agreement, understanding or commitment (whether oral or written) and any liability in respect of Taxes which is payable by operation of law, or Treas. Reg. Section 1.1502-6 (or any predecessor or successor thereof or any analogous or similar provision under state, local or foreign law).

          “Tax Claim” is defined in Section 12.3.

          “Tax Return” means any report, return, statement, information return or other information required to be supplied to a Governmental Body in connection with Taxes (including any attachment thereto or amendment thereof), including any claim for refund, declaration of any estimated Tax and combined or consolidated return for any group of entities that includes Company.

          “Teralogix” means Teralogix, Inc., a Missouri corporation.

          “Teralogix Amendment” means the amendment to the Agreement between Teralogix and Company dated January 1, 2002, in the form attached as Exhibit Q hereto.

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           “Third Party Claim” means any demand or Proceeding for which Buyer, Company or Sellers would have a Loss that is asserted against or sought to be collected from any of them by any Person other than a party hereto or an Affiliate thereof.

          “Trade Secrets” means all know-how, trade secret, confidential information, customer lists, the source code of all Software, technical information, data, process technology, plans, drawings, and blue prints that derive value (economic, strategic or otherwise) from not being generally known to and/or readily ascertainable by other Persons.

          “Transaction Documents” means this Agreement, the Employment Agreements, the Transition Services Agreement, the Registration Rights Agreement, the Transfer Agreement, the Escrow Agreement, the Sublease, the Teralogix Amendment, the ABF License, and the estoppel certificate described in Section 8.14.

          “Transfer Agreement” means the Transfer Agreement to be entered into by and among Company, AAQ and Teralogix on or prior to the Closing Date but preceding the Closing, substantially in the form attached as Exhibit A.

          “Transferred Employees” is defined in Section 3.18.

          “Transferring Seller” means any of Joseph Q. DiMartini as Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, Joseph Q. DiMartini as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002, Eric J. Schaefer, Daniel A. Schmitt as Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999, Daniel A. Schmitt as Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002, and Dru A. Schmitt as Trustee U/A dated October 20, 1997 f/b/o Dru A. Schmitt.

          “Transition Services Agreement” means the Transition Services Agreement to be entered into by and between Company, Teralogix and AAQ as of the Closing Date, substantially in the form attached as Exhibit D.

          “Unpaid Contingent Payment” is defined in Section 2.4.

          “Voting Debt” is defined in Section 3.4.

ARTICLE 2
PURCHASE AND SALE OF SHARES; THE CLOSING

          2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, at the Closing each Transferring Seller will sell and transfer its respective portion of the Shares to Buyer, and Buyer will purchase the Shares from Transferring Sellers.

          2.2 Purchase Price.

          (a) Calculation. The aggregate purchase price for the Shares (the “Purchase Price”) will be (i) $110,000,000 (the “Base Closing Price”), minus the Estimated Net Debt Adjustment, if any, plus or minus, as the case may be, the Estimated Working Capital Adjustment (the Base Closing Price as so adjusted, the “Closing Payment”), (ii) plus or minus,

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as the case may be, (A) the Final Net Debt Adjustment, if any, and (B) the Final Working Capital Adjustment, if any, and (iii) plus each payment required by the terms of Section 2.4 (each such payment, a “Contingent Payment”). Buyer will pay the Closing Payment minus the Escrow Amount to Transferring Sellers on the Closing Date by wire transfer in immediately available funds in an amount equal to their respective Applicable Consideration Percentages. Buyer will pay the Escrow Amount by wire transfer in immediately available funds to the Escrow Agent pursuant to the Escrow Agreement. The Escrow Agent will remit the remaining portion of the Escrow Amount to Transferring Sellers at the end of the escrow period as set forth in and pursuant to the Escrow Agreement. Buyer will pay any Contingent Payments in accordance with the terms of Section 2.4.

          (b) Illustration. The parties acknowledge and agree that, for purposes of the Closing Payment and Purchase Price calculations, the amount of the Estimated Net Debt Adjustment, the Estimated Working Capital Adjustment, the Final Net Debt Adjustment and the Final Working Capital Adjustment will be determined consistent with the calculation (and the components thereof) set forth on Exhibit K.

          2.3 Adjustments to Base Closing Price.

          (a) Net Debt Adjustment.

     (i) The Base Closing Price will be reduced by the amount, if any, by which the amount of Debt as of the Closing Date exceeds the amount of Cash as of the Closing Date (the “Net Debt”).

     (ii) Two Business Days before the Closing Date, Sellers Representative will deliver to Buyer a certificate setting forth, as of the date thereof, an estimate of the amount of Cash and Debt expected as of the Closing Date (on a pro forma basis giving effect to the transactions contemplated by the Transfer Agreement). The amount of Debt will be broken down by creditor, with supporting detail, and the amount of Cash will specify cash on hand and each cash equivalent, with supporting detail. If the amount of Cash as of the Closing Date minus the amount of Debt as of the Closing Date (determined as provided above) (the “Estimated Net Debt”) is less than $0, the Base Closing Price will be reduced by such shortfall (the amount of such shortfall, the “Estimated Net Debt Adjustment”).

     (iii) Within five Business Days of the final determination of the Final Balance Sheet pursuant to Section 2.3(b), the Closing Payment will be adjusted (the amount of any such adjustment, the “Final Net Debt Adjustment”) and the parties will make whatever payments are necessary, if any, such that the Closing Payment is what it would have been had the Estimated Net Debt equaled the Net Debt reflected on such Final Balance Sheet (the “Final Net Debt”). Buyer will pay any amount due to Transferring Sellers by wire transfer in immediately available funds in an amount equal to their respective Applicable Consideration Percentages, and Sellers will pay any amount due to Buyer by wire transfer in immediately available funds to the account specified by Buyer, as applicable. For

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example, if the Estimated Net Debt is less than $0 (thus resulting in an Estimated Net Debt Adjustment) but the Final Net Debt is $0, the Closing Payment will be increased by the amount of the Estimated Net Debt Adjustment.

         (b) Working Capital Adjustment.

     (i) The Base Closing Price will be adjusted by the amount by which the Closing Date Working Capital is less or greater than $2,000,000 (the “Target Working Capital”).

     (ii) Two Business Days before the Closing Date, Sellers Representative will deliver to Buyer a certificate setting forth, as of the date thereof, an estimate of the Closing Date Working Capital (the “Estimated Working Capital”), with supporting detail. If the Closing Date Working Capital set forth in such certificate is greater than the Target Working Capital, the Base Closing Price will be increased by such excess and if the Closing Date Working Capital set forth in such certificate is less than the Target Working Capital, the Base Closing Price will be decreased by such shortfall (the amount of such increase or decrease, the “Estimated Working Capital Adjustment”).

     (iii) The Closing Payment will be subject to further adjustment after the Closing in accordance with the following:

               (A) Within 45 days after the Closing Date, Buyer will prepare, in accordance with GAAP and in a manner consistent with the Accounting Policies, and deliver to Sellers Representative a balance sheet of Company as of the Closing Date (the “Final Balance Sheet”).

               (B) Sellers Representative and his accountants will have the right to review Company’s books and records relating to, and the work papers of Buyer and its advisors utilized in preparing the Final Balance Sheet. The Final Balance Sheet will be binding on Sellers unless Sellers Representative presents to Buyer within 15 days after receipt of the Final Balance Sheet from Buyer written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement.

               (C) If Sellers Representative delivers a timely notice of disagreement, Buyer and Sellers Representative will attempt in good faith during the 30 days immediately following Buyer’s receipt of timely notice of disagreement to resolve any disagreement with respect to the Final Balance Sheet. If, at the conclusion of such 30-day period, Buyer and Sellers Representative have not resolved their disagreements regarding the Final Balance Sheet, Buyer and Sellers Representative will refer the items of disagreement for final determination to a mutually agreed upon independent accounting firm (the “Independent Accountants”). If Buyer and Sellers Representative cannot mutually agree upon the Independent Accountants within 10 Business Days after the conclusion of the 30-day period referenced above, Buyer will on such 10th Business Day deliver to

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Sellers Representative a list of three nationally recognized independent accounting firms that are not auditors, tax advisors or other consultants to Buyer, and Sellers Representative will select one of such three firms to be the Independent Accountants within five Business Days. Buyer and Sellers Representative will be reasonably available and work diligently to facilitate such firm to render a final determination within the 20-day period immediately following the referral to the Independent Accountants. The Final Balance Sheet will be deemed to be conclusive and binding on Buyer and Sellers upon (i) the failure of Sellers Representative to deliver to Buyer a notice of disagreement within 15 days of its receipt of the Final Balance Sheet prepared by Buyer, (ii) resolution of any disagreement by mutual agreement of Buyer and Sellers Representative after a timely notice of disagreement has been delivered to Buyer, or (iii) notification by the Independent Accountants of their final determination of the items of disagreement submitted to them.

               (D) Within five Business Days of the final determination of the Final Balance Sheet, the Closing Payment will be adjusted (the amount of any such adjustment, the “Final Working Capital Adjustment”) and the parties will make whatever payments are necessary, if any, such that the Closing Payment is what it would have been had the Estimated Working Capital equaled the Working Capital reflected on the Final Balance Sheet (the “Final Working Capital”). Buyer will pay any amount due to Transferring Sellers by wire transfer in immediately available funds in an amount equal to their respective Applicable Consideration Percentages, and Sellers will pay any amount due to Buyer by wire transfer in immediately available funds to the account specified by Buyer, as applicable.

               (E) The Independent Accountants, Buyer and Sellers Representative will enter into such engagement letters as required by the Independent Accountants to perform under this Section 2.3(b). The fees and disbursements of the Independent Accountants under this Section 2.3(b), will be borne exclusively by Sellers unless it is determined that the Final Balance Sheet understated the Final Working Capital by 10% or more, in which case such fees and disbursements will be borne exclusively by Buyer.

          2.4 Contingent Payments.

          (a) Contingent Payment Determination. Within 15 Business Days after the finalization of year-end financial statements for Company and its consolidated Subsidiaries for each calendar year in the Contingent Payment Period (until the Contingent Payment Ceiling is reached), but in no event later than April 15 of the calendar year immediately following the calendar year for which such financial statements are prepared, Buyer will determine the Contingent Payment for such calendar year. Such Contingent Payment will be an amount equal to the product of (i) the Incremental Pre-Tax Income multiplied by (ii) the number determined pursuant to the terms of Exhibit R; provided, that notwithstanding anything to the contrary contained in this Agreement, the aggregate amount of all Contingent Payments will not exceed $150,000,000 (the “Contingent Payment Ceiling”); provided, however, that Buyer and Sellers

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acknowledge and agree that as a consequence of the calculation of the number of shares of Buyer’s common stock that may be issuable pursuant to subsection (b) below, the value of the Contingent Payments could exceed the Contingent Payment Ceiling in the event that the Deemed Closing Price is less than the fair market value of such shares. As soon as reasonably practicable following Buyer’s determination of the Contingent Payment (but not later than April 15), Buyer will deliver to Sellers Representative (A) a statement (each such statement, a “Contingent Payment Statement”, the date such statement is delivered being the “Contingent Payment Calculation Date”), that includes each element of the calculation of the Contingent Payment, and (B) a certificate of Buyer’s Chief Financial Officer certifying on behalf of Buyer that the calculation of the Contingent Payment was made in accordance with the terms of Sections 2.4(a) and (b). A Contingent Payment Statement will be delivered no later than April 15 even if such calculation yields no Contingent Payment that calendar year, unless the Contingent Payment Ceiling has been reached in a prior calendar year. Sellers Representative and his accountants will be given reasonable access to the books and records of Company that are necessary to confirm the calculation of the Contingent Payment. All information obtained by Sellers Representative and his accountants pursuant to this Section 2.4(a) will be deemed to be the Confidential Information of Buyer subject to the restrictions of Section 7.3.

          (b) Contingent Payment Procedures.

     (i) On the first Business Day after the Contingent Payment Calculation Date (and, if applicable, on the first Business Day after each date upon which a final determination is made under the dispute resolution provisions of Section 2.4(c) that additional amounts of Contingent Payment are due Transferring Sellers) (each, a “Share Delivery Date”), Buyer will deliver to each Transferring Seller its Applicable Consideration Percentage of the amount of the Contingent Payment for the applicable calendar year by delivering to Sellers Representative certificates representing the number of shares of Buyer’s common stock as determined (A) by dividing one-half of the amount of the Contingent Payment due to such Transferring Seller (less half of any amounts paid in cash pursuant to the Cash Option) by the lesser of (1) the average closing price per share of Buyer’s common stock for the last 10 trading days immediately preceding the Contingent Payment Calculation Date (the “Measurement Period”) and (2) the Deemed Closing Price, and (B) by dividing the other half of the amount of such Contingent Payment (less half of any amounts paid in cash pursuant to the Cash Option) by the average closing price per share of Buyer’s common stock during the Measurement Period. The previous sentence notwithstanding, if the average closing price per share of Buyer’s common stock during the Measurement Period is less than the Deemed Closing Price, Buyer may elect in its sole and absolute discretion to pay all or any portion of the amount of the Contingent Payment to Transferring Sellers by wire transfer in immediately available funds in the Applicable Consideration Percentages (the “Cash Option”). Notwithstanding anything to the contrary above, the parties agree that Buyer will be obligated to pay a Contingent Payment in cash if, on the Contingent Payment Calculation Date, Buyer’s common stock is not quoted or listed, as applicable, on The Nasdaq Stock Market or The New York Stock Exchange, or Buyer has received a written notice from The Nasdaq Stock Market or The New

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York Stock Exchange, as applicable, that its common stock will be delisted and such notice has not been rescinded. No certificates for fractional interests in Buyer’s common stock will be issued; in lieu thereof, each Transferring Seller otherwise entitled to a fractional interest after taking into account all shares to be received by such Transferring Seller will receive an amount in cash equal to the value of such fractional interest and will have no other rights with respect to such fractional interest.

     (ii) If Buyer has determined in good faith that there is any material non-public information concerning Buyer as of a Share Delivery Date, Buyer will not deliver the Contingent Payment, but will instead deliver written notice to Sellers Representative so stating (a “First Notice”). When Buyer determines in good faith that the material nonpublic information has either become public or is no longer material, it will deliver a written notice of such determination to Sellers Representative (a “Second Notice”). On the 11th trading day following the delivery of a Second Notice, Buyer will deliver the remaining portion of the Contingent Payment to Transferring Sellers in accordance with subsection (i) above, except that the Measurement Period will be the 10 trading days following the date of the Second Notice. This Section 2.4(b)(ii) will not apply if Buyer is required to pay the Contingent Payment in cash pursuant to the penultimate sentence of Section 2.4(b)(i).

     (iii) For purposes of determining the form of Contingent Payment under subsection (i) above for each relevant calendar year, if, after the Effective Date: (A) Buyer’s outstanding shares of common stock are subdivided into a greater number of shares or consolidated into a smaller number of shares; (B) there is any reorganization or reclassification of Buyer’s common stock; (C) Buyer is consolidated or merged with or into or acquired by another Person (any such Person, as well as any acquiring Person in clause (D) immediately below, an “Acquiror”) and Buyer is not the surviving or resulting Person in such transaction; or (D) there is a sale of all or substantially all of the operating assets of Buyer (any transaction referenced in clauses (A) through (D) above, an “Event” and the date the referenced Event is consummated, the “Event Date”), the terms of this subsection (iii) will apply. If the Event Date of an Event specified in clauses (A) or (B) occurs prior to the commencement of the Measurement Period, the Deemed Closing Price will be adjusted proportionately. If an Event Date of an Event specified in clauses (A) or (B) occurs during the Measurement Period, for purposes of calculating the number of shares of Buyer’s common stock to be issued to Transferring Sellers, the Deemed Closing Price and the average closing price per share pursuant to clauses (A)(1) and (A)(2) of subsection (i) above will be adjusted proportionately for the trading days in the Measurement Period which precede the Event Date. If an Event Date for an Event specified in clause (C) occurs prior to the Contingent Payment Calculation Date, where the consideration payable to the holders of Buyer’s common stock consists solely of (A) shares of common stock of an Acquiror that is publicly traded on The Nasdaq Stock Market or The New York Stock Exchange, and/or (B) cash (the aggregate consideration, comprised of the number of shares of

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Acquiror’s common stock and/or the amount of cash, received per share of Buyer’s common stock in the Event being a “Consideration Unit”), the Transferring Sellers will be entitled to receive the number of Consideration Units equal to the sum of (1) one-half of the amount of the Contingent Payment divided by the Consideration Unit Value (as defined below), plus (2) one-half of the amount of the Contingent Payment divided by the lesser of the Consideration Unit Value and the Deemed Closing Price. For purposes of the foregoing, “Consideration Unit Value” means the sum of (x) the number of shares of Acquiror’s common stock included in a Consideration Unit, if any, multiplied by the average closing price per share of Acquiror’s common stock for the last 10 trading days immediately preceding the Contingent Payment Calculation Date, plus (y) the amount of cash, if any, included in a Consideration Unit. If an Event Date for an Event specified in clause (C) occurs where the consideration payable to the holders of Buyer’s common stock consists of any consideration other than shares of common stock of an Acquiror that is publicly traded on The Nasdaq Stock Market or The New York Stock Exchange or cash, or an Event Date for an Event specified in clause (D) occurs, Sellers Representative and Acquiror will negotiate to make equitable adjustments to the form of Contingent Pa yment under subsection (i) above. If Sellers Representative is not satisfied in his sole and absolute discretion with the equitable adjustments proposed by Acquiror pursuant to the immediately preceding sentence, the Contingent Payment for that calendar year and all other calendar years remaining in the Contingent Payment Period will be paid in cash. The parties acknowledge and agree that no Contingent Payment that has been finally determined and paid will be subject to the terms of this subsection (iii).

     (iv) The shares of Buyer common stock received by each Transferring Seller in payment of all or any portion of a Contingent Payment as provided in this Section 2.4 will be subject to the terms of the Registration Rights Agreement.

         (c) Contingent Payment Dispute Resolution.

     (i) The Contingent Payment Statement will be binding on Sellers unless Sellers Representative presents to Buyer written notice of disagreement within 30 days after receipt of such Contingent Payment Statement solely on the basis that either (A) the calculation of Pre-Tax Income reflected in the Contingent Payment Statement is not in accordance with GAAP (and determined in a manner consistent with the Accounting Policies) and/or the calculation of the amount of the Adjusted Pre-Tax Income, Incremental Pre-Tax Income or Contingent Payment contained in the Contingent Payment Statement is not in accordance with the terms of Section 2.4(a) or (b) or in accordance with the calculation procedures (including those reflected in the definitions contained in Article 1) contained in this Agreement, and/or (B) Buyer failed to comply with the terms of Section 2.4(e), in either case specifying in reasonable detail the basis for such allegations.

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     (ii) Buyer and Sellers Representative will attempt in good faith during the 30 days immediately following Buyer’s receipt of Sellers Representative’s timely notice of disagreement to resolve any disagreement with respect to such Contingent Payment Statement. All reasonable requests for information made by Buyer or Sellers Representative to the other will be honored. All negotiations pursuant to this Section 2.4(c), and the fact that a dispute regarding a Contingent Payment has arisen, are confidential and such negotiations will be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

     (iii) If, at the end of the 30-day period referenced in subsection (ii) above, Buyer and Sellers Representative have not resolved all disagreements with respect to whether the calculation of Pre-Tax Income reflected in the Contingent Payment Statement is in accordance with GAAP (and determined in a manner consistent with the Accounting Policies) and/or the calculation of the amount of the Adjusted Pre-Tax Income, Incremental Pre-Tax Income or Contingent Payment contained in the Contingent Payment Statement is in accordance with the terms of Section 2.4(a) or (b) or in accordance with the calculation procedures (including those reflected in the definitions contained in Article 1) contained in this Agreement, Buyer and Sellers Representative will refer the items of disagreement for determination to the Independent Accountants, and the parties will be reasonably available and work diligently to facilitate the Independent Accountants to render a determination within the 20-day period immediately following the referral to them. A determination by the Independent Accountants with respect to any item of disagreement submitted to them will be binding on Buyer and Sellers except to the extent the disagreement also constitutes a disagreement subject to subsection (iv) below. The Independent Accountants, Buyer and Sellers Representative will enter into such engagement letters as required by the Independent Accountants to perform under this Section 2.4(c)(iii). The fees and disbursements of the Independent Accountants under this Section 2.4(c)(iii) will be borne exclusively by Sellers unless it is determined that (A) the Contingent Payment Statement understated the Contingent Payment by 10% or more or (B) Buyer acted in bad faith with respect to such understatement, in either which case such fees and disbursements will be borne exclusively by Buyer.

     (iv) If, at the end of the 30-day period referenced in subsection (ii) above or within 30 days after the date of the Independent Accountants’ determination pursuant to subsection (iii) above, as applicable, Buyer and Sellers Representative have not resolved (A) all disagreements not resolved by the determination of the Independent Accountants with respect to whether the calculation of Pre-Tax Income reflected in the Contingent Payment Statement is in accordance with GAAP (and determined in a manner consistent with the Accounting Policies) and/or the calculation of the amount of the Adjusted Pre-Tax Income, Incremental Pre-Tax Income or Contingent Payment contained in the Contingent Payment Statement is in accordance with the terms of Section 2.4(a) or (b) or in accordance with the calculation procedures (including those reflected in the definitions contained in Article 1) contained in this Agreement, and/or (B)

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all disagreements with respect to whether Buyer or Sellers have complied with the terms of Section 2.4(e), any such remaining disagreement, regardless of the legal theory upon which it is based, will be settled by final, binding arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §. 1 et seq., in accordance with the applicable rules of JAMS/Endispute in effect at such time, which will be the sole and exclusive procedures for any such disagreement. The arbitration will be heard before a sole neutral arbitrator mutually agreed upon by Buyer and Sellers Representative. If Buyer and Sellers Representative cannot agree upon such an arbitrator within 10 Business Days after the date referenced in the first sentence of this subsection (iv), JAMS/Endispute will appoint an arbitrator with expertise in the general industry of the Business. All arbitration proceedings will take place in Chicago, Illinois. If the arbitrator finds in favor of Transferring Sellers, the arbitrator will have no authority to award amounts to Transferring Sellers in excess of the amounts Transferring Sellers would have been entitled to receive for any Contingent Payment (plus interest as provided for in subsection (v) below) in the absence of the actions taken by Buyer and determined by the arbitrator to be in violation of Section 2.4(a), Section 2.4(b) and/or Section 2.4(e); provided, however, that in such event, the arbitrator will have the authority to award, and to direct Buyer to pay or reimburse Sellers for, all costs and expenses of the arbitration (including reasonable fees and expenses of attorneys and other professionals retained by Sellers for such arbitration). Without limiting the generality of the foregoing, the arbitrator will have no authority to award any special, punitive, exemplary, consequential, incidental or indirect losses or damages. Judgment upon any award granted in a proceeding brought pursuant to this subsection (iv) may be entered in any court of competent jurisdiction. Should it become necessary to resort or respond to court proceedings to enforce a party’s compliance with this Section 2.4(c), such proceedings will be brought only in the federal or state courts located in Chicago, Illinois, which will have exclusive jurisdiction to resolve any disputes with respect to this Section 2.4(c), with each party irrevocably consenting to the jurisdiction thereof. If the court directs or otherwise requires compliance herewith, then all costs and expenses, including reasonable attorneys’ fees incurred by the party requesting such compliance, will be reimbursed by the non-complying party to the requesting party.

     (v) If the dispute provisions of Section 2.4(c) are invoked by Sellers Representative and Transferring Sellers are thereafter entitled to receive any additional Contingent Payment not previously delivered to Transferring Sellers with the Contingent Payment Statement as provided in Section 2.4(b) (the “Unpaid Contingent Payment”), each Transferring Seller also will receive from Buyer (A) interest at the Prime Rate, accruing from the first Business Day after the Contingent Payment Calculation Date, on any Unpaid Contingent Payment paid to such Transferring Seller in cash, and/or (B) an amount equal to the unpaid dividends payable from and after the first Business Day after the Contingent Payment Calculation Date on any Unpaid Contingent Payment paid to such Transferring Seller in shares of Buyer’s common stock.

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         (d) Automatic Acceleration of Contingent Payments.

     (i) Upon the occurrence of an Acceleration Event at any time prior to Buyer’s delivery of the Contingent Payment Statement for the calendar year ending on December 31, 2005, then, notwithstanding anything to the contrary in this Agreement, automatically and without any further action on the part of Buyer, Sellers Representative or any Seller, the Contingent Payments will immediately become due and payable to Transferring Sellers in cash in an amount equal to $150,000,000 less the aggregate amount of Contingent Payments theretofore paid to Transferring Sellers under this Section 2.4. Buyer will give Sellers Representative written notice of the occurrence (i) of an Acceleration Event within 48 hours of the occurrence of such Acceleration Event and (ii) of the execution of a definitive agreement for a transaction described in clause (i) or clause (ii) of the definition of Acceleration Event within 48 hours of the execution of such definitive agreement.

     (ii) Upon the occurrence of an Acceleration Event at any time prior to Buyer’s delivery to Transferring Sellers of the Contingent Payment for the calendar year ending on December 31, 2005, if any, and the failure of Buyer to pay the maximum amount of the Contingent Payments to Transferring Sellers in cash in an amount equal to $150,000,000 less the aggregate amount of Contingent Payments theretofore paid to Transferring Sellers under this Section 2.4 on or prior to the fifth Business Day following the occurrence of such Acceleration Event, then, in addition to the obligations of Buyer under Section 2.4(d)(i), Sellers will be released from any and all restrictions and obligations of Sellers under Section 7.3, and, without any further action by the parties, the provisions of Section 7.3 will be deemed terminated and of no force or effect.

         (e) Post-Closing Conduct of Business.

     (i) Buyer intends to manage and operate Company in a commercially reasonable manner and with a view toward the long-term growth of Company and its other businesses. Sellers acknowledge and agree that Buyer is entitled to manage and operate Company and its other businesses as it may determine in its sole and absolute discretion. Accordingly, Sellers further agree that (A) the rights of Transferring Sellers to receive the Contingent Payments do not create in Sellers any right to control or direct the management and operations of Company, and (B) subject to the next sentence, Sellers will have no claim against Buyer or its Affiliates (including Company), and Buyer will have no Liabilities with respect to, the management and operation of Company, including any impact thereof on any Contingent Payment. Notwithstanding the foregoing, Buyer will not take any action in bad faith, or authorize or permit any of its Affiliates (including Company) to take any action in bad faith, in order to reduce the amount or delay the payment of any Contingent Payment.

     (ii) The parties acknowledge and agree that, unless otherwise agreed by each of Buyer and Sellers Representative in its and his sole discretion, during

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the Contingent Payment Period, Buyer will not (A) conduct a business substantially identical to the Business except (1) as listed on Schedule 2.4(e)(ii) of Buyer Disclosure Letter, and (2) to the extent Buyer or an Affiliate acquires or combines with any Acquired Person with respect to which an amendment to this Agreement is not entered into pursuant to Section 2.4(f); provided, however, that in the event that Buyer or an Affiliate acquires or combines with any Acquired Person with respect to which an amendment to this Agreement is not entered into pursuant to Section 2.4(f), then, in such event, Buyer will not and will not permit the Acquired Person or any other of its Affiliates other than Company to solicit any Company Print-and-Mail Customer for the provision of services that both (x) fall within the scope of the definition of “Business” and (y) are actually provided by Company to such Company Print-and-Mail Customer, or (B) cause to be operated through Company any business other than the Business and such other activities, if any, conducted by Company as of the Closing Date. Notwithstanding anything to the contrary in this Agreement, Buyer will not be restricted from engaging in (1) pharmacy claims communications services, including the distribution of any pharmacy information and documents, (2) the distribution of medical billing statements to patients and premium billing statements to insureds or members on behalf of integrated delivery networks (IDNs) and other payors, and (3) the distribution of claim forms on behalf of payor for submission to another payor.

     (iii) Sellers acknowledge that they are not authorized to, and will not, take (and will not attempt to cause Company or any of its other employees to take) any action in bad faith in order to increase the amount or accelerate the payment of any Contingent Payment. Sellers understand that Buyer will take actions and make decisions that it deems to be appropriate with a view toward Company’s growth after the Contingent Payment Period.

     (iv) Buyer will maintain or cause to be maintained separate or otherwise identifiable (e.g., in the case of a shared general ledger) books and records for Company at all times during the Contingent Payment Period in a manner necessary for the financial statements of Company to be prepared in accordance with GAAP (and in a manner consistent with the Accounting Policies).

          (f) Potential Acquired Persons. Buyer will notify Sellers Representative in writing if it intends, or intends to cause Company or any of its Affiliates, to acquire or otherwise combine with any potential Acquired Person prior to the end of the Contingent Payment Period. Any such notice (an “Acquisition Notice”) will include the terms (including price and structure) of the proposed acquisition and the terms upon which Buyer would be willing to amend this Agreement (taking into consideration the matters described below in this Section 2.4(f)). Buyer will also provide to Sellers Representative such other information as may be reasonably requested by him relating to the proposed acquisition. If, within 15 days of the Acquisition Notice, Buyer and Sellers Representative have entered into an amendment to this Agreement with respect to the treatment of such potential Acquired Person for purposes of calculating Company’s Adjusted Pre-Tax Income for any remaining Contingent Payments, and the

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acquisition of or combination with the potential Acquired Person is consummated, the income, gain, loss, expense, and other financial results of, or otherwise relating to, such Acquired Person will be included in calculation of Adjusted Pre-Tax Income on the terms set forth in such amendment. The parties intend that any such amendment will include provisions relating to the manner in which the pre-tax income of such Acquired Person will be calculated and its impact on the amounts determined pursuant to Exhibit V, as well as adjustments to such pre-tax income, including the impact of cost of capital, transaction costs, and changes resulting from the structure of the acquisition. If Buyer and Sellers Representative do not enter into an amendment to this Agreement with respect to the treatment of such potential Acquired Person within 15 days of the Acquisition Notice, such potential Acquired Person may be acquired by Buyer in its sole and absolute discretion but any income, gain, loss, expense, and other financial results of, or otherwise relating to, such Acquired Person will not be included in calculation of Adjusted Pre-Tax Income. The parties acknowledge and agree that the operation of the business of any such Acquired Person will not be deemed to be a breach of the restrictions of Section 2.4(e)(ii), subject to compliance with non-solicitation provisions set forth in Section 2.4(e)(ii)(A)(2). Further, nothing in this Section 2.4(f) will be deemed to confer upon Sellers or Sellers Representative, any approval over the acquisition of or combination with any Person, it being understood and agreed that the decision to consummate the acquisition of or combination with any Person will be in Buyer’s sole and absolute discretion.

          2.5 The Closing. The purchase and sale of the Shares (the “Closing”) provided for in this Agreement will take place at the offices of O’Melveny & Myers LLP, at 10:00 a.m. (Pacific time) on the third Business Day following the satisfaction or written waiver of all conditions to the obligations of the parties set forth in Article 8 and Article 9 (other than such conditions that by their nature must be satisfied simultaneously with the Closing), or at such other time and place as the parties may agree in writing (the “Closing Date”).

          2.6 Closing Deliveries. At the Closing, in addition to such other actions as may be provided for herein:

          (a) Sellers Deliveries. Sellers will deliver to Buyer:

     (i) certificates representing the Shares, duly endorsed for transfer (or accompanied by duly executed stock powers in favor of Buyer or its nominee in form acceptable to Buyer), and otherwise in a form acceptable for transfer on the books of Company;

     (ii) the certificates referenced in Sections 8.1 and 8.2; and

     (iii) counterpart signatures (including the signatures of Sellers’ Affiliates) to each of the Transaction Documents to which they are a party.

          (b) Buyer Deliveries. Buyer will deliver to Sellers:

     (i) the Closing Payment, minus the Escrow Amount, as provided in Section 2.2(a);

     (ii) the certificates referenced in Sections 9.1 and 9.2; and

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     (iii) counterpart signatures to each of the Transaction Documents to which it is a party.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS

          Subject to the exceptions set forth in the disclosure letter delivered to Buyer on the date of this Agreement (“Sellers Disclosure Letter”), Sellers jointly and severally represent and warrant to Buyer as follows:

          3.1 Organization and Good Standing. Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Missouri. Company has the full corporate power and authority to own, lease and operate its property and assets and carry on its business as now being conducted. Company is duly qualified or licensed to do business as a foreign corporation in good standing in all jurisdictions in which the character or the location of the assets owned, leased or used by it or the nature of the business conducted by it requires such licensing or qualification, except those jurisdictions in which the failure to be so duly qualified or licensed and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect. True and complete copies of the Organizational Documents of Company, as of the Effective Date, and true and complete copies of the minutes of meetings of the stockholders and board of directors and all committees thereof of Company for the five years immediately preceding the Effective Date have been delivered to Buyer. Company is not in breach of any of its Organizational Documents.

          3.2 Authority; Validity; Consents.

          (a) Each Seller and its Affiliates has the requisite power, capacity and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party and to consummate the transactions contemplated by the Transaction Documents. This Agreement has been duly executed and delivered by each Seller and constitutes, and each other Transaction Document to which any Seller or its Affiliates is a party when executed and delivered by such Person will constitute the legal, valid and binding obligations of such Seller and/or Affiliate, as the case may be, enforceable against such Seller and/or Affiliate, as the case may be, in accordance with their respective terms, except as such enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally or general principles of public policy. Except as set forth in Schedule 3.2 of Sellers Disclosure Letter, no Seller or any Affiliates thereof is required to give any notice to or obtain any Approval in connection with the execution and delivery of any Transaction Document or the consummation or performance of any of the transactions contemplated by any Transaction Document.

          (b) Each Transferring Seller, other than Eric J. Schaefer, has been duly created, and is validly existing as a trust under the laws of the State of Missouri. Each Person executing this Agreement on behalf of a Transferring Seller has the trust power to own such Transferring Seller’s properties and to carry on such Transferring Seller’s business as now being conducted. True and complete copies of the Organizational Documents of each Transferring

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Seller, other than Eric J. Schaefer, as of the Effective Date, and true and complete copies of the minutes of meetings of the board of trustees and all committees thereof of each such Transferring Seller relating to the transactions contemplated by this Agreement have been delivered to Buyer. No such Transferring Seller is in breach of any of its Organizational Documents.

          3.3 No Conflict. Assuming the Approvals described in Schedule 3.2 of Sellers Disclosure Letter have been obtained, the execution and delivery of the Transaction Documents and the consummation of the transactions provided for in the Transaction Documents will not result in the breach of any of the terms and provisions of, or constitute a default under, or conflict with, or cause any acceleration of any obligation of Company, Seller or any Affiliate thereof, or result in the imposition of any Encumbrance on any asset or property owned by any of them under (a) any Contract or other instrument to which it is bound, (b) the Organizational Documents of any Transferring Seller, Company or such Affiliate or (c) any Legal Requirement.

          3.4 Capitalization.

          (a) The Equity Interests of Company are 30,000 authorized shares of common stock, par value $1.00 per share, of which 21,000 shares are Class A Voting Common Stock and 9,000 shares are Class B Non-Voting Common Stock. Of the 30,000 authorized shares of common stock, 70 shares of Class A Voting Common Stock and 30 shares of Class B Non-Voting Common Stock are issued and outstanding and constitute the Shares. All of the Shares have been duly authorized and validly issued, are fully paid and nonassessable and were issued in compliance with all applicable Legal Requirements. Transferring Sellers are and will be on the Closing Date the record and beneficial owners of the Shares, free and clear of any Encumbrances. The delivery of the Shares to Buyer at the Closing pursuant to this Agreement will transfer to Buyer good and valid title thereto, free and clear of all Encumbrances (other than Encumbrances created on or after the Closing related to Buyer’s ownership thereof, as to which no representation or warranty is made by Sellers).

          (b) There are no Equity Interests of Company (i) reserved for issuance or (ii) except as set forth on Schedule 3.4 of Sellers Disclosure Letter, subject to Commitments. Except as set forth on Schedule 3.4 of Sellers Disclosure Letter, there are no Contracts with respect to the voting or transfer of Company’s Equity Interests. Company has no outstanding bonds, debentures, notes, or other obligations (“Voting Debt”), the holder of which has the right to vote (or convertible or exercisable for securities having the right to vote) with the stockholders of Company on any matter.

          3.5 Books and Records. The books and records (including the books of account, minute books, stock record books and other records) of Company are true, complete and correct in all material respects and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. Except as set forth on Schedule 3.5 of Sellers Disclosure Letter, the minute books of Company contain true, complete and correct records of all meetings of, and corporate action taken by, the stockholders, the board of directors and committees thereof.

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          3.6 Subsidiaries; Other Equity Interests. Company has no direct or indirect Subsidiaries, and neither owns, of record or beneficially, nor is party to any Contract to acquire, any Equity Interest in any Person or any direct or indirect Equity Interest in any other business.

          3.7 Bank Accounts, Power, Etc. Schedule 3.7 of Sellers Disclosure Letter sets forth a complete list of each bank, trust company, savings institution, brokerage firm, mutual fund or other financial institution with which Company has an account or safe deposit box and the names and identification of all Persons authorized to draw thereon or to have access thereto.

          3.8 Financial Statements. Attached as Schedule 3.8 of Sellers Disclosure Letter are the following financial statements (collectively, the “Financial Statements”): (i) the audited balance sheets of AAQ as of December 31, 2000 and as of December 31, 2001, with the supplemental balance sheets for Company, and the related statements of income and cash flows for each of the fiscal years ended December 31, 2000 and 2001; (ii) the audited balance sheet of Company as of December 31, 2002, and the related statement of income and cash flow for the fiscal year ended December 31, 2002; (iii) the unaudited balance sheet of Company as of April 30, 2003 (the “Balance Sheet”) and the related statement of income for the period then ended; and (iv) the Balance Sheet with the pro-forma adjustments necessary to account for the transactions contemplated by the Transfer Agreement (the “Pro-Forma Balance Sheet”). The Balance Sheet was prepared in accordance with GAAP and in a manner consistent with the Accounting Policies (except that the Balance Sheet does not include footnotes required by GAAP and it is subject to normal and recurring year-end adjustments which are not reasonably expected, individually or in the aggregate, to be material). The Financial Statements, other than the Pro-Forma Balance Sheet, (a) were prepared in the ordinary course of Company’s business and in accordance with the books of account and other financial records of Company and (b) fairly present in all material respects, as applicable, the financial position, results of operations and cash flows of Company as of each date and for each period covered thereby in accordance with GAAP, with only such deviations from GAAP as are referred to in the notes thereto. The Financial Statements described in clause (ii) above would not be materially different if prepared in accordance with the applicable Accounting Policies. There are no material differences from the information included in the notes to the audited Financial Statements that would be disclosed in footnotes to the unaudited Financial Statements if such footnotes had been prepared.

          3.9 No Undisclosed Liabilities. Company does not have any material debts, liabilities or obligations (including capital commitments), whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable (“Liabilities”), other than Liabilities (i) reflected or adequately reserved for in the Financial Statements, (ii) incurred in the ordinary course of business under Contracts and employee benefit arrangements and (iii) incurred in connection with defending any existing Proceeding involving Company disclosed in Schedule 3.19 of Sellers Disclosure Letter. There are no outstanding warranty claims against Company.

          3.10 Dividends and Other Distributions. Except as set forth on Schedule 3.10 of Sellers Disclosure Letter, there has been no dividend or other distribution of assets or securities whether consisting of money, property or any other thing of value, declared, issued or paid by Company since the Balance Sheet Date.

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          3.11 Accounts Receivable. All accounts receivable of Company that are reflected on the Financial Statements or the accounting records of Company as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales (including reimbursable postage and postage deposits) actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible. The invoicing of Accounts Receivable by Company has been performed accurately in all material respects. Schedule 3.11 of Sellers Disclosure Letter contains a true, complete and correct list of all Accounts Receivable (with receivables for customer postage deposits segregated from the other Accounts Receivable) (i) as of the Balance Sheet Date, which list sets forth the aging of such Accounts Receivable, and (ii) as of the date that is two Business Days before the Effective Date.

          3.12 Absence of Certain Changes and Events. Since the Balance Sheet Date, Company has operated its business only in the ordinary course, and, except as set forth on Schedule 3.12 of Sellers Disclosure Letter:

          (a) Company has not (i) incurred any indebtedness for borrowed money, (ii) issued any debt securities, or (iii) assumed or guaranteed or otherwise become responsible for any indebtedness of any Person;

          (b) Company has not made any acquisition (by merger, consolidation, or acquisition of stock or assets or otherwise) of any other Person;

          (c) Company has not created any Encumbrances on any of its assets, tangible or intangible, other than Encumbrances created by virtue of “after acquired property” clauses in agreements or other documents listed on Schedule 3.21(a)(vi) of Sellers Disclosure Letter pursuant to which Company granted security interests in favor of Commerce Bank, N.A. prior to the Effective Date in certain of Company’s assets to secure a line or lines of credit in connection with the operation of Company;

          (d) Company has not sold, assigned or transferred any of its tangible assets except for sales of inventory in the ordinary course of business;

          (e) Company has not entered into or amended (i) any customer Contract with a Person that is or would be a Significant Person or (ii) any Contract, other than a customer Contract, that is or would be a Material Contract;

          (f) Company has not (i) entered into or amended any employment or severance or similar agreement with any employee (other than the Employment Agreements) or any collective bargaining agreement or (ii) adopted or amended, or increased the payments to or benefits under, any profit sharing, bonus, thrift, stock option, deferred compensation, savings, insurance, restricted stock, pension, retirement, or other employee benefit plan for or with any of its directors, officers or employees;

          (g) Company has not (i) made or changed any Tax election or (ii) made any material change in any method of accounting or accounting practice used by it, other than any such changes required by GAAP;

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          (h) Company has conducted and reflected in its books and records each transaction referenced in Section 3.27 on an arm’s-length basis;

          (i) as of the Effective Date, there has been no change, event or development that has had or would be reasonably likely to have, individually or in the aggregate, a Seller Material Adverse Effect;

          (j) there has not been any material casualty, loss, damage or destruction (whether or not covered by insurance);

          (k) Company has not made any expenditure or commitment to purchase personal property or for additions to property, plant and equipment in excess of $50,000;

          (l) Company has not issued, sold or otherwise disposed of any debenture, note, stock, or Equity Interest or modified or amended any right of any holder thereof;

          (m) Company has not amended, terminated, waived, disposed of, or permitted to lapse, any material license, permit or other Governmental Authorization; and

          (n) there has not been any amendment to the Organizational Documents of Company.

          3.13 Inventory. All inventory of Company, whether or not reflected in the Financial Statements, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Financial Statements or on the accounting records of Company as of the Closing Date, as the case may be. All inventories not written off have been priced at the lower of cost or market on a first in, first out basis.

          3.14 Legal Compliance.

          (a) Except as set forth on Schedule 3.14 of Sellers Disclosure Letter, Company is, and at all times in the last five years has been, in compliance in all material respects with all Legal Requirements applicable to its business, and Company holds all Permits that are required by any Governmental Body to permit it to conduct its business as currently conducted and as currently contemplated to be conducted and all such Permits are valid and in full force and effect. Except as set forth on Schedule 3.14 of Sellers Disclosure Letter, none of Sellers or Company has received any written notice of any violation of a Legal Requirement, nor, to the Knowledge of Sellers, do facts or circumstances exist which may reasonably be expected to give rise to any material violation.

          (b) Company has implemented all such measures required for it to comply with its obligations as a Business Associate of its Health Plan and Provider customers under the privacy regulations (45 C.F.R. 160 and 164) promulgated under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). With respect to any obligations of Company related to its compliance with HIPAA, if any, or its customers’ compliance with HIPAA, including any privacy and security commitments for Protected Health Information (as defined under HIPAA) by Company or any of its Affiliates (the “HIPAA Commitments”), (i) Company

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is in material compliance with the HIPAA Commitments; (ii) the transactions contemplated by this Agreement will not violate any of the HIPAA Commitments; (iii) Company has not received written inquiries from the Department of Health and Human Services, the Federal Trade Commission or any other Governmental Body regarding Company’s compliance with the HIPAA Commitments; and (iv) the HIPAA Commitments have not been rejected by any applicable certification organization which has reviewed such HIPAA Commitments or to which any such HIPAA Commitment has been submitted. Company and its Affiliates have not engaged in any activity constituting fraud or abuse under any Laws relating to healthcare insurance or reimbursement. Company and its Affiliates are not engaging in any activities such that Company and/or its Affiliates are Covered Entities (as such term is defined under HIPAA).

          3.15 Tax Matters.

          (a) Except as set forth on Schedule 3.15 of Sellers Disclosure Letter, all Tax Returns required to be filed by, on behalf of, or that include Company have been timely filed in all jurisdictions in which such Tax Returns are required to be filed, and all such Tax Returns were true, correct and complete in all material respects; all Taxes shown on such Tax Returns to be due and payable have been fully and timely paid; and Company has no liability for Taxes, other than those set forth on or adequately reserved for in the Financial Statements or those incurred since the Balance Sheet Date in the ordinary course of business.

          (b) Company has duly and timely withheld and paid over to the appropriate Governmental Bodies all Taxes required to be so withheld and paid over under all applicable laws in connection with amounts paid or owing to any employee, independent contractor, subcontractor, lender, stockholder or other third party.

          (c) Schedule 3.15 of Sellers Disclosure Letter sets forth a complete list of all income and franchise Tax Returns and any other material Tax Returns filed by Company for all taxable periods ended after December 31, 1997 and all such Tax Returns that currently are the subject of audit (including any jurisdictions for which only a written notice of audit has been received) or as to which there are other pending administrative or court proceedings with respect to any Taxes for which Company may be liable (including severally liable). Except as set forth on Schedule 3.15 of Sellers Disclosure Letter, Company has made available to Buyer complete copies of all income and franchise and other material Tax Returns, and statements of deficiencies assessed against or agreed to by, Company for all taxable periods ended after December 31, 1997.

          (d) (i) Except as set forth on Schedule 3.15 of Sellers Disclosure Letter, neither Company nor any of its Affiliates has received any written notice of any assessment or intent to make any assessment by any Governmental Body regarding Taxes for which Company may have primary or, to the Knowledge of Sellers, secondary liability that have not been fully and irrevocably resolved; (ii) there are no pending requests for rulings from any Governmental Body with respect to Taxes of Company; (iii) except as set forth on Schedule 3.15 of Sellers Disclosure Letter, no written claim has been made by a Governmental Body in a jurisdiction where Company does not file Tax Returns that Company is or may be subject to taxation by that jurisdiction or is obliged to act as withholding agent under the laws of that jurisdiction; (iv) no waiver or extension of any statute of limitations has been given or requested with respect to

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Company in connection with any Tax Returns which would remain effective on the Closing Date.

          (e) There are no Liens on any of the assets of Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax which is currently due and payable.

          (f) Company is not a party to or bound by any agreement now in effect providing for the allocation, sharing or indemnification of Taxes, and there are no powers of attorney currently in effect with respect to any matter related to Taxes of Company. Distributions with respect to Shares in calendar year 2001 have been, and in calendar year 2002 and in the current tax year as of the Closing Date will be, made by Company to the owners of the Shares on a pro-rata basis based upon Share holdings.

          (g) Except as set forth on Schedule 3.15 of Sellers Disclosure Letter, Company has never been a member of any affiliated group for Tax purposes.

          (h) The transactions contemplated by this Agreement will not result in any payment, or the assumption of any obligation to make a payment, that would constitute an “excess parachute payment” within the meaning of Section 280G of the Code.

          (i) Neither Company nor any other Person on its behalf (i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a “subsection (f) asset” (as such term is defined in Section 341(f)(4) of the Code) owned by Company; (ii) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law or any other agreement relating to Taxes that could reasonably be expected to have an effect on Company’s liability for, or reporting of, Taxes in any period after the Closing Date; or (iii) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law.

          (j) No indebtedness of Company is (i) “corporate acquisition indebtedness” within the meaning of Code Section 279(b), (ii) an “applicable high yield discount obligation” within the meaning of Code Section 163(i), or (iii) debt on which any portion of the interest thereon is “disqualified interest” within the meaning of Code Section 163(f).

          (k) Company is, and effective January 1, 2001 has been, an S Corporation within the meaning of Sections 1361 and 1362 of the Code (and comparable state statutes, if applicable) for federal income Tax purposes, as well as for Missouri state income Tax purposes.

          (l) Since December 31, 2002, Company has not prepared or filed any Tax Return inconsistent with past practice or, on any such Tax Return, taken any position, made any election, or adopted any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods (including positions, elections or methods which would have the effect of deferring income to periods after the Closing Date or accelerating deductions to periods on or prior to the Closing Date).

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          3.16 Employee Benefits.

          (a) Employee Benefit Plans and Agreements.

     (i) Company is not, and has never been, a party to or bound by any collective bargaining agreement or similar Contract with any labor organization or employee association. Schedule 3.16(a)(i) of Sellers Disclosure Letter sets forth a complete list of all employee benefit plans, employment or severance agreements and other similar Contracts to which Company is or ever has been since January 1, 1998 a party or by which it is or ever has been since January 1, 1998 bound (including as a participating employer), legally or otherwise (the “Plans”), including (a) any profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, (b) any plan, agreement or arrangement providing for “fringe benefits” or perquisites to employees, officers, directors or agents, including benefits relating to company automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life insurance and other types of insurance, (c) any employment agreement, or (d) any other “employee benefit plan” within the meaning of Section 3(3) of ERISA. Schedule 3.16(a)(i) of Sellers Disclosure Letter sets forth a complete list of the plan sponsor for each Plan (i.e. indicating whether Company or another Company Person is the plan sponsor for each Plan).

     (ii) Schedule 3.16(a)(ii) of Sellers Disclosure Letter sets forth a complete list as of the Balance Sheet Date, of past and current employees of Company and, on a per employee basis, their salaries, bonuses and other compensation, as well as vacation or other compensated absences accrued for each such employee. Not later than two Business Days prior to the Closing Date, Sellers will deliver an updated version of Schedule 3.16 of Sellers Disclosure Letter setting forth such information as accrued through the Closing Date.

     (iii) Except as otherwise disclosed on Schedule 3.16(a)(iii) of Sellers Disclosure Letter, Company has delivered to Buyer true and complete copies of all documents and summary plan descriptions with respect to the Plans or summary descriptions of any Plans not otherwise in writing.

     (iv) Company is in compliance with the applicable provisions of ERISA, the regulations and published authorities thereunder, and all other laws applicable with respect to the Plans in all material respects. Except as set forth on Schedule 3.16(a)(iv) of Sellers Disclosure Letter, Company has performed all of its obligations under the Plans. To the Knowledge of Sellers, there are no legal proceedings (other than routine claims for benefits) pending or threatened against the Plans or their assets, or arising out of the Plans and, except as set forth on Schedule 3.16(a)(iv) of Sellers Disclosure Letter all of the Plans have been operated in compliance with their terms in all material respects. To the Knowledge of Sellers, no facts exist which could give rise to any such legal proceedings.

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     (v) Except as otherwise disclosed on Schedule 3.16(a)(v) of Sellers Disclosure Letter, each of the Plans can be terminated by Company within a period of 30 days following the Closing Date, without payment of any additional compensation or amount or the additional vesting or acceleration of any benefits.

     (vi) All obligations of Company under each of the Plans (A) that are due prior to the Closing Date, have been paid or will be paid prior to that date, and (B) that have accrued prior to the Closing Date have been or will be paid or properly accrued at that time.

     (vii) Company has classified all individuals who perform services for Company correctly under the Plans, ERISA and the Code as common law employees, independent contractors, leased employees, and exempt or non-exempt employees.

     (viii) No payment which is due under any of the Plans or otherwise which is contingent in whole or in part on the transactions described in this Agreement will be an “excess parachute payment” within the meaning of Section 280G of the Code.

          (b) Qualified Plans.

     (i) Each Plan which is intended to satisfy the requirements of Section 401(a) of the Code is qualified in form and operates in all material respects in accordance with Section 401(a) of the Code. No event has occurred that could reasonably be expected to give rise to disqualification or loss of tax-exempt status of any such Plan or trust thereunder under such sections. No event has occurred that could reasonably be expected to subject any such Plan to tax under Section 511 of the Code. Except as otherwise disclosed on Schedule 3.16(b)(i) of Sellers Disclosure Letter, Company has not engaged in any prohibited transaction (within the meaning of Section 4975 of the Code) or party-in-interest transaction (within the meaning of Section 406 of ERISA) with respect to any Plan, and to the Knowledge of Sellers, no such prohibited transaction or party-in-interest transaction has occurred with respect to any Plan.

     (ii) Except as otherwise disclosed on Schedule 3.16(b)(ii) of Sellers Disclosure Letter, Company has delivered to Buyer for each applicable Plan copies of the following documents: (A) the Form 5500 filed in the most recent plan year, including all schedules thereto and financial statements with attached opinions of independent accountants, and (B) the most recent determination letter from the Internal Revenue Service. The financial statements so delivered fairly present the financial condition and the results of operations of each such Plan as of such dates in accordance with GAAP.

          (c) Title IV Plans. No Plan is a “single employer plan” within the meaning of Section 4001(a)(15) of ERISA or a “multiemployer plan” within the meaning of Section 3(37) of ERISA. Neither Company, nor any ERISA Affiliate has ever maintained or had an obligation to

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contribute to a “single employer plan” within the meaning of Section 4001(a)(15) of ERISA or a “multiemployer plan” within the meaning of Section 3(37) of ERISA.

          (d) Health Plans. All group health plans of Company and any ERISA Affiliate have been operated in material compliance with the group health plan continuation coverage requirements of Section 4980B of the Code. Except as required under Section 4980B of the Code, neither Company nor any ERISA Affiliate has any obligation to provide health benefits to any employee following termination of employment.

          (e) Fines and Penalties. Except as disclosed on Schedule 3.16 of Sellers Disclosure Letter, there has been no act or omission by Company or any ERISA Affiliate that has given rise to or may give rise to fines, penalties, taxes, or related charges under Section 502(c) or (i) or Section 4071 of ERISA or Chapter 43 of the Code.

          3.17 Labor Relations. There is not any, and in the five years preceding the Effective Date there has been no, (i) pending or threatened strike, slowdown, picketing, work stoppage, material labor dispute, (ii) pending application for certification of a collective bargaining agent against Company or (iii) union organizing or election activity involving any employee of Company.

          3.18 Transferred Employees. Schedule 3.18 of Sellers Disclosure Letter sets forth a complete list of each of the employees currently being employed by AAQ or Teralogix that are to become employees of Company upon the Closing (the “Transferred Employees”), and, on a per employee basis, their salaries, bonuses and other compensation, as well as vacation and other compensated absences accrued for each such employee. Not later than two Business Days prior to the Closing Date, Sellers will deliver an updated version of Schedule 3.18 of Sellers Disclosure Letter setting forth such information as accrued through the Closing Date.

          3.19 Legal Proceedings. Except as set forth on Schedule 3.19 of Sellers Disclosure Letter, there is no Proceeding pending or, to the Knowledge of Sellers, threatened against or affecting Company or its properties or assets and, to the Knowledge of Sellers, no event has occurred or circumstance exists that would be reasonably likely to give rise to or serve as the basis for any such Proceeding. Except as set forth on Schedule 3.19 of Sellers Disclosure Letter, there is no matter as to which Company or any Seller has received any notice, claim or assertion, or, which otherwise has been threatened or to the Knowledge of Sellers could reasonably be expected to be threatened or initiated, against or affecting any director, officer, employee, agent or representative of Company or any other Person, nor is there any reasonable basis therefor, in connection with which any such Person has or may reasonably be expected to have any right to be indemnified by Company.

          3.20 Insurance. Company is, and at all times during the past five years has been, insured with reputable insurers against all risks normally insured against by companies of similar size and in similar lines of business. Schedule 3.20 of Sellers Disclosure Letter sets forth a list of all insurance policies with respect to which Company is a named insured, and such coverages are in full force and effect and will continue in full force and effect following consummation of the transactions contemplated hereby (subject to such entities’ continuing compliance with the applicable terms thereof). None of Company or any Seller has received any

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notice or other indication from any insurer or agent of any intent to cancel or not so renew any of such insurance policies and there are no pending or, to the Knowledge of Sellers, threatened claims against such insurance as to which the insurer has denied liability. All due premiums have been paid and are not subject to any retroactive premium adjustment or other material loss-sharing arrangement. No Company Person is in default under any such policy. Company has timely filed claims with the respective insurers with respect to all material matters and occurrences for which Sellers believe Company has coverage.

          3.21 Material Contracts.

          (a) Identifying Material Contracts. Schedule 3.21 of Sellers Disclosure Letter contains a list of each of the following Contracts to which Company is a party or by which its assets or properties are bound (each a “Material Contract”):

     (i) all Contracts that Sellers reasonably anticipate may, in accordance with its terms, involve aggregate payments by Company of more than $25,000 within the 12 month period following the Effective Date and that is not cancelable by Company without liability on 30 or less days’ notice to the other party thereto;

     (ii) all Contracts for the lease of personal property by Company that Sellers reasonably anticipate may, in accordance with its terms, involve annual payments in excess of $25,000 and not cancelable without liability on 30 or less days’ notice to the lessor;

     (iii) all Contracts with independent distributors or sales agents anticipated to involve aggregate payments by Company of more than $25,000 within the 12 month period following the Effective Date and that is not cancelable by Company without liability on 30 or less days’ notice to the other party thereto;

     (iv) all employment agreements or severance agreements;

     (v) all Contracts that limit or purport to limit the ability of Company to engage in any line of business or compete with any Person or otherwise conduct its business in any geographic area or during any period of time;

     (vi) all Contracts evidencing indebtedness for borrowed money;

     (vii) all Contracts under which any Person has directly or indirectly guaranteed the indebtedness, liabilities or obligations of Company or Company has directly or indirectly guaranteed the indebtedness, liabilities or obligations of any Person;

     (viii) all Contracts which are joint venture or partnership agreements or other Contracts involving a sharing of profits, losses or costs with any other Person;

     (ix) all Contracts relating to product warranties, guaranties and/or other similar undertakings with respect to contractual performance extended by

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Company other than in the ordinary course of business consistent with past practice;

     (x) all licensing agreements or other Contracts with respect to Company Intellectual Property;

     (xi) all Contracts that contain a right of first refusal;

     (xii) all Contracts that require Company to buy or sell goods or services with respect to which there will be material losses or will be costs and expenses in excess of expected receipts;

     (xiii) all Contracts that are material to Company and are terminable upon or prohibit a change of ownership or control of Company;

     (xiv) all Contracts between Company and its officers or directors;

     (xv) all Contracts between Company and any Significant Person;

     (xvi) all Contracts with any Governmental Body;

     (xvii) all Contracts involving the payment by Company of royalties or other amounts calculated based upon the revenues, income or similar measures of results of Company or based upon income, revenues, unit sales or similar measures of results related to any product or service of Company or containing any other form of variable pricing terms depending on future results of Company or any of its products or services;

     (xviii) all Contracts that provide for Company to be the exclusive or a preferred provider of any product or service to any Person or the exclusive or a preferred recipient of any product or service of any Person during any period of time or that otherwise involves the granting by any Person to Company of exclusive or preferred rights of any kind;

     (xix) all Contracts that provide for any Person to be the exclusive or a preferred provider of any product or service to Company or the exclusive or a preferred recipient of any product or service of Company during any period of time or that otherwise involves the granting by Company to any Person of exclusive or preferred rights of any kind; and

     (xx) all Contracts that were not made in the ordinary course of business.

          (b) Delivery; Compliance; Past Practice. A true copy (or detailed description if such Material Contract is oral) of each Material Contract has been delivered to Buyer. Each Material Contract: (i) is valid and binding on Company and, to the Knowledge of Sellers, the other parties thereto, and is in full force and effect; (ii) contains terms and conditions consistent with past and current practice as conducted between Company and the other parties thereto (including the billing and invoicing practice and policies of Company); and (iii) upon

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consummation of the transactions contemplated by this Agreement, will continue in full force and effect without penalty or other adverse consequence, and without obtaining any Approval. Company is not in breach of or default under any Material Contract and, to the Knowledge of Sellers, no other party to any Material Contract is in breach thereof or default thereunder.

          (c) Payments, Adjustments and Credits. Schedule 3.21 of the Sellers Disclosure Letter contains a description of any assertions by customers that Company (i) has issued checks incorrectly, or (ii) failed to provide accurate billing, invoicing or check issuance services that resulted in refunds, credits or other adjustments (other than refunds of postage deposits) greater than $10,000 being issued by Company.

          3.22 Personal Property; Sufficiency of Assets. Except as set forth on Schedule 3.22 of Sellers Disclosure Letter, Company has good title to or other right to use, free of Encumbrances, all of its tangible personal property used in or necessary for its business. All such personal property is in good operating condition and repair as required for use in Company’s business, taking into account reasonable wear and tear. The assets, properties and rights of Company reflected in the Financial Statements (including the notes thereto) or acquired since the Balance Sheet Date comprise and, following the Closing and after giving effect to the transactions contemplated by the Transfer Agreement and the Transition Services Agreement, will comprise, all assets, properties and rights necessary in its business in all material respects as currently conducted and as currently planned to be conducted.

          3.23 Real Property.

          (a) Company owns no Real Property. Schedule 3.23 of Sellers Disclosure Letter sets forth the address of each parcel of leased Real Property of Company and a list of all Leases for each such parcel of leased Real Property. Sellers have delivered to Buyer a true copy of each such Lease document as of the Effective Date. With respect to each such Lease: (i) the Lease is in full force and effect and Company has a valid leasehold interest in, or other right to use, free and clear of Encumbrances, each parcel of leased Real Property; (ii) the transactions contemplated by this Agreement will not result in a breach of or default under the Lease, and will not otherwise cause the Lease to cease to be in full force and effect on identical terms following the Closing; (iii) neither Company nor, to the Knowledge of Sellers, any other party to the Lease, is in breach or default thereunder; and (iv) Company’s possession and quiet enjoyment of the leased Real Property under the Lease has not been disturbed and there are no disputes with respect to the Lease.

          (b) The buildings, plants, facilities, structures and equipment of Company are structurally sound, are in good operating condition and repair, taking into account reasonable wear and tear, and are adequate for the uses to which they are being put, and none of such buildings, plants, facilities, structures and equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The buildings, plants, facilities, structures and equipment of Company are sufficient for the continued conduct of its businesses and are suitable for operation after the Closing in substantially the same manner as conducted prior to the Closing.

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           (c) The consent of LJP Investments-II, L.L.C. (predecessor-in-interest to H W Development, L.L.C.) to the current subleasing arrangement between AAQ and Company for a portion of the premises currently being leased by AAQ pursuant to the Master Lease, as such consent is set forth in the letter dated March 19, 2003 from LJP Investment-II’s agent A.M.C.I. Incorporated, is valid and effective, and no further consent of the “landlord” under the Master Lease is (or will be) required as a result of the execution of the Sublease and/or the consummation of the sale and purchase of the Shares as contemplated by this Agreement for Company to enjoy the undisturbed use of the premises covered by the Sublease for the term thereof, subject to the terms thereof.

          3.24 Environmental Matters. None of Sellers, Company, or any of their respective Affiliates has received during the last five years any notice, demand, letter, claim or request for information alleging that it may be in violation of or subject to liability under any Environmental Law. Company is not subject to any Order or other arrangement with any Governmental Body or any Contract with any third party relating to liability under any Environmental Law or relating to Hazardous Substances. Sellers have made available to Buyer copies of all environmental reports, studies, assessments, sampling data and other environmental information in their possession or the possession of Company relating to Company or its respective current and former properties or operations. There are no underground storage tanks on, in or under any properties presently or formerly owned or operated by Company and no underground storage tanks have been closed or removed from any such properties which are or have been in the ownership of Company, provided, however, that with respect to any properties formerly owned or operated by Company the representation in this sentence is limited to the period that Company owned or operated such properties. There is no asbestos present in any property presently owned or operated by Company, and no asbestos has been removed from any property while such property was owned or operated by Company. None of the properties presently or formerly owned or operated by Company has been used at any time by Company as a sanitary landfill or hazardous waste disposal site. Company has complied at all times with all applicable Environmental Laws. No property currently owned or operated by Company (including soils, groundwater, surface water, buildings or other structures) is contaminated with any Hazardous Substance. No property formerly owned or operated by Company was contaminated with any Hazardous Substance during or prior to such period of ownership or operation. Company is not subject to liability for any Hazardous Substance disposal or contamination on any third party property. Company has not been associated with any release or threat of release of any Hazardous Substance. There are no other circumstances or conditions involving Company that could reasonably be expected to result in any claim, liability, investigation, cost or restriction on the ownership, use, or transfer of any property pursuant to any Environmental Law.

          3.25 Intellectual Property. Schedule 3.25 of Sellers Disclosure Letter sets forth a true and complete list of all Intellectual Property, including Software and work made for hire, owned or utilized by or licensed to Company, or that is used, held for use by Company or any Company Person, or otherwise relates to its business (each such piece of Intellectual Property listed or required to be listed, “Company Intellectual Property”), which list briefly describes the item (including filing particulars, if applicable) and specifies its owner. Company has the exclusive ownership of and/or right to use in any manner, in any and all languages and by any means or media now known or hereafter devised, in perpetuity and worldwide, and all free

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and clear of any royalty, payment, credit or other obligations, claims of infringement or other Encumbrances, all Company Intellectual Property, and Company is not in conflict with or in violation or infringement of, nor has Company received any notice alleging or otherwise learned nor does any Seller have Knowledge of any conflict with or violation or infringement of, any Contract or other alleged rights of any Person with respect to any Company Intellectual Property. Company has taken every step to maintain and protect each item of Registered Company Intellectual Property, and has taken reasonable steps necessary and appropriate to protect the other categories of Company Intellectual Property including steps reasonably necessary to protect know how and similar items as trade secrets of the Company, and no filing for Registered Company Intellectual Property is invalid, abandoned, canceled, lapsed or otherwise unenforceable. Company has fully complied with any and all formal legal and/or administrative requirements related to each piece of Registered Company Intellectual Property (including the payment of all maintenance fees related thereto, and the timely post-registration filing of affidavits of use and incontestability and renewal applications) which are due prior to or on the Closing Date. No Proceeding (including any opposition, public protest, interference, invalidation and/or cancellation proceeding or other claim) has ever been brought against any Registered Company Intellectual Property and no such Proceeding is either pending or threatened. Without limiting the generality of, or providing an exception to (except where specifically noted), the foregoing representations and warranties, Sellers make the following additional representations and warranties.

          (a) Software. Company: (i) has licensed copies of all Retail Software and Negotiated Software and does not possess any pirated, illegally copied, bootleg or otherwise non-licensed copies of any Retail Software or Negotiated Software; (ii) has rights in the Negotiated Software as described in Schedule 3.25(a)(ii) of Sellers Disclosure Letter; (iii) has the exclusive right to display, perform, copy, modify, create derivative works, manufacture, distribute, license, use and otherwise exploit all Company Owned Software, in each and every data carrying medium, whether now known or hereafter devised, that it has created, is presently creating or otherwise owns or controls the rights to, and (iv) owns the source code included in all Company Owned Software, including the exclusive right to modify, create derivative works, make additions to, use and otherwise exploit, in any and all languages and by any means or media now known or hereafter devised, in perpetuity and throughout the universe, free and clear of any Encumbrances, all such source code.

          (b) URLs; Websites. Company has, or after giving effect to the transactions contemplated by the Transfer Agreement will have, sole ownership of the URLs listed on Schedule 3.25(b) of Sellers Disclosure Letter and any and all content and programming scripts within any website located at such URLs in any and all languages and by any means or media now known or hereafter devised, in perpetuity and worldwide, free and clear of any Encumbrances.

          (c) Preexisting Code. Sellers Disclosure Letter contains a complete and accurate list of the Preexisting Code within the Software, including the title and a brief description thereof. There are no third party rights, including Intellectual Property rights, to such Preexisting Code that will interfere with Company’s ownership and/or exclusive use of such Software.

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          (d) Works For Hire. Each current and former employee of each Company Person, and each independent contractor of such Company Person has executed a written Contract with such Company Person of the type set forth on Schedule 3.25 of Sellers Disclosure Letter. No employee of any Company Person has entered into any Contract that restricts or limits in any way the scope or type of work in which he may be engaged or requires him to transfer, assign, or disclose any Intellectual Property devised, developed, or designed by him for or on behalf of Company to any Person other than Company, and Company has exclusive ownership of all such work made for hire. All individuals who developed the Current Platform Software and MCDS Software were, at the time of such development, either: (i) bona fide employees of Company; or (ii) bona fide employees of Teralogix all of whose rights in such software will be transferred to Company pursuant to the Teralogix Amendment.

          (e) Intellectual Property Contracts. No party to any Contract concerning Intellectual Property (including Negotiated Software) to which Company is a party or third party beneficiary (an “Intellectual Property Contract”) has given notice of its intention to terminate, or of its intention to alter the scope of rights available under, or of its intention to fail to renew, such Contract. Company has not, and, to the Knowledge of Sellers, no other party has, breached any Intellectual Property Contract in any material respect. Company has not received notice that it has breached any Intellectual Property Contract in any material respect. The consummation of the transactions contemplated by this Agreement will not breach, terminate, provide any right to terminate, or reduce or impair any rights under, any Intellectual Property Contract.

          (f) No Use of Affiliate Intellectual Property. With the exception of the Simon License, Company does not use or require any Intellectual Property owned, in whole or in part, licensed by or otherwise held for use by any Company Person (other than Company), except as expressly contemplated to be transferred to Company pursuant to the Transfer Agreement.

          (g) Platform Software. The Current Platform Software in production use by Company as of the Effective Date is fully adequate for the business of Company, meets all requirements of customers and contracts of Company, and will be fully adequate and meet all customer and contract requirements of Company, including volume requirements of customers and contracts, contemplated in the Budget. The MCDS Software running on the Windows 2000 operating system and the Linux operating system to be implemented and placed in production use by Company after the Effective Date will, upon such implementation and placement in production, be fully adequate for the business of Company, will meet all requirements of customers and contracts of Company, and will be fully adequate and meet all customer and contract requirements of Company, including volume requirements of customers and contracts, contemplated in the Budget, or will be fixed so that it does or is, as the case may be, within a commercially reasonable time following such implementation and placement in production, provided that such bug fixes or other corrections will not significantly disrupt Company’s business or have a significant adverse effect on customer relationships or significant cost. When the MCDS Software is implemented, Company can immediately revert, if necessary in Company’s sole discretion, to production use of the Current Platform Software, without any disruption to Company’s business, adverse effect on customer relationships, or significant cost.

          (h) No Public Software. Except as set forth in Schedule 3.25(h) of Sellers Disclosure Letter, no Public Software: (i) forms part of the Current Platform Software or the

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MCDS Software; (ii) was, or is, used in connection with the development of the Current Platform Software or the MCDS Software; or (iii) was, or is, incorporated or distributed, in whole or in part, in conjunction with the Current Platform Software or the MCDS Software or in the conduct of the business of Company.

          3.26 Affiliate Transactions. Except as set forth on Schedule 3.26 of Sellers Disclosure Letter, no Seller, Seller Affiliate, or any of Company’s officers, directors, employees or Affiliates, has any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in or pertaining to Company’s business. Except as set forth on Schedule 3.26 of Sellers Disclosure Letter, no Seller or any of Company’s officers, directors, employees or Affiliates, owns an Equity Interest or any other financial or profit interest in any Person (except for Equity Interests of any Seller in AAQ, except for Equity Interests of AAQ in any Subsidiary of AAQ, and except for Equity Interests that are less than 5% of the outstanding capital stock of any such Person that is a publicly traded entity) that has (i) had business dealings or a material financial interest in any transaction with Company during the past five years or (ii) engaged in competition with Company during the past five years.

          3.27 Affiliate Assets and Services. Schedule 3.27 of Sellers Disclosure Letter sets forth a complete list of (with related dollar amounts, whether or not reflected on or disclosed in the notes to the Financial Statements) each (i) transaction between Company and any other Company Person including each product, service or other thing of value provided to or performed on behalf or for the benefit of Company by any Company Person other than Company in the 18 months immediately preceding the Effective Date, (ii) asset (including software and software tools) used by Company and held or owned by any Company Person other than Company, (iii) employee of any Company Person other than an employee of Company that devotes time to Company (including the time such employee so devotes), (iv) other asset (including software and software tools) or lease, sublease, license, concession or other Contract shared by Company with any Company Person other than Company; and (v) any asset or monetary transactions or transfers between Company on the one hand and any Company Person other than Company on the other hand. All matters referenced above have been conducted and reflected in the books and records of Company on an arm’s-length basis.

          3.28 Significant Persons. Other than routine verbal communications with customers and vendors regarding immaterial complaints concerning services and pricing, Company has no outstanding disputes concerning its goods or services with any Person described on Exhibit S (each, a “Significant Person”). No Seller nor Company has received any written notice from any Significant Person, nor to the Knowledge of Sellers has any Significant Person threatened, that such Person will not continue its relationship with Company or Buyer after the Closing or that such Person intends to terminate or materially modify existing Contracts with Company or materially reduce the amount paid to Company for products or services; and to the Knowledge of Sellers, no event or circumstances exist that may be reasonably likely to give rise to or serve as the basis therefor. No Seller nor Company has received written notice from any Significant Person that it intends to file a petition under applicable bankruptcy laws or otherwise seek relief from or make an assignment for the benefit of its creditors, and to Sellers’ Knowledge, no such notice or action has been threatened. Notwithstanding the representations and warranties set forth in this Section 3.28, Buyer acknowledges and agrees that Sellers make no, and will not be deemed to have made any, representation or warranty as to the effect

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(positive or negative) that the public announcement of this Agreement or the consummation of the transactions provided for hereunder (including the affiliation of Company with Buyer from and after the Closing) will have on the relationship of Company with any Significant Person or any other client, customer, vendor, or supplier of Company.

          3.29 Investment Representation. Except in accordance with the Registration Rights Agreement, each Transferring Seller is acquiring any shares of Buyer’s common stock issuable pursuant to Section 2.4, if any, for investment purposes only for its own account and not with a view to the resale or distribution of any part thereof in any transaction or series of transactions that would require its registration under applicable Legal Requirements.

          3.30 Sophistication. Each Transferring Seller (i) except as set forth in Schedule 3.30 of Sellers Disclosure Letter, is an “accredited investor” as defined in Rule 501(a) of the rules promulgated under the Securities Act; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of his investment in shares of Buyer’s common stock; (iii) has the ability to bear the economic risks of such investment; (iv) has the capacity to protect his own interests in connection with the transactions contemplated by the Transaction Documents; (v) has had full opportunity to obtain such financial and other information from Buyer as he deems necessary, or appropriate, in connection with evaluating the merits of the investment in shares of Buyer’s common stock and to conduct whatever due diligence he has deemed appropriate; (vi) has made his own independent investigation and evaluation of Buyer and is relying on such investigation and evaluation, together with the representations and warranties of Buyer set forth in Article 4, in making its decision to engage in the transactions contemplated hereby; and (vii) understands that any certificates representing shares of Buyer’s common stock issuable pursuant to Section 2.4 will bear the following legends:

     “The shares of common stock represented by this certificate were originally issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”). The shares may not be sold, offered for sale, pledged or otherwise transferred or assigned in the absence of an effective registration statement for the shares under the Act, or an opinion of counsel reasonably satisfactory to WebMD Corporation and its counsel, that registration is not required under the Act.

     In addition, transfer of the shares of common stock represented by this certificate is subject to certain restrictions forth in a Registration Rights Agreement dated as of          , 2003, and any amendments thereto, copies of which are available for inspection at the office of the Company.”

          3.31 Powers of Attorney. Schedule 3.31 of Sellers Disclosure Letter sets forth a complete list of each power of attorney or other similar Contract under which Company has granted a power of attorney or other similar power (each a “Power of Attorney”).

          3.32 Key Man Insurance. Company has no remaining obligations (contingent or otherwise) on any insurance policy taken out on the life or well-being of any Individual Seller.

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          3.33 Postage Deposits. Schedule 3.33 of Sellers Disclosure Letter sets forth a complete list of any liability for customer postage deposits, listed by customer, on the books and records of Company as of the Effective Date.

          3.34 Brokers or Finders. No agent, broker, finder, or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Company or Sellers in connection with the negotiation, execution or performance of the Transaction Documents, is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement or the transactions contemplated, except U.S. Bancorp Piper Jaffray Inc. Subject to Section 7.5, Sellers will have full responsibility for the payment of all fees and expenses to U.S. Bancorp Piper Jaffray Inc., and Buyer will not have any liability in respect thereof.

          3.35 No Representation re Memorandum; Disclaimer of Projections. Notwithstanding anything herein to the contrary, but without limiting the representations and warranties specifically set forth in this Agreement, Sellers make no representation or warranty to Buyer with respect to (i) the information set forth in the Confidential Memorandum dated January 2003 distributed by U.S. Bancorp Piper Jaffray in connection with the transactions contemplated hereby, or (ii) any financial projection or forecast relating to the Business or Company, including any underlying assumptions related thereto. With respect to any such projection or forecast delivered by or on behalf of Sellers to Buyer, Buyer acknowledges that (w) there are uncertainties inherent in attempting to make such projections and forecasts, (x) it is familiar with such uncertainties, (y) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (z) it will have no claim against any of the Sellers or Company with respect thereto, except for any claim based on fraud by any Seller.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

          Subject to the exceptions set forth in the disclosure letter delivered to Sellers Representative on the date of this Agreement (“Buyer Disclosure Letter”), Buyer represents and warrants to Sellers as follows:

          4.1 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Buyer is not in breach of any of its Organizational Documents. Buyer and each of its Subsidiaries has the full corporate power and authority to own, lease and operate its property and assets and carry on its respective business as now being conducted, except to the extent that any failure to have such corporate power has not had and would not reasonably be expected to result in a Buyer Material Adverse Effect.

          4.2 Authority; Validity; Consents. Buyer has the requisite power, capacity and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party and to consummate the transactions contemplated by such Transaction Documents. The execution, delivery and performance of the Transaction Documents to which it is a party by Buyer and the consummation of the transactions

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contemplated by such Transaction Documents have been duly and validly authorized by all necessary corporate action in respect thereof. This Agreement has been duly executed and delivered by Buyer and constitutes, and each other Transaction Document to which it is a party when executed and delivered by Buyer will constitute, the legal, valid and binding obligations of Buyer, enforceable against it in accordance with their respective terms except as such enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally or general principles of public policy. Buyer is not required to give any notice to or obtain any Approval in connection with the execution and delivery of the Transaction Documents to which it is a party or the consummation or performance of any of the transactions contemplated by any such Transaction Document.

          4.3 No Conflict. Assuming the Approvals described in Schedule 4.2 of Buyer Disclosure Letter have been obtained, the execution and delivery of the Transaction Documents and the consummation of the transactions provided for in the Transaction Documents will not result in the breach of any of the terms and provisions of, or constitute a default under, or conflict with, or cause any acceleration of any obligation of Buyer or result in the imposition of any Encumbrance on any asset or property owned by Buyer under (a) any Contract to which it is bound, (b) the Organizational Documents of Buyer, (c) any Order, or (d) any Legal Requirement except to the extent such breach, default or conflict would not affect the ability of Buyer to consummate the transactions contemplated by the Transaction Documents.

          4.4 Certain Proceedings. There is no pending Proceeding that has been commenced against or otherwise relating to or involving Buyer or any of its assets that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by the Transaction Documents to which it is a party. To Buyer’s Knowledge, no such Proceeding has been threatened.

          4.5 Investment Representation. Buyer is acquiring the Shares for investment purposes only for its own account and not with a view to the resale or distribution of any part thereof in any transaction or series of transactions that would require their registration under applicable Legal Requirements.

          4.6 Financing. Buyer will have sufficient cash, available lines of credit or other sources of funds to enable it to make the Closing Payment and any Contingent Payment(s).

          4.7 Buyer Shares. The shares of Buyer’s common stock issuable pursuant to Section 2.4, if any, will be, upon such issuance, duly authorized and validly issued and fully paid and nonassessable.

          4.8 Brokers or Finders. Neither Buyer nor its officers and agents have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement.

          4.9 SEC Filings.

          (a) Buyer has filed all forms, reports and documents required to be filed by it with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act since December 31, 2001 (collectively, the “Buyer SEC Reports”). As of the respective dates they were filed (or if

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amended or superseded by a filing prior to the Effective Date, on the date of such amending or superseding filing), (i) the Buyer SEC Reports complied in all material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) none of the Buyer SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

          (b) Each of the consolidated-financial-statements (including, in each case, any notes and schedules thereto) contained in the Buyer SEC Reports complied in all material respects as to form with the applicable accounting requirements and rules and regulations of the SEC and was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC), and each presented fairly, in all material respects, the consolidated financial position of Buyer and the consolidated Subsidiaries of Buyer as of the respective dates thereof and their results of operations and cash flows for the respective periods indicated therein, all in accordance with GAAP (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected to be material in amount).

          4.10 Absence of Buyer Material Adverse Effect. As of the Effective Date, since the date of Buyer’s last publicly filed report on Form 10-K or 10-Q, there has not been a Buyer Material Adverse Effect.

ARTICLE 5
PRE-CLOSING COVENANTS OF SELLERS

          5.1 Access and Investigation. Until the Closing, Sellers will, and will cause Company and each of their respective Representatives to: (a) afford Buyer and its Representatives access to, during normal business hours and upon reasonable prior notice (which may be oral), Company and its properties, Contracts, books and records, and other documents and data, and (b) furnish Buyer and its Representatives with such additional financial, operating and other data and information relating to Company as Buyer or its Representatives may reasonably request (other than, in the case of both clause (a) and clause (b), attorney work product and attorney/client privileged information). Sellers Representative will promptly notify Buyer of any event of which any Seller obtains Knowledge that, if known as of the Effective Date, would have been required to be included on any Schedule of Sellers Disclosure Letter, including any notice of termination of the type described in Section 3.28.

          5.2 Operation of Company’s Business. Until the Closing, Sellers will and will cause Company to:

          (a) conduct Company’s business in the ordinary course and in a manner consistent with prudent industry practice and consistent with the Budget;

          (b) preserve intact the current business organization of Company

          (c) comply in all material respects with all Legal Requirements applicable to Company; and

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          (d) conduct Company’s billing and bookkeeping practices, including with respect to postage deposits, in the ordinary course and in a manner consistent with any governing Contracts and prudent industry practice and policy.

          5.3 Negative Covenants. Until the Closing, Sellers will cause their respective Affiliates not to sell, assign or transfer, or create any Encumbrance on or allow to lapse, any of the assets or rights that are to be transferred to Company pursuant to the Transfer Agreement. Until the Closing, Sellers will also cause Company not to:

          (a) create any Subsidiaries, amend any of its Organizational Documents, or split, combine or reclassify its outstanding capital stock;

          (b) issue, sell, pledge or encumber any shares of or securities convertible into or exercisable for, or warrants, options or other rights to purchase, any capital stock or any Voting Debt;

          (c) declare, issue, make, or pay any dividend or other distribution of assets, whether consisting of money, other personal property, real property, Intellectual Property, or any other thing of value, to its shareholders, except for cash dividends in an amount sufficient to satisfy all Tax liabilities of Sellers arising from the income of Company for the period between the Effective Date and the Closing Date and other cash dividends and distributions, in each case as described on Schedule 3.10 of Sellers Disclosure Schedule; provided that Sellers Representative will give Buyer prior written notice of the timing and amount of any such permitted dividend;

          (d) (i) incur any indebtedness for borrowed money or capital lease commitments (other than those arising from transfers pursuant to the Transfer Agreement), (ii) issue any debt securities or (iii) assume or guarantee or otherwise become responsible for any indebtedness of any Person;

          (e) make any acquisition (by merger, consolidation, or acquisition of stock or assets or otherwise) of any corporation, partnership or other business organization or entity or division thereof;

          (f) liquidate, dissolve or wind up;

          (g) create any Encumbrance on any of its assets, tangible or intangible, other than any Encumbrances created by virtue of “after acquired property” clauses in agreements or other documents pursuant to which Company granted security interests in favor of Commerce Bank, N.A. prior to the Effective Date in certain of Company’s assets to secure a line or lines of credit in connection with the operation of Company;

          (h) sell, assign or transfer any of its assets, except for sales of inventory in the ordinary course of business and except for any such assets having a value of less than $10,000 in the aggregate and except as contemplated by or set forth in the Transfer Agreement;

          (i) enter into, modify or amend any Material Contract, except for any Contract referenced in subsections (i), (ii), (iii), and (xviii) of Section 3.21(a), or enter into any

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customer Contract with any Person that is or would have reasonably been expected to be a Significant Person.

          (j) other than in the ordinary course of business consistent with past practice, enter into, modify or amend any Contract referenced in subsections (i), (ii), (iii), and (xviii) of Section 3.21(a);

          (k) make or authorize or commit to any capital expenditures other than as set forth in the Budget or that exceed $50,000 in the aggregate;

          (l) accelerate the collection of accounts receivable or decelerate the payment of accounts payable or modify its method of handling customer deposits;

          (m) (i) hire any new employee with an anticipated annual aggregate salary and bonus greater than $60,000, (ii) enter into or amend any employment or severance or similar agreement with any of their employees or any collective bargaining agreement (other than the Employment Agreements) or (iii) except as required by any Legal Requirement (in which case Sellers Representative will provide prior written notice to Buyer), adopt or amend, or increase the payments to or benefits under, any profit sharing, bonus, thrift, stock option, deferred compensation, savings, insurance, restricted stock, pension, retirement, or other employee benefit plan for or with any of their directors, officers or employees;

          (n) make any material change in any method of accounting or accounting practice used by it, other than any such changes required by GAAP;

          (o) take any action to cause any change, event or development that has had or would be reasonably likely to have, individually or in the aggregate, a Seller Material Adverse Effect;

          (p) take any action to cause any material casualty, loss, damage or destruction (whether or not covered by insurance);

          (q) settle or compromise any material claims or litigation or waive, release or assign any material rights or claims;

          (r) make any material tax election, file any material Tax Return taking any position inconsistent with past practice, settle any tax audit, claim or litigation, request any private letter or similar ruling or enter into any tax closing agreement;

          (s) permit any insurance policy naming Company as a beneficiary or a loss payable payee to be canceled or terminated;

          (t) authorize or enter into any agreement (oral, written or otherwise) to do any of the foregoing; or

          (u) accelerate any accounts receivable, grant any early payment discount or take any other action the primary goal of which is to increase Company’s cash on hand or decrease or defer any outstanding debt (except for satisfaction in full of such debt).

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          5.4 Exclusivity. Each Seller agrees that he will not and will cause Company not to and will direct his Representatives not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase by any Person of all or a substantial portion of its assets or the assets to be transferred to Company pursuant to the Transfer Agreement or any equity securities of Company (an “Acquisition Proposal”). Each Seller further agrees he will not, he will cause Company not to and he will direct his Representatives not to, directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal. Sellers agree that they will be jointly and severally liable for any failure of Company or any Representative of any Seller to comply with the foregoing restrictions. Sellers Representative will notify Buyer immediately if any such inquiries, proposals or offers are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with, any Representative of any Seller, indicating in connection with such notice the name of such Person and the material terms and conditions of any proposals or offers and thereafter will keep Buyer informed, on a current basis, on the status and terms of any such proposals or offers. Sellers also agree that they will promptly request each Person that has heretofore executed a confidentiality agreement in connection with its consideration of acquiring Company or its business to return all confidential information heretofore furnished to such Person.

          5.5 Required Approvals. As promptly as reasonably practicable, but in no event later than 10 days, after the Effective Date, Sellers will, and will cause Company to, (i) make all filings required by any Legal Requirement to be made by it or them in order to consummate the transactions contemplated by the Transaction Documents and (ii) use commercially reasonable efforts to obtain all Approvals identified in Schedule 3.2 of Sellers Disclosure Letter. Until the Closing, Sellers will, and will cause Company to, reasonably cooperate with Buyer: (A) with respect to all filings that Buyer is required by any Legal Requirement to make in connection with the transactions contemplated by the Transaction Documents, and (B) to the extent required by the HSR Act, in filing within 10 days of the Effective Date with the United States Federal Trade Commission and the United States Department of Justice the notification and report form required for the transactions contemplated by the Transaction Documents and any supplemental or additional information that may reasonably be requested in connection therewith pursuant to the HSR Act and will comply in all material respects with the requirements of the HSR Act. Sellers Representative will promptly deliver to Buyer copies of all filings, correspondence and Orders to and from any Governmental Body in connection with the transactions contemplated by the Transaction Documents.

          5.6 Employee Issues. Subject to the approval of the applicable insurance carriers, all employees of Company (including the Transferred Employees) will cease to participate in the dental, vision, long term disability, life insurance and supplemental life insurance plans maintained by Sellers, AAQ, Teralogix, or any Affiliate thereof (other than Company) on a date no later than the last day of the calendar month in which the Closing occurs; provided, however, that Buyer will use its commercially reasonable efforts to provide such coverage under its own plans (subject to the terms of such plans, such as the evidence of insurability requirements for certain levels of coverage) for all employees of Company

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(including the Transferred Employees) as of the Closing. As of the Closing, all employees of Company (including the Transferred Employees) will cease to participate in the health insurance plan, the 401(k) Plan, the Section 125 plan, and any other plan maintained by Sellers, AAQ, Teralogix, or any Affiliate thereof (other than Company). Prior to the Closing, Sellers will cause Company to amend or terminate any Plan sponsored by Company or maintained solely for the benefit of employees of Company to the extent requested by Buyer in accordance with the terms of such Plans and applicable Legal Requirements. Except to the extent that Transferred Employees continue to participate in any of the Plans described in the first sentence of this Section 5.6 after the Closing Date, Sellers, AAQ, and Teralogix will retain all obligations and liabilities under the Plans (and any other employee benefit plan maintained or contributed to by Sellers, AAQ, Teralogix, or any other entity that would be treated as a single employer with Sellers, AAQ or Teralogix under ERISA or the Code), and neither Buyer, Company nor any of their Affiliates will have any liabilities or obligations with respect to the Plans or such other employee benefit plans. If any employees of Sellers, AAQ or Teralogix (but specifically excluding the Transferred Employees), or any Affiliate thereof (other than Company) or any eligible spouse or dependent of any such employees become entitled to continuation of medical coverage under Section 4980B of the Code or Sections 601-608 of ERISA or any similar state law (“COBRA”) at any time before, after or as of the Closing, Sellers, AAQ, Teralogix, or such Affiliate (other than Company) that employed such individual will be responsible for satisfying any obligations to such individual under COBRA.

          5.7 S Corporation Status. Company and Sellers will not revoke Company’s election to be taxed as an S corporation within the meaning of Code Sections 1361 and 1362 in any tax jurisdiction, or take any other action that would preclude the parties from making elections under Section 338(h)(10) of the Code and comparable elections under state law pursuant to Section 7.2.

          5.8 Implementation of MCDS Software. Prior to the Closing, Sellers will not, and will not permit any other Company Person to, implement the MCDS Software for production use without Buyer’s prior written consent.

ARTICLE 6
PRE-CLOSING COVENANT OF BUYER

          6.1 Required Approvals. As promptly as reasonably practicable, (i) but in no event later than 10 Business Days after the Effective Date, Buyer will make all filings required by any Legal Requirement to be made by it to consummate the transactions contemplated by the Transaction Documents and (ii) Buyer will use commercially reasonable efforts to obtain all Approvals identified in Schedule 4.2 of Buyer Disclosure Letter. Until the Closing Date, Buyer will reasonably cooperate with Sellers (i) with respect to all filings that Sellers are required by any Legal Requirement to make in connection with the transactions contemplated by the Transaction Documents, (ii) in obtaining all Approvals identified in Schedule 3.2 of Sellers Disclosure Letter and (iii) to the extent required by the HSR Act, in filing within 10 days of the Effective Date with the United States Federal Trade Commission and the United States Department of Justice the notification and report form required for the transactions contemplated by the Transaction Documents and any supplemental or additional information which may reasonably be requested in connection therewith pursuant to the HSR Act and will

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comply in all material respects with the requirements of the HSR Act. Buyer will promptly deliver to Sellers Representative copies of all filings, correspondence and Orders to and from any Governmental Body in connection with the transactions contemplated by the Transaction Documents. Buyer will pay all filing fees related to the filings of Buyer under the HSR Act.

ARTICLE 7
CONTINUING COVENANTS

          7.1 Further Assurances. The parties will use commercially reasonable efforts to deliver or cause to be delivered such additional documents and other papers and to take or cause to be taken such further actions as may be necessary, proper or advisable to make effective the transactions contemplated by the Transaction Documents and carry out the provisions hereof. For Sellers, this obligation will include: (i) delivery, upon Buyer’s reasonable request, of instruments of transfer of Company Intellectual Property and any Intellectual Property Contract, (ii) delivery, upon Buyer’s reasonable request, of all documents and pertinent facts in their or any Company Person’s possession relating to Company Intellectual Property and any underlying inventions and any Intellectual Property Contract, (iii) cooperation in identifying witnesses who can testify as to pertinent facts relating to Company Intellectual Property and any underlying inventions any Intellectual Property Contract in any interference or litigation related thereto and (iv) delivery, upon Buyer’s reasonable request, of any and all papers, instruments or affidavits reasonably available to Sellers and required to apply for, obtain, maintain, issue and enforce Company Intellectual Property any Intellectual Property Contract rights in the United States or in any foreign country.

          7.2 Section 338(h)(10) Election.

          (a) At Buyer’s option, Buyer and Transferring Sellers will join in making a timely election under Section 338(h)(10) of the Code (the “Elections”) with respect to the purchase and sale of the Shares hereunder. In connection therewith, Buyer and Transferring Sellers agree to allocate the “aggregate deemed selling price” and the “adjusted grossed up basis” (as described in the applicable Treasury Regulations) among the assets of Company in the manner required by Section 338 of the Code and such Treasury Regulations and the principles set forth on Schedule 7.2 (the “Purchase Price Allocation”). Buyer and Transferring Sellers will report, in connection with the determination of income, franchise or other Taxes measured by or based upon net income, the transactions being undertaken pursuant to this Agreement in a manner consistent with the Elections unless required to do otherwise by this Agreement or by applicable Legal Requirement.

          (b) Transferring Sellers and Buyer agree to cooperate fully in order to make the Elections valid. Buyer will be responsible for the initial preparation of all forms and documents required in connection with making the Elections, and Buyer and Transferring Sellers will timely execute and file all forms required to be filed to make the Elections. Transferring Sellers will execute such documents and forms as are required by any Tax Laws to complete the Elections, and Sellers Representative will deliver such documents and forms to Buyer not later than 45 days after the delivery of the draft documents to Sellers Representative described in subsection (d) below or, if later, 10 days after any dispute regarding such draft documents has been resolved by the parties or the Independent Accountants, as applicable.

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          (c) To the extent permitted by state and local laws, at the election of Buyer, the principles and procedures of this Section 7.2 will also apply with respect to a Section 338(h)(10) election or equivalent or comparable provision under state or local law.

          (d) Within 120 days after the Closing Date, Buyer will provide to Sellers Representative for his review a draft of the exhibits proposed to be attached to the Internal Revenue Service Forms 8023 and a copy of the Internal Revenue Service Forms 8883 (if required by applicable Law) or other required forms, if any, related to the Elections and any required exhibits thereto. Within 30 days after receipt of such draft documents thereof, Sellers Representative will, in writing, either agree or state his objections. Sellers Representative and Buyer will negotiate in good faith to attempt to resolve any objections. If Sellers Representative and Buyer are unable to resolve differences within 30 days, then any remaining disputed matters will be finally and conclusively determined by the Independent Accountants. In determining any such dispute, the Independent Accountants will be instructed to give deference to the position advocated by Buyer provided there is a reasonable basis for such position and Transferring Sellers are not materially harmed thereby. Promptly, but not later than 10 days after acceptance of appointment pursuant to this Section 7.2(d), the Independent Accountants will determine (based solely on presentations by Sellers Representative and Buyer and not by independent review) only those matters in dispute and will render a written report as to the disputed matters and the resulting Purchase Price Allocation, which report will be conclusive and binding upon the parties. The fees and expenses, if any, of the Independent Accountants will be paid 50% by Buyer and 50% by Sellers. Transferring Sellers and Buyer will file the Forms 8023 (and any other documents required by Federal, state or local Law to make the Elections) promptly following the resolution of any disputes, but in no event later than 10 Business Days before the due date for making the Elections. Sellers and Buyer agree to follow said Purchase Price Allocation for purposes of all U.S. federal and, where applicable, state and local income and franchise Tax Returns, to the extent said values are relevant for such purposes.

          (e) Notwithstanding anything herein to the contrary, Buyer will bear 100% of the cost of all franchise, income (including built-in gains Tax), sales, use, excise, value added, earned surplus, gross receipts, registration, business and occupation, transfer, stamp duty, securities transactions, real estate transfer, and other Taxes and notarial fees assessed on or payable by Company (as opposed to Sellers) in connection with or as a result of the Elections, regardless of whether such Taxes become due or payable on or after the Closing Date, other than Taxes described in clause (ii) of Section 12.1(a).

          7.3 Noncompetition; Antisolicitation; Continuing Confidentiality.

          (a) Noncompetition. Each Seller agrees that for a period of five years from the Closing Date, unless this Section 7.3(a) is terminated prior to the expiration of such five year period in accordance with Section 2.4(d)(ii), he will not, within the boundaries of the territory applicable to the business of Company, without the prior written consent of Buyer which consent may be withheld in the sole and absolute discretion of Buyer, directly or indirectly, including through AAQ or AIM, either alone or in association or in connection with or on behalf of any Person now existing or hereafter created: (i) be or become engaged in, directly or indirectly, with any Competitive Business (as defined below) including being or becoming an organizer, investor, lender, partner, joint venturer, stockholder, officer, director, employee, manager,

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independent sales representative, associate, consultant, agent, supplier, lessor, or lessee of, to or from any Competitive Business; (ii) give information or financial assistance to any Competitive Business; or (iii) use or authorize the use of his name or any part thereof to be used or employed in connection with any Competitive Business (collectively and severally, the “Noncompetition Covenants”). For the purposes of this Agreement, a “Competitive Business” is the business of Company as currently conducted or as conducted during the Contingent Payment Period. Nothing in this Section 7.3(a) will prevent any Seller from owning a less than 3% interest in any publicly traded company that is a Competitive Business. The Noncompetition Covenants will be construed to be divided into separate and distinct Noncompetition Covenants with respect to (i) each jurisdiction of the territory and (ii) each matter or type of conduct described therein. Each such divided Noncompetition Covenant will be separate and distinct from all such other Noncompetition Covenants with respect to the same or any aspect of the business of Company.

          (b) Antisolicitation. Except as set forth on Schedule 7.3(b), each Seller agrees that for a period of five years from the Closing Date, unless this Section 7.3(b) is terminated prior to the expiration of such five year period in accordance with Section 2.4(d)(ii), he will not directly or indirectly solicit for hire or hire any employee of Company or any of its present or future Subsidiaries or Affiliates, or either directly or indirectly, solicit for hire or hire on behalf of any third party any employee of Company or any of its Subsidiaries or Affiliates, without the prior written consent of Buyer which consent may be withheld in the sole and absolute discretion of Buyer.

          (c) Continuing Confidentiality. In addition to any other confidentiality or non-disclosure obligations of Sellers to Buyer or Company, including under their respective Employment Agreements, from and after the Effective Date:

     (i) Sellers acknowledge that, in connection with the operation of Company prior to the Closing, Sellers had access to confidential information relating to Company, including technical, manufacturing, financial or marketing information, lists of vendors, suppliers and customers, ideas, methods, developments, inventions, improvements, business plans, trade secrets, scientific or statistical data, diagrams, drawings, specifications, Company Intellectual Property or other proprietary information relating thereto, together with all analyses, compilations, studies or other documents, records or data prepared by Company Persons or their respective Representatives which contain or otherwise reflect or are generated from such information (“Confidential Information”).

     (ii) For five years after the Closing Date, unless this Section 7.3(c) is terminated prior to the expiration of such five year period in accordance with Section 2.4(d)(ii), but in either case, in perpetuity for any Confidential Information that constitutes a Trade Secret, Sellers will treat all Confidential Information as confidential, preserve the

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confidentiality thereof and not use or disclose any Confidential Information, except to their respective Representatives and Affiliates who need to know such Confidential Information in connection with the transactions contemplated hereby including the activities anticipated by the Transition Services Agreement. Sellers will cause each of their respective Representatives to treat all Confidential Information as confidential, preserve the confidentiality thereof and not use or disclose any Confidential Information to the same extent as such Sellers are required hereunder. Sellers will be responsible for any breach of this Section 7.3(c) by any of their respective Representatives or Affiliates. If, however, Confidential Information is disclosed, Sellers Representative will immediately notify Buyer in writing and Sellers will take all reasonable steps required to prevent further disclosure.

     (iii) Notwithstanding the provisions of this Section 7.3(c) Sellers will be permitted to disclose any Confidential Information pursuant to the requirement or request of a Governmental Body to the extent such disclosure is required by a valid Law Requirement and prompt notice is given by Sellers Representative to Buyer of any such requirement or request. Sellers will reasonably cooperate with Buyer in seeking a protective order or exemption from such requirement or request (provided that nothing in this Section 7.3(c)(iii) will require any Seller to violate a Legal Requirement). Confidential Information will not include information that is or becomes publicly available without fault of Sellers or any of their respective Representatives or is otherwise generally known in the general industry of Company.

          (d) Acknowledgements. Each Seller acknowledges and agrees that: (i) the covenants and the restrictions contained in this Section 7.3 are necessary, fundamental and required for the protection of the business of Company; (ii) the covenants and the restrictions contained in this Section 7.3 relate to matters that are of a special, unique and extraordinary value; (iii) a breach of any of the covenants and the restrictions contained in this Section 7.3 will result in irreparable harm and damages that cannot be adequately compensated by a monetary award, and accordingly Company will be entitled to injunctive or other equitable relief to prevent or redress any such breach; (iv) immediately prior to the date of this Agreement, each Transferring Seller was a holder of an Equity Interest in Company and is selling all of his equity in Company pursuant to this Agreement; (v) in connection with such sale of equity, Buyer has required and Seller has agreed, as a condition to the purchase by Buyer of such equity, that Seller enter into the covenants and the restrictions contained in this Section 7.3; (vi) Seller understands that Buyer would not purchase any of the Shares from Transferring Sellers if each Seller did not enter into this Agreement and the covenants and the restrictions contained in this Section 7.3; and (vii) Seller is entering into the covenants and the restrictions contained in this Section 7.3 in connection with the transactions contemplated by the Transaction Documents.

          (e) Judicial Limitation. Notwithstanding the foregoing provisions of this Section 7.3, if at any time a court of competent jurisdiction holds that any portion of any the covenants and the restrictions contained in this Section 7.3 is unenforceable by reason of its extending for too great of a period of time or over too great of a geographical area or by reason of its being too extensive in any other respect, such covenant or restriction will be interpreted to extend only over the maximum period of time, maximum geographical area, or maximum extent in all other respects, as the case may be, as to which it may be enforceable all as determined by such court in such action.

          7.4 Transfer Taxes. Except as provided in Section 7.2(e), any sales, stock transfer, use, or other transfer Taxes payable by reason of transfer and conveyance of the Shares

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hereunder and any documentary stamp or transfer Taxes payable by reason of the real estate or interests therein included will be paid entirely by Sellers, provided that Buyer will pay any such items levied by the States of Delaware and New Jersey.

          7.5 Certain Expenses. Only if the Closing occurs, Buyer will pay, or will cause one of its Affiliates to pay, on the Closing Date, the out of pocket fees expenses set forth on Exhibit T. Any additional amounts owed to any Person set forth on Exhibit T are the sole responsibility of Sellers, to the extent not reflected as an account payable on the certificate setting forth the Estimated Working Capital.

          7.6 Seller Releases.

          (a) Effective as of the Closing, each Seller, solely in its capacity as a present or former shareholder of Company and not in its capacity as a present or former officer, director or employee of Company, agrees not to sue and fully releases and discharges Company and its shareholders, directors, officers, assigns, and successors, past and present (collectively, “Releasees”), with respect to and from the Shareholders Agreement and any and all claims, issuances of Company’s stock, notes or other securities, any demands, rights, liens, Contracts, covenants, Proceedings, causes of action, obligations, debts, and Losses of whatever kind or nature in law, equity or otherwise, whether now known or unknown, and whether or not concealed or hidden, all of which each Seller now owns or holds or has at any time owned or held against Releasees. Nothing in this Section 7.6 will be deemed to constitute a release by any Seller of any right of such Seller under this Agreement or any other Transaction Document.

          (b) It is the intention of each Seller that such release be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention each Seller hereby expressly waives, effective as of the Closing, any and all rights and benefits conferred upon him by the provisions of applicable Legal Requirements, including Section 1542 of the California Civil Code and expressly consents that this release will be given full force and effect according to each and all of its express terms and provisions, including as well, those related to unknown and unsuspected claims, demands and causes of action, if any, as those relating to any other claims, demands and causes of action hereinabove specified, but only to the extent such section is applicable to releases such as this. Section 1542 provides:

     "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

          7.7 Certain Material Contract Termination and Security Releases. Upon Buyer’s request, the parties will use reasonable best efforts to deliver or cause to be delivered such additional documents and other papers and to take or cause to be taken such further actions as may be necessary, proper or advisable to ensure that each Material Contract listed on Schedules 3.21(a)(vi) (indebtedness for borrowed money) and Schedule 3.21(a)(vii) (guaranties) of Sellers Disclosure Letter will have been terminated and any related security interest that any Person may have in any assets, capital stock, rights, or property of Company or a Seller, an Individual Seller’s spouse, or a Seller’s Affiliate will have been released, and that each Seller,

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each Individual Seller’s spouse and each Seller’s Affiliates are released from any and all guarantees of, or other personal liability under, such Material Contracts, all in form and substance reasonably satisfactory to either Buyer or such Seller, as applicable. In the event that such Material Contracts are not terminated and released as of the Closing Date as provided in the preceding sentence, Buyer will (a) nonetheless contact the lender under each such Material Contract and request that in light of the consummation of the transactions contemplated by this Agreement all security interests or guaranties given by a Seller, an Individual Seller’s spouse, or a Seller’s Affiliate be released, provide information reasonably required by such lender relating thereto and agree to provide a replacement guaranty to such lender if so requested in order to obtain such a release, and (b) indemnify and hold harmless each Seller, each Individual Seller’s spouse and each of Seller’s Affiliates from any Losses related to, resulting from or otherwise in connection with any such Material Contract.

          7.8 Continuing Access and Audit Cooperation.

          (a) Sellers agree that they will cause all Company Persons (other than Company) to maintain, for the duration of the Contingent Payment Period, all Tax and financial books and records pertaining to Company, its business, assets and properties and all transactions between Company and any other Company Person prior to the Closing Date, created or maintained by such Company Persons by virtue of Company having been an Affiliate and/or a member of a reporting group that includes such Company Person. After the Closing, Sellers will cause all Company Persons (other than Company) to provide Buyer and its Representatives, during normal business hours and upon reasonable prior notice (which may be oral), access to such materials.

          (b) Buyer will have the right to cause an audit of the financial statements of Company for the period commencing on January 1, 2003 and ending on the Closing Date (the “Stub Period”). In connection therewith, Sellers will cause all Company Persons (other than Company) to cooperate as reasonably requested by Buyer and its Representatives to satisfactorily complete such audit. Buyer will reimburse Company Persons for any reasonable out-of-pocket expenses incurred by them in connection with compliance with this Section 7.8(b).

          7.9 Prevailing Party; Attorneys’ Fees. The prevailing party under any Proceeding under the covenants contained in this Article 7, will be entitled to recovery of its reasonable attorneys’ fees incurred in connection with such Proceeding.

          7.10 Coverage in Buyer Benefit Plans. Buyer will take all such actions as are required to cause Company’s employees (each, together with each Transferred Employee, a “Continued Employee”) to be eligible for coverage as of the Closing Date under a group medical benefit plan which is the same as or comparable to that maintained for similarly situated employees of the WEBMD Envoy segment of Buyer. Buyer will cause the Continued Employees to be eligible for coverage on, or as soon as practicable after, the Closing Date, but in no event later than 30 Business Days after the Closing Date under other employee benefit plans, programs, policies, and arrangements which are the same as or comparable to those maintained for similarly situated employees of the WEBMD Envoy segment of Buyer (collectively, with the group medical benefit plan, the “Buyer Employee Plans”); provided, however, that Buyer will use its commercially reasonable efforts to cause the Continued Employees to be eligible for such

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coverage as of the Closing Date. Continued Employees will be eligible to participate in Buyer’s stock option plan if selected for participation therein under the terms thereof. All participation of Continued Employees in the Buyer Employee Plans will be subject to such terms of such plans as may be in effect from time to time, and this Section 7.10 is not intended to give Continued Employees any rights or privileges superior to those of other employees of Buyer or Subsidiaries of Buyer (except as provided in the following sentence with respect to credit for past service). Buyer will, for purposes of vesting and any period of service requirements for commencement of participation with respect to any Buyer Employee Plans in which Continued Employees may participate (but not for benefit accruals under any defined benefit plan) credit each Continued Employee with his terms of service with Company and its predecessors, and in the case of Transferred Employees, AAQ and Teralogix, as applicable. Notwithstanding the foregoing, Continued Employees will not be eligible to participate in Buyer’s employee stock ownership plan, or otherwise receive a contribution for periods, prior to January 1, 2004. Buyer will not impose any waiting period on Continued Employees in Buyer’s medical and dental insurance plans to the extent that such Continued Employees have satisfied the participation requirements of corresponding plans of AAQ in which such Continued Employee participated prior to the Closing Date. Buyer will provide coverage for pre-existing conditions of the Continued Employees and their covered dependents under Buyer’s medical and dental plans to the extent such Continued Employees have satisfied the requirements for such coverage under corresponding plans of AAQ in which such Continued Employee participated prior to the Closing Date, as well as credit for deductibles paid by each Continued Employee under AAQ’s medical and dental plans in which such Continued Employee participated prior to the Closing Date during the current plan year. Buyer will credit each Continued Employee with (i) his accrued vacation, and (ii) his service with Company, AAQ or Teralogix, as the case may be, for purposes of providing vacation benefits under a vacation policy that is comparable to that provided to similarly situated employees of the WebMD Envoy segment of Buyer. Sellers will cause AAQ to cooperate with Buyer in order to effect a timely transfer of the health care spending account and dependent care spending account portions of AAQ’s Section 125 plan with respect to the Continued Employees. With respect to any present or former employee of Company, including any Continued Employee, for whom a “qualifying event,” as defined in COBRA, occurs prior to the Closing, AAQ will continue to be responsible for satisfying any obligations under COBRA. From and after the Closing Date, Company or Buyer will be responsible for satisfying any obligations under COBRA to all employees of Company including Continued Employees with respect to “qualifying events,” as defined in COBRA, occurring on or after the Closing.

          7.11 Reservation of Buyer Shares. For the duration of the Contingent Payment Period or until such earlier time as the obligations of Buyer under Section 2.4 have been fully satisfied, Buyer will reserve a sufficient number of shares of its common stock (based on the Deemed Closing Price) to fulfill all of its obligations under Section 2.4.

          7.12 Performance of Transfer Agreement. Each Seller covenants and agrees that each Company Person, as applicable, will duly execute and deliver, and fully comply with all of the terms of and perform all of their respective obligations under the Transfer Agreement.

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          7.13 Intellectual Property Licenses.

          (a) Each Seller will, and will cause any Company Person other than Company to, fully comply will all the terms of and perform all of their respective obligations under the ABF License and the Simon License.

          (b) Buyer will, and will cause Company to, fully comply will all the terms of and perform all of their respective obligations under the ABF License and the Simon License.

          7.14 Lease.

          (a) At the request of Buyer, Sellers will, and will cause AAQ to, assist Buyer in requesting the consent of the “landlord” under the Master Lease for, at Buyer’s election in its sole and absolute discretion, (i) the termination of the Master Lease and the replacement thereof with two separate comparable leases, one with AAQ for the space that Company does not sublease pursuant to the Sublease and the other with Company for the space that Company subleases pursuant to the Sublease, (ii) the execution and delivery of a non-disturbance agreement in a form required by Buyer, which non-disturbance will, among other things, provide Company with the right to receive notices (including notices of default) under the Master Lease from the “landlord”, a right to cure any defaults of the “tenant” under the Master Lease, and the agreement of the “landlord” under the Master Lease to recognize Company’s sublease for the subleased premises thereunder through the term (including all extension terms) of the Sublease in the event of the termination of the Master Lease or (iii) the assignment of the Master Lease from AAQ to Company. Concurrently with any such assignment contemplated in subsection (iii), Buyer will cause Company and Sellers will cause AAQ to enter into a sublease from Company to AAQ, on terms and conditions similar to those set forth in the Sublease, for a mutually agreed upon portion of the “premises” that is not leased by Company pursuant to the Sublease, provided that, if the parties do not agree, such portion will be the same as that which AAQ occupied as of the Effective Date. Sellers agree that if the “landlord” under the Master Lease agrees to consent to any of subsections (i), (ii) or (iii) above upon reasonable terms and conditions, Sellers will agree to such reasonable terms and conditions.

          (b) Throughout the term of the Sublease, Sellers hereby covenant and agree to cause AAQ to fully and faithfully perform each of the obligations of the “tenant” under the Master Lease (including the obligation to pay any rental or other amounts payable thereunder) and not to cause or permit AAQ to commit any breach of or default under the Master Lease. Sellers will not cause or permit AAQ to amend, modify, supplement, assign, cancel or terminate the Master Lease (or any interest of AAQ therein) without the prior written consent of Buyer (which consent may be given or withheld in Buyer’s sole and absolute discretion). Each Seller, jointly and severally, agrees to protect, defend, indemnify, save and hold Buyer and Company harmless from and against any and all obligations, liabilities, claims, liens, losses, damages, costs, charges, or expenses that Buyer and/or Company may sustain or incur by reason of (i) any default of Sellers under this Section 7.14 and (ii) any breach or default of AAQ under the Master Lease.

          7.15 Shareholders Agreement. Notwithstanding anything to the contrary in the Shareholders Agreement, Sellers agree that neither the entering into of this Agreement nor

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the consummation of the transactions contemplated by this Agreement, will be deemed to be a breach of the Shareholders Agreement or to give rise to any right or obligation of any party thereto. Sellers further agree that at or prior to the Closing the Shareholders Agreement will be terminated with no further obligation of Company to any party thereto.

ARTICLE 8
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

          Buyer’s obligation to consummate the purchase and sale of the Shares on or prior to the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

          8.1 Accuracy of Representations. The representations and warranties of Sellers set forth in this Agreement were true and correct in all material respects when made and: (i) with respect to Sellers’ representations and warranties set forth in Sections 3.2, 3.4, 3.6, 3.8, 3.9, 3.26, and 3.34, are true and correct in all material respects as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date will be true and correct only as of such specified date); and (ii) with respect to all other representations and warranties of Sellers set forth in Article 3, are true and correct as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date will be true and correct only as of such specified date), except for any failures to be true and correct, individually or in the aggregate, that as of the Closing Date have not had and are not reasonably likely to have a Seller Material Adverse Effect. In addition, Buyer will have received a certificate of Sellers to such effect signed by Sellers Representative.

          8.2 Sellers’ Performance. The covenants and obligations that Sellers are required to perform or to comply with pursuant to this Agreement at or prior to the Closing will have been duly performed and complied with in all material respects and Buyer will have received a certificate of Sellers Representative to such effect signed by Sellers Representative.

          8.3 No Order.

          (a) No Governmental Body will have enacted, issued, promulgated or entered any Order which is in effect and has the effect of making illegal or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.

          (b) There will not be pending or threatened by any Governmental Body or pending by any other Person any Proceeding challenging or seeking to restrain, delay or prohibit the purchase and sale of the Shares or any of the other transactions contemplated by this Agreement.

          8.4 Governmental Authorizations and Approvals. All requisite Governmental Authorizations or waiting periods following governmental filings will have been obtained or expired or been terminated (including expiration or termination of the applicable waiting periods under the HSR Act), and all other required Approvals of any other Persons set

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forth on Exhibit L will have been obtained in form and substance reasonably satisfactory to Buyer.

          8.5 No Seller Material Adverse Effect. Since the Effective Date of this Agreement, there will not have occurred and there will have been no change, event or development that has had or may reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

          8.6 Resignations. Buyer will have received the written resignation of every director of Company in form and substance reasonably satisfactory to Buyer.

          8.7 Opinion of Counsel. Buyer will have received the signed legal opinion of Lewis, Rice & Fingersh, L.C., dated the Closing Date, in substantially the form attached as Exhibit E.

          8.8 Employment Agreements. Buyer will have received an employment agreement with Company for each Individual Seller (each an “Employment Agreement”), duly executed by Company and the employee contemplated thereunder, in each case in the form delivered concurrently with this Agreement and which will be in full force and effect as of the Closing Date.

          8.9 Transition Services Agreement. Buyer will have received the Transition Services Agreement, duly executed by Company, Teralogix and AAQ, and any agreement for the provision of services between either Teralogix or AAQ, on the one hand, and Company, on the other hand, will have been terminated in form and substance reasonably satisfactory to Buyer.

          8.10 Transfer Agreement. Buyer will have received the Transfer Agreement, duly executed by Company, AAQ and Teralogix, and each of the transfers contemplated thereunder will have been completed free and clear of any Encumbrance.

          8.11 Escrow Agreement. Buyer will have received the Escrow Agreement, duly executed by Sellers and the Escrow Agent.

          8.12 Landlord Estoppel Certificate. Buyer will have received an estoppel certificate, duly executed by the landlord under the Master Lease, in form and substance reasonably satisfactory to Buyer.

          8.13 Sublease. Buyer will have received the Sublease, duly executed by AAQ.

          8.14 AIM Estoppel Certificate. Buyer will have received an estoppel certificate, duly executed by AIM, in connection with the Outbound Mail Service Agreement dated August 30, 2002 between Company and AIM in form and substance reasonably satisfactory to Buyer.

          8.15 Powers of Attorney. Each Power of Attorney will have been revoked in form and substance reasonably satisfactory to Buyer.

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          8.16 Shareholders Agreement. The Shareholders Agreement will have been terminated in form and substance reasonably satisfactory to Buyer.

          8.17 Teralogix Amendment. Buyer will have received the Teralogix Amendment, duly executed by Teralogix, including by Robert Clem in his capacity as a Teralogix shareholder.

          8.18 Other Documents. Buyer will have received the other documents and instruments required to be delivered by any Seller to Buyer pursuant to Section 2.6.

ARTICLE 9
CONDITIONS PRECEDENT TO SELLERS’ OBLIGATION TO CLOSE

          Sellers’ obligations to consummate the purchase and sale of the Shares on or prior to the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

          9.1 Accuracy of Representations. The representations and warranties of Buyer set forth in this Agreement were true and correct in all material respects when made and are true and correct in all material respects as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date will be true and correct only as of such specified date). In addition, Sellers will have received a certificate of Buyer to such effect signed by a duly authorized officer thereof.

          9.2 Buyer’s Performance. The covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing will have been performed and complied with in all material respects and Sellers will have received a certificate of Buyer to such effect signed by a duly authorized officer thereof.

          9.3 No Order.

          (a) No Governmental Body will have enacted, issued, promulgated or entered any Order which is in effect and has the effect of making illegal or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.

          (b) There will not be pending or threatened by any Governmental Body or pending by any other Person any Proceeding challenging or seeking to restrain, delay or prohibit the purchase and sale of the Shares or any of the other transactions contemplated by this Agreement.

          9.4 Governmental Authorizations and Approvals. All requisite Governmental Authorizations or waiting periods following governmental filings will have been obtained or expired or been terminated (including expiration or termination of the applicable waiting periods under the HSR Act), and all other required Approvals of any other Persons set forth on Exhibit L will have been obtained in form and substance reasonably satisfactory to Sellers.

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          9.5 Opinions of Counsel. Sellers will have received the signed legal opinions of Buyer’s General Counsel (or any Assistant General Counsel) and O’Melveny & Myers LLP, dated the Closing Date, in substantially the form attached as Exhibit F.

          9.6 Registration Rights Agreement. Sellers will have received the Registration Rights Agreement, duly executed by Buyer.

          9.7 Escrow Agreement. Sellers will have received the Escrow Agreement, duly executed by Buyer and the Escrow Agent.

          9.8 Other Documents. Sellers will have received the other documents and instruments required to be delivered by Buyer to any Seller pursuant to Section 2.6.

ARTICLE 10
TERMINATION

          10.1 Termination Events. This Agreement may be terminated, by written notice given prior to the Closing:

          (a) by mutual written consent of Buyer and Sellers;

          (b) by either Sellers, on the one hand, or Buyer, on the other hand, in the event that any Governmental Body will have issued an Order making illegal or otherwise prohibiting the sale of the Shares by Sellers to Buyer and such Order will have become final and unappealable; provided, however, that the provisions of this Section 10.1(b) will not be available to any party if such party failed to comply with its obligations under this Agreement and such failure caused, or otherwise resulted in, such Order;

          (c) by either Buyer or Sellers if the Closing has not occurred on or before the date that is 90 days from (but not including) the Effective Date; provided that such date may be extended for up to an additional 45 days if the Federal Trade Commission or Department of Justice has issued a supplemental information request in connection with the HSR filing made in connection with this Agreement and upon such 90th day the only conditions precedent to the Closing that remain unsatisfied are those in Sections 8.4 and 9.4 due to the failure of the applicable waiting period under the HSR Act to expire or terminate; provided, further, that the right to terminate this Agreement under this Section 10.1(c) will not be available to any party whose failure to comply with its obligations under this Agreement will have caused, or otherwise resulted in, the failure of the Closing to occur on or before such date;

          (d) by Buyer, if there has been a breach of any representation, warranty, covenant or agreement made by Sellers in this Agreement such that the conditions set forth in Section 8.1 or 8.2 would not be satisfied as of the Closing Date and such breach or condition is not curable or, if curable, is not cured within 10 days after written notice thereof is given by Buyer to Sellers Representative; or

          (e) by Sellers, if there has been a breach of any representation, warranty, covenant or agreement made by Buyer in this Agreement such that the conditions set forth in Section 9.1 or 9.2 would not be satisfied as of the Closing Date and such breach or condition is

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not curable or, if curable, is not cured within 10 days after written notice thereof is given by Sellers Representative to Buyer.

          10.2 Effect of Termination. If validly terminated pursuant to Section 10.1, this Agreement will become null and void and all further obligations of the parties under this Agreement will terminate and there will be no liability on the part of any party, except no such termination will extinguish any liability of Buyer or Sellers for breach of this Agreement.

ARTICLE 11
SURVIVAL; INDEMNIFICATION; REMEDIES

          11.1 Survival. The representations and warranties of the parties contained in this Agreement will survive the Closing, regardless of any investigation made by or on behalf of Sellers or Buyer, through and including the date that is the one year anniversary of the Closing Date; provided, however, that (a) the representations and warranties set forth in Sections 3.2 (Authority; Validity; Consents), 3.4 (Capitalization), 3.29 (Investment Representation), 3.30 (Sophistication), 3.34 (Brokers or Finders), 4.2 (Authority; Validity; Consents), 4.5 (Investment Representation), and 4.8 (Brokers or Finders), will survive the Closing and remain in full force and effect for the applicable periods specified in the respective Sections or, if no such period is specified, indefinitely, (b) the representations and warranties set forth in Sections 3.15 (Tax Matters), 3.16 (Employee Benefits), 3.24 (Environmental Matters), and 4.7 (Buyer Shares) will survive the Closing and remain in full force and effect until the expiration of the statute of limitations applicable to the matters addressed in such Sections, and (c) in the case of the representations and warranties of Buyer that are made after the Closing pursuant to Section 2.4(b)(i), through and including the date that is the one year anniversary of any date after the Closing on which Buyer makes such representations and warranties. The covenants and agreements of the parties contained in this Agreement, including under Articles 2, 7, 11,12, and 13, will survive the Closing and remain in full force and effect for the applicable periods specified in the respective Sections and Articles or, if no such period is specified, indefinitely.

          11.2 Indemnification by Sellers.

          (a) Scope of Indemnification. Sellers agree, subject to the other terms and conditions of this Section 11.2, to jointly and severally indemnify, defend and hold harmless each of Buyer and Company (each a “Buyer Indemnified Party”) from, and will reimburse them for, (i) all Losses of any Buyer Indemnified Party based on, arising out of, resulting from or related to the failure to be true and correct of any representation or warranty contained in Article 3 (other than Section 3.15 (Taxes), which is subject to the terms of Article 12), and (ii) all Covered Business Losses (determined in accordance with Exhibit O).

          (b) Exclusive Remedy. Notwithstanding anything to the contrary contained in this Agreement, the rights of Buyer Indemnified Parties to indemnification under this Section 11.2 will constitute the sole and exclusive remedy for Losses of such Person from and after the Closing for any failure to be true and correct of any representation or warranty contained in Article 3 (other than Section 3.15 (Taxes), which is subject to the terms of Article 12), except for any claim based on fraud by any Seller and except that Buyer may pursue specific performance or other appropriate equitable relief.

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          (c) Limitations on Sellers Indemnification Liability for Section 11.2(a)(i). Any claims of any Buyer Indemnified Party under Section 11.2(a)(i) will be limited as follows:

     (i) Aggregate Ceiling. Sellers’ aggregate liability for Losses under Section 11.2(a)(i) related to breaches of the representations and warranties in Article 3 (other than Section 3.15 (Taxes), which is subject to the terms of Article 12) will not exceed an amount equal to $44,000,000 minus any amounts actually received by Buyer from Sellers pursuant to Sellers’ indemnification obligations under Section 11.2(a)(ii); provided that the limitation contemplated hereby will not be applicable with respect to (i) breaches of Sections 3.2, 3.4 or 3.34, and (ii) instances of fraud by any Seller.

     (ii) Basket. Sellers will have no liability for Losses under Section 11.2(a)(i) related to breaches of the representations and warranties in Article 3 (other than Section 3.15 (Taxes), which is subject to the terms of Article 12) unless and until the aggregate amount of such Losses claimed exceeds $2,000,000 (the “General Threshold Amount”); provided, however, that the limitation contemplated hereby will not be applicable with respect to (i) breaches of Sections 3.2, 3.4 or 3.34, or (ii) instances of fraud by any Seller; provided further, that once such amount exceeds the General Threshold Amount, the Buyer Indemnified Parties will be entitled to recover the amount of all such Losses in excess of $1,000,000.

     (iii) Insurance. In determining the amount of any indemnification obligations under this Section 11.2, the amount of any obligation for which indemnification may be claimed by any Buyer Indemnified Party will be reduced by any insurance proceeds actually received by any Buyer Indemnified Party under the E&O Policy with respect to the matter that is the subject of the indemnification claim. Buyer Indemnified Parties agree to make good faith, commercially reasonable efforts to make a claim to obtain any insurance proceeds available under the E&O Policy.

          (d) Limitations on Sellers Indemnification Liability for Section 11.2(a)(ii).

     (i) Aggregate Ceiling. Subject to the aggregate ceiling provided for in Section 11.2(c)(i), Sellers’ aggregate liability for Losses under Section 11.2(a)(ii) related to Covered Business Losses will not exceed an amount equal to $11,000,000; provided that the limitation contemplated hereby will not be applicable with respect to instances of fraud by any Seller; provided further, however, that in no event will Sellers’ aggregate liability for Losses under Section 11.2(a)(i) related to breaches of the representations and warranties in Article 3 (other than Section 3.15 (Taxes), which is subject to the terms of Article 12) and Covered Business Losses under Section 11.2(a)(ii) exceed an amount equal to $44,000,000.

     (ii) Basket. Sellers will have no liability for Losses under Section 11.2(a)(ii) related to Covered Business Losses unless and until the aggregate

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amount of such Losses claimed exceeds $200,000 (the “Covered Business Losses Threshold Amount”); provided, however, that the limitation contemplated hereby will not be applicable with respect to instances of fraud by any Seller; provided further, that once such amount exceeds the Covered Business Losses Threshold Amount, the Buyer Indemnified Parties will be entitled to recover the amount of all such Losses including the Covered Business Losses Threshold Amount.

          (e) Individual Ceiling. Notwithstanding Sections 11.2(c) or 11.2(d) above, in no event will any Seller Group’s liability for Losses exceed the sum of (i) such Seller Group’s interest in the Escrow Amount while subject to the Escrow Agreement (based upon its Applicable Interest Percentage), (ii) Contingent Payments such Seller Group would have received but for the application of the set-off rights of Buyer (based upon its Applicable Interest Percentage), and (iii) the amount of Purchase Price actually received by such Seller Group (including any cash or shares released to such Seller Group pursuant to the Escrow Agreement).

          (f) Notice of Potential Claims for Indemnification.

     (i) No claim for indemnification pursuant to this Section 11.2 may be brought by Buyer Indemnified Parties after the applicable expiration date set forth in Section 11.1; provided, however, that if, prior to such applicable date, Sellers Representative will have received a Buyer Indemnification Notice of a claim for indemnification under this Section 11.2 (whether or not formal legal action will have been commenced based upon such claim), such claim described in the Buyer Indemnification Notice will continue to be subject to indemnification in accordance with this Section 11.2 notwithstanding such expiration date.

     (ii) Buyer will provide written notice (the “Buyer Indemnification Notice”) to the Sellers Representative reasonably promptly after becoming aware of any Losses that Buyer will have determined to have given or is reasonably likely to give rise to a claim for indemnification hereunder, which notice will include a general description of the facts and circumstances giving rise to such indemnification obligation. Notwithstanding the foregoing, but subject to Section 11.2(f)(i),the failure to so notify Sellers Representative will not relieve Sellers of any liability that they may have to any Buyer Indemnified Party, except to the extent that Sellers Representative demonstrates that Sellers are actually and materially prejudiced by such failure.

          (g) Third Party Claims. The obligations and liabilities of Sellers with respect to a Third Party Claim for which a Buyer Indemnified Party is entitled to indemnification pursuant to this Section 11.2 will be subject to the following terms and conditions. Buyer will have the right (including the selection of counsel) to defend against, direct the defense of, or settle any such Third Party Claim and any related Proceeding, but Sellers must reasonably cooperate in the defense thereof. In connection therewith, Buyer agrees (i) to keep Sellers Representative reasonably informed of its defense and resolution of the Third Party Claim, (ii) to report to Sellers Representative in writing, at least quarterly, as to the amount of Losses (including attorneys’ fees and expenses) incurred as of the date of such report, together with a

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good faith estimate of the amount of any additional Losses that Buyer expects may be incurred in the future based upon the status of such matters as of such date, and (iii) that it will make reasonable judgments with respect to incurring costs and expenses (including the selection of outside counsel) in a similar manner and based on similar factors as it does for similar third party claims for which it has no claim against Sellers for indemnification. No compromise, discharge or settlement of, or admission of liability in connection with, such claims may be effected by a Buyer Indemnified Party without the written consent of Sellers Representative (which consent will not be unreasonably withheld or delayed), unless the Buyer Indemnified Party has waived any right to indemnification therefor by Sellers. Buyer will only charge Sellers for (or otherwise allocate to Sellers as Losses hereunder) any out-of-pocket costs or expenses incurred by Buyer or its Affiliates (including Company) related to the handling or defense of the Third Party Claim. So long as Buyer is conducting the defense of the Third Party Claim in accordance with Section 11.2(g)(ii), Sellers may retain separate co-counsel at their sole cost and expense and participate in the defense of the Third Party Claim.

          11.3 Indemnification by Buyer.

          (a) Scope of Indemnification. Buyer agrees, subject to the other terms and conditions of this Section 11.3, to defend and hold harmless each Seller from, and will reimburse them for, all Losses of any Seller based on, arising out of, resulting from or related to the failure to be true and correct of any representation or warranty contained in Article 4.

          (b) Exclusive Remedy. Notwithstanding anything to the contrary contained in this Agreement, the rights of Sellers to indemnification under this Section 11.3 will constitute the sole and exclusive remedy for Losses of any Seller from and after the Closing for any failure to be true and correct of any representation or warranty contained in Article 4, except for any claim based on fraud by Buyer and except that Sellers may pursue specific performance or other appropriate equitable relief.

          (c) Limitations on Buyer’s Indemnification Liability. Any claims of Sellers under this Section 11.3 will be limited as follows:

     (i) Aggregate Ceiling. Buyer’s aggregate liability for Losses under this Agreement related to breaches of the representations and warranties in Article 4 will not exceed an amount equal to $44,000,000; provided that the limitation contemplated hereby will not be applicable with respect to (i) breaches of Section 4.2 or 4.8, or (ii) instances of fraud by Buyer.

     (ii) Basket. Buyer will have no liability for Losses related to breaches of the representations and warranties in Article 4 unless and until the aggregate amount of Losses claimed under this Section 11.3 exceed the General Threshold Amount; provided, however, that the limitation contemplated hereby will not be applicable with respect to (i) breaches of Sections 4.2, or 4.8,or (ii) instances of fraud by Buyer; provided further, that once such amount exceeds the General Threshold Amount, the Sellers will be entitled to recover the amount of all such Losses in excess of $1,000,000.

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          (d) Notice of Potential Claims for Indemnification.

     (i) No claim for indemnification pursuant to this Section 11.3 may be brought by Sellers Representative after the applicable expiration date set forth in Section 11.1; provided, however, that if, prior to such applicable date, Buyer will have received a Sellers Indemnification Notice of a claim for indemnification under this Section 11.3 from Sellers Representative (whether or not formal legal action will have been commenced based upon such claim), such claim described in the Sellers Indemnification Notice will continue to be subject to indemnification in accordance with this Section 11.3 notwithstanding such expiration date.

     (ii) Sellers Representative will provide written notice (the “Sellers Indemnification Notice”) to Buyer reasonably promptly after any Seller becomes aware of any Losses that Sellers Representative will have determined to have given or is reasonably likely to give rise to a claim for indemnification hereunder, which notice will include a general description of the facts and circumstances giving rise to such indemnification obligation. Notwithstanding the foregoing, but subject to Section 11.2(d)(i),the failure to so notify Buyer will not relieve Buyer of any liability that it may have to Sellers, except to the extent that Buyer demonstrates that it is actually and materially prejudiced by such failure.

          (e) Third Party Claims. The obligations and liabilities of Buyer hereunder with respect to a Third Party Claim for which Sellers are entitled to indemnification pursuant to this Section 11.3 will be subject to the following terms and conditions.

     (i) Buyer will have the right, but not the obligation, to defend against and to direct the defense of any such Third Party Claim and any related Proceeding at Buyer’s sole cost and expense and with counsel of Buyer’s choosing (subject to the approval of Sellers Representative, which will not be unreasonably withheld or delayed) and Sellers will reasonably cooperate in the defense thereof. Sellers Representative may participate in such defense with counsel of its own choosing, provided that Buyer will not, following written notice of its election to defend against and direct the defense of any such Third Party Claim, be liable to Sellers under this Section 11.3 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding incurred by Sellers Representative in connection with the defense of such Proceeding unless (A) a Seller is also a party to such Third Party Claim and the Sellers Representative determines in good faith that such Seller has available to him one or more defenses or counterclaims that are inconsistent with those of Buyer or (B) Buyer fails to provide reasonable assurance to Sellers Representative of its financial capacity to defend such Third Party Claim and provide indemnification with respect to such Third Party Claim. If Buyer assumes the defense of a Third Party Claim, no compromise, discharge or settlement of, or admission of liability in connection with, such claims may be effected by Buyer without the written consent of Sellers Representative (which consent will not be unreasonably withheld or delayed) unless (x) there is no finding or admission of

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any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against Sellers, and (y) the sole relief provided is monetary damages that are paid in full by Buyer. Buyer will have no liability with respect to any compromise or settlement of such claims effected without its written consent (which consent will not be unreasonably withheld or delayed), unless Sellers Representative has waived any right of Sellers to indemnification therefore by Buyer.

     (ii) If, however, Buyer fails or refuses to undertake the defense of such Third Party Claim within 10 days after the Sellers Indemnification Notice has been given to Buyer by Sellers Representative or if Buyer later withdraws from such defense, Sellers Representative will have the right to undertake the defense of such claim with counsel of his own choosing, with Buyer responsible for the costs and expenses of such defense and bound by any determination made in such Third Party Claim or any compromise or settlement effected by Sellers Representative.

ARTICLE 12
ADDITIONAL TAX MATTERS

          12.1 Liability For Taxes.

          (a) Sellers will be liable for and pay, and will indemnify Buyer and Company against (i) all Taxes imposed on Company, or for which Company may otherwise be liable, for any Pre-Closing Tax Period, other than (A) Taxes imposed on Company (as opposed to Sellers) resulting from the Elections if made (other than Taxes described in clause (ii) hereof), and (B) the amount reflected as a current liability for Taxes included in the calculation of Final Working Capital, and (ii) any additional Taxes not covered by clause (i) arising as a result of any breach of the representation contained in Section 3.15 and the covenants of Sellers contained in Section 7.2 and this Article 12; provided, however, that Sellers will in no event be liable for or required to pay Taxes imposed on Company with respect to any taxable period subsequent to the Closing Date as a result of a breach of a representation contained in Section 3.15(a) that all Tax Returns required to be filed by, on behalf of, or that include, Company have been timely filed in all jurisdictions in which such Tax Returns are required to be filed. Notwithstanding any other provision to the contrary, Sellers’ indemnification obligations under this Section 12.1 will survive until the expiration of the statute of limitations applicable to such matters and will not be subject to or count towards the time or monetary limitations in Section 11.2.

          (b) For purposes of subsection (a) above, whenever it is necessary to determine the liability for Taxes of Company for a period that begins before and ends after the Closing Date (a “Straddle Period”), the determination of the Taxes of Company for the portion of the Straddle Period ending on and including, and the portion of the Straddle Period beginning after, the Closing Date will be determined by assuming that the Straddle Period consisted of two taxable years or periods, one which ended at the close of the Closing Date and the other which began at the beginning of the day following the Closing Date, and, items of income, gain, deduction, loss or credit of Company for the Straddle Period will be allocated between such two taxable years or periods on a “closing of the books basis” by assuming that the books of

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Company were closed at the close of the Closing Date, provided, however, that exemptions, allowances or deductions that are calculated on an annual basis (such as the deductions for depreciation and real estate taxes) will be apportioned between such two taxable years or periods on a daily basis.

          12.2 Tax Returns. Subject to the requirements set forth below, Sellers Representative will cause to be prepared and timely filed (or provided to Buyer for filing, if applicable) when due (taking into account all extensions properly obtained), all income and franchise Tax Returns that are required to be filed by or with respect to Company for Tax periods actually ending on or prior to the Closing Date, and all other Tax Returns required to be filed prior to the Closing Date. Buyer will be responsible for causing the preparation and filing of all other Tax Returns of Company that include Pre-Closing Tax Periods. All Tax Returns described in this Section 12.2 will be prepared and filed in a manner consistent with past practice of Company and, on such Tax Returns, no position will be taken, elections made or method adopted without the written consent (which will not be unreasonably withheld) of Buyer or Sellers Representative, as applicable, that is inconsistent with positions taken, elections made or methods used in preparing and filing similar Tax Returns in prior periods. To the extent responsible for the preparation of a Tax Return hereunder, Buyer will provide Sellers Representative or Sellers Representative will provide Buyer, as applicable, a copy of such Tax Return for its review and approval at least 45 days prior to the due date for filing any such Tax Return (including extensions properly obtained). The reviewing Person will have 15 days to notify the preparing Person of any issues it wishes to raise with respect to such Tax Return. Sellers Representative and Buyer will consult and resolve in good faith any such issues and mutually to consent to the filing as promptly as possible of such Tax Return. If they are unable to resolve any disputed issue within 10 days, the matter will be submitted for resolution by the Independent Accountants in accordance with the procedures described in Section 7.2(d).

          12.3 Contest Provisions . Promptly after receipt by Buyer, one its Affiliates or any Seller of written notice of the assertion or commencement of any claim, audit, examination or other proposed change or adjustment by any taxing authority relating to a Pre-Closing Tax Period (a “Tax Claim”), the recipient will promptly notify Buyer or Sellers Representative, as applicable. Such notice will contain factual information (to the extent known) describing the asserted Tax Claim in reasonable detail and will include copies of any notice or other document received from any taxing authority in respect of any such asserted Tax Claim. The failure of Sellers Representative to receive prompt notice from Buyer or its Affiliates as provided herein will not relieve Sellers of any of their indemnification obligations under this Agreement except to the extent such failure to provide notice materially adversely affects Sellers’ ability to assert any of their or Company’s or its Affiliates’ rights with respect to such Tax Claim. Buyer will have the sole right to represent Company’s interests in any Tax audit or administrative or court proceeding relating to Pre-Closing Tax Periods as to any issues; provided, however, Buyer will keep Sellers Representative informed of, and provide it with copies of all material correspondence related to, any such audit or proceeding. Without the Sellers Representative’s written consent (which will not be unreasonably withheld or delayed), Buyer will not settle or compromise any claim, litigation, audit, examination or other proposed change or adjustment by any taxing authority relating to any period (including the portion of any Straddle Period) ending from and after the Closing Date if such settlement or compromise results in or has the effect of increasing the amount of Taxes payable with respect to any Pre-Closing Tax Period.

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          12.4 Assistance and Cooperation. After the Closing Date, each of Sellers and Buyer will (and cause their respective Affiliates to):

          (a) timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports with respect to sales, transfer and similar Taxes;

          (b) assist the other party in preparing any Tax Returns which such other party is responsible for preparing and filing in accordance with Section 12.2;

          (c) cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of Company;

          (d) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of Company; and

          (e) render such other assistance as the other party may reasonably request pertaining to Taxes of Company.

ARTICLE 13
GENERAL PROVISIONS

          13.1 Expenses. Except as otherwise provided in Section 7.5, Article 11 or Article 12, each party to this Agreement will pay all expenses incurred by it in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of its Representatives, whether or not the Closing will have occurred.

          13.2 Publicity and Reports. Sellers Representative and Buyer will coordinate all publicity relating to the transactions contemplated by this Agreement, and no party will issue any press release, publicity statement or other public notice relating to this Agreement or transactions contemplated hereby without first obtaining the written consent of the other party to the issuance of such release, statement or notice (which consent may not be unreasonably withheld, conditioned or delayed), except as such release or announcement may be required by law or the rules or regulations of the Nasdaq Stock Market, Inc., in which case the party required to make the release or announcement will be obligated only to use commercially reasonable efforts to consult with the other party prior to issuing any such press release, publicity statement or other public notice.

          13.3 Notices. Unless otherwise specified, any notice or other communication hereunder must be given in writing and: (i) delivered in person; (ii) transmitted by facsimile or other telecommunications mechanism; (iii) delivered via an overnight courier service of national reputation; or (iv) mailed by certified or registered mail, postage prepaid, receipt requested as follows:

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If to any Seller, to Sellers Representative:

      Dru A. Schmitt

      147 West Coconut Palm Road

      Boca Raton, Florida 33432

      Facsimile: (561) 347-6627

with a copy (which will not constitute notice) to:

      Lewis, Rice & Fingersh, L.C.

      500 North Broadway, Suite 2000

      St. Louis, Missouri 63102

      Attention: Tom W. Zook, Esq.

      Facsimile: (314) 612-7671

If to Buyer:

      WebMD Corporation

      River Drive Center 2

      669 River Drive

      Elmwood Park, New Jersey 07407-1371

      Attention: General Counsel

      Facsimile: (201) 703-3443

with copies (which will not constitute notice) to:

      WebMD Corporation

      River Drive Center 2

      669 River Drive

      Elmwood Park, New Jersey 07407-1371

      Attention: Chief Financial Officer

      Facsimile: (201) 398-2615

and to:

      O’Melveny & Myers LLP

      1999 Avenue of the Stars

      Los Angeles, California 90067

      Attention: Steven L. Grossman, Esq.

      Facsimile: (310) 246-6779

or to such other address or to such other Person as such Seller or Buyer has last designated by such notice to the other parties. Each such notice or other communication will be effective: (i) if given by facsimile or other telecommunication, when transmitted to the applicable number so specified in this Section 13.3 and an appropriate confirmation is received; (ii) if given by mail, three Business Days after such communication is deposited in the mails with first class postage prepaid, addressed as above; (iii) if given by overnight courier service of national reputation, one

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Business Day after such communication is deposited with such courier service; or (iv) if given by any other means, when actually received at such address.

          13.4 Waiver. Except as explicitly provided in this Agreement, the rights and remedies of the parties under this Agreement are cumulative and not alternative and are not exclusive of any right or remedies that any party may otherwise have at law or in equity. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (i) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (ii) no notice to or demand on one party will be deemed to be a waiver of any right of the party giving such notice or demand to take further action without notice or demand.

          13.5 Entire Agreement; Amendment. This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement between the parties with respect to its respective subject matter. This Agreement may not be amended except by a written agreement executed by Buyer and Sellers Representative.

          13.6 Assignment. This Agreement, and the rights, interests and obligations hereunder, will not be assigned by any party by operation of law or otherwise without the express written consent of the other parties (which consent may be granted or withheld in the sole and absolute discretion of each such other party); provided, however, that Buyer may assign any or all of its rights and interests hereunder to any Person with the written consent of Sellers Representative and to one or more of its Affiliates without such consent, but in the later case no such assignment will relieve Buyer of any of its obligations hereunder.

          13.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party in any material respect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

          13.8 Governing Law; Consent to Jurisdiction and Venue; Jury Trial Waiver.

          (a) This Agreement and the legal relations between the parties will be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be performed in such State and without regard to conflicts of law doctrines unless certain matters are preempted by federal law.

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          (b) Subject to Section 2.4(c), which the parties intend to be the sole and exclusive remedy with respect to disputes concerning Contingent Payments, all actions and proceedings arising out of or relating to this Agreement will be heard and determined in a New York State or a federal court sitting in the Southern District of New York, and the parties to this Agreement hereby irrevocably submit to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. The parties hereby consent to service of process by mail (in accordance with Section 13.3) or any other manner permitted by law.

          (c) SELLERS AND BUYER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SELLERS OR BUYER OR THEIR RESPECTIVE REPRESENTATIVES IN THE NEGOTIATION OR PERFORMANCE HEREOF.

          13.9 Right of Set-Off. In addition to any other rights and remedies Buyer may have under this Agreement and applicable Legal Requirements, but in lieu of any other rights of set-off or recoupment that Buyer may otherwise have under applicable Legal Requirements (except for any claim based on fraud by any Seller), Buyer will have (a) a right of set-off in whole or in part against any Contingent Payments to the extent that any amounts or claims arising from this Agreement are determined to be owed to it, as agreed upon by the parties or as reflected in a certified order or ruling from an arbitrator or a court, as of the date that any such Contingent Payment becomes due, and (b) a right to deposit into an escrow account with the Escrow Agent an amount of such Contingent Payment equal to Buyer’s good faith estimate of the amount of any claim arising from this Agreement and set forth in a “Notice of Claim” submitted to Sellers Representative and the Escrow Agent in accordance with the terms of the Escrow Agreement that remains outstanding as of the date that any such Contingent Payment becomes due. When any claim referenced in clause (b) above is determined to be owed to Buyer in accordance with the terms of this Agreement, the amount owed to it will be released to Buyer from escrow and the remainder, if any, deposited with respect to such claim will be released to Transferring Sellers in accordance with the Applicable Consideration Percentages, as provided in the Escrow Agreement. For the purposes of clarification, if the set-off and deposit rights above are with respect to a portion of any Contingent Payment, the remainder of the Contingent Payment will be paid by Buyer to Transferring Sellers pursuant to Section 2.4. If any amounts are so set-off or deposited into escrow and the relevant Contingent Payment is made in both cash and stock, the amount so set-off or deposited will first reduce the cash portion of the Contingent Payment and then, if necessary, reduce the portion of such Contingent Payment paid in shares of Buyer’s common stock. In the event that amounts are off-set by Buyer in accordance with clause (a) above or distributed to Buyer under the Escrow Agreement, in either case, based upon a certified order or ruling from an arbitrator or a court and, thereafter, it is determined pursuant to a final, non-appealable, order or ruling from an arbitrator or court that all or a portion of the amount so off-set by Buyer under clause (a) above or distributed to Buyer under the Escrow Agreement was not due and owing by Sellers to any Buyer Indemnified Party hereunder, then Buyer will promptly deliver to Sellers, in accordance with their Applicable Consideration Percentages, an amount of cash equal to the excess amount that was so off-set or distributed to Buyer. Buyer agrees that it will make claims under this Agreement first against the Escrow

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Amount, provided that a sufficient portion of the Escrow Amount is then-available to satisfy the full amount of such claim.

          13.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other telecommunications mechanism will be effective as delivery of a manually executed counterpart of this Agreement.

          13.11 Sellers Representative . Whenever any action is required or permitted under this Agreement to be taken by Sellers or any of them (including exercising any rights, giving or receiving any notices, or taking any other actions), Sellers will act hereunder in concert through a single individual designated in a written notice signed by each Seller and delivered to Buyer and Escrow Agent (the “Sellers Representative”). Buyer and Escrow Agent may rely conclusively on Sellers Representative in taking any such action and otherwise performing for and on behalf of Sellers and each of them with the same conclusive authority as if each Seller had individually so acted. Sellers have appointed and authorized Dru A. Schmitt to act as their initial Sellers Representative, to serve in such capacity until Sellers provide a written notice hereunder appointing a different Sellers Representative. Sellers’ execution and delivery of this Agreement will constitute the written notice appointing the above-named initial Sellers Representative.

          13.12 No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties and their permitted assigns and, except as set forth in Article 11, nothing herein, express or implied, is intended to or will confer upon any other Person any legal or equitable benefit, claim, cause of action, remedy or right of any kind.

          13.13 Successors and Assigns. Except as otherwise provided in this Agreement, the terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.

          13.14 Representation by Counsel; Interpretation. Each party acknowledges that it has been represented by counsel in connection with this Agreement. Accordingly, any Legal Requirement that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement will be interpreted in a reasonable manner to effect the intent of the parties.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives, all as of the Effective Date.

WebMD Corporation,
a Delaware corporation

By:	/s/ DAVID C. AMBURGEY	/s/ JOSEPH Q. DIMARTINI
Name: David C. Amburgey		Joseph Q. DiMartini Trustee U/A dated February
Title: Senior Vice President		6, 1998 f/b/o Joseph Q. DiMartini
/s/ JOSEPH Q. DIMARTINI		/s/ JOSEPH Q. DIMARTINI
Joseph Q. DiMartini		Joseph Q. DiMartini, Trustee of the Joseph Q.
		DiMartini 2002 Irrevocable Trust dated October 14, 2002
/s/ ERIC J. SCHAEFER		/s/ DANIEL A. SCHMITT
Eric J. Schaefer		Daniel A. Schmitt, Trustee of the Daniel A.
		Schmitt Revocable Trust dated March 26, 1999
/s/ DANIEL A. SCHMITT		/s/ DANIEL A. SCHMITT
Daniel A. Schmitt		Daniel A. Schmitt, Trustee of the Daniel Schmitt
		2002 Irrevocable Trust dated September 24, 2002
/s/ DRU A. SCHMITT		/s/ DRU A. SCHMITT
Dru A. Schmitt		Dru A. Schmitt Trustee, U/A dated October 20,
		1997 f/b/o Dru A. Schmitt

I hereby acknowledge and accept my
appointment as Sellers Representative

/s/ DRU A. SCHMITT

Dru A. Schmitt

EX-2.1

EX-2.1 STOCK PURCHASE AGREEMENT

EX-3.2

EXHIBIT 3.2

AMENDED AND RESTATED

BYLAWS

OF

WEBMD CORPORATION

Effective August 1, 2003

TABLE OF CONTENTS

Article I Corporate Offices
	1.1 Registered Office
	1.2 Other Offices
Article II Meetings of Stockholders
	2.1 Place of Meetings
	2.2 Annual Meeting
	2.3 Special Meeting
	2.4 Notice of Stockholders’ Meetings
	2.5 Manner of Giving Notice; Affidavit of Notice
	2.6 Quorum
	2.7 Adjourned Meeting; Notice
	2.8 Voting
	2.9 Waiver of Notice
	2.10 No Stockholder Action by Written Consent Without a Meeting
	2.11 Record Date for Stockholder Notice; Voting; Giving Consents
	2.12 Proxies
	2.13 List of Stockholders Entitled to Vote
	2.14 Advance Notice of Business to be Transacted at Annual Meetings
	2.15 Advance Notice of Nomination of Directors
	2.16 Conduct of Meetings of Stockholders
Article III Directors
	3.1 Powers
	3.2 Number of Directors
	3.3 Election, Qualification and Term of Office of Directors
	3.4 Resignation and Vacancies
	3.5 Place of Meetings; Meetings by Telephone
	3.6 First Meetings
	3.7 Regular Meetings
	3.8 Special Meetings; Notice
	3.9 Quorum
	3.10 Waiver of Notice
	3.11 Adjourned Meeting; Notice
	3.12 Board Action by Written Consent Without a Meeting
	3.13 Fees and Compensation of Directors
	3.14 Approval of Loans to Officers
	3.15 Removal of Directors
Article IV Committees
	4.1 Committees of Directors
	4.2 Committee Minutes
	4.3 Meetings and Action of Committees
	4.4 Advisory Committees
Article V Officers
	5.1 Officers
	5.2 Election of Officers
	5.3 Subordinate Officers and Agents
	5.4 Removal and Resignation of Officers
	5.5 Vacancies in Offices
	5.6 CEO
	5.7 President
	5.8 Vice President
	5.9 Secretary
	5.10 CFO
	5.11 Treasurer
	5.12 Assistant Secretary
	5.13 Assistant Treasurer
	5.14 Authority and Duties of Officers
Article VI Indemnity
	6.1 Indemnification of Directors and Officers
	6.2 Indemnification of Others
	6.3 Insurance
Article VII Books and Records
Article VIII General Matters
	8.1 Checks
	8.2 Execution of Corporate Contracts and Instruments
	8.3 Stock Certificates
	8.4 Special Designation on Certificates
	8.5 Lost Certificates
	8.6 Construction; Definitions
	8.7 Dividends
	8.8 Fiscal Year
	8.9 Seal
	8.10 Transfer of Stock
	8.11 Stock Transfer Agreements
	8.12 Registered Stockholders
	8.13 Representation of Shares of Other Corporations
Article IX Amendments
EX-2.1 STOCK PURCHASE AGREEMENT
EX-3.2 AMENDED & RESTATED BYLAWS WEBMD CORPORATION
EX-4.1 INDENTURE WEBMD CORPORATION & BANK OF NY
EX-4.2 REGISTRATION RIGHTS AGREEMENT JUNE 25, 2003
EX-4.3 REGISTRATION RIGHTS AGREEMENT JULY 17, 2003
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

TABLE OF CONTENTS

ARTICLE I     CORPORATE OFFICES			1
	1.1	REGISTERED OFFICE	1
	1.2	OTHER OFFICES	1
ARTICLE II     MEETINGS OF STOCKHOLDERS			1
	2.1	PLACE OF MEETINGS	1
	2.2	ANNUAL MEETING	1
	2.3	SPECIAL MEETING	1
	2.4	NOTICE OF STOCKHOLDERS’ MEETINGS	2
	2.5	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE	2
	2.6	QUORUM	2
	2.7	ADJOURNED MEETING; NOTICE	2
	2.8	VOTING	3
	2.9	WAIVER OF NOTICE	3
	2.10	NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING	3
	2.11	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS	4
	2.12	PROXIES	4
	2.13	LIST OF STOCKHOLDERS ENTITLED TO VOTE	5
	2.14	ADVANCE NOTICE OF BUSINESS TO BE TRANSACTED AT ANNUAL MEETINGS	5
	2.15	ADVANCE NOTICE OF NOMINATIONS OF DIRECTORS	7
	2.16	CONDUCT OF MEETINGS OF STOCKHOLDERS	9
ARTICLE III     DIRECTORS			9
	3.1	POWERS	9
	3.2	NUMBER OF DIRECTORS	10
	3.3	ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS	10
	3.4	RESIGNATION AND VACANCIES	10
	3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE	11
	3.6	FIRST MEETINGS	11
	3.7	REGULAR MEETINGS	11
	3.8	SPECIAL MEETINGS; NOTICE	11
	3.9	QUORUM	11
	3.10	WAIVER OF NOTICE	11
	3.11	ADJOURNED MEETING; NOTICE	12
	3.12	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING	12
	3.13	FEES AND COMPENSATION OF DIRECTORS	12
	3.14	APPROVAL OF LOANS TO OFFICERS	12
	3.15	REMOVAL OF DIRECTORS	12
ARTICLE IV     COMMITTEES			13
	4.1	COMMITTEES OF DIRECTORS	13
	4.2	COMMITTEE MINUTES	13
	4.3	MEETINGS AND ACTION OF COMMITTEES	14
	4.4	ADVISORY COMMITTEES	14
ARTICLE V     OFFICERS			14
	5.1	OFFICERS	14
	5.2	ELECTION OF OFFICERS	14
	5.3	SUBORDINATE OFFICERS AND AGENTS	15
	5.4	REMOVAL AND RESIGNATION OF OFFICERS	15
	5.5	VACANCIES IN OFFICES	15
	5.6	CEO	15

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	5.7	PRESIDENT	15
	5.8	VICE PRESIDENT	16
	5.9	SECRETARY	16
	5.10	CHIEF FINANCIAL OFFICER	16
	5.11	TREASURER	17
	5.12	ASSISTANT SECRETARY	17
	5.13	ASSISTANT TREASURER	17
	5.14	AUTHORITY AND DUTIES OF OFFICERS	17
ARTICLE VI     INDEMNITY			18
	6.1	INDEMNIFICATION OF DIRECTORS AND OFFICERS	18
	6.2	INDEMNIFICATION OF OTHERS	18
	6.3	INSURANCE	18
ARTICLE VII     BOOKS AND RECORDS			19
ARTICLE VIII     GENERAL MATTERS			19
	8.1	CHECKS	19
	8.2	EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS	19
	8.3	STOCK CERTIFICATES	19
	8.4	SPECIAL DESIGNATION ON CERTIFICATES	20
	8.5	LOST CERTIFICATES	20
	8.6	CONSTRUCTION; DEFINITIONS	20
	8.7	DIVIDENDS	20
	8.8	FISCAL YEAR	21
	8.9	SEAL	21
	8.10	TRANSFER OF STOCK	21
	8.11	STOCK TRANSFER AGREEMENTS	21
	8.12	REGISTERED STOCKHOLDERS	21
	8.13	REPRESENTATION OF SHARES OF OTHER CORPORATIONS	21
ARTICLE IX     AMENDMENTS			22

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AMENDED AND RESTATED
BYLAWS
OF
WEBMD CORPORATION

ARTICLE I

CORPORATE OFFICES

     1.1 Registered Office

     The registered office of WebMD Corporation (the “Corporation”) shall be at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation at such location is The Corporation Trust Company.

     1.2 Other Offices

     The Board of Directors of the Corporation (the “Board of Directors”) may at any time establish other offices at any place or places where the Corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

     2.1 Place of Meetings

     Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders’ meetings shall be held at the principal office of the Corporation.

     2.2 Annual Meeting

     The annual meeting of stockholders shall be held each year, on a date and at a time designated by the Board of Directors, for the purpose of electing directors and transacting such other business as may properly come before the meeting.

     2.3 Special Meeting

     Special meetings of the stockholders of the Corporation may be called for any purpose or purposes at any time by a majority of the members of the Board of Directors or by the Chairman of the Board or the CEO (as defined in Section 5.1 of these Bylaws). Special meetings of the stockholders of the Corporation may not be called by any other person or persons. Special meetings shall be held solely for the purpose or purposes specified in the notice of the meeting.

     2.4 Notice of Stockholders’ Meetings

     All notices of meetings of the stockholders of the Corporation shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

     2.5 Manner of Giving Notice; Affidavit of Notice

     Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

     2.6 Quorum

     Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation of the Corporation as it may be amended from time to time (the “Certificate of Incorporation”) or these Bylaws, the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote thereat, present in person or represented by proxy, shall be necessary and sufficient to constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum is not present or represented at any meeting of the stockholders, then the Chairman of the Board or stockholders entitled to vote thereat, present in person or represented by proxy, by a majority in voting power thereof, shall have power to adjourn the meeting from time to time, in the manner provided in Section 2.7 of these Bylaws, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any subsidiary of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

     2.7 Adjourned Meeting; Notice

     When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is

2

fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     2.8 Voting

     The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

     Except as may be otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to cast one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Except as otherwise provided by law or the Certificate of Incorporation or elsewhere in these Bylaws: (a) the election of directors submitted to stockholders at any meeting shall be decided by a plurality of the votes cast thereon; (b) all matters other than the election of directors submitted to the stockholders at any meeting shall be decided by the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote thereon, unless otherwise provided by, or pursuant to, the rules or regulations of any stock exchange applicable to the Corporation, applicable law or any regulation applicable to the Corporation or its securities. Votes need not be by written ballot, unless the Board, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his or her discretion, requires any vote or votes cast at such meeting to be cast by written ballot.

     2.9 Waiver of Notice

     Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws.

     2.10 No Stockholder Action by Written Consent Without a Meeting

     Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly announced and called, as provided in these Bylaws, and may not be taken by a written consent of the stockholders without a meeting.

3

     2.11 Record Date for Stockholder Notice; Voting; Giving Consents

     (a)  In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date:

          (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting;

          (ii) in the case of any other action, shall be not more than sixty (60) days prior to such action.

     (b)  If the Board of Directors does not so fix a record date:

          (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and

          (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

     A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

     2.12 Proxies

     Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by a written proxy, signed by the stockholder and filed with the Secretary of the Corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the Corporation.

4

     2.13 List of Stockholders Entitled to Vote

     The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, as required by applicable law. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

     2.14 Advance Notice of Business to be Transacted at Annual Meetings

          (a) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting of stockholders except business brought before such meeting in accordance with the procedures set forth in this Section 2.14 and nominations brought before such meeting in accordance with the procedures set forth in Section 2.15; provided, however, that, once business has been properly brought before such meeting in accordance with such procedures, nothing in this Section 2.14 shall be deemed to preclude discussion by any stockholder of any such business. To be properly brought before the annual meeting of stockholders, business must be either (i) specified in the notice of the meeting or any supplement thereto given by or at the direction of the Board of Directors or any duly authorized committee thereof (including any such business included pursuant to Rule 14a-8 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), (ii) otherwise properly brought before the meeting by or at the direction of the Board (or any duly authorized committee thereof) or (iii) otherwise properly brought before the meeting by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.14 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 2.14. Nothing in this Section 2.14 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

          (b) In addition to any other requirements under applicable law, for business to be properly brought before an annual meeting by a stockholder under clause (iii) of Section 2.14(a), such stockholder must have given timely notice thereof (in accordance with Section 2.14(c)) in proper written form (in accordance with Section 2.14(d)) to the Secretary of the Corporation.

          (c) To be timely, a stockholder’s notice to the Secretary must be received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10^th ) day

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following the earlier of (i) the day on which notice of the annual meeting is mailed to stockholders and (ii) the day on which public announcement of the date of the annual meeting is first made by the Corporation; provided, further, that if the Corporation mails notice of the annual meeting to stockholders or otherwise makes public announcement of a date for the annual meeting and subsequently changes the date of such annual meeting (other than a change from a date which is within thirty (30) before or after such anniversary date to another date which is within thirty (30) days before or after such anniversary date), notice by the stockholder will be timely if it is so received not later than the close of business on the tenth (10^th ) day following the earlier of (A) the day on which notice of the annual meeting reflecting the new date is mailed to stockholders and (B) the day on which public announcement of the new date of the annual meeting is first made by the Corporation. For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, PR Newswire, Business Wire, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

          (d) To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment); and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (A) the name and record address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner, (C) a representation that the stockholder is a holder of record of the stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, (D) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal and/or (2) otherwise to solicit proxies from stockholders in support of such proposal, and (E) a description of all arrangements or understandings between such stockholder or such beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder, any such beneficial owner and/or any such other persons in such business.

          (e) Notwithstanding the foregoing provisions of this Section 2.14, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present business otherwise proposed in accordance with the requirements of this Section 2.14, such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

          (f) The Chairman of the meeting shall have the power and duty to determine whether any business proposed to be brought before the annual meeting was not properly

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brought before the meeting in accordance with the procedures set forth in this Section 2.14 and, if the Chairman declares to the meeting that any proposed business was not properly brought before the meeting, such business shall not be considered or voted upon at the meeting and shall be disregarded.

     2.15 Advance Notice of Nomination of Directors

          (a) Only persons who are nominated in accordance with the procedures set forth in this Section 2.15 shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.15 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 2.15.

          (b) In addition to any other requirements under applicable law, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof (in accordance with Section 2.15(c)) in proper written form (in accordance with Section 2.15(d)) to the Secretary of the Corporation.

          (c) To be timely, a stockholders’ notice to the Secretary must be received at the principal executive offices of the Corporation (i) in the case of an annual meeting of stockholders, not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10^th ) day following the earlier of (A) the day on which notice of the annual meeting is mailed to stockholders and (B) the day on which public announcement of the date of the annual meeting is first made by the Corporation; provided, further, that if the Corporation mails notice of the annual meeting to stockholders or otherwise makes public announcement of a date for the annual meeting and subsequently changes the date of such annual meeting (other than a change from a date which is within thirty (30) days before or after such anniversary date to another date that is within thirty (30) days before or after such anniversary date), notice by the stockholder will be timely if it is so received not later than the close of business on the tenth (10^th ) day following the earlier of (1) the day on which notice of the annual meeting reflecting the new date is mailed to stockholders and (2) the day on which public announcement of the new date of the annual meeting is first made by the Corporation, or (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10^th ) day following the earlier of (A) the day on which notice of the special meeting is mailed to stockholders and (B) the day on which public announcement of the date of the special meeting is first made by the Corporation. Notwithstanding anything in the first sentence of this Section 2.15(c) to the contrary, in the event

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that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least seventy (70) days prior to the anniversary date of the immediately preceding annual meeting of stockholders (or, in the event that directors are to be elected at a special meeting, at least seventy (70) days prior to the date of such special meeting), a stockholder’s notice to the Secretary shall also be considered timely, but only with respect to nominees for any new position created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10^th ) day following the day on which such public announcement is first made by the Corporation.

          (d) To be in proper written form, a stockholder’s notice to the Secretary must set forth: (i) as to each person whom the stockholder proposes to nominate for election as a director, (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination is made, (A) the name and record address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner, (C) a representation that the stockholder is a holder of record of the stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination, (D) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to solicit proxies from stockholders in support of such nomination, (E) a description of all arrangements or understandings between such stockholder or such beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such nomination by such stockholder, and (F) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations or proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as it may reasonable require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

          (e) Notwithstanding the foregoing provisions of this Section 2.15, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination otherwise proposed in accordance with the requirements of this Section 2.15, such nomination shall be disregarded, notwithstanding that proxies voting for such nominee may have been received by the Corporation.

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          (f) The Chairman of the meeting shall have the power and duty to determine whether any nomination was not made in accordance with the procedures set forth in this Section 2.15 and, if the Chairman of the meeting declares to the meeting that a nomination was not properly made, such nomination shall not be considered or voted upon at the meeting and shall be disregarded.

     2.16 Conduct of Meetings of Stockholders

     The date and time of the opening and the closing of the polls for each matter upon which the stockholders of the Corporation will vote at an annual or special meeting of the stockholders shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may, to the extent not prohibited by law, the Certificate of Incorporation or these Bylaws, adopt such additional or supplemental rules and regulations for the conduct of the meetings of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as are adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and authority, prior to, at the inception of, or during the meeting, to prescribe such additional or supplemental rules, regulations and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. The person presiding over any meeting of stockholders shall have the authority to make any determinations applicable to the conduct of the meeting necessary or advisable under applicable law, the Certificate of Incorporation or these Bylaws or under any such rules, regulations or procedures adopted in accordance with this Section 2.16. Unless the Board of Directors or the person presiding over the meeting shall determine otherwise, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

ARTICLE III

DIRECTORS

     3.1 Powers

     The property, business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation directed or required to be exercised or done by the stockholders. The Board of Directors may appoint a Chairman of the Board who shall, if present, preside at meetings of the Board of Directors and

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exercise and perform such other powers and duties as may from time to time be assigned to him or her by the Board of Directors or as may be prescribed by these Bylaws.

     3.2 Number of Directors

     The number of directors of the Corporation shall be nine (9). This number may be changed exclusively by a resolution duly adopted by the affirmative vote of a majority of the members of the Board of Directors then authorized by the Bylaws, except as may otherwise be provided by the Certificate of Incorporation or by statute.

     No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

     3.3 Election, Qualification and Term of Office of Directors

     The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the annual meeting of stockholders in 2002, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the annual meeting of stockholders in 2003, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the annual meeting of stockholders in 2001, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

     Notwithstanding the foregoing provisions of this Section 3.3, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

     3.4 Resignation and Vacancies

     Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other causes shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors and not by the stockholders. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified.

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     3.5 Place of Meetings; Meetings by Telephone

     The Board of Directors of the Corporation may hold meetings, both regular and special, either within or outside the State of Delaware.

     Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

     3.6 First Meetings

     The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be determined by the Board of Directors.

     3.7 Regular Meetings

     Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

     3.8 Special Meetings; Notice

     Special meetings of the Board of Directors may be called by the CEO on twenty-four (24) hours notice to each director, either personally or by mail, telegram, telex, electronic mail, facsimile transmission or telephone; special meetings shall be called by the CEO or Secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director, in which case special meetings shall be called by the CEO or Secretary in like manner and on like notice on the written request of the sole director.

     3.9 Quorum

     At all meetings of the Board of Directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation.

     3.10 Waiver of Notice

     Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of

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notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws.

     3.11 Adjourned Meeting; Notice

     If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

     3.12 Board Action by Written Consent Without a Meeting

     Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee.

     3.13 Fees and Compensation of Directors

     Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors.

     3.14 Approval of Loans to Officers

     The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiary, including any officer or employee who is a director of the Corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.

     3.15 Removal of Directors

     Unless otherwise restricted by statute, by the Certificate of Incorporation or by these Bylaws, any director or the entire Board of Directors may be removed, only with cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

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ARTICLE IV

COMMITTEES

     4.1 Committees of Directors

     The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors or in the Bylaws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, (iv) recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or (v) amend the Bylaws of the Corporation; and, unless the board resolution establishing the committee, the Bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. The Board of Directors may adopt rules for the governance of any committee not inconsistent with the provisions of these Bylaws and, unless the Board of Directors provides otherwise by resolution, each committee may adopt such rules for itself to the extent not inconsistent with these Bylaws and any such rules adopted by the Board of Directors. Except as may otherwise be provided by resolution of the Board of Directors, a majority of the members of any such committee may adopt such governance rules or otherwise fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware of its meetings. The Board of Directors shall have the power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time.

     4.2 Committee Minutes

     Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

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     4.3 Meetings and Action of Committees

     Except as otherwise provided in this Article IV or in any applicable governance or procedural rules adopted pursuant to Section 4.1, meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of the following Sections of these Bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), and Section 3.12 (action without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that (a) special and regular meetings of committees may be called by the Chairman of the Board, the CEO or the Chairman of the applicable committee and shall be called by the CEO or Secretary upon resolution of the Board of Directors or written request of a majority of the whole Board of Directors or of any two members of the applicable committee; and (b) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee.

     4.4 Advisory Committees

     The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more advisory committees, with each committee to consist of one or more of the directors of the Corporation or any other such persons as the Board of Directors may appoint. The Board of Directors may designate one or more persons as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Members who are not members of the Board of Directors shall not have the responsibilities or obligations of members of the Board of Directors nor be deemed directors of the Corporation for any other purpose.

ARTICLE V

OFFICERS

     5.1 Officers

     The officers of the Corporation shall include a Chief Executive Officer (the “CEO”), a Secretary, a Chief Financial Officer (“CFO”) and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, a President, one or more Vice Presidents, one or more Assistant Vice Presidents, Assistant Secretaries, and Assistant Treasurers. Any number of offices may be held by the same person, except that no person may, at the same time, be both the CEO and the CFO.

     5.2 Election of Officers

     The officers of the Corporation shall be elected by the Board of Directors; provided, however, that (a) the Board of Directors may also delegate authority to the CEO to elect any

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officer other than the CEO and the CFO. Each officer shall hold office until his or her successor is qualified or until his or her earlier resignation or removal. Each such officer shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors or the CEO may from time to time determine. Each such officer shall hold office until his or her successor is qualified or until his or her earlier resignation or removal.

     5.3 Subordinate Officers and Agents

     The Board of Directors and the CEO may each appoint or cause to be appointed such subordinate officers and agents as the business of the Corporation may require. Each such subordinate officer or agent shall hold office for such period, have such authority, and perform such duties as the Board of Directors, the CEO or the President may from time to time determine.

     5.4 Removal and Resignation of Officers

     All officers and agents shall be subject to removal, with or without cause, at any time by the Board of Directors. The CEO may remove or cause to be removed any officer or agent whose election or appointment could, pursuant to this Article V, be made by the CEO or delegated to the CEO.

     Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective.

     5.5 Vacancies in Offices

     Any vacancy occurring in any office of the Corporation shall be filled in accordance with the applicable provisions for election of officers in Section 5.2 and 5.3.

     5.6 CEO

     The CEO shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the Corporation. The CEO shall preside at all meetings of the stockholders and, in the absence or nonexistence of a Chairman of the Board, at all meetings of the Board of Directors, if the CEO is also a director. The CEO shall have the general powers and duties of management usually vested in the chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. If there is no President, then the CEO shall also have the powers and duties of the President prescribed in Section 5.7 of these Bylaws.

     5.7 President

     The President may assume and perform the duties of the CEO in the absence or disability of the CEO or whenever the office of the CEO is vacant. The President of the Corporation shall

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exercise and perform such powers and duties as may from time to time be assigned to him or her by the Board of Directors, the CEO, or as may be prescribed by these Bylaws. The President shall have the authority to execute in the name of the Corporation bonds, contracts, deeds, leases and other written instruments to be executed by the Corporation. In the absence or nonexistence of the Chairman of the Board and the CEO, he or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of the Chairman of the Board and the CEO, at all meetings of the Board of Directors, if the President is also a director, and shall perform such other duties as the Board of Directors may from time to time determine.

     5.8 Vice President

     In the absence or disability of the CEO and the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the CEO or the President.

     5.9 Secretary

     The Secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

     The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

     The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors and committees of the Board of Directors required to be given by law or by these Bylaws. He or she shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.

     5.10 CFO

     The CFO shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the

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Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The CFO shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.

     5.11 Treasurer

     The Treasurer shall deposit all money and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the CEO, the President and the Board of Directors, whenever they request it, an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.

     5.12 Assistant Secretary

     The Assistant Secretary, or, if there is more than one, the Assistant Secretaries in the order determined by the stockholders or Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these Bylaws.

     5.13 Assistant Treasurer

     The Assistant Treasurer, or, if there is more than one, the Assistant Treasurers, in the order determined by the stockholders or Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these Bylaws.

     5.14 Authority and Duties of Officers

     In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board of Directors.

17

ARTICLE VI

INDEMNITY

     6.1 Indemnification of Directors and Officers

     The Corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.1, a “director” or “officer” of the Corporation includes any person (i) who is or was a director or officer of the Corporation or any subsidiary of the Corporation, (ii) who is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the Corporation or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary.

     6.2 Indemnification of Others

     The Corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.2, an “employee” or “agent” of the Corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the Corporation or any subsidiary of the Corporation, (ii) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the Corporation or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary.

     6.3 Insurance

     The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation or its subsidiaries as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.

18

ARTICLE VII

BOOKS AND RECORDS

     The books and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE VIII

GENERAL MATTERS

     8.1 Checks

     From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments.

     8.2 Execution of Corporate Contracts and Instruments

     The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

     8.3 Stock Certificates

     The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the CEO, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of such Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

19

     8.4 Special Designation on Certificates

     If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

     8.5 Lost Certificates

     Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

     8.6 Construction; Definitions

     Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

     8.7 Dividends

     The directors of the Corporation, subject to any restrictions contained in the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock.

     The directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

20

     8.8 Fiscal Year

     The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.

     8.9 Seal

     The seal of the Corporation shall be such as from time to time may be approved by the Board of Directors.

     8.10 Transfer of Stock

     Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

     8.11 Stock Transfer Agreements

     The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

     8.12 Registered Stockholders

     The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

     8.13 Representation of Shares of Other Corporations

     The CEO, the President, the CFO or any other person authorized by the Board of Directors or the CEO, is authorized to vote, represent, and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

21

ARTICLE IX

AMENDMENTS

     These Bylaws may be altered, amended or repealed, and new bylaws made (a) by the affirmative vote of the holders of a majority of the total voting power of all classes of outstanding capital stock voting thereon as a single class or (b) by the Board of Directors.

22 EX-4.1 5 g84264exv4w1.htm EX-4.1 INDENTURE WEBMD CORPORATION & BANK OF NY

Exhibit 4.1

WEBMD CORPORATION

and

THE BANK OF NEW YORK

as Trustee

INDENTURE

Dated as of June 25, 2003

$300,000,000 Principal Amount

(Plus Option)

1.75% Convertible Subordinated Notes due June 15, 2023

CROSS-REFERENCE TABLE*

TIA		Indenture
Section		Section
310	(a)(1)		7.10
	(a)(2)		7.10
	(a)(3)		N.A.
	(a)(4)		N.A.
	(b)		7.08; 7.10; 12.02
	(c)		N.A.
311	(a)		7.11
	(b)		7.11
	(c)		N.A.
312	(a)		2.05
	(b)		12.03
	(c)		12.03
313	(a)		7.06
	(b)(1)		N.A.
	(b)(2)		7.06
	(c)		7.06; 12.02
	(d)		7.06
314	(a)		4.03
	(b)		N.A.
	(c)(1)		12.04
	(c)(2)		12.04
	(c)(3)		N.A.
	(d)		N.A.
	(e)		12.05
	(f)		N.A.
315	(a)		7.01(B)
	(b)		7.05; 12.02
	(c)		7.01(A)
	(d)		7.01(C)
	(e)		6.11
316	(a)(last sentence)		2.09
	(a)(1)(A)		6.05
	(a)(1)(B)		6.04
	(a)(2)		N.A.
	(b)		6.07
317	(a)(1)		6.08
	(a)(2)		6.09
	(b)		2.04
318	(a)		12.01

* This Cross-Reference Table is not part of the Indenture.

i

TABLE OF CONTENTS

			Page
ARTICLE I		DEFINITIONS AND INCORPORATION BY REFERENCE		1
	1.01	Definitions		1
	1.02	Other Definitions		4
	1.03	Incorporation by Reference of Trust Indenture Act		6
	1.04	Rules of Construction		6
ARTICLE II		THE SECURITIES		7
	2.01	Form and Dating		7
	2.02	Execution and Authentication		7
	2.03	Registrar, Paying Agent and Conversion Agent		8
	2.04	Paying Agent To Hold Money in Trust		9
	2.05	Securityholder Lists		9
	2.06	Transfer and Exchange		9
	2.07	Replacement Securities		10
	2.08	Outstanding Securities		10
	2.09	Securities Held by the Company or an Affiliate		10
	2.10	Temporary Securities		11
	2.11	Cancellation		11
	2.12	Defaulted Interest		11
	2.13	CUSIP Numbers		11
	2.14	Deposit of Moneys		11
	2.15	Book-Entry Provisions for Global Securities		12
	2.16	Special Transfer Provisions		13
	2.17	Restrictive Legends		14
ARTICLE III		REDEMPTION AND REPURCHASE		15
	3.01	Right of Redemption		15
	3.02	Notices to Trustee of Redemption		15
	3.03	Selection of Securities to Be Redeemed		15
	3.04	Notice of Redemption		16
	3.05	Effect of Notice of Redemption		17
	3.06	Deposit of Redemption Price		17
	3.07	Securities Redeemed in Part		17
	3.08	Repurchase of Securities at Option of the Holder		17
	3.09	Repurchase Upon a Change in Control		19
	3.10	Conversion Arrangement on Call for Redemption		25
	3.11	Effect of Repurchase Notice or Change in Control Repurchase Notice		26
	3.12	Covenant to Comply With Securities Laws Upon Purchase of Securities		27

ii

			Page
ARTICLE IV		COVENANTS		27
	4.01	Payment of Securities		27
	4.02	Maintenance of Office or Agency		28
	4.03	Reports		28
	4.04	Compliance Certificate		29
	4.05	Stay, Extension and Usury Laws		29
	4.06	Corporate Existence		29
	4.07	Notice of Default		29
	4.08	Tax Treatment of Securities		29
ARTICLE V		SUCCESSORS		31
	5.01	When Company May Merge, etc.		31
	5.02	Successor Substituted		31
ARTICLE VI		DEFAULTS AND REMEDIES		32
	6.01	Events of Default		32
	6.02	Acceleration		33
	6.03	Other Remedies		34
	6.04	Waiver of Past Defaults		34
	6.05	Control by Majority		34
	6.06	Limitation on Suits		34
	6.07	Rights of Holders to Receive Payment		35
	6.08	Collection Suit by Trustee		35
	6.09	Trustee May File Proofs of Claim		35
	6.10	Priorities		36
	6.11	Undertaking for Costs		36
ARTICLE VII		TRUSTEE		37
	7.01	Duties of Trustee		37
	7.02	Rights of Trustee		37
	7.03	Individual Rights of Trustee		39
	7.04	Trustee’s Disclaimer		39
	7.05	Notice of Defaults		39
	7.06	Reports by Trustee to Holders		39
	7.07	Compensation and Indemnity		40
	7.08	Replacement of Trustee		40
	7.09	Successor Trustee by Merger, etc.		41
	7.10	Eligibility; Disqualification		41
	7.11	Preferential Collection of Claims Against Company		41
ARTICLE VIII		DISCHARGE OF INDENTURE		42
	8.01	Termination of the Obligations of the Company		42
	8.02	Application of Trust Money		43
	8.03	Repayment to Company		43
	8.04	Reinstatement		43

iii

			Page
ARTICLE IX		AMENDMENTS		44
	9.01	Without Consent of Holders		44
	9.02	With Consent of Holders		44
	9.03	Compliance with Trust Indenture Act		45
	9.04	Revocation and Effect of Consents		45
	9.05	Notation on or Exchange of Securities		46
	9.06	Trustee Protected		46
ARTICLE X		CONVERSION		46
	10.01	Conversion Privilege; Restrictive Legends		46
	10.02	Conversion Procedure		49
	10.03	Fractional Shares		51
	10.04	Taxes on Conversion		51
	10.05	Company to Provide Stock		51
	10.06	Adjustment of Conversion Rate		51
	10.07	No Adjustment		56
	10.08	Other Adjustments		56
	10.09	Adjustments for Tax Purposes		57
	10.10	Notice of Adjustment		57
	10.11	Notice of Certain Transactions		57
	10.12	Effect of Reclassifications, Consolidations, Mergers, Binding Share Exchanges or Sales on Conversion Privilege		57
	10.13	Trustee’s Disclaimer		58
ARTICLE XI		SUBORDINATION		59
	11.01	Agreement to Subordinate		59
	11.02	Certain Definitions		59
	11.03	Liquidation; Dissolution; Bankruptcy		60
	11.04	Company Not To Make Payments with Respect to Securities in Certain Circumstances		60
	11.05	Acceleration of Securities		61
	11.06	When Distribution Must Be Paid Over		61
	11.07	Notice by Company		61
	11.08	Subrogation		61
	11.09	Relative Rights		62
	11.10	Subordination May Not Be Impaired by Company		62
	11.11	Distribution or Notice to Representative		62
	11.12	Rights of Trustee and Paying Agent		62
	11.13	Officers’ Certificate		63
	11.14	Not to Prevent Events of Default		63
ARTICLE XII		MISCELLANEOUS		64
	12.01	Trust Indenture Act Controls		64
	12.02	Notices		65
	12.03	Communication by Holders with Other Holders		63

iv

		Page
12.04	Certificate and Opinion as to Conditions Precedent		65
12.05	Statements Required in Certificate or Opinion		65
12.06	Rules by Trustee and Agents		66
12.07	Legal Holidays		66
12.08	No Recourse Against Others		66
12.09	Duplicate Originals		66
12.10	Governing Law		66
12.11	No Adverse Interpretation of Other Agreements		66
12.12	Successors		67
12.13	Separability		67
12.14	Table of Contents, Headings, etc.		67

EXHIBITS

Exhibit A	- -	Form of Global Security
Exhibit B	- -	Form of Legends
Exhibit C	- -	Form of Notice of Transfer Pursuant to Registration Statement
Exhibit D	- -	Form of Opinion of Counsel in Connection with Registration of Securities
Exhibit E	- -	Projected Payment Schedule

v

          INDENTURE, dated as of June 25, 2003, between WebMD Corporation, a Delaware corporation (the “ Company”), and The Bank of New York, as trustee (the “Trustee”).

          Each party agrees as follows for the other parties and for the equal and ratable benefit of the Holders of the Company's 1.75% Convertible Subordinated Notes due June 15, 2023 (the “Securities”).

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

     1.01 Definitions.

          “Affiliate” means any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. For this purpose, “control” shall mean the power to direct the management and policies of a person through the ownership of securities, by contract or otherwise.

          “Agent” means any Registrar, Paying Agent, Conversion Agent or co-registrar.

          “Board of Directors” means the board of directors of the Company or any committee thereof authorized to act for it hereunder.

          “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by its Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

          “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of the Company and all warrants or options to acquire such capital stock.

          “Cash” means U.S. legal tender currency.

          “Common Stock” means the common stock, par value $0.0001 per share, of the Company, or such other capital stock into which the Company’s common stock is reclassified or changed.

          “Company” means the party named as such above until a successor replaces it pursuant to the applicable provision hereof and thereafter means the successor.

          “Company Request” or “Company Order” means a written request or order signed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer, any Executive Vice President or any Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary, and delivered to the Trustee.

1

          “Conversion Period” means the period from and including the eleventh Trading Day in a fiscal quarter of the Company up to, but not including, the eleventh Trading Day of the following fiscal quarter of the Company.

          “Conversion Price” means an amount equal to $1,000 principal amount of Securities divided by the then current conversion rate.

          “Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 12.02 or such other address as the Trustee may give notice of to the Company.

          “Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

          “Depositary” means The Depository Trust Company, its nominees and successors.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Holder” or “Securityholder” means a person in whose name a Security is registered on the Registrar’s books.

          “Indenture” means this Indenture as amended or supplemented from time to time.

          “Initial Purchaser” means Banc of America Securities LLC.

          “interest” includes liquidated damages, unless the context otherwise requires.

          “liquidated damages” has the meaning provided in the Registration Rights Agreement.

          “Make Whole Payment” means, with respect to each $1,000 principal amount of Securities being redeemed by the Company on or after June 15, 2008 and prior to June 20, 2010, a Cash amount equal to $259.26, minus the sum of (a) the amount of any regular interest paid and (b) accrued and unpaid on such Security prior to the Redemption Date for such Security.

          “Maturity Date” means June 15, 2023.

          “Non-Recourse Indebtedness” means Indebtedness upon the enforcement of which recourse may be had by the holder(s) thereof only to identified assets of the Company or any Subsidiary and not to the Company or any Subsidiary personally.

          “Officer” means the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Vice President, the Treasurer or the Secretary of the Company.

          “Officers’ Certificate” means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary of the Company.

2

          “Opinion of Counsel” means a written opinion from legal counsel who may be an employee of or counsel for the Company, or other counsel reasonably acceptable to the Trustee.

          “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof.

          “Purchase Agreement” means the Purchase Agreement dated June 20, 2003 between the Company and the Initial Purchaser.

          “QIB” means a “qualified institutional buyer” within the meaning of Rule 144A under the Act.

          “Redemption Date” means, with respect to Securities to be redeemed by the Company in accordance with Section 3.01, the business day specified for redemption of such Security in accordance with the terms of the Securities and this Indenture, as set forth in a notice of redemption.

          “Redemption Price” means, with respect to Securities to be redeemed by the Company in accordance with Section 3.01, a Cash amount equal to (i) if the Redemption Date is on or after June 15, 2008 and prior to June 20, 2010, the sum of 100% of the outstanding principal amount of such Securities and the Make Whole Payment related to such Securities, or (ii) if the Redemption Date is on or after June 20, 2010, 100% of the outstanding principal amount of such Securities.

          “Registration Rights Agreement” means the Registration Rights Agreement, dated as of June 25, 2003, between the Company and the Initial Purchaser.

          “Repurchase Price” means, with respect to Securities duly tendered for purchase by the Company in accordance with Section 3.08 or Section 3.09, 100% of the outstanding principal amount of such Securities so tendered.

          “Responsible Officer” shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

          “Restricted Security” means a Security that constitutes a “restricted security” within the meaning of Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Security constitutes a Restricted Security.

          “Rule 144A” means Rule 144A under the Securities Act.

3

          “Rule 144A Global Security” means a permanent Global Security in registered form representing the aggregate principal amount of Securities sold in reliance on Rule 144A.

          “Sale Price” means the price of a share of Common Stock on the relevant date, determined on the basis of the last reported per share sale price (or, if no last sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) of the Common Stock on such date as reported on the NASDAQ National Market, or if the Common Stock is not quoted on the NASDAQ National Market, as reported by the principal U.S. exchange or quotation system the Common Stock is then listed or quoted; provided, however, in the absence of such quotations, the Board of Directors will make a good faith determination of the Sale Price.

          “SEC” means the U.S. Securities and Exchange Commission.

          “Securities” means the 1.75% Convertible Subordinated Notes due June 15, 2023 issued by the Company pursuant to this Indenture.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Significant Subsidiary” with respect to any person means any subsidiary of such person that, from time to time, constitutes a “significant subsidiary” within the meaning of Rule 1-02 of Regulation S-X under the Securities Act, as such regulation is in effect on the date of this Indenture.

          “subsidiary” means (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by the Company, by one or more subsidiaries of the Company or by the Company and one or more of its subsidiaries or (ii) any other person (other than a corporation) in which the Company, one or more its subsidiaries or the Company and one or more its subsidiaries, directly or indirectly, at the date of determination thereof, have at least majority ownership interest.

          “TIA” means the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in Section 9.03.

          “Trading Day” means a day during which trading in securities generally occurs on the NASDAQ National Market or, if the Common Stock is not quoted on the NASDAQ National Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or quoted.

          “Trustee” means the party named as such in this Indenture until a successor replaces it in accordance with the provisions hereof and thereafter means the successor.

4

     1.02 Other Definitions.

Term	Defined in Section
“95% Trading Condition”		10.01
“Additional Securities”		2.01
“Bankruptcy Law”		6.01
“business day”		12.07
“Cash”		3.08
“Change in Control”		3.09
“Change in Control Notice”		3.09
“Change in Control Repurchase Date”		3.09
“Change in Control Repurchase Right”		3.09
“Commencement Date”		10.06
“Company Notice”		3.08
“Company Notice Date”		3.08
“comparable yield”		4.08
“Contingent Payment Regulations”		4.08
“Conversion Agent”		2.03
“conversion date”		10.02
“conversion rate”		10.01
“Conversion Shares”		10.01
“Custodian”		6.01
“Determination Date”		10.06
“Distribution Date”		10.06
“Event of Default”		6.01
“ex-dividend date”		10.01
“Expiration Time”		10.06
“Global Security”		2.01
“Global Security Legend”		2.17
“Indebtedness”		11.02
“Legal Holiday”		11.07
“Market Price”		3.09
“Participants”		2.15
“Paying Agent”		2.03
“Payment Blockage”		11.04
“Payment Blockage Notice”		11.04
“Physical Securities”		2.01
“Principal Value Conversion”		10.02
“Principal Value Conversion Notice”		10.02
“Private Placement Legend”		2.17
“Purchased Shares”		10.06
“Registrar”		2.03
“Representative”		11.02
“Repurchase Date”		3.08
“Repurchase Right”		3.08
“Resale Restriction Termination Date”		2.16
“Rights”		10.06
“Senior Indebtedness”		11.02
“Trading Price”		10.01
“U.S. Government Obligations”		8.01

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     1.03 Incorporation by Reference of Trust Indenture Act.

          Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

          The following TIA terms used in this Indenture have the following meanings:

          “Commission” means the SEC.

          All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA and not otherwise defined herein have the meanings so assigned to them.

     1.04 Rules of Construction.

          Unless the context otherwise requires:

     (i) a term has the meaning assigned to it;

     (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date hereof;

     (iii) “or” is not exclusive;

     (iv) words in the singular include the plural and in the plural include the singular;

     (v) provisions apply to successive events and transactions; and

     (vi) “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

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ARTICLE II

THE SECURITIES

     2.01 Form and Dating.

          The Securities and the Trustee’s certificate of authentication shall be substantially in the form set forth in Exhibit A, which is incorporated in and forms a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication.

          Securities offered and sold in reliance on Rule 144A under the Securities Act shall be issued initially in the form of one or more Global Securities, substantially in the form set forth in Exhibit A (each, a “Global Security”), deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided and bearing the legends set forth in Exhibits B-1 and B-2. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary, as hereinafter provided; provided that in no event shall the aggregate principal amount of the Global Security or Securities exceed $300,000,000, or $350,000,000 if the Initial Purchaser elects to purchase additional Securities pursuant to the option provided for in Section 1 of the Purchase Agreement (the “Additional Securities”).

          Securities issued in exchange for interests in a Global Security pursuant to Section 2.15 may be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibit A (the “Physical Securities”) and, if applicable, bearing any legends required by Section 2.17.

     2.02 Execution and Authentication.

          One Officer shall sign the Securities for the Company by manual or facsimile signature.

          If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid.

          A Security shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

          Upon a written order of the Company signed by one Officer of the Company, the Trustee shall authenticate Securities for original issue in the aggregate principal amount of $300,000,000 and such additional principal amount, if any, as shall be determined pursuant to the next sentence of this Section 2.02. Upon receipt by the Trustee of an Officers’ Certificate stating that the Initial Purchaser has elected to purchase from the Company a specified principal amount of Additional Securities, not to exceed $50,000,000, pursuant to Section l of the Purchase Agreement, the Trustee shall authenticate and deliver such specified principal amount of Additional Securities to or upon the written order of the Company signed as provided in the

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immediately preceding sentence. Such Officers’ Certificate must be received by the Trustee not later than the proposed date for delivery of such Additional Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $350,000,000 except as provided in Section 2.07.

          Upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company, the Trustee shall authenticate Securities not bearing the Private Placement Legend to be issued to the transferee when sold pursuant to an effective registration statement under the Securities Act as set forth in Section 2.16(C).

          The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and its Affiliates.

          If a written order of the Company pursuant to this Section 2.02 of the Indenture has been, or simultaneously is, delivered, any instructions by the Company to the Trustee with respect to endorsement, delivery or redelivery of a Security issued in global form shall be in writing but need not comply with Section 12.04 hereof and need not be accompanied by an Opinion of Counsel.

          The Securities shall be issuable only in registered form without interest coupons and only in denominations of $1,000 principal amount and any positive integral multiple thereof.

     2.03 Registrar, Paying Agent and Conversion Agent.

          The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (“Registrar”), an office or agency where Securities may be presented for payment (“Paying Agent”) and an office or agency where Securities may be presented for conversion (“Conversion Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint or change one or more co-registrars, one or more additional paying agents and one or more additional conversion agents without notice and may act in any such capacity on its own behalf. The term “Registrar” includes any co-registrar; the term “Paying Agent” includes any additional paying agent; and the term “Conversion Agent” includes any additional conversion agent.

          The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such.

          The Company initially appoints the Trustee as Paying Agent, Registrar and Conversion Agent.

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     2.04 Paying Agent To Hold Money in Trust.

          Each Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all moneys held by the Paying Agent for the payment of the Securities, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent shall have no further liability for the money. If the Company acts as Paying Agent, it shall segregate and hold as a separate trust fund all money held by it as Paying Agent.

     2.05 Securityholder Lists.

          The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Securityholders.

     2.06 Transfer and Exchange.

          Subject to Sections 2.15 and 2.16 hereof, where Securities are presented to the Registrar with a request to register their transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transaction are met. To permit registrations of transfer and exchanges, the Trustee shall authenticate Securities at the Registrar’s request. The Company or the Trustee, as the case may be, shall not be required (a) to issue, authenticate, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 3.04 and ending at the close of business on the day of such mailing or (b) to register the transfer of or exchange any Security so selected for redemption or repurchase in whole or in part, except the unredeemed or unrepurchased portion of Securities being redeemed or repurchased in part.

          No service charge shall be made for any transfer, exchange or conversion of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer, exchange or conversion of Securities, other than exchanges pursuant to Section 2.10, 3.07, 3.08, 3.09, 9.05 or 10.02 not involving any transfer.

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     2.07 Replacement Securities.

          If the Holder of a Security claims that the Security has been mutilated, lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee’s requirements are met and, in the case of a mutilated Security, such mutilated Security is surrendered to the Trustee. In the case of lost, destroyed or wrongfully taken Securities, if required by the Trustee, an indemnity bond must be provided by the Holder that is sufficient in the judgment of the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Trustee may charge for its expenses in replacing a Security.

          In case any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security when due.

          Every replacement Security is an additional obligation of the Company only as provided in Section 2.08.

     2.08 Outstanding Securities.

          Securities outstanding at any time are all the Securities authenticated by the Trustee except for those converted, those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Except to the extent provided in Section 2.09, a Security does not cease to be outstanding because the Company or one of its subsidiaries or Affiliates holds the Security.

          If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it, or a court holds, that the replaced Security is held by a protected purchaser.

          If the Paying Agent (other than the Company) holds on a Redemption Date, Repurchase Date or maturity date money sufficient to pay Securities payable on that date, then on and after that date, such Securities shall be deemed to be no longer outstanding and interest on them shall cease to accrue, and such Security shall be deemed paid whether or not the Security is delivered to the Paying Agent. Thereafter, all other rights of the Holders of such Securities shall terminate with respect to such Securities, other than the right to receive the Redemption Price, Repurchase Price or principal amount, as applicable.

     2.09 Securities Held by the Company or an Affiliate.

          In determining whether the Holders of the required aggregate principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any of its subsidiaries or an Affiliate shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Responsible Officer of the Trustee knows are so owned shall be so disregarded.

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     2.10 Temporary Securities.

          Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities.

     2.11 Cancellation.

          The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, payment or conversion. The Trustee shall cancel all Securities surrendered for transfer, exchange, payment, conversion or cancellation in accordance with its customary procedures. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation or that any Securityholder has converted pursuant to Article X.

     2.12 Defaulted Interest.

          If and to the extent the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest in any lawful manner plus, to the extent not prohibited by applicable statute or case law, interest payable on the defaulted interest at the rate provided in the Securities. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix such record date and payment date. At least 15 days before the record date, the Company shall mail to Securityholders a notice that states the record date, payment date and amount of interest to be paid.

     2.13 CUSIP Numbers.

          The Company in issuing the Securities may use one or more “CUSIP” numbers, and if so, the Trustee shall use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that no representation is hereby deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP numbers printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company shall promptly notify the Trustee of any change in the CUSIP numbers.

     2.14 Deposit of Moneys.

          Prior to 11:00 a.m., New York City time, on each interest payment date, Maturity Date, Redemption Date, Repurchase Date and Change in Control Repurchase Date, the Company shall deposit with the Paying Agent in immediately available funds money sufficient to make Cash payments, if any, due on such interest payment date, Maturity Date, Redemption Date, Repurchase Date and Change in Control Repurchase Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such interest

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payment date, Maturity Date, Redemption Date, Repurchase Date, and Change in Control Repurchase Date, as the case may be.

     2.15 Book-Entry Provisions for Global Securities.

     [Paragraphs (A) - (C) Intentionally Omitted]

     (D) The Global Securities initially shall (i) be registered in the name of the Depositary or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.17.

     (E) Members of, or participants in, the Depositary (“Participants”) shall have no rights under this Indenture with respect to any Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

     (F) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depositary, its successors or their respective nominees. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities only if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for any Global Security and a successor Depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depositary to issue Physical Securities.

     (G) In connection with the transfer of a Global Security in its entirety to beneficial owners pursuant to Section 2.15(F), such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall upon written instructions from the Company authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Physical Securities of authorized denominations.

     (H) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to Section 2.15(F) shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend (as defined).

     (I) The Holder of any Global Security may grant proxies and otherwise authorize any person, including Participants and persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Securities.

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     2.16 Special Transfer Provisions.

     (A) Transfers to QIBs. The Registrar shall register the transfer of any Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the requested transfer is after the later of the second anniversary after (i) the issue date for the Securities and (ii) the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed between the Company and the Holder thereof) (“such later date being the “Resale Restriction Termination Date”), or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A.

     (B) Restrictions on Transfer and Exchange of Global Securities. Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

     (C) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend until after the second anniversary of the later of (i) the issue date for the Securities, (ii) the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed between the Company and the Holder thereof), (y) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Company to the effect that neither such legend nor the

13

related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (z) such Security has been sold pursuant to an effective registration statement under the Securities Act and the Holder selling such Securities has delivered to the Registrar a notice in the form of Exhibit C hereto. Upon the effectiveness of a Shelf Registration Statement (as defined in the Registration Rights Agreement), the Company shall deliver to the Trustee a notice of effectiveness, a Security or Securities, an authentication order in accordance with Section 2.02 and an opinion of counsel in the form of Exhibit D hereto and, if required by the Depositary, the Company shall deliver to the Depositary a letter of representations in a form reasonably acceptable to the Depositary.

     (D) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture.

     The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

     (E) Transfers of Securities Held by Affiliates. Any certificate (i) evidencing a Security that has been transferred to an Affiliate of the Company within two years after the issue date for the Securities, as evidenced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof or (ii) evidencing a Security that has been acquired from an Affiliate (other than by an Affiliate) in a transaction or a chain of transactions not involving any public offering, shall, until two years after the last date on which the Company or any Affiliate of the Company was an owner of such Security, in each case, bear the Private Placement Legend, unless otherwise agreed by the Company (with written notice thereof to the Trustee).

     2.17 Restrictive Legends.

          Each Global Security and Physical Security that constitutes a Restricted Security shall bear the legend (the “Private Placement Legend”) as set forth in Exhibit B-1 on the face thereof until after the second anniversary of the later of (i) the issue date for the Securities, (ii) the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed between the Company and the Holder thereof).

          Each Global Security shall also bear the “Global Security Legend” as set forth in Exhibit B-2.

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ARTICLE III

REDEMPTION AND REPURCHASE

     3.01 Right of Redemption.

          Redemption of the Securities, as permitted by any provision of this Indenture, shall be made in accordance with Paragraphs 6 and 7 of the Securities and in accordance with this Article III. The Company will not have the right to redeem any Securities prior to June 15, 2008. On or after June 15, 2008, the Company will have the right to redeem for Cash all or any part of the Securities, subject to the conditions specified in Paragraph 6 of the Securities, at the applicable Redemption Price, plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, thereon to, but not including, the Redemption Date, provided that, if such Redemption Date is on or after an interest record date, but on or prior to the related interest payment date, such interest and liquidated damages will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date for payment of such interest.

          The Make Whole Payment portion of the Redemption Price, if any, shall be paid on all Securities being redeemed by the Company on the relevant Redemption Date, including any Securities that may have been converted after the date of the notice of redemption and prior to such Redemption Date.

     3.02 Notices to Trustee of Redemption.

          If the Company elects to redeem Securities pursuant to Paragraph 6 of the Securities, it shall notify the Trustee at least 15 days prior to the mailing of the notice of redemption (unless a shorter notice period shall be satisfactory to the Trustee) of the Redemption Date and the aggregate principal amount of Securities to be redeemed.

     3.03 Selection of Securities to Be Redeemed.

          If the Company elects to redeem Securities pursuant to Paragraph 6 of the Securities and less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed on a pro rata basis. The Trustee shall make the selection from Securities outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000 principal amount. Securities and portions of them it selects shall be in amounts of $1,000 principal amount or positive integral multiples of $1,000 principal amount. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and the principal amount thereof to be redeemed.

          The Registrar need not transfer or exchange any Securities selected for redemption, except the unredeemed portion of the Securities redeemed in part. Also, the Registrar need not transfer or exchange any Securities for a period of 15 days before selecting Securities to be redeemed.

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          If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.

     3.04 Notice of Redemption.

          At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail by first-class mail a notice of redemption to each Holder whose Securities are to be redeemed.

          The notice shall identify the Securities and the aggregate principal amount thereof to be redeemed and shall state:

     (i) the Redemption Date;

     (ii) the Redemption Price, plus the amount of accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, to be paid on the Securities called for redemption;

     (iii) the then current conversion rate and Conversion Price;

     (iv) the name and address of the Paying Agent and Conversion Agent;

     (v) the date on which the right to convert the principal of the Securities called for redemption will terminate and the place or places where such Securities may be surrendered for conversion;

     (vi) that Holders who want to convert Securities must satisfy the requirements in Article X;

     (vii) the Paragraph of the Securities pursuant to which the Securities are to be redeemed;

     (viii) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price;

     (ix) that unless the Company shall default in the payment of the Redemption Price, interest (including contingent interest, if any) and liquidated damages, if any, on Securities called for redemption ceases to accrue on and after the Redemption Date and that the Securities will cease to be convertible after the close of business on the business day immediately preceding the Redemption Date; and

     (x) the CUSIP number or numbers, as the case may be, of the Securities.

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          The date on which the right to convert the principal of the Securities called for redemption will terminate shall be at the close of business on the business day immediately preceding the Redemption Date.

          At the Company’s request, upon reasonable prior notice, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense; provided that the form and content of such notice shall be prepared by the Company.

     3.05 Effect of Notice of Redemption.

          Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date at the Redemption Price, plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, to the date of redemption, and, on and after such date (unless the Company shall default in the payment of the Redemption Price), such Securities shall cease to bear interest, contingent interest and liquidated damages. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price, plus accrued interest (including contingent interest, if any) and liquidated damages, if any, to, but excluding, the Redemption Date, subject to the proviso to Section 3.01.

     3.06 Deposit of Redemption Price.

          On or before the Redemption Date, the Company shall, in accordance with Section 2.14, deposit with the Paying Agent money in funds immediately available on the Redemption Date sufficient to pay the Redemption Price of and accrued interest (including contingent interest, if any) and liquidated damages, if any, on all Securities to be redeemed on that date. The Paying Agent shall return to the Company, as soon as practicable, any money not required for that purpose.

     3.07 Securities Redeemed in Part.

          Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Security or Securities in an aggregate principal amount equal to the unredeemed portion of the Security surrendered.

          If any Security selected for partial redemption is converted in part, the converted portion of such Security shall be deemed to be the portion selected for redemption.

     3.08 Repurchase of Securities at Option of the Holder.

          Each Holder shall have the right (the “Repurchase Right”), at the Holder’s option, to require the Company to repurchase in Cash in accordance with the provisions of Paragraph 8 of the Securities all of such Holder’s Securities, or a portion thereof which is $1,000 in principal amount or any positive integral multiple thereof, on June 15, 2010, June 15, 2013 and June 15, 2018 (each, a “Repurchase Date”) at the Repurchase Price plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, thereon, up to but not including the Repurchase Date; provided that if the Repurchase Date is on or after an interest record date but on or prior to the related interest payment date, interest (including contingent

17

interest, if any) and liquidated damages, if any, will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date.

          To exercise a Repurchase Right, a Holder shall deliver to the Trustee, or to a Paying Agent designated by the Company for such purpose in the Company Notice, at any time from the opening of business on the date that is 30 business days prior to the Repurchase Date until the close of business on the fifth business day prior to the Repurchase Date, (i) the Option of Holder to Elect Repurchase Notice on the back of the Securities with respect to which the Repurchase Right is being exercised, or any other form of written notice substantially similar to the Option of Holder to Elect Repurchase Notice, in each case, duly completed and signed, with appropriate signature guarantee, and (ii) such Securities with respect to which the Repurchase Right is being exercised, duly endorsed for transfer to the Company, and the Holder of such Securities shall be entitled to receive from the Trustee, or such Paying Agent a nontransferable receipt of deposit evidencing such deposit.

          In the event a Repurchase Right shall be exercised in accordance with the terms hereof, the Company shall, on the later of the Repurchase Date and the time of the Securities to be repurchased, deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust in accordance with Section 2.04), in accordance with Section 2.14, an amount of Cash (to be available on the Repurchase Date) sufficient to pay the Repurchase Price (plus accrued and unpaid interest, including contingent interest, if any, and liquidated damages, if any) with respect to all of the Securities which are to be repurchased on that date.

          Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Option of Holder to Elect Repurchase Notice contemplated by this Section 3.08 shall have the right to withdraw such notice at any time prior to the close of business on the second business day prior to the Repurchase Date by delivery of a written notice of withdrawal to the Paying Agent at the principal office of the Paying Agent in accordance with Section 3.11.

          In connection with any repurchase of Securities pursuant to this Section 3.08, the Company shall give written notice of the Repurchase Date to the Holders (the “Company Notice”). The Company Notice shall be sent by first-class mail to the Trustee and to each Holder not less than 30 business days prior to any Repurchase Date (the “Company Notice Date”). The Company will also disseminate the Company Notice via a press release through Dow Jones & Company, Inc. or Bloomberg Business News or other similarly broad public medium that is customary for such press releases. Each Company Notice shall include an Option of Holder to Elect Repurchase Notice to be completed by a Securityholder that wishes to exercise its Repurchase Right and shall state, among other things:

     (i) the Repurchase Price, plus the amount of accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, payable on the Repurchase Date;

     (ii) the name and address of the Paying Agent and the Conversion Agent;

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     (iii) a description of the procedures which a Holder must follow to exercise a Repurchase Right and a brief description of those rights;

     (iv) that, in order to exercise the Repurchase Right, the Securities are to be surrendered for payment of the Repurchase Price;

     (v) that Securities as to which a repurchase notice has been given may be converted if they are otherwise convertible only in accordance with Article X hereof and Paragraph 10 of the Securities if the applicable Option of Holder to Elect Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;

     (vi) that the Repurchase Price for, and any accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, on, any Security as to which an Option of Holder to Elect Repurchase Notice has been given and not withdrawn will be paid promptly following the later of the Repurchase Date and the time of surrender of such Security as described in subclause (iv) above;

     (vii) the procedures for withdrawing an Option of Holder to Elect Repurchase Notice (as specified in Section 3.11);

     (viii) the then existing conversion rate;

     (ix) the place or places where such Securities may be surrendered for conversion;

     (x) that, unless the Company defaults in making payment on Securities for which a repurchase notice has been submitted, interest (including contingent interest, if any), and liquidated damages, if any, on such Securities will cease to accrue on the Repurchase Date;

     (xi) that all rights of the Holders of such Securities shall terminate with respect to such Securities on the Repurchase Date, other than the right to receive the Repurchase Price upon delivery of the Securities to be purchased; and

     (xii) the CUSIP number of the Securities.

          At the Company’s request, the Trustee shall give such Company Notice in the Company’s name and at the Company’s expense; provided, however, that the Company makes such request at least three business days prior to the date by which such Company Notice must be given to the Holders and that, in all cases, the text of such Company Notice shall be prepared by the Company.

     3.09 Repurchase Upon a Change in Control.

          Upon any Change in Control (as defined below) with respect to the Company, each Holder shall have the right (the “Change in Control Repurchase Right”), at the Holder’s option, subject to the rights of the holders of Senior Indebtedness under Article XI of this Indenture, to require the Company to repurchase all of such Holder’s Securities, or a portion

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thereof which is $1,000 in principal amount or any positive integral multiple thereof, on the date (the “Change in Control Repurchase Date”) that is 30 business days after the date of the Change in Control Notice (as defined below) at the Repurchase Price, plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, to, but not including, the Change in Control Repurchase Date. Provisions of this Indenture that apply to the repurchase of Securities pursuant to this Section 3.09 of all of a Security also apply to the repurchase of such portion of such Security.

     At the option of the Company, all or a specified percentage of the Repurchase Price of Securities in respect of which a Change in Control Notice pursuant to this Section 3.09 has been given may be paid by the Company by the issuance of a number of shares of Common Stock or, in the case of a merger in which the Company is not the surviving corporation, common stock, ordinary shares, American Depositary Shares or analogous securities of the surviving corporation or its direct or indirect parent, equal to the quotient obtained by dividing (i) the amount of Cash to which the Holders would have been entitled had the Company elected to pay all or a specified percentage of the Repurchase Price of such Securities in Cash by (ii) the product of (A) the Market Price of the Common Stock, subject to the next succeeding paragraph, and (B) 0.95.

     The Company will not issue fractional shares of Common Stock in payment of the Repurchase Price in connection with the exercise of any Change in Control Repurchase Right. Instead the Company will pay Cash based on the Market Price for all fractional shares. The Market Price of a fractional share shall be determined to the nearest 1/1,000th of a share, by multiplying the applicable Market Price of a full share by the fractional amount and rounding to the nearest whole cent. It is understood that if a Holder elects to have more than one Security repurchased, the number of shares of Common Stock shall be based on the aggregate principal amount of Securities to be repurchased.

     In the event that the Company is unable to purchase the Securities of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for Cash. The Company may not change its election with respect to the consideration to be paid once the Company has given its Change in Control Notice to Securityholders except pursuant to the immediately preceding sentence in the event of a failure to satisfy, prior to the close of business on the Change in Control Repurchase Date, any condition to the payment of the Repurchase Price in shares of Common Stock.

     At least three business days before the date of the Change in Control Notice (as defined below), the Company shall deliver an Officers’ Certificate to the Trustee specifying:

     (i) the manner of payment selected by the Company;

     (ii) the information required to be included in the Change in Control Notice;

     (iii) if the Company elects to pay all or a specified percentage of the Repurchase Price in shares of Common Stock, that the conditions to such manner of payment set forth in this Section 3.09 have been or will be complied with; and

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     (iv) whether the Company desires the Trustee to give the Change in Control Notice required by this Section 3.09.

     The Company’s right to exercise its election to purchase Securities through the issuance of Common Stock shall be conditioned upon:

     (i) the Company’s giving of timely Change in Control Notice to purchase Securities with Common Stock as provided herein;

     (ii) the registration of such Common Stock under the Securities Act or the Exchange Act, in each case, if required;

     (iii) such Common Stock having been quoted or listed on the NASDAQ National Market or other principal U.S. exchange or quotation system on which the shares of Common Stock are then listed, or if the Common Stock is not so quoted or listed then on the principal other market on which the Common Stock are then traded;

     (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and

     (v) the receipt by the Trustee of an Officers’ Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of all or a specified percentage of the Repurchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of all or a specified percentage of the Repurchase Price in respect of the Securities, will be validly issued, fully paid and nonassessable and, to the best of such counsel’s knowledge, free from preemptive rights, and, (a) in the case of such Officers’ Certificate, stating that the conditions above and the condition set forth in the second succeeding sentence have been satisfied and, (b) in the case of such Opinion of Counsel, stating that the conditions above have been satisfied.

          Such Officers’ Certificate shall also set forth (i) the number of shares of Common Stock of to be issued for each $1,000 principal amount at maturity of Securities, (ii) the Sale Price on each Trading Day during the period during which the Market Price is calculated and (iii) the Market Price of the Common Stock. The Company may pay the Repurchase Price in Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation or is otherwise publicly available or obtainable (e.g., by dissemination on the World Wide Web or by other public means). If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Change in Control Repurchase Date and the Company has elected to purchase the Securities pursuant to this Section 3.09 through the issuance of Common Stock, the Company shall pay the entire Repurchase Price of the Securities of such Holder or Holders in Cash.

          All shares of Common Stock delivered upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim.

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          Within 30 days after the occurrence of a Change in Control of the Company, the Company shall mail to all Holders of record of the Securities a notice (the “Change in Control Notice”) of the occurrence of such Change in Control and the Change in Control Repurchase Right arising as a result thereof. The Company shall deliver a copy of the Change in Control Notice to the Trustee and shall disseminate a copy via a press release through Dow Jones & Company, Inc. or Bloomberg Business News or other similarly broad public medium that is customary for such press releases. To exercise the Change in Control Repurchase Right, a Holder of Securities must deliver on or before the close of business on the 30^th day after the date of the Change in Control Notice irrevocable written notice to the Trustee, or to a Paying Agent designated by the Company for such purpose in the Change in Control Notice, in the form of the Option of Holder to Elect Repurchase Notice on the back of the Security, of the Holder’s exercise of such right together with the Securities with respect to which the right is being exercised, duly endorsed for transfer.

     Each Change in Control Notice shall state:

     (i) the events causing the Change in Control;

     (ii) the date of such Change in Control;

     (iii) the Change in Control Repurchase Date;

     (iv) the date by which the Change in Control Repurchase Right must be exercised;

     (v) the Repurchase Price, plus the amount of accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, to be paid on the Securities to be repurchased;

     (vi) the name and address of the Paying Agent and the Conversion Agent;

     (vii) a description of the procedure which a Holder must follow to exercise a Change in Control Repurchase Right and a brief description of those rights;

     (viii) that, in order to exercise the Change in Control Repurchase Right, the Securities are to be surrendered for payment of the Repurchase Price;

     (ix) that Securities as to which a Change in Control Notice has been given may be converted if they are otherwise convertible only in accordance with Article X hereof and Paragraph 10 of the Securities if the applicable Option of Holder to Elect Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;

     (x) that the Repurchase Price for, any accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, on any Security as to which an Option of Holder to Elect Repurchase Notice has been given and not withdrawn, shall be so paid pursuant to this Section 3.09 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Change in Control Notice, as determined by the Company in its sole discretion;

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     (xi) the procedures for withdrawing an Option of Holder to Elect Repurchase Notice (as specified in Section 3.11);

     (xii) the then existing conversion rate, and any adjustment to the conversion rate that will result from the Change in Control;

     (xiii) the place or places where such Securities may be surrendered for conversion;

     (xiv) that, unless the Company defaults in making payment on Securities for which a Change in Control repurchase notice has been submitted, interest (including contingent interest, if any), and liquidated damages, if any, on such Securities will cease to accrue on the Change in Control Repurchase Date;

     (xv) that all rights of the Holders of such Securities shall terminate with respect to such Securities on the Change in Control Repurchase Date, other than the right to receive the Repurchase Price upon delivery of the Securities to be purchased;

     (xvi) the CUSIP number of the Securities; and

     (xvii) whether the Repurchase Price will be paid in Cash, Common Stock or a combination of both and, if both, the percentage thereof; provided, however, if the Company elects to pay all or a portion of the Repurchase Price in Common Stock, such Change in Control Notice shall also:

(X)	state that each Holder will receive shares of Common Stock with a Market Price determined as of a specified date prior to the Change in Control Repurchase Date equal to such specified percentage of the Repurchase Price of the Securities held by such Holder (except any Cash amount to be paid in lieu of fractional shares);
(Y)	describe the method of calculating the Market Price of the Common Stock; and
(Z)	state that because the Market Price of Common Stock will be determined prior to the Change in Control Repurchase Date, Holders of the Securities will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Change in Control Repurchase Date.

          The “Market Price” means the average of the Sale Prices for the five consecutive Trading Days ending on the third business day prior to the applicable Change in Control Repurchase Date (if the third business day prior to the applicable Change in Control Repurchase Date is a Trading Day, or if not, then on the last Trading Day prior to the third business day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of the Trading Days during the five Trading Day period and ending on the Change in Control Purchase Date, of any event described in Section 10.6.

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          No failure of the Company to give the foregoing notice shall limit any Holder’s right to exercise a Change in Control Repurchase Right.

          To exercise a Change in Control Repurchase Right, a Holder shall deliver to the Trustee, or to a Paying Agent designated by the Company for such purpose in the Change in Control Notice, on or before the close of business on the 30^th day after the date of the Change in Control Notice, (i) irrevocable written notice in the form of the Option of Holder to Elect Repurchase Notice on the back of the Securities with respect to which the Change in Control Repurchase Right is being exercised, or any other form of written notice substantially similar to the Option of Holder to Elect Repurchase Notice, in each case, duly completed and signed, with appropriate signature guarantee, and (ii) such Securities with respect to which the Change in Control Repurchase Right is being exercised, duly endorsed for transfer to the Company, and the Holder of such Securities shall be entitled to receive from the Company (if it is acting as its own Paying Agent), or such Paying Agent a nontransferable receipt of deposit evidencing such deposit.

          In the event a Change in Control Repurchase Right shall be exercised in accordance with the terms hereof, the Company shall, on or prior to a Change in Control Repurchase Date, deposit Cash in respect of the Cash portion of a repurchase under this Section 3.09 or for fractional shares of Common Stock, as applicable, plus Cash sufficient to pay accrued an unpaid interest, including contingent interest, if any, and liquidated damages, if any, with respect to all Securities to be purchased pursuant to this Section 3.09. On the Trading Day following the Change in Control Repurchase Date, the Company shall deliver to each Holder entitled to receive Common Stock the number of full shares of Common Stock issuable in payment of the Repurchase Price. The person in whose name the certificate for shares of Common Stock is registered shall be treated as a holder of record of Common Stock on the business day following the Change in Control Repurchase Date. No payment or adjustment will be made for dividends on the shares of Common Stock on the record date for which occurred on or prior to the Change in Control Repurchase Date.

          If a Holder of a repurchased Security is paid in Common Stock pursuant to this Section 3.09, the Company shall pay all, stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder’s name. The Trustee or any Paying Agent may refuse to deliver the certificates representing the Common Stock issued in a name other than the Holder’s name until the Trustee or any such Paying Agent receives a sum sufficient to pay any tax which shall be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any withholding tax required by law.

          As used in this Section 3.09 of the Indenture and in the Securities:

          A “Change in Control” of the Company shall be deemed to have occurred at such time as:

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     (i) any person acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of the Company’s capital stock entitling the person to exercise 50% or more of the total voting power of all shares of the Company’s capital stock that are entitled to vote generally in elections of directors, other than an acquisition by the Company, any of its subsidiaries or any of its employee benefit plans; or

     (ii) the conveyance, sale, transfer or lease by the Company of all or substantially all of its assets to another person.

          However, a Change in Control will not be deemed to have occurred if:

(X)

the Sale Price for any five Trading Days within the period of ten consecutive Trading Days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of capital stock, or the period of ten consecutive Trading Days ending immediately before the Change in Control, in the case of a Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the Conversion Price of the Securities in effect on each of those five Trading Days; or

(Y)

all or substantially all (but in no event less than 90%) of the consideration, excluding Cash payments for fractional shares of Common Stock and Cash payments made pursuant to dissenters’ appraisal rights, in a merger or consolidation otherwise constituting a Change in Control in the preceding paragraph consists of shares of common stock, depositary receipts or other certificates representing common equity interests traded on a national securities exchange or quoted on the NASDAQ National Market, or will be so traded or quoted immediately following such merger or consolidation, and as a result of such merger or consolidation the Securities become convertible solely into such common stock, depositary receipts or other certificates representing common equity interests.

          For purposes of this “Change in Control” definition:

     (1) whether a person is a “beneficial owner” will be determined in accordance with Rule 13d-3 under the Exchange Act; and

     (2) a “person” includes any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

     3.10 Conversion Arrangement on Call for Redemption.

          In connection with any redemption of Securities, the Company may arrange, in lieu of redemption, for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment bankers or other purchasers to purchase all or a portion of such Securities by paying to the Trustee in trust for the Holders whose Securities are to be so

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purchased, on or before the close of business on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for redemption of such Securities, is not less than the Redemption Price, together with interest (including contingent interest, if any) and liquidated damages, if any, accrued to the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article III, the obligation of the Company to pay the Redemption Price of such Securities and such interest (including contingent interest, if any) and liquidated damages, if any, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers, but no such agreement shall relieve the Company of its obligation to pay such Redemption Price and such interest (including contingent interest, if any) and liquidated damages, if any. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article X) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Trustee’s prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, rights, immunities, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any and all loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses (including counsel fees and expenses) incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture except to the extent arising from its bad faith, willful misconduct or negligence.

     3.11 Effect of Repurchase Notice or Change in Control Repurchase Notice.

          Upon receipt by the Paying Agent of a Holder’s Option of Holder to Elect Repurchase Notice in accordance with Section 3.08 or Section 3.09, as applicable, the Holder of the Security in respect of which such notice, as the case may be, was given shall (unless such notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Repurchase Price, together with all accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, thereon, to but not including the Repurchase Date or Change in Control Repurchase Date, as the case may be, with respect to such Security. Securities in respect of which a repurchase notice has been given by the Holder thereof may not be converted pursuant to Article X hereof on or after the date of the delivery of such notice unless such notice has first been validly withdrawn as specified in the following paragraph.

          With respect any Physical Security which is to be submitted for repurchase only in part pursuant to Section 3.08 or Section 3.09, as applicable (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or its attorney duly authorized in writing), the Company shall execute, and the Trustee shall authenticate and make

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available for delivery to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, of the same tenor and in aggregate principal amount equal to the portion of such Security not submitted for repurchase thereunder.

          A Holder’s Option of Holder to Elect Repurchase Notice specified in Section 3.08 or Section 3.09, as applicable, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business on the second business day prior to the Repurchase Date or prior to close of business on second the business day prior to the Change in Control Repurchase Date, as the case may be, specifying:

     (i) the certificate or CUSIP number, as applicable, of the Security in respect of which such notice of withdrawal is being submitted;

     (ii) the aggregate principal amount of the Security with respect to which such notice of withdrawal is being submitted; and

     (iii) the aggregate principal amount, if any, of such Security which remains subject to the original Option of Holder to Elect Repurchase Notice and which has been or will be delivered for purchase by the Company.

          The Paying Agent shall promptly notify the Company of the receipt of any repurchase notice specified in Section 3.08 or Section 3.09, as applicable, or written notice of withdrawal thereof.

     3.12 Covenant to Comply With Securities Laws Upon Purchase of Securities.

          When complying with the provisions of Section 3.08 or 3.09 hereof (provided that such offer or purchase constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply with the applicable provisions of Rule 13e-4 and Rule 14e-1 (or any successor provisions) under the Exchange Act, and any other tender offer rules under the Exchange Act that may then apply, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply with any applicable federal and state securities laws so as to permit the rights and obligations under Sections 3.08 and 3.09 to be exercised in the time and in the manner specified in Sections 3.08 and 3.09.

ARTICLE IV

COVENANTS

     4.01 Payment of Securities.

          The Company shall pay all amounts due with respect to the Securities on the dates and in the manner provided in the Securities. All such amounts shall be considered paid on the date due if the Paying Agent holds (or, if the Company is acting as Paying Agent, if the

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Company has segregated and holds in trust in accordance with Section 2.04) on that date money sufficient to pay the amount then due with respect to the Securities.

          The Company shall pay interest on any overdue amount (including, to the extent permitted by applicable law, overdue interest) at the rate borne by the Securities.

     4.02 Maintenance of Office or Agency.

          The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Securities may be surrendered for registration of transfer or exchange or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

          The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

          The Company hereby designates the Corporate Trust Office of the Trustee as an agency of the Company in accordance with Section 2.03.

     4.03 Reports.

     (A) The Company will promptly provide to the Trustee and shall, upon request, provide to any Holder or beneficial owner of Securities or prospective purchaser of Securities that so requests, the information required to be delivered pursuant to Rule 144A(d)(4) until such time as the Securities and the underlying Common Stock have been registered by the Company for resale under the Securities Act pursuant to the Registration Rights Agreement. In addition, the Company will furnish such Rule 144A(d)(4) information if, at any time while the Securities or the Common Stock issuable upon conversion of the Securities are restricted securities within the meaning of the Securities Act, the Company is not subject to the informational requirements of the Exchange Act.

     (B) The Company will comply with the provisions of TIA § 314(a).

     (C) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its

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covenants hereunder (as to which the Trustee is entitled to rely exclusively on the Officers’ Certificate).

     4.04 Compliance Certificate.

          The Company shall deliver to the Trustee within 90 days after the end of each fiscal year of the Company an Officers’ Certificate stating whether or not the signers know of any Default or Event of Default by the Company in performing any of its obligations under this Indenture or the Securities. If they do know of any such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status.

     4.05 Stay, Extension and Usury Laws.

          The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (in each case, to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

     4.06 Corporate Existence.

          Subject to Article V, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Significant Subsidiaries in accordance with the respective organizational documents of each Significant Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Significant Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate existence of any Significant Subsidiary, if in the judgment of the Board of Directors (i) such preservation or existence is not material to the conduct of business of the Company and (ii) the loss of such right, license or franchise or the dissolution of such Significant Subsidiary does not have a material adverse impact on the Holders.

     4.07 Notice of Default.

          In the event that any Default or Event of Default shall occur, the Company will give prompt written notice of such Default or Event of Default to the Trustee.

     4.08 Tax Treatment of Securities.

          The Company and the Holders, by purchasing a beneficial ownership interest in the Securities, agree that (i) the Securities are contingent payment debt instruments as described in Section 1.1275-4 of the Treasury regulations promulgated by the Department of Treasury pursuant to the Internal Revenue Code of 1986, amended (the “Contingent Payment Regulations”), (ii) each Holder shall be bound by the Company’s application of the Contingent Payment Regulations to the Securities, including the Company’s determination that the rate at

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which interest will be deemed to accrue on the Securities for U.S. federal income tax purposes, will be 8.0% compounded semiannually, which is the rate comparable to the rate at which the Company would borrow on a noncontingent, nonconvertible borrowing with no contingent payments, but with terms and conditions otherwise comparable to the Securities (the “comparable yield”), (iii) each Holder shall use the projected payment schedule with respect to the Securities provided by the Company to the Holder, as provided in the Contingent Payment Regulations, to determine its interest accruals and adjustments as provided in the Contingent Payment Regulations (iv) for purposes of the Contingent Payment Regulations, to treat the fair market value of any Common Stock received upon any conversion of the Securities as a contingent payment, and (v) the Company and each Holder will not take any position on a tax return inconsistent with clauses (i), (ii), or (iii) of this Section 4.08, unless required by applicable law.

          The comparable yield and the schedule of projected payments are not determined for any purpose other than for the determination of interest accruals and adjustment thereof in respect of the Securities for U.S. federal income tax purposes. The comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the future stock price or the amount payable on the Securities. A Holder may obtain the issue date, comparable yield and projected payment schedule (which schedule is attached as Exhibit E) by telephoning the Company’s Investor Relations Department at (201) 414-20002 or submitting a written request to: WebMD Corporation, 669 River Drive, Center 2, Elmwood Park, New Jersey 07407, Attn: Investor Relations.

          On conversion of the Securities, that portion of accrued interest including accrued contingent interest with respect to the converted Securities shall not be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Securities being converted pursuant to the provisions hereof, and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for interest accrued and unpaid through the conversion date and accrued and unpaid contingent interest, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the principal amount of the Securities being converted pursuant to the provisions hereof.

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ARTICLE V

SUCCESSORS

     5.01 When Company May Merge, etc.

          The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another person unless such other person is a corporation organized under the laws of the United States, any State thereof or the District of Columbia or a corporation or comparable legal entity organized under the laws of a foreign jurisdiction and whose equity securities are listed on a national securities exchange in the United States or authorized for quotation on the NASDAQ National Market prior to or upon giving effect to the transaction (provided, however, that in the case of a transaction where the surviving entity is organized under the laws of a foreign jurisdiction, the Company may not consummate the transaction without first (i) making provision for the satisfaction of its obligations to repurchase the Securities following a change in control, if any, (ii) amending the terms of the Securities to provide that, in the event the Company is required under the laws of such foreign jurisdiction (or any political subdivision thereof) to withhold or deduct amounts in respect of taxes from payments made to Securityholders on the Securities, the Company will pay, subject to certain standard exceptions, such additional amounts to the holders as may be necessary so that each Securityholder will receive the same amounts it would have received had no such withholding or deduction been required, and (iii) obtaining an opinion of tax counsel experienced in such matters to the effect that, under then existing United States federal income tax laws, there would be no material adverse tax consequences to Securityholders of the Securities resulting from such transaction); such person assumes by supplemental indenture all the obligations of the Company, under the Securities and this Indenture; and immediately after giving effect to the transaction, no Default or Event of Default shall exist under the terms of this Indenture.

          The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers’ Certificate to the foregoing effect and an Opinion of Counsel, which may rely upon such Officers’ Certificate as to the absence of Defaults and Events of Default, stating that the proposed transaction and such supplemental indenture will, upon consummation of the proposed transaction, comply with this Indenture.

     5.02 Successor Substituted.

          Upon any consolidation or merger or transfer or lease of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor person formed by such consolidation or into which the Company is merged or to which such transfer or lease is made shall succeed to, and, except in the case of a lease, be substituted for, and may exercise every right and power of, and shall assume every duty and obligation of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein. When the successor assumes all obligations of the Company hereunder, except in the case of a lease, all obligations of the predecessor shall terminate.

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ARTICLE VI

DEFAULTS AND REMEDIES

     6.01 Events of Default.

          An “Event of Default” occurs if:

     (i) the Company defaults in the payment of the principal amount, Redemption Price (including the Make Whole Payment portion of the Redemption Price, if any) or Repurchase Price with respect to any Security when the same becomes due and payable, whether on the Maturity Date, Redemption Date, the Repurchase Date, Change in Control Repurchase Date or otherwise, whether or not such payment shall be prohibited by the provisions of Article XI hereof;

     (ii) the Company defaults in the payment of accrued and unpaid interest (including contingent interest, if any) or liquidated damages, if any, on any Security when the same becomes due and payable and such default continues for a period of 30 days, whether or not such payment shall be prohibited by the provisions of Article XI hereof;

     (iii) the Company fails to comply with any of its other agreements in the Securities or this Indenture and the default continues for the period and after the notice specified below;

     (iv) the Company fails to provide a Change in Control Notice in accordance with Section 3.09;

     (v) the Company or any of its Significant Subsidiaries defaults in the payment at the final maturity thereof, after the expiration of any applicable grace period, of principal of, or premium, if any, on indebtedness for money borrowed, other than Non-Recourse Indebtedness, in the aggregate principal amount then outstanding of $30,000,000 or more, or the acceleration of indebtedness for money borrowed in such aggregate principal amount so that it becomes due and payable prior to the date on which it would otherwise become due and payable and such acceleration is not rescinded or such default is not cured within 30 business days after notice to the Company in accordance with this Indenture;

     (vi) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law:

     (A) commences a voluntary case,

     (B) consents to the entry of an order for relief against it in an involuntary case,

     (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or

     (D) makes a general assignment for the benefit of its creditors; or

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     (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

     (A) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case or proceeding, or adjudicates the Company or any Significant Subsidiary insolvent or bankrupt,

     (B) appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of the property of the Company or any such Significant Subsidiary, as the case may be, or

     (C) orders the winding up or liquidation of the Company or any of its Significant Subsidiaries,

and the order or decree remains unstayed and in effect for 90 consecutive days.

          The term “Bankruptcy Law” means Title 11, U.S. Code or any similar federal or State law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

          A default under Section 6.01(iii) above is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company and the Trustee of the default and the default is not cured within 60 days after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a “Notice of Default.” If the Holders of 25% in aggregate principal amount of the outstanding Securities request the Trustee to give such notice on their behalf, the Trustee shall do so. When a default is cured, it ceases.

     6.02 Acceleration.

          If an Event of Default (other than an Event of Default specified in Section 6.01(vi) or (vii) with respect to the Company) as to which the Trustee has received notice pursuant to the provisions of this Indenture occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding by notice to the Company and the Trustee may declare the Securities to be due and payable. Upon such declaration such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(vi) or (vii) with respect to the Company occurs, the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Holders of a majority in aggregate principal amount of the Securities then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any order or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration and if all amounts due to the Trustee under Section 7.07 have been paid.

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     6.03 Other Remedies.

          Notwithstanding any other provision of this Indenture, if an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of amounts due with respect to the Securities or to enforce the performance of any provision of the Securities or this Indenture.

          The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative.

     6.04 Waiver of Past Defaults.

          Subject to Sections 6.07 and 9.02, the Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive any past Default or Event of Default and its consequences, except a default in the payment of the principal amount, accrued and unpaid interest (including contingent interest), if any, and liquidated damages, if any, any Redemption Price, any Repurchase Price or obligation to deliver Conversion Shares. When a Default or an Event of Default is waived, it is cured and ceases for every purpose of this Indenture.

     6.05 Control by Majority.

          The Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

     6.06 Limitation on Suits.

          Except as provided in Section 6.07, a Securityholder may pursue a remedy with respect to this Indenture or the Securities only if:

     (i) the Holder gives to the Trustee written notice of a continuing Event of Default;

     (ii) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding make a written request to the Trustee to pursue the remedy;

     (iii) such Holder or Holders offer and, if requested, provide to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense;

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     (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

     (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the Securities then outstanding do not give the Trustee a direction inconsistent with the request.

          A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder.

     6.07 Rights of Holders to Receive Payment.

          Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of all amounts due with respect to the Securities, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder.

          Notwithstanding any other provision of this Indenture, the right of any Holder to bring suit for the enforcement of the right to convert the Security shall not be impaired or affected without the consent of the Holder.

     6.08 Collection Suit by Trustee.

          If an Event of Default specified in Section 6.01(i) or (i) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount due with respect to the Securities, including any unpaid and accrued interest (including contingent interest, if any) or liquidated damages, if any.

     6.09 Trustee May File Proofs of Claim.

          The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee, any predecessor Trustee and the Securityholders allowed in any judicial proceedings relative to the Company or its creditors or properties.

          The Trustee may collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07.

          Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

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     6.10 Priorities.

          If the Trustee collects any money pursuant to this Article VI, it shall pay out the money in the following order:

          First: to the Trustee for amounts due under Section 7.07;

          Second: to holders of Senior Indebtedness to the extent required by Article XI;

          Third: to Securityholders for all amounts due and unpaid on the Securities, without preference or priority of any kind, according to the amounts due and payable on the Securities; and

          Fourth: to the Company.

          The Trustee, upon prior written notice to the Company may fix a record date and payment date for any payment by it to Securityholders pursuant to this Section 6.10.

     6.11 Undertaking for Costs.

          In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit other than the Trustee of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities.

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ARTICLE VII

TRUSTEE

     7.01 Duties of Trustee.

     (A) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

     (B) Except during the continuance of an Event of Default:

     (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

     (ii) in the absence of bad faith, willful misconduct or negligence on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

     (C) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

     (i) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

     (ii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

     (D) Every provision of this Indenture that in any way relates to the Trustee is subject to the provisions of this Section 7.01.

     (E) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

     7.02 Rights of Trustee.

     (A) Subject to Section 7.01, the Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document; if,

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however, the Trustee shall determine to make such further inquiry or investigation, it shall be entitled during normal business hours to examine the relevant books, records and premises of the Company, personally or by agent or attorney upon reasonable prior notice.

     (B) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and/or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel.

     (C) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution.

     (D) The Trustee may consult with counsel (such counsel to be reasonably acceptable to the Company) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

     (E) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.

     (F) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its discretion, rights or powers conferred upon it by this Indenture.

     (G) Except with respect to Section 6.01, the Trustee shall have no duty to inquire as to the performance of the Company with respect to the covenants contained in Article IV. In addition, the Trustee shall not be deemed to have knowledge of an Event of Default except (1) any Default or Event of Default occurring pursuant to Sections 6.01(i) and 6.01(ii) or (2) any Default or Event of Default of which a Responsible Officer of the Trustee shall have received written notification or obtained actual knowledge. Delivery of reports, information and documents to the Trustee under Article IV (other than Sections 4.04 and 4.07) is for informational purposes only and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

     (H) The Trustee shall be under no obligation to exercise any of the rights or powers vested by this Indenture at the request or direction of any of the Holders pursuant to this Indenture unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

     (I) The rights, privileges, protections, immunities and benefits given to the Trustee, including without limitation, its right to be indemnified, are extended to, and

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shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other person employed to act hereunder.

     (J) The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

     7.03 Individual Rights of Trustee.

          The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, must comply with Sections 7.10 and 7.11.

     7.04 Trustee’s Disclaimer.

          The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company’s use of the proceeds from the Securities; and it shall not be responsible for any statement in the Securities other than its certificate of authentication.

     7.05 Notice of Defaults.

          If a Default or Event of Default occurs and is continuing as to which the Trustee has received notice pursuant to the provisions of this Indenture, the Trustee shall mail to each Securityholder a notice of the Default or Event of Default within 30 days after it occurs unless such Default or Event of Default has been cured or waived. Except in the case of a Default or Event of Default in payment of any amounts due with respect to any Security, the Trustee may withhold the notice if and so long as it in good faith determines that withholding the notice is in the interests of Securityholders.

     7.06 Reports by Trustee to Holders.

          Within 60 days after each May 15 beginning with May 15, 2004, the Trustee shall mail to each Securityholder if required by TIA § 313(a) a brief report dated as of such May 15 that complies with TIA § 313(c). In such event, the Trustee also shall comply with TIA § 313(b).

          A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed by the Trustee with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange.

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     7.07 Compensation and Indemnity.

          The Company shall pay to the Trustee from time to time such compensation for its services as shall be agreed upon in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and out-of-pocket expenses of the Trustee’s agents and counsel.

          The Company shall indemnify the Trustee against any and all loss, liability, damage, claim or expense (including the reasonable fees and expenses of counsel and taxes other than those based upon the income of the Trustee) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Company, any Holder or any other person) or liability in connection with the exercise or performance of any of its powers and duties hereunder. The Company need not pay for any settlement made without its consent. The Trustee shall notify the Company promptly of any claim for which it may seek indemnification. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through the Trustee’s negligence, bad faith or willful misconduct.

          To secure the Company’s payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay amounts due on particular Securities.

          The indemnity obligations of the Company with respect to the Trustee provided for in this Section 7.07 shall survive any resignation or removal of the Trustee.

          When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vi) or (vii) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.

     7.08 Replacement of Trustee.

          A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.08.

          The Trustee may resign by so notifying the Company in writing 30 business days prior to such resignation. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and the Company in writing and may appoint a successor Trustee with the Company’s consent. The Company may remove the Trustee if:

     (i) the Trustee fails to comply with Section 7.10;

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     (ii) the Trustee is adjudged a bankrupt or an insolvent;

     (iii) a receiver or other public officer takes charge of the Trustee or its property; or

     (iv) the Trustee becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee.

          If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Company’s expense), the Company or the Holders of at least 10% in aggregate principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

          If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

     7.09 Successor Trustee by Merger, etc.

          If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee, if such successor corporation is otherwise eligible hereunder.

     7.10 Eligibility; Disqualification.

          There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b).

     7.11 Preferential Collection of Claims Against Company.

          The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated.

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ARTICLE VIII

DISCHARGE OF INDENTURE

     8.01 Termination of the Obligations of the Company.

          The Company may terminate all of its obligations under this Indenture if all Securities previously authenticated and delivered (other than mutilated, destroyed, lost or stolen Securities which have been replaced or paid as provided in Section 2.07) have been delivered to the Trustee for cancellation or if:

     (i) the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption;

     (ii) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient to pay the principal or Redemption Price of and any unpaid and accrued interest on the Securities to maturity or redemption, as the case may be. Immediately after making the deposit, the Company shall give notice of such event to the Securityholders;

     (iii) the Company has paid or caused to be paid all sums then payable by the Company to the Trustee hereunder as of the date of such deposit; and

     (iv) the Company has delivered to the Trustee an opinion of counsel and an Officers’ Certificate stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. The Company may make the deposit only during the one-year period and only if Article XI permits it.

However, the Company’s obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.15, 2.16, 2.17, 4.01, 4.02, 7.07, 7.08 and Article VIII and Article X shall survive until the Securities are no longer outstanding. Thereafter the obligations of the Company in Sections 7.07 and 8.03 shall survive.

          After a deposit pursuant to this Section 8.01, the Trustee upon request shall acknowledge in writing the discharge of the obligations of the Company under the Securities and this Indenture, except for those surviving obligations specified above.

          In order to have money available on a payment date to pay the principal or Redemption Price of and any unpaid and accrued interest on the Securities, the U.S. Government Obligations shall be payable as to principal and any unpaid and accrued interest on or before such payment date in such amounts as will provide the necessary money.

          “U.S. Government Obligations” means direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged.

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     8.02 Application of Trust Money.

          The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of the principal or Redemption Price of and any unpaid and accrued interest on the Securities. Money and securities so held in trust are not subject to the subordination provisions of Article XI.

     8.03 Repayment to Company.

          The Trustee and the Paying Agent shall promptly notify the Company of, and pay to the Company upon the request of the Company, any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon the written request of the Company any money held by them for the payment of the principal, premium, Repurchase Price or Redemption Price of and any unpaid and accrued interest (including contingent interest, if any) or liquidated damages, if any, that remains unclaimed for two years; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may, at the expense and request of the Company, cause to be published once in a newspaper of general circulation in The City of New York or cause to be mailed to each Holder, notice stating that such money remains and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After repayment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and all liability of the Trustee and the Paying Agent shall cease.

     8.04 Reinstatement.

          If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Sections 8.01 and 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Sections 8.01 and 8.02 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Sections 8.01 and 8.02; provided, however, that if the Company has made any payment of amounts due with respect to any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

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ARTICLE IX

AMENDMENTS

     9.01 Without Consent of Holders.

          The Company, with the consent of the Trustee, may amend or supplement this Indenture or the Securities without notice to or the consent of any Securityholder:

     (i) to evidence a successor to the Company and the assumption by that successor of the Company’s obligations under this Indenture and the Securities;

     (ii) to evidence and provide for the acceptance of the appointment under this Indenture of a successor Trustee;

     (iii) to add to the covenants of the Company described in this Indenture for the benefit of Securityholders or to surrender any right or power conferred upon the Company;

     (iv) to secure the obligations of the Company in respect of the Securities;

     (v) to make any changes or modifications to this Indenture necessary in connection with the registration of the Securities under the Securities Act and the qualification of the Indenture under the TIA;

     (vi) to cure any ambiguity, inconsistency or other defect in this Indenture; or

     (vii) to comply with Sections 5.01 and 10.12.

          Notwithstanding the foregoing, no supplemental indenture pursuant to the foregoing clauses (iii), (iv), (v) or (vi) may be entered into without the consent of the holders of a majority in principal amount of the Securities if such supplemental indenture would materially and adversely affect the interests of the Holders of the Securities.

     9.02 With Consent of Holders.

          The Company, with the consent of the Trustee, may amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of a majority in aggregate principal amount of the outstanding Securities. Subject to Section 6.07, the Holders of a majority in aggregate principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any other Securityholder. However, without the consent of each Securityholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not:

     (i) reduce the rate of or change the time for payment of interest (including any contingent interest, if any) or any liquidated damages, if any, on any Security;

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     (ii) make any Security payable in money or securities other than as stated in such Security;

     (iii) change the stated maturity of any Security;

     (iv) reduce the principal amount, Redemption Price (including the Make Whole Payment portion of the Redemption Price) or Repurchase Price of any Security;

     (v) make any change that adversely affects the right of a Holder to require the Company to repurchase a Security in accordance with Article III;

     (vi) make any change that adversely affects the right to convert, or receive payment with respect to, any Security or the right to institute suit for the enforcement of any payment with respect to, or conversion of, any Security;

     (vii) modify the provisions of Article XI hereof in a manner adverse to the Holders; or

     (viii) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver.

            An amendment under this Section 9.02 may not make any change that adversely affects the rights under Article XI of any holder of Senior Indebtedness unless the holders of such Senior Indebtedness pursuant to its terms consent to the change.

            Promptly after an amendment under Section 9.01 and this Section 9.02 becomes effective, the Company shall mail to Securityholders a notice briefly describing the amendment. Any failure of the Company to mail such notice shall not in any way impair or affect the validity of such amendment, supplement or waiver.

            It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or supplement, but it shall be sufficient if such consent approves the substance thereof.

     9.03 Compliance with Trust Indenture Act.

            Every amendment, waiver or supplement to this Indenture or the Securities shall comply with the TIA as then in effect.

     9.04 Revocation and Effect of Consents.

            Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective.

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An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Securityholder.

          After an amendment, supplement or waiver becomes effective with respect to the Securities, it shall bind every Securityholder unless it makes a change described in Section 9.02. In that case, the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and, provided that notice of such amendment, supplement or waiver is reflected on a Security that evidences the same debt as the consenting Holder’s Security, every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder’s Security.

     9.05 Notation on or Exchange of Securities.

          If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security as directed and prepared by the Company about the changed terms and return it to the Holder. Alternatively, if the Company so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms.

     9.06 Trustee Protected.

          The Trustee need not sign any amendment, supplement or waiver authorized pursuant to this Article IX that adversely affects the Trustee’s rights, duties, liabilities or immunities. The Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel and an Officers’ Certificate that any supplemental indenture, amendment or waiver is permitted or authorized pursuant to the Indenture.

ARTICLE X

CONVERSION

     10.01 Conversion Privilege; Restrictive Legends.

          Subject to the provisions of this Article X, a Holder of a Security may convert such Security into Common Stock (the shares of Common Stock issuable upon such conversion, the “Conversion Shares”), at the conversion rate then in effect, if any of the following conditions is satisfied:

(a)	during any Conversion Period prior to June 15, 2021, if the Sale Price for at least 20 Trading Days in the period of 30 consecutive Trading Days ending on the first day of such Conversion Period is greater than 120% of the Conversion Price on the first day of such Conversion Period;
(b)	at any time on or after June 15, 2021 through the business day immediately prior to the Maturity Date, if the Sale Price on any date on or after June 15, 2021 is greater than 120% of the then current Conversion Price;

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(c)	during the five Trading Day period immediately following a period of five consecutive Trading Days in which the average of the Trading Prices (as determined following a request by a Holder of the Securities in accordance with the procedures set forth below in this Section 10.01) was less than 95% of the average Sale Price during such five Trading Day period multiplied by the then current conversion rate (the condition specified in this clause (c) being the “95% Trading Condition”);
(d)	the Security has been called for redemption by the Company pursuant to Section 3.01;
(e)	the Company (i) distributes rights, options or warrants referred to in Section 10.06(b) or (ii) makes a distribution referred to in Section 10.06(c) where the fair market value of such distribution per share of Common Stock (as determined by the Board of Directors of the Company, which determination shall be conclusive evidence of such fair market value) exceeds 10.0% of the Sale Price on the Trading Day immediately preceding the date of declaration of such distribution; or
(f)	(x) the Company is party to a consolidation, merger, share exchange, sale of all or substantially all of its assets or other similar transaction pursuant to which the Common Stock is subject to conversion into shares of stock, other securities or property (including cash) pursuant to Section 10.12 and (y) the conversion of such Security occurs at any time from and after the date that is 15 days prior to the date of the anticipated effective time of such transaction until and including the date that is 15 days after the actual effective date of such transaction.

          Prior to June 15, 2021, in connection with the foregoing clause (a), the Conversion Agent shall, on the Company’s behalf, determine daily if the Securities are convertible pursuant to such clause (a) and, at the end of each Conversion Period, the Conversion Agent shall, promptly notify the Company and the Holders if the Securities are convertible in the immediately succeeding Conversion Period.

          Commencing on and after June 15, 2021, in connection with the foregoing clause (b), the Conversion Agent shall, on the Company’s behalf, determine daily if the Securities are convertible pursuant to such clause (b), and the Conversion Agent shall promptly notify the Company and the Holders if the Securities are convertible pursuant to such clause (b). On and after such date that the Securities shall have become convertible pursuant to such clause (b), the Securities shall remain convertible through the business day prior to the Maturity Date.

          In the case of the foregoing clauses (e)(i) and (ii), the Company must notify the Holders at least 20 days prior to the ex-dividend date for such issuance or distribution. Once the Company has given such notice, Holders may surrender their Securities for conversion at any time thereafter until the earlier of the close of business on the business day prior to the ex-dividend date or the Company’s announcement that such issuance or distribution will not take

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place. This provision shall not apply if the Holder of a Security otherwise participates in the distribution without conversion.

          The “ex-dividend date” for any such issuance or distribution means the date immediately prior to the commencement of “ex-dividend” trading for such issuance or distribution on the NASDAQ National Market or the principal U.S. exchange or quotation system on which the Common Stock on which the Common Stock is then listed or quoted.

          The number of shares of Common Stock issuable upon conversion of each $1,000 principal amount of Securities shall be equal to the “conversion rate.” The initial conversion rate is 64.9773 shares of Common Stock per $1,000 principal amount of Securities, or an effective initial Conversion Price of approximately $15.39 per share). The conversion rate is subject to adjustment in accordance with Sections 10.06 through 10.12.

          A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

          If a Security is called for redemption pursuant to Section 3.01, the right to convert such Security shall terminate at the close of business on the business day before the Redemption Date for such Security (unless the Company shall default in making the redemption payment then due, in which case the conversion right shall terminate on the date such default is cured and such Security is redeemed). A Security in respect of which a Holder has delivered an Option of Holder to Elect Repurchase Notice pursuant to Section 3.08 or Section 3.09 exercising the option of such Holder to require the Company to repurchase such Security may be converted only if such notice is withdrawn in accordance with Section 3.11.

          A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted its Securities into Common Stock and, upon such conversion, only to the extent such Securities are deemed to have been converted into Common Stock pursuant to this Article X.

          The “Trading Price” per $1,000 in principal amount of Securities on any date of determination means the average of the secondary market bid quotations per $1,000 in principal amount of Securities obtained by the Trustee for $5,000,000 in principal amount of Securities at approximately 3:30 p.m., New York City time, on such determination date from two independent nationally recognized securities dealers selected by the Company; provided that if at least two such bids cannot reasonably be obtained by the Trustee, but one such bid can be reasonably obtained by the Trustee, then such one bid shall be used. If the Trustee cannot reasonably obtain at least one bid for $5,000,000 in principal amount of Securities from a nationally recognized securities dealer or, in the reasonable judgment of the Company, the bid quotations are not indicative of the secondary market value of the Securities, then the Trading Price will equal (a) the applicable conversion rate multiplied by (b) the Sale Price on such determination date. The Trustee will determine the Trading Price after being requested to do so by the Company. The Company shall have no obligation to make that request unless a Holder provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Securities may be less than 95% of the Sale Price multiplied by the then current conversion rate. If a Holder

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provides such evidence, the Company shall instruct the Trustee to determine the Trading Price of the Securities beginning on the next Trading Day and on each successive Trading Day (i) for 30 Trading Days or (ii) until the date that the average Trading Price per $1,000 principal amount of Securities for any five consecutive Trading Days is equal to or greater than 95% of the average Sale Price during such five consecutive Trading Days multiplied by the then current conversion rate, whichever is earlier.

          Any shares issued upon conversion of a Security shall bear the Private Placement Legend until after the second anniversary of the later of (i) the issue date for the Securities, (ii) the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed between the Company and the Holder thereof).

     10.02 Conversion Procedure.

          To convert a Security, a Holder must satisfy the requirements in Paragraph 10 of the Securities. The date on which the Holder satisfies all those requirements is the “conversion date.” As promptly as practicable following the conversion date, the Company shall deliver to the Holder through the Trustee (who shall deliver to the Conversion Agent) a certificate for, or a book-entry notation of, the number of full shares of Common Stock issuable upon the conversion and Cash in lieu of any fractional share. The person in whose name the certificate is registered shall be treated as a stockholder of record on and after the conversion date.

          Except as described below, no payment or adjustment will be made for accrued interest (including contingent interest, if any) on, or liquidated damages, if any, with respect to, a converted Security or for dividends or distributions on any shares of Common Stock issued on or prior to conversion (provided that the shares of Common Stock received upon conversion of Securities shall accrue liquidated damages, if any, and shall be entitled to receive, at the next interest payment date, any accrued and unpaid liquidated damages with respect to the converted Securities, in accordance with the terms and subject to the conditions set forth in the Registration Rights Agreement). Delivery by the Company to the Holder of the Security converted of the number of shares of Common Stock into which the Security is convertible, at the Conversion Price in effect at such time, shall satisfy the obligations of the Company to pay the principal amount of such Security being converted and the accrued but unpaid interest on such Security through the conversion date; any such accrued but unpaid interest shall be deemed to be paid in full rather than canceled, extinguished or forfeited. The conversion rate in effect at any time will be adjusted only in accordance with Section 10.06 through 10.12; the conversion rate will not be adjusted to account for accrued interest.

          If any Holder surrenders a Security for conversion after the close of business on the record date for the payment of an installment of interest and prior to the opening of business on the immediately succeeding interest payment date, then, notwithstanding such conversion, the interest (including contingent interest, if any) or liquidated damages, if any, payable on such interest payment date shall be paid to the Holder of such Security on such record date; provided,

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however, that such Security, when surrendered for conversion, must be accompanied by payment to the Conversion Agent on behalf of the Company of an amount equal to the interest (including contingent interest, if any) or liquidated damages, if any, payable on such interest payment date on the portion so converted; provided, further, however, that such payment to the Conversion Agent described in the immediately preceding proviso shall not be required in connection with any conversion of a Security called for redemption pursuant to Section 3.01 hereof on a Redemption Date that is from and including the record date for the payment of interest and on or before the next succeeding interest payment date.

          If on the day before the conversion date of a Security pursuant to the 95% Trading Condition the Sale Price is greater than the Conversion Price but less than or equal to 120% of such Conversion Price, the Company may elect to pay to the Holder of such Security, in lieu of issuance of Conversion Shares based on the Conversion Price, Cash or Common Stock or a combination of Cash and Common Stock, at the Company’s option, with a value equal to 100% of the principal amount of the Security surrendered for conversion as of such conversion date (a “Principal Value Conversion”). The Company shall notify the surrendering Holder of any Security whose conversion is a Principal Value Conversion and the Trustee (such notice being a “Principal Value Conversion Notice”) of such Principal Value Conversion by the second Trading Day following the conversion date for such conversion and whether the Company shall pay to such Holder all or a portion of the principal amount of such Security in Cash, Common Stock or a combination of Cash and Common Stock and, if a combination, the percentages of the principal amount in respect of which it will pay in Cash or Common Stock. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid upon a Principal Value Conversion once the Company has given its Principal Value Conversion Notice to the Holder surrendering such Security whose conversion is a Principal Value Conversion. Any Common Stock to be delivered upon a Principal Value Conversion shall be valued at the average Sale Price for the five consecutive Trading Days ending on or prior to the third Trading Day preceding the conversion date. The Company shall pay any portion of the principal amount to be paid in Cash in a Principal Value Conversion on or prior to the third Trading Day after the conversion date. With respect to any portion of the principal amount to be paid in Common Stock in a Principal Value Conversion, the Company shall deliver the Common Stock to the Holder of the Security surrendered for conversion in such Principal Value Conversion on or prior to the fourth Trading Day following the conversion date.

          If a Holder converts more than one Security at the same time, the number of full shares issuable upon the conversion shall be based on the total principal amount of the Securities converted.

          Upon surrender of a Security that is converted in part the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unconverted portion of the Security surrendered.

          If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding day that is not a Legal Holiday.

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     10.03 Fractional Shares.

          The Company will not issue fractional shares of Common Stock upon conversion of Securities. Instead, the Company will pay Cash for all fractional shares based on the Sale Price at the close of business on the last Trading Day prior to the conversion date. The Sale Price of a fractional share shall be determined to the nearest 1/1,000th of a share, by multiplying the applicable Sale Price of a full share by the fractional amount and rounding to the nearest whole cent. It is understood that if a Holder elects to have more than one Security converted, the number of shares of Common Stock issuable upon conversion and the Cash payment in lieu of fractional shares shall be based on the aggregate principal amount of Securities converted.

     10.04 Taxes on Conversion.

          If a Holder converts its Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the shares are issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which shall be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any withholding tax required by law.

     10.05 Company to Provide Stock.

          The Company shall reserve out of its authorized but unissued Common Stock or Common Stock held in its treasury enough shares of Common Stock to permit the conversion of all of the Securities.

          All shares of Common Stock which may be issued upon conversion of the Securities shall be validly issued, fully paid and nonassessable.

          The Company will endeavor to comply with all securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities and will endeavor to list such shares on each national securities exchange or automated quotation system on which the Common Stock is listed or quoted.

     10.06 Adjustment of Conversion Rate.

          The conversion rate shall be subject to adjustment from time to time as follows:

     (a) In case the Company shall (1) pay a dividend in shares of Common Stock to all holders of Common Stock, (2) make a distribution in shares of Common Stock to all or substantially all holders of Common Stock, (3) subdivide the outstanding shares of Common Stock into a greater number of shares of Common Stock, (4) combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock or (5) reclassify its outstanding Common Stock, the conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Common

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Stock which he would have owned immediately following such action had such Securities been converted immediately prior thereto. Any adjustment made pursuant to this Section 10.06(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, or reclassification.

     (b) In case the Company shall issue rights, options or warrants to all or substantially all holders of Common Stock, as the case may be, entitling them (for a period commencing no earlier than the record date for the determination of Holders of Common Stock entitled to receive such rights, options or warrants and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock), at a price per share less than the then current market price (as determined pursuant to Section 10.06(g) below) per share of Common Stock on such record date, the conversion rate shall be increased by multiplying the conversion rate in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock so offered for subscription or purchase, and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price. Such adjustments shall become effective immediately after such record date.

     (c) In case the Company shall distribute to all or substantially all holders of Common Stock shares of capital stock of the Company other than Common Stock, evidences of indebtedness, cash or other assets (other than cash dividends out of current or retained earnings) or shall distribute to all or substantially all holders of Common Stock rights, options or warrants to subscribe for securities (in each case other than those referred to in Section 10.06(a) and (b) above and Section 10.06(d) and (e) below), then in each such case the conversion rate shall be increased by multiplying the conversion rate in effect immediately prior to the close of business on the record date for the determination of shareholders entitled to such distribution by a fraction of which the numerator shall be the current market price per share of Common Stock (determined as provided in Section 10.06(g) below) on such date and the denominator shall be such current market price less the fair market value (as determined by the Board of Directors whose determination shall be conclusive and described in a Board Resolution) on such date of the portion of the evidences of indebtedness, shares of capital stock, cash and other assets to be distributed or of such subscription rights, options or warrants applicable to one share of Common Stock, such increase to become effective immediately prior to the opening of business on the day following such record date. Notwithstanding the foregoing, in the event that the Company shall distribute rights, options or warrants (other than those referred to in Section 10.06(b) above) (“Rights”) pro rata to holders of Common Stock, the Company may, in lieu of making any adjustment pursuant to this Section 10.06(c), make proper provision so that each Holder of a Security who converts such Security (or any portion thereof) after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the Conversion Shares, a

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number of Rights to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “Distribution Date”), the same number of Rights to which a holder of a number of shares of Common Stock equal to the number of shares of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of Common Stock into which the principal amount of the Security so converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights.

     (d) In case the Company shall make a distribution consisting exclusively of cash to all or substantially all holders of Common Stock, then the conversion rate shall be increased by multiplying the conversion rate in effect immediately prior to the close of business on the record date for the determination of shareholders entitled to such distribution by a fraction of which the numerator shall be the current market price per share of Common Stock (determined as provided in Section 10.06(g) below) on such date and the denominator shall be such current market price less the amount of cash to be distributed per share of Common Stock, such increase to become effective immediately prior to the opening of business on the day following such record date; provided, however, that after June 20, 2010, the conversion rate shall be so adjusted only if the amount of cash being distributed per share of Common Stock, combined together with all other such cash distributions made within the preceding 12 months in respect of which no adjustment has been made under this Section 10.06, is greater than the amount of interest (exclusive of any contingent interest or liquidated damages) paid during the preceding 12 months on the principal amount of Securities that would be convertible into one share of Common Stock, based on the conversion rate in effect on such record date.

     (e) In case a repurchase (including by way of tender offer or exchange offer) made by the Company or any of its subsidiaries for all or any portion of the Common Stock shall expire and such repurchase (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the repurchase) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) that combined together with:

(1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution), as of the expiration of such repurchase, of other consideration payable in respect of any other tender offers, exchange offers or other repurchases, by the Company or any of its subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such repurchase and in respect of which no adjustment pursuant to this Section 10.06 has been made; and

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(2) the aggregate amount of any distributions to all or substantially all holders of the Company’s Common Stock made exclusively in cash within the 12 months preceding the expiration of such repurchase and in respect of which no adjustment pursuant to Section 10.06 has been made,

exceeds 10% of the product of (x) the current market price per share (as determined in accordance with Section 10.06(g)) as of the last time (the “Expiration Time”) tenders, exchanges or other repurchases could have been made pursuant to such repurchase (as it may be amended) and (y) the number of shares of Common Stock outstanding (including any tendered shares, exchanged shares or repurchased shares) at the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the conversion rate shall be adjusted by multiplying the conversion rate in effect immediately prior to the close of business on the date of the Expiration Time by a fraction:

     (i) the numerator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer, exchange offer or other repurchase offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the current market price of the Common Stock as of the Expiration Time; and

     (ii) the denominator of which shall be the number of shares of Common Stock outstanding (including any tendered, exchanged or repurchased shares) at the Expiration Time multiplied by the current market price of the Common Stock as of the Expiration Time.

     Such adjustment (if any) shall become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company is obligated to purchase shares pursuant to any such repurchase, but the Company is permanently prevented by applicable law from effecting any such repurchase or all such repurchase are rescinded, the conversion rate shall again be adjusted to be the conversion rate which would then be in effect if such repurchase had not been made. If the application of this Section 10.06(e) to any repurchase (including by way of tender offer or exchange offer) would result in a decrease in the conversion rate, no adjustment shall be made for such repurchase under this Section 10.06(e).

     (f) In addition to the foregoing adjustments in subsections (a), (b), (c), (d) and (e) above, the Company, from time to time and to the extent permitted by law, may increase the conversion rate by any amount for at least 20 days or such longer period as may be required by law, if the Board of Directors of the Company has made a determination, which determination shall be conclusive, that such increase would be in the best interests of the Company, provided that the effective Conversion Price is not less than the par value of a share of Common Stock. The Company shall give notice to the

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Trustee and cause notice of such increase to be mailed to each Holder at such Holder’s address as the same appears on the registry books of the Registrar, at least 15 days prior to the date on which such increase commences. Any increase, however, will not be taken into account for purposes of determining whether the Sale Price equals or exceeds the Conversion Price by 105% in connection with an event that otherwise would be a Change in Control. Such conversion rate increase shall be irrevocable during such period.

     (g) For the purpose of any computation under subsections (a), (b), (c), (d) and (e) above of this Section 10.06, the current market price per share of Common Stock on the date fixed for determination of the stockholders entitled to receive the issuance or distribution requiring such computation (the “Determination Date”) shall be deemed to be the average of the Sale Price for the ten consecutive Trading Days immediately preceding the Determination Date; provided, however, that (i) if the “ex” date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the conversion rate pursuant to subsection (a), (b), (c), (d) or (e) above occurs on or after the tenth Trading Day prior to the Determination Date and prior to the “ex” date for the issuance or distribution requiring such computation, the Sale Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by multiplying such Sale Price by the reciprocal of the fraction by which the conversion rate is so required to be adjusted as a result of such other event, (ii) if the “ex” date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the conversion rate pursuant to subsection (a), (b), (c), (d) or (e) above occurs on or after the “ex” date for the issuance or distribution requiring such computation and on or prior to the Determination Date, the Sale Price for each business day on and after the “ex” date for such other event shall be adjusted by multiplying such Sale Price by the same fraction by which the conversion rate is so required to be adjusted as a result of such other event, and (iii) if the “ex” date for the issuance or distribution requiring such computation is on or prior to the Determination Date, after taking into account any adjustment required pursuant to clause (i) or (ii) of this proviso, the Sale Price for each Trading Day on and after the “ex” date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors in a manner consistent with any determination of such value for the purposes of this Section 10.06, whose determination shall be conclusive and described in a Resolution of the Board of Directors) of the evidences of indebtedness, shares of capital stock or other securities or assets being distributed (in the distribution requiring such computation) applicable to one share of Common Stock as of the close of business on the day before such “ex” date. For the purpose of any computation under subsection (e) of this Section 10.06, the current market price per share of Common Stock at the expiration time for the repurchase requiring such computation shall be deemed to be the average of the Sale Price for the ten consecutive Trading Days commencing on the business day immediately following the expiration time of such repurchase (the “Commencement Date”); provided, however, that if the “ex” date for any event (other than the repurchase requiring such computation) that requires an adjustment to the conversion rate pursuant to subsection (a), (b), (c), (d) or (e) above occurs on or after the expiration time for the repurchase requiring such computation and prior to the day in question, the Sale Price for each Trading Day on or after the “ex” date for such other event shall be adjusted by multiplying such Sale Price by the same fraction by which the conversion rate is so required to be adjusted as a result of such other event.

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For purposes of this subsection, the term “ex” date, (i) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Sale Price was obtained without the right to receive such issuance or distribution, (ii) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective, and (iii) when used with respect to any repurchase means the first date on which the Common Stock trades regular way on such exchange or in such market after the expiration time of such repurchase (as it may be amended or extended).

     10.07 No Adjustment.

          No adjustment in the conversion rate shall be required until cumulative adjustments amount to 1% or more of the conversion rate as last adjusted; provided, however, that any adjustments which by reason of this Section 10.07 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article X shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value of the Common Stock.

          If any rights, options or warrants issued by the Company as described in Section 10.06 are only exercisable upon the occurrence of certain triggering events, then the conversion rate will not be adjusted as provided in Section 10.06 until the earliest of such triggering event occurs. Upon the expiration or termination of any rights, options or warrants without the exercise of such rights, options or warrants, the conversion rate then in effect shall be adjusted immediately to the conversion rate which would have been in effect at the time of such expiration or termination had such rights, options or warrants, to the extent outstanding immediately prior to such expiration or termination, never been issued.

          No adjustment need be made for a transaction referred to in this Article X if Securityholders are to participate in the transaction without conversion on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction.

     10.08 Other Adjustments.

          In the event that, as a result of an adjustment made pursuant to Section 10.06 hereof, the Holder of any Security thereafter surrendered for conversion shall become entitled to receive any shares of Capital Stock other than shares of Common Stock, thereafter the conversion rate of such other shares so receivable upon conversion of any Security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Article X.

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10.09 Adjustments for Tax Purposes.

          The Company may make such increases in the conversion rate, in addition to those required by Section 10.06 hereof, as it determines to be advisable in order that any stock dividend, subdivision of shares, distribution or rights to purchase stock or securities or distribution of securities convertible into or exchangeable for stock made by the Company or to its stockholders will not be taxable to the recipients thereof.

     10.10 Notice of Adjustment.

          Whenever the conversion rate is adjusted, the Company shall promptly mail to Holders at the addresses appearing on the Registrar’s books a notice of the adjustment and file with the Trustee an Officers’ Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment.

     10.11 Notice of Certain Transactions.

          In the event that:

     (1) the Company takes any action which would require an adjustment in the conversion rate;

     (2) the Company takes any action that would require a supplemental indenture pursuant to Section 10.12; or

     (3) there is a dissolution or liquidation of the Company;

a Holder of a Security may wish to convert such Security into shares of Common Stock prior to the record date for or the effective date of the transaction so that he may receive the rights, warrants, securities or assets which a holder of shares of Common Stock on that date may receive. Therefore, the Company shall mail to Holders at the addresses appearing on the Registrar’s books and the Trustee a notice stating the proposed record or effective date, as the case may be, of any transaction referred to in clause (1), (2) or (3) of this Section 10.11. The Company shall mail such notice at least 15 days before such date; however, failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 10.11.

     10.12 Effect of Reclassifications, Consolidations, Mergers, Binding Share Exchanges or Sales on Conversion Privilege.

          If any of the following shall occur, namely: (i) any reclassification or change in the Common Stock issuable upon conversion of Securities (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or binding share exchange to which the Company is a party other than a merger in which the Company is the continuing corporation and which

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does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination) in, the Common Stock, or (iii) any sale or conveyance of all or substantially all of the property or business of the Company as an entirety, then the Company or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, binding share exchange, sale or conveyance, execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, binding share exchange, sale or conveyance by a holder of the number of shares of Common Stock, deliverable upon conversion of such Security immediately prior to such reclassification, change, consolidation, merger, binding share exchange, sale or conveyance. Such supplemental indenture shall provide for adjustments of the conversion rate that shall be as nearly equivalent as may be practicable to the adjustments of the conversion rate provided for in this Article X. The foregoing, however, shall not in any way affect the right a Holder of a Security may otherwise have, pursuant to clause (ii) of the last sentence of subsection (c) of Section 10.06 hereof, to receive Rights upon conversion of a Security. If, in the case of any such consolidation, merger, binding share exchange, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock includes shares of stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, binding share exchange, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provision of this Section 10.12 shall similarly apply to successive consolidations, mergers, binding share exchanges, sales or conveyances. This Section 10.12 shall not apply to any consolidation, merger, binding share exchange, sale or conveyance of all or substantially all of the property or business of the Company as an entirety that does not result in any reclassification, conversion, exchange or cancellation of the Common Stock.

          In the event the Company shall execute a supplemental indenture pursuant to this Section 10.12, the Company shall promptly file with the Trustee an Officers’ Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, consolidation, merger, binding share exchange, sale or conveyance and any adjustment to be made with respect thereto.

     10.13 Trustee’s Disclaimer.

          The Trustee has no duty to determine when an adjustment under this Article X should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of the correctness of any such adjustment, and shall be protected in relying upon the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.10 hereof. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee

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shall not be responsible for the failure by the Company to comply with any provisions of this Article X.

          The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 10.12, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.12 hereof.

ARTICLE XI

SUBORDINATION

     11.01 Agreement to Subordinate.

          The Company agrees, and each Securityholder by accepting a Security agrees, that the payment of all amounts due with respect to the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article XI, to the prior payment in full of all Senior Indebtedness and that the subordination is for the benefit of the holders of Senior Indebtedness.

          Money and securities held in trust pursuant to Article VIII are not subject to the subordination provisions of this Article XI.

     11.02 Certain Definitions.

          “Indebtedness” means, with respect to any person, the principal of, and premium, if any, and interest on (a) all indebtedness of such person for borrowed money (including all indebtedness evidenced by notes, bonds, debentures or other securities sold by such person for money), (b) all obligations incurred by such person in the acquisition (whether by way of purchase, merger, consolidation or otherwise and whether by such person or another person) of any business, real property or other assets (except trade payables), (c) guarantees by such person of indebtedness described in clause (a) or (b) of another person, (d) all renewals, extensions, refundings, deferrals, restructurings, amendments and modifications of any such indebtedness, obligation or guarantee, (e) all reimbursement obligations of such person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such person, (f) all capital lease obligations of such person and (g) all net obligations of such person under interest rate swap, currency exchange or similar agreements of such person.

          “Representative” means the Trustee or other trustee, agent or representative for an issue of Senior Indebtedness.

          “Senior Indebtedness” means all Indebtedness of the Company outstanding at any time, except the Securities, Indebtedness that by its terms provides that it shall not be “senior” in right of payment to the Securities or Indebtedness that by its terms provides that it shall be “pari passu” or “junior” in right of payment to the Securities. Senior Indebtedness does not include Indebtedness of the Company to any of its subsidiaries or the Company’s 3¼% Convertible Subordinated Notes due 2007.

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     11.03 Liquidation; Dissolution; Bankruptcy.

          Upon any distribution of assets to creditors of the Company in a liquidation, winding up or dissolution of the Company, or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property:

     (i) holders of Senior Indebtedness shall be entitled to receive payment in full of the principal of and interest (including interest accruing after the commencement of any such proceeding) to the date of payment on the Senior Indebtedness before Securityholders shall be entitled to receive any payment from the Company of amounts due with respect to the Securities (other than cash payments due upon conversion of Securities in lieu of fractional shares); and

     (ii) until the Senior Indebtedness is paid in full, any distribution to which Securityholders would be entitled from the Company but for this Article XI shall be made to holders of Senior Indebtedness, as their interests may appear, except the Securityholders may receive securities that are subordinated to Senior Indebtedness to at least the same extent as the Securities and payments made pursuant to Sections 8.01 and 8.02.

     11.04 Company Not To Make Payments with Respect to Securities in Certain Circumstances.

          No payment of amounts due may be made by the Company, directly or indirectly, with respect to the Securities (including any repurchase pursuant to the exercise of the Repurchase Right or the Change in Control Repurchase Right, but excluding Cash payments due upon conversion in lieu of fractional shares) or to acquire any of the Securities at any time if a default in payment of the principal of or premium, if any, or interest on Senior Indebtedness exists beyond any applicable grace period, unless and until such default shall have been cured or waived or shall have ceased to exist. During the continuance of any default with respect to any Senior Indebtedness pursuant to which any Senior Indebtedness has been issued (other than default in payment of the principal of or premium, if any, or interest on any Senior Indebtedness), permitting the holders thereof to accelerate the maturity thereof, no payment may be made by the Company, directly or indirectly, of any amount due with respect to the Securities (a “Payment Blockage”) until the earlier of (i) the date on which such default has been cured or waived, (ii) 180 days following receipt of written notice (a “Payment Blockage Notice”) to the Company from any holder or holders thereof or its Representative or Representatives or the trustee or trustees under any indenture under which any instrument evidencing any such Senior Indebtedness may have been issued, that such a default has occurred and is continuing, (iii) the date on which such Senior Indebtedness is discharged or paid in full or (iv) the date of which the imposition of such Payment Blockage shall have been terminated by written notice to such trustee or the Company from such trustee or other representative initiating such Payment Blockage. Notwithstanding the foregoing, no new Payment Blockage Notice shall be given until a period of at least 365 consecutive days shall have elapsed since the beginning of the prior Payment Blockage period. No default (other than a default in payment) that existed or was continuing on the date of delivery of any Payment Blockage Notice shall be the basis for any subsequent Payment Blockage Notice, unless such default has been cured or waived for a period

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of not less than 90 consecutive days. However, if the maturity of such Senior Indebtedness is accelerated, no payment may be made by the Company on the Securities until such Senior Indebtedness that has matured has been paid or such acceleration has been cured or waived.

          Regardless of anything to the contrary herein, nothing shall prevent (a) any payment by the Trustee to the Securityholders of amounts deposited with it pursuant to Article VIII or (b) any payment by the Trustee or the Paying Agent as permitted by Section 11.12. Nothing contained in this Article XI will limit the right of the Trustee or the Securityholders to take any action to accelerate the maturity of the Securities pursuant to Section 6.02 or to pursue any rights or remedies hereunder.

     11.05 Acceleration of Securities.

          If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration.

     11.06 When Distribution Must Be Paid Over.

          In the event that the Company shall make any payment to the Trustee with respect to the Securities at a time when such payment is prohibited by Section 11.03 or 11.04, such payment shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their Representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness.

          If a distribution is made to Securityholders, that because of this Article XI should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear.

     11.07 Notice by Company.

          The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any amount due with respect to the Securities to violate this Article XI, but failure to give such notice shall not affect the subordination of the Securities to the Senior Indebtedness provided in this Article XI.

     11.08 Subrogation.

          After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated (equally and ratably with all other Indebtedness of the Company ranking pari passu with the Securities) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Securityholders have been applied to the payment of Senior Indebtedness. A distribution made under this Article XI to holders of Senior Indebtedness which

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otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on Senior Indebtedness.

     11.09 Relative Rights.

          This Article XI defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall:

     (i) impair, as between the Company, on the one hand, and Securityholders, on the other hand, the obligation of the Company, which is absolute and unconditional, to pay all amounts due with respect to the Securities in accordance with their terms;

     (ii) affect the relative rights of Securityholders and creditors of the Company other than holders of Senior Indebtedness; or

     (iii) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders.

          Upon any distribution of assets of the Company referred to in this Article XI, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders of the Securities shall be entitled to rely upon any order or decree by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other person making any distribution to the Trustee or the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XI. Nothing contained in this Article XI or elsewhere in this Indenture or in any Security is intended to or shall affect the obligation of the Company to make, or prevent the Company from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any default specified in Section 11.04 (not cured or waived), payments at any time of all amounts due with respect to the Securities.

     11.10 Subordination May Not Be Impaired by Company.

          No right of any holder of Senior Indebtedness to enforce the subordination of the indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by the failure of the Company to comply with this Indenture.

     11.11 Distribution or Notice to Representative.

          Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representatives.

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     11.12 Rights of Trustee and Paying Agent.

          The Trustee or Paying Agent may continue to make payments on the Securities until it receives written notice of facts that would cause a payment of amounts due with respect to the Securities to violate this Article XI. Only the Company or a Representative or a holder of an issue of Senior Indebtedness that has no Representative may give the notice.

          The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a Representative on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a Representative on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person who is a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article XI, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article XI, and if such evidence is not furnished the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment or until such time as the Trustee shall be otherwise satisfied as to the right of such person to receive such payment.

          The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.

          The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holder if it shall mistakenly pay over or distribute to Securityholders or the Company or any other person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article XI or otherwise.

     11.13 Officers’ Certificate.

          If there occurs an event referred to in Section 11.03 or 11.04, the Company shall promptly give to the Trustee an Officers’ Certificate (on which the Trustee may conclusively rely) identifying all holders of Senior Indebtedness or their Representatives and the principal amount of Senior Indebtedness then outstanding held by each such holder and stating the reasons why such Officers’ Certificate is being delivered to the Trustee.

     11.14 Not to Prevent Events of Default.

          The failure to make any payment due with respect to the Securities by reason of any provision of this Article XI shall not be construed as preventing the occurrence of an Event of Default under Section 6.01.

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ARTICLE XII

MISCELLANEOUS

     12.01 Trust Indenture Act Controls.

          If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision of the TIA shall control.

     12.02 Notices.

          Any notice or communication by the Company or the Trustee to one or both of the others is duly given if in writing and delivered in person, mailed by first-class mail or by express delivery to the other parties’ addresses stated in this Section 12.02. The Company or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications.

          Any notice or communication to a Securityholder shall be mailed to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders.

          If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

          If the Company mails a notice or communication to Securityholders, it shall mail a copy to the other and to the Trustee and each Agent at the same time.

          All notices or communications shall be in writing.

          The Company’s address is:

WebMD Corporation
669 River Drive, Center 2
Elmwood Park, New Jersey 07407-1361
Facsimile: (201) 703-3401
Attention: Executive Vice President—Chief Financial Officer

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          The Trustee’s address is:

The Bank of New York
101 Barclay Street, Floor 8 W
New York, NY 10286
Facsimile: (212) 815-5704
Attention: Corporate Trust Administration

     12.03 Communication by Holders with Other Holders.

          Securityholders may communicate pursuant to TIA § 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

     12.04 Certificate and Opinion as to Conditions Precedent.

          Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

     (i) an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

     (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

          Each signer of an Officers’ Certificate or an Opinion of Counsel may (if so stated) rely, effectively, upon an Opinion of Counsel as to legal matters and an Officers’ Certificate as to factual matters if such signer reasonably and in good faith believes in the accuracy of the document relied upon.

     12.05 Statements Required in Certificate or Opinion.

          Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include:

     (i) a statement that the person making such certificate or opinion has read such covenant or condition;

     (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

     (iii) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

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     (iv) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

     12.06 Rules by Trustee and Agents.

          The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules and set reasonable requirements for their respective functions.

     12.07 Legal Holidays.

          A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the City of New York, in the State of New York or in the city in which the Trustee or the applicable agent administers its corporate trust business. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on that payment for the intervening period.

          A “business day” is a day other than a Legal Holiday.

     12.08 No Recourse Against Others.

          No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities.

     12.09 Duplicate Originals.

          The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Delivery of an executed counterpart by facsimile shall be effective as delivery of a manually executed counterpart thereof.

     12.10 Governing Law.

          The laws of the State of New York shall govern this Indenture and the Securities.

     12.11 No Adverse Interpretation of Other Agreements.

          This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

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     12.12 Successors.

          All agreements of the Company in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors.

     12.13 Separability.

          In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and a Holder shall have no claim therefor against any party hereto.

     12.14 Table of Contents, Headings, etc.

          The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

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          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first above written.

WEBMD CORPORATION
By:	/s/ KIRK G. LAYMAN Name: Kirk G. Layman Title: Executive Vice President, Administration and Acting Chief Financial Officer
THE BANK OF NEW YORK
By:	/s/ MARIE E. TRIMBOLI Name: Marie E. Trimboli Title: Assistant Vice President

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EXHIBIT A

[Face of Security]

WEBMD CORPORATION

[Certificate No.          ]

[INSERT PRIVATE PLACEMENT LEGEND AND GLOBAL SECURITY LEGEND AS REQUIRED]

1.75% Convertible Subordinated Note due June 15, 2023
CUSIP No.           

     WEBMD CORPORATION, a Delaware corporation (herein called the “Company”), for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of                  Dollars ($                  ) on June 15, 2023, and to pay interest (including contingent interest, if any) and liquidated damages, if any, thereon, as provided on the reverse hereof, until the principal and any unpaid and accrued interest is paid or duly provided for. The right to payment of the principal and all other amounts due with respect hereto is subordinated to the rights of Senior Indebtedness as set forth in the Indenture referred to on the reverse side hereof.

     Interest Payment Dates: June 15 and December 15, with the first payment to be made on December 15, 2003.

     Record Dates: June 1 and December 1 immediately preceding each Interest Payment Date.

     The provisions on the back of this certificate are incorporated as if set forth on the face hereof.

     IN WITNESS WHEREOF, WEBMD CORPORATION has caused this instrument to be duly signed.

WEBMD CORPORATION
By:
	Name:
	Title:

     Dated: 

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred
to in the within-mentioned Indenture.

THE BANK OF NEW YORK, as Trustee

By:
	Authorized Signatory

Dated: 

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[REVERSE OF SECURITY]

WEBMD CORPORATION

1.75% Convertible Subordinated Note due June 15, 2023

     1.     Interest. WebMD Corporation, a Delaware corporation (the “Company”), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on June 15 and December 15 of each year, with the first payment to be made on December 15, 2003, to the Holders of record on the immediately preceding June 1 and December 1, respectively, whether or not such day is a business day. Interest on the Securities will accrue on the principal amount from the most recent date to which interest has been paid or provided for or, if no interest has been paid, from June 25, 2003. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will not be required to make any interest payment on the Securities (including contingent interest, if any) or liquidated damages, if any, on any day that is not a business day until the next succeeding business day. Such interest payment made on the next succeeding business day will be treated as though it were paid on the original due date and no interest will accrue on the payment for the additional period of time.

     The Company shall pay contingent interest to the Holders during the period from June 20, 2010 to December 14, 2010 and during any period from December 15 to June 14 and from June 15 to December 14 thereafter (each, a “Contingent Interest Period”) if the average Trading Price per $1,000 principal amount of Securities for the five Trading Days ending on the second Trading Day immediately preceding the first day of the applicable Contingent Interest Period equals 120% or more of the $1,000 principal amount of such Securities. The amount of contingent interest payable per $1,000 principal amount of Securities in respect of any Contingent Interest Period shall equal 0.25% per annum of the average Trading Price of such Securities for the five Trading Days ending on the second Trading Day immediately preceding such Contingent Interest Period. Upon determination that Holders will be entitled to receive contingent interest which may become payable during a Contingent Interest Period, on or prior to the start of such Contingent Interest Period, the Company will provide notice to the Trustee setting forth the amount of contingent interest per $1,000 principal amount of Securities and disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News or other similarly broad public medium that is customary for such press releases. The Company will pay contingent interest, if any, in the same manner as it will pay interest as described above.

     2.     Maturity. The Notes will mature on June 15, 2023.

     3.     Method of Payment. The Company will pay interest on the Securities (except defaulted interest), including contingent interest, if any, and liquidated damages, if any, to the persons who are registered Holders of Securities at the close of business on the record date set forth on the face of this Security immediately preceding the applicable interest payment date. Liquidated damages, if any, would be paid in accordance with the terms and subject to the conditions set forth in the Registration Rights Agreement. Holders must surrender Securities to a Paying Agent to collect the principal, Redemption Price or Repurchase Price of the Securities. The Company will pay all amounts due with respect to the Securities in money of the United

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States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay interest (including contingent interest, if any), liquidated damages, if any, the Redemption Price, Repurchase Price, the premium, if any, and the principal amount at maturity, as the case may be, by check or wire payable in such money; provided, however, that a Holder holding Securities with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder. The Company may mail an interest check to the Holder’s registered address. Notwithstanding the foregoing, so long as this Security is registered in the name of a Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

     4.     Paying Agent, Registrar, Conversion Agent. Initially, The Bank of New York (the “Trustee”) will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice. The Company may act as Paying Agent.

     5.     Indenture; Ranking. The Company issued the Securities under an Indenture, dated as of June 25, 2003 (the “Indenture”), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) (the “Act”) as in effect on the date of the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of such terms. The Securities are general unsecured subordinated obligations of the Company limited to $300,000,000 aggregate principal amount ($350,000,000 if the Initial Purchaser (as defined in the Indenture) has elected to exercise its option to purchase an additional $50,000,000 of the Securities), except as otherwise provided in Section 2.07 of the Indenture. The Securities rank equal in right of payment to the Company’s 3¼% Convertible Subordinated Notes due 2007. Terms used and not otherwise defined herein that are defined in the Indenture have the meanings assigned to them in the Indenture.

     6.     Redemption by the Company. The Securities are not redeemable by the Company prior to June 15, 2008. Beginning June 15, 2008 and prior to June 20, 2010, the Securities will be redeemable at the option of the Company, in whole or in part, at the Redemption Price, plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, thereon up to, but not including, the Redemption Date for such Securities if (1) the Sale Price has exceeded 125% of the Conversion Price for at least 20 Trading Days in any consecutive period of 30 Trading Days ending on the Trading Day prior to the mailing of the notice of redemption described in Paragraph 7 below and (2) the shelf registration statement covering resales of the Securities and the Common Stock into which the Securities are convertible is effective and available for use and is expected to remain effective and available for use for the 30 days following such Redemption Date, unless registration is no longer required pursuant to the terms of the Registration Rights Agreement.

     At any time on and after June 20, 2010 through the business day immediately prior to the Maturity Date, the Securities will be redeemable, at the option of the Company, in whole or in part, at the Redemption Price, plus accrued and unpaid interest (including contingent interest, if

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any) and liquidated damages, if any, thereon up to but not including the Redemption Date for such Securities.

     7.     Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder to be redeemed at its registered address. Securities in denominations larger than $1,000 principal amount may be redeemed in part but only in positive integral multiples of $1,000 principal amount. On and after the Redemption Date interest (including contingent interest, if any) and liquidated damages, if any, cease to accrue on Securities or portions of them called for redemption.

     8.     Repurchase at Option of Holder. Each Holder shall have the right (the “Repurchase Right”), at the Holder’s option, to require the Company to repurchase in Cash in accordance with the provisions of this Paragraph 8 of such Holder’s Securities, or a portion thereof which is $1,000 in principal amount or any positive integral multiple thereof, on June 15, 2010, June 15, 2013 and June 15, 2018 (each, a “Repurchase Date”) at the Repurchase Price plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, thereon, up to but not including the Repurchase Date; provided that if the Repurchase Date is on or after an interest record date but on or prior to the related interest payment date, interest (including contingent interest, if any) and liquidated damages, if any, will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date. To exercise a Repurchase Right, a Holder shall deliver an Option of Holder to Elect Repurchase Notice as required by the Indenture, together with the Securities subject thereto, at any time from the opening of business on the date that is 30 business days prior to the Repurchase Date until the close of business on the fifth business day prior to the Repurchase Date, as set forth in the Indenture.

     9.     Repurchase Upon a Change in Control. Upon any Change in Control (as defined below) with respect to the Company, each Holder shall have the right (the “Change in Control Repurchase Right”), at the Holder’s option, subject to the rights of the holders of Senior Indebtedness under Article XI of the Indenture, to require the Company to repurchase all of such Holder’s Securities, or a portion thereof which is $1,000 in principal amount or any positive integral multiple thereof, on the date (the “Change in Control Repurchase Date”) that is 30 business days after the date of the Change in Control Notice (as defined below) at the Repurchase Price set forth in Paragraph 8 above, plus accrued and unpaid interest (including contingent interest, if any) and liquidated damages, if any, to, but not including, the Change in Control Repurchase Date. At the option of the Company, the Repurchase Price for Securities the Company is required to repurchase pursuant to a Change in Control may be paid in Cash, Common Stock or a combination of both, subject to certain conditions as set forth in the Indenture.

     Within 30 days after the occurrence of a Change in Control of the Company, the Company shall mail to all Holders of record of the Securities a notice (the “Change in Control Notice”) of the occurrence of such Change in Control and the Change in Control Repurchase Right arising as a result thereof. The Company shall deliver a copy of the Change in Control Notice to the Trustee and shall disseminate a copy via a press release through Dow Jones & Company, Inc. or Bloomberg Business News or other similarly broad public medium that is customary for such press releases. To exercise the Change in Control Repurchase Right, a

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Holder of Securities must deliver on or before the close of business on the 30^th day after the date of the Change in Control Notice irrevocable written notice to the Trustee, or to a Paying Agent designated by the Company for such purpose in the Change in Control Notice, in the form of the Option of Holder to Elect Repurchase Notice on the back of the Security, of the Holder’s exercise of such right together with the Securities with respect to which the right is being exercised, duly endorsed for transfer.

               A “Change in Control” of the Company shall be deemed to have occurred at such time as:

     (i) any person acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of the Company’s capital stock entitling the person to exercise 50% or more of the total voting power of all shares of the Company’s capital stock that are entitled to vote generally in elections of directors, other than an acquisition by the Company, any of its subsidiaries or any of its employee benefit plans; or

     (ii) the conveyance, sale transfer or lease by the Company of all or substantially all of its assets to another person.

     However, a Change in Control will not be deemed to have occurred if:

(X)

the Sale Price for any five Trading Days within the period of ten consecutive Trading Days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of capital stock, or the period of ten consecutive Trading Days ending immediately before the Change in Control, in the case of a Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the Conversion Price of the Securities in effect on each of those five Trading Days; or

(Y)

all or substantially all (but in no event less than 90%) of the consideration, excluding Cash payments for fractional shares of Common Stock and Cash payments made pursuant to dissenters’ appraisal rights, in a merger or consolidation otherwise constituting a Change in Control in the preceding paragraph consists of shares of common stock, depositary receipts or other certificates representing common equity interests traded on a national securities exchange or quoted on the NASDAQ National Market, or will be so traded or quoted immediately following such merger or consolidation, and as a result of such merger or consolidation the Securities become convertible solely into such common stock, depositary receipts or other certificates representing common equity interests.

     For purposes of this “Change in Control” definition:

(1) whether a person is a “beneficial owner” will be determined in accordance with Rule 13d-3 under the Exchange Act; and

A-6

(2) a “person” includes any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

     10.     Conversion. Subject to the provisions of Article X of the Indenture, a Holder of a Security may convert such Security into shares of Common Stock of the Company if any of the conditions specified in paragraphs (a) through (f) of Section 10.01 of the Indenture is satisfied. The initial conversion rate is 64.9773 shares of Common Stock per $1,000 principal amount of Securities, or an effective initial Conversion Price of approximately $15.39 per share, subject to adjustment in the event of certain circumstances as specified in the Indenture. The Company will deliver Cash in lieu of any fractional share.

     To convert a Security, a Holder must (1) complete and sign the Conversion Notice, with appropriate signature guarantee, on the back of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, (4) if required by Article X of the Indenture, pay the amount of interest (including contingent interest, if any) and liquidated damages, if any, the Holder may be paid and (5) pay any transfer or similar tax if required. A Holder may convert a portion of a Security if the portion is $1,000 principal amount or a positive integral multiple of $1,000 principal amount.

     Any shares issued upon conversion of a Security shall bear the Private Placement Legend until after the second anniversary of the later of (i) the issue date for the Securities, (ii) the last date on which the Company or any Affiliate of the Company was the owner of such shares or the Security (or any predecessor security) from which such shares were converted (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the Opinion of Counsel for the Company, unless otherwise agreed by the Company and the Holder thereof).

     11.     Subordination. The Securities are subordinated in right of payment, in the manner and to the extent set forth in Article XI of the Indenture, to the prior payment in full of all Senior Indebtedness. Each Holder by accepting a Security agrees to such subordination and authorizes the Trustee to give it effect.

     12.      Denominations, Transfer, Exchange. The Securities are in registered form without coupons in denominations of $1,000 principal amount and positive integral multiples of $1,000 principal amount. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Registrar need not exchange or register the transfer of any Security selected for redemption in whole or in part, except the unredeemed portion of Securities to be redeemed in part. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before the mailing of a notice of redemption of the Securities selected to be redeemed and in certain other circumstances provided in the Indenture.

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     13.     Persons Deemed Owners. The registered Holder of a Security may be treated as the owner of such Security for all purposes.

     14.     Merger or Consolidation. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another person unless such other person is a corporation organized under the laws of the United States, any State thereof or the District of Columbia or a corporation or comparable legal entity organized under the laws of a foreign jurisdiction and whose equity securities are listed on a national securities exchange in the United States or authorized for quotation on the NASDAQ National Market prior to or upon giving effect to the transaction (provided, however, that in the case of a transaction where the surviving entity is organized under the laws of a foreign jurisdiction, the Company may not consummate the transaction without first (i) making provision for the satisfaction of its obligations to repurchase the Securities following a Change in Control, if any, (ii) amending the terms of the Securities to provide that, in the event the Company is required under the laws of such foreign jurisdiction (or any political subdivision thereof) to withhold or deduct amounts in respect of taxes from payments made to Securityholders on the Securities, the Company will pay, subject to certain standard exceptions, such additional amounts to the holders as may be necessary so that each Securityholder will receive the same amounts it would have received had no such withholding or deduction been required, and (iii) obtaining an opinion of tax counsel experienced in such matters to the effect that, under then existing United States federal income tax laws, there would be no material adverse tax consequences to Securityholders of the Securities resulting from such transaction); such person assumes by supplemental indenture all the obligations of the Company, under the Securities and this Indenture; and immediately after giving effect to the transaction, no Default or Event of Default shall exist.

     15.     Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or the consent of any Securityholder, the Indenture or the Securities may be amended or supplemented, with the consent of the Trustee, to cure any ambiguity, inconsistency or other defect in the Indenture; to comply with Sections 5.01 and 10.12 of the Indenture; to evidence a successor to the Company and the assumption by that successor of the Company’s obligations under the Indenture and the Securities; to evidence and provide for the acceptance of the appointment under the Indenture of a successor Trustee; to make any changes or modifications to the Indenture necessary in connection with the registration of the Securities under the Securities Act and the qualification of the Indenture under the TIA; to secure the obligations of the Company in respect of the Securities; or to add to covenants of the Company described in the Indenture for the benefit of Securityholders or to surrender any right or power conferred upon the Company.

     16.     Defaults and Remedies. An Event of Default includes the occurrence of those events set forth in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may declare all the Securities to be due and payable immediately, except as provided in the Indenture. If an Event of Default specified in Section 6.01(vi) or (vii)

A-8

of the Indenture with respect to the Company occurs, the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Company must furnish an annual compliance certificate to the Trustee.

     17.     Registration Rights. The Holders are entitled to registration rights as set forth in the Registration Rights Agreement (as defined in the Indenture). The Holders shall be entitled to receive liquidated damages in certain circumstances, all as set forth in the Registration Rights Agreement.

     18.     Trustee Dealings with the Company. The Trustee under the Indenture, or any banking institution serving as successor Trustee thereunder, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee.

     19.     No Recourse Against Others. No past, present or future director, officer, employee or stockholder, as such, of the Company shall have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

     20.     Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

     21.     Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors Act).

     THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:

WebMD Corporation
669 River Drive, Center 2
Elmwood Park, New Jersey 07407-1361
Attention: Executive Vice President—Chief Financial Officer

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[FORM OF ASSIGNMENT]

I or we assign to

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER

(please print or type name and address) the within Security and all rights thereunder, and hereby irrevocably constitutes and appoints Attorney to transfer the Security on the books of the Company with full power of substitution in the premises.

Dated:
	NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Security in every particular without alteration or enlargement or any change whatsoever and be guaranteed by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee.

Signature Guarantee: 

               In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) the Resale Restriction Termination Date, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with transfer and confirms that this Security is being transferred:

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[Check One]

(1)       to the Company or any subsidiary thereof; or

(2)       pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or

(3)       pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or

(4)       pursuant to an effective registration statement under the Securities Act of 1933, as amended.

and unless the box below is checked, the undersigned confirms that such Security is not being transferred to an “affiliate” of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an “Affiliate”):

     o     The transferee is an Affiliate of the Company. (If the Security is transferred to an Affiliate, the restrictive legend must remain on the Security for two years following the date of the transfer).

               Unless one of the items is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Securities, in their sole discretion, such written legal opinions, certifications and other information as the Trustee or the Company have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended.

               If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied.

Dated:	Signed:
		(Sign exactly as name appears on the other side of this Security)

Signature Guarantee: 

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TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

          The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
NOTICE: To be executed by an executive officer

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CONVERSION NOTICE

To convert this Security into Common Stock, check the box: o

To convert only part of this Security, state the principal amount to be converted (must be in multiples of $1,000):

$ __________________

If you want the stock certificate made out in another person’s name, fill in the form below:

(Insert other person’s soc. sec. or tax I.D. no.) (Print or type other person’s name, address and zip code)

Dated:		Signature(s):
		(Sign exactly as your name(s) appear(s) on the other side of this Security)
Signature(s) guaranteed by:	(All signatures must be guaranteed by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee.)

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OPTION OF HOLDER TO ELECT REPURCHASE NOTICE

Certificate No. of Security: ___________

     If you want to elect to have this Security purchased by the Company pursuant to Section 3.08 of the Indenture, check the box: o

     If you want to elect to have this Security purchased by the Company pursuant to Section 3.09 of the Indenture, check the box: o

     If you want to elect to have only part of this Security purchased by the Company pursuant to Section 3.08 or Section 3.09 of the Indenture, as the case may be, state the principal amount:

$ __________________________________
(in an integral multiple of $1,000)

Date:		Signature(s):
		(Sign exactly as your name(s) appear(s) on the other side of this Security)
Signature(s) guaranteed by:	(All signatures must be guaranteed by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee.)

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SCHEDULE A

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY¹

     The following exchanges of a part of this Global Security for an interest in another Global Security or for Securities in certificated form, have been made:

		Amount of	Principal amount
	Amount of	increase in	of this Global	Signature or
	decrease in	Principal	Security	authorized
	Principal amount	amount of this	following such	signatory of
	of this Global	Global	decrease (or	Trustee or Note
Date of Exchange	Security	Security	increase)	Custodian

¹ This is included in Global Securities only.

1

EXHIBIT B-1

FORM OF PRIVATE PLACEMENT LEGEND

THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986,AS AMENDED, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER’S “COMPARABLE YIELD” FOR U.S. FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION 4.08 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR U.S. FEDERAL INCOME TAX PURPOSES, (I) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS (THE “CONTINGENT PAYMENT REGULATIONS”), AND, FOR PURPOSES OF THE CONTINGENT PAYMENT REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER

B-1-1

UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (II) TO BE BOUND BY THE COMPANY’S DETERMINATION OF THE “COMPARABLE YIELD” AND “PROJECTED PAYMENT SCHEDULE,” WITHIN THE MEANING OF THE CONTINGENT PAYMENT REGULATIONS, WITH RESPECT TO THE NOTES. THE COMPANY’S DETERMINATION OF THE COMPARABLE YIELD IS 8% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS EXHIBIT E. YOU MAY OBTAIN THE ISSUE DATE, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY TELEPHONING WEBMD CORPORATION’S INVESTOR RELATIONS DEPARTMENT AT (201) 414-2002 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: WEBMD CORPORATION, 669 RIVER DRIVE, CENTER 2, ELMWOOD PARK, NEW JERSEY 07407, ATTN: INVESTOR RELATIONS.

B-1-2

EXHIBIT B-2

FORM OF LEGEND FOR GLOBAL SECURITY

     Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE.

FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986,AS AMENDED, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER’S “COMPARABLE YIELD” FOR U.S. FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION 4.08 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR U.S. FEDERAL

B-2-1

INCOME TAX PURPOSES, (I) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS (THE “CONTINGENT PAYMENT REGULATIONS”), AND, FOR PURPOSES OF THE CONTINGENT PAYMENT REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (II) TO BE BOUND BY THE COMPANY’S DETERMINATION OF THE “COMPARABLE YIELD” AND “PROJECTED PAYMENT SCHEDULE,” WITHIN THE MEANING OF THE CONTINGENT PAYMENT REGULATIONS, WITH RESPECT TO THE NOTES. THE COMPANY’S DETERMINATION OF THE COMPARABLE YIELD IS 8% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS EXHIBIT E. YOU MAY OBTAIN THE ISSUE DATE, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY TELEPHONING WEBMD CORPORATION’S INVESTOR RELATIONS DEPARTMENT AT (201) 414-2002 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: WEBMD CORPORATION, 669 RIVER DRIVE, CENTER 2, ELMWOOD PARK, NEW JERSEY 07407, ATTN: INVESTOR RELATIONS.

B-2-2

EXHIBIT C

Form of Notice of Transfer Pursuant to Registration Statement

WebMD Corporation
669 River Drive, Center 2
Elmwood Park, New Jersey 07407-1361
Attention: Executive Vice President - Chief Financial Officer

The Bank of New York
101 Barclay Street, Floor 8 W
New York, NY 10286
Fax: (212) 815-5704
Attention: Corporate Trust Administration

Re: WEBMD CORPORATION (the “Company”)
1.75% Convertible Subordinated Notes due June 15, 2023 (the “Securities”)

Ladies and Gentlemen:

     Please be advised that                  has transferred $                  aggregate principal amount of the Securities or                  shares of the Common Stock, $0.001 par value per share, of the Company issuable on conversion of the Securities (“Stock”) pursuant to an effective Shelf Registration Statement on Form S-3 (File No. 333- ________________).

     We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933 as amended, have been satisfied with respect to the transfer described above and that the above-named beneficial owner of the Securities or Stock is named as a “Selling Securityholder” in the Prospectus dated                  , or in amendments or supplements thereto, and that the aggregate principal amount of the Securities, or number of shares of Stock transferred are [a portion of] the Securities or Stock listed in such Prospectus, as amended or supplemented, opposite such owner’s name.

Very truly yours,

(Name)

C-1

EXHIBIT D

Form of Opinion of Counsel in Connection with Registration of Securities

The Bank of New York
101 Barclay Street, Floor 8 W
New York, NY 10286
Fax: (212) 815-5704
Attention: Corporate Trust Administration

Re: WEBMD CORPORATION (the “Company”)
1.75% Convertible Subordinated Notes due June 15, 2023 (the “Securities”)

     Ladies and Gentlemen:

     Reference is made to the Securities issued pursuant to a certain indenture, dated as of June 25, 2003, by and between the Company and The Bank of New York, as trustee (the “Trustee”). The Company issued $300,000,000 principal amount of Securities on June 25, 2003 [and an additional $50,000,000 on             , 2003 [IF THE INITIAL PURCHASER’S OVERALLOTMENT OPTION IS EXERCISED]] in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The Company has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-3 (File No. 333-_____________________) (the “Registration Statement”) relating to the registration under the Securities Act of $                          principal amount of the Securities and the shares of Common Stock of the Company (the “Shares”) issuable upon conversion of the Securities being registered. The Registration Statement was declared effective by order of the SEC dated [                          ].

     We have acted as counsel for the Company in connection with the issuance of the Securities and the preparation and filing of the Registration Statement and are familiar with the Securities, the Indenture, the Registration Statement, the above-mentioned SEC order and such other documents as are necessary to render this opinion.

     Based on the foregoing, it is our opinion that (1) the Registration Statement has become effective under the Securities Act and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued, (2) assuming that the Securities covered by the Registration Statement and the Shares issuable upon conversion of such Securities are sold by a relevant Holder specified in the Registration Statement in a manner specified in the Registration Statement, such sale of the Securities and Shares issuable upon conversion of the Securities will have been duly registered under the Securities Act and (3) the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended.

Yours truly,

D-1

EXHIBIT E

Projected Payment Schedule

Convertible Subordinated Notes due June 15, 2023
(per $1000 principal amount)

					Projected		PV Projected
		Payment	Projected		Contingent		Contingent
Period		Dates	Payments		Payments		Payments
	1	15 Dec 03	$	8.31	$	0.00	$	0.00
	2	15 Jun 04	$	8.75	$	0.00	$	0.00
	3	15 Dec 04	$	8.75	$	0.00	$	0.00
	4	15 Jun 05	$	8.75	$	0.00	$	0.00
	5	15 Dec 05	$	8.75	$	0.00	$	0.00
	6	15 Jun 06	$	8.75	$	0.00	$	0.00
	7	15 Dec 06	$	8.75	$	0.00	$	0.00
	8	15 Jun 07	$	8.75	$	0.00	$	0.00
	9	15 Dec 07	$	8.75	$	0.00	$	0.00
	10	15 Jun 08	$	8.75	$	0.00	$	0.00
	11	15 Dec 08	$	8.75	$	0.00	$	0.00
	12	15 Jun 09	$	8.75	$	0.00	$	0.00
	13	15 Dec 09	$	8.75	$	0.00	$	0.00
	14	15 Jun 10	$	8.75	$	0.00	$	0.00
	15	15 Dec 10	$	10.40	$	1.65	$	0.92
	16	15 Jun 11	$	10.48	$	1.73	$	0.92
	17	15 Dec 11	$	10.55	$	1.80	$	0.93
	18	15 Jun 12	$	10.62	$	1.87	$	0.93
	19	15 Dec 12	$	10.70	$	1.95	$	0.93
	20	15 Jun 13	$	10.79	$	2.04	$	0.93
	21	15 Dec 13	$	10.87	$	2.12	$	0.93
	22	15 Jun 14	$	10.96	$	2.21	$	0.94
	23	15 Dec 14	$	11.06	$	2.31	$	0.94
	24	15 Jun 15	$	11.16	$	2.41	$	0.94
	25	15 Dec 15	$	11.26	$	2.51	$	0.94
	26	15 Jun 16	$	11.37	$	2.62	$	0.95
	27	15 Dec 16	$	11.48	$	2.73	$	0.95
	28	15 Jun 17	$	11.59	$	2.84	$	0.95

E-1

					Projected		PV Projected
		Payment	Projected		Contingent		Contingent
Period		Dates	Payments		Payments		Payments
	29	15 Dec 17	$	11.71	$	2.96	$	0.95
	30	15 Jun 18	$	11.84	$	3.09	$	0.95
	31	15 Dec 18	$	11.97	$	3.22	$	0.96
	32	15 Jun 19	$	12.11	$	3.36	$	0.96
	33	15 Dec 19	$	12.25	$	3.50	$	0.96
	34	15 Jun 20	$	12.40	$	3.65	$	0.96
	35	15 Dec 20	$	12.55	$	3.80	$	0.97
	36	15 Jun 21	$	12.72	$	3.97	$	0.97
	37	15 Dec 21	$	12.88	$	4.13	$	0.97
	38	15 Jun 22	$	13.06	$	4.31	$	0.97
	39	15 Dec 22	$	13.24	$	4.49	$	0.98
	40	15 Jun 23	$	3,725.78	$	4.68	$	0.98

E-2 EX-4.2 6 g84264exv4w2.htm EX-4.2 REGISTRATION RIGHTS AGREEMENT JUNE 25, 2003

Exhibit 4.2

WebMD Corporation

1.75% Convertible Subordinated Notes due June 15, 2023

Registration Rights Agreement

June 25, 2003

Banc of America Securities LLC
9 West 57^th Street
New York, New York 10019

Ladies and Gentlemen:

     WebMD Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to the initial purchaser named in the purchase agreement (the “Purchaser”), upon the terms set forth in such purchase agreement dated June 20, 2003 (the “Purchase Agreement”), its 1.75% Convertible Subordinated Notes due June 15, 2023 (the “Securities”). As an inducement to the Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Purchaser thereunder, the Company agrees with the Purchaser for the benefit of Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows:

     1.     Definitions.

     (a)  Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement. As used in this Agreement, the following defined terms shall have the following meanings:

     “Act” or “Securities Act” means the United States Securities Act of 1933, as amended.

     “Affiliate” of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Applicable Amount” means, (i) with respect to the Securities, the principal amount of the Securities and, (ii) with respect to shares of Common Stock issued upon conversion of the

Securities pursuant to the Indenture, the principal amount of Securities that would then be convertible into such number of shares.

     “Commission” means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.

     “Common Stock” means the Company’s common stock, par value $.0001 per share.

     “DTC” means The Depository Trust Company.

     “Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i) hereof.

     “Effective Time” means the time at which the Commission declares any Shelf Registration Statement effective or at which any Shelf Registration Statement otherwise becomes effective.

     “Electing Holder” has the meaning assigned thereto in Section 3(a)(iii) hereof.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Holder” means any person that is the record owner of Registrable Securities (and includes any person that has a beneficial interest in any Registrable Security in book-entry form).

     “Indenture” means the Indenture, dated as of June 25, 2003, between the Company and The Bank of New York, and as amended and supplemented from time to time in accordance with its terms.

     “Issue Date” means the first date of original issuance of the Securities.

     “Liquidated Damages” has the meaning assigned thereto in Section 7(a) hereof.

     “Notice and Questionnaire” means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Appendix A hereto.

     The term “person” means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

     “Prospectus” means the prospectus (including, without limitation, any preliminary prospectus, any final prospectus and any prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act) included in any Shelf Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by any Shelf Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein.

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     “Registrable Securities” means all or any portion of the Securities issued from time to time under the Indenture in registered form and the shares of Common Stock issuable upon conversion of such Securities; provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security.

     “Registration Default” has the meaning assigned thereto in Section 7(a) hereof.

     “Restricted Security” means any Security until such Security has been converted into the Common Stock and, at all times the Common Stock and any securities into or for which such Common Stock has been converted, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, the earliest of (x) the date on which such security has been effectively registered under the Securities Act and disposed of, whether or not in accordance with a Shelf Registration Statement, (y) the date that is two years after the later of (1) the original issuance of the Securities and (2) the last date that the Company or any of its Affiliates was the owner of such Securities (or any predecessor thereto), or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provisions thereunder or (z) its sale to the public pursuant to Rule 144 under the Securities Act.

     “Rules and Regulations” means the published rules and regulations of the Commission promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time.

     “Shelf Registration” means a registration effected pursuant to Section 2 hereof.

     “Shelf Registration Statement” means a “shelf” registration statement filed under the Securities Act providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement, and any additional “shelf” registration statements filed under the Securities Act to permit the registration and sale of Registrable Securities pursuant to Section 3(a)(ii) hereof.

     “Suspension Period” has the meaning assigned thereto in Section 2(c) hereof.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, as the same shall be amended from time to time.

     The term “underwriter” means any underwriter, or any person deemed to be an underwriter pursuant to the Rules and Regulations, of Registrable Securities in connection with an offering thereof under a Shelf Registration Statement.

     (b)  Wherever there is a reference in this Agreement to a percentage of the “principal amounts” of Registrable Securities or to a percentage of Registrable Securities, Common Stock shall be treated as representing the principal amount of Securities that would have been

3

surrendered for conversion or exchange as of the date of determination in order to receive such number of shares of Common Stock.

     2.     Shelf Registration.

     (a)  The Company shall, no later than 90 calendar days following the Issue Date, file with the Commission a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and, thereafter, shall use its reasonable best efforts to cause such initial Shelf Registration Statement to be declared effective under the Act no later than 180 calendar days following the Issue Date; provided, however, that the Company may, upon written notice to all Holders, postpone having the initial Shelf Registration Statement declared effective for a reasonable period not to exceed 90 days if the Company possesses material non-public information, the disclosure of which would have a material adverse effect on the Company and its subsidiaries taken as a whole; provided, further, however, that no Holder shall be entitled to be named as a selling securityholder in any Shelf Registration Statement as of the date it is declared effective or to use the Prospectus forming a part thereof for offers and resales of Registrable Securities unless such Holder is an Electing Holder.

     (b)  The Company shall use its reasonable best efforts:

     (i) to keep any Shelf Registration Statement effective, supplemented and amended as required by the provisions of Section 3(j) hereto, in order to permit the Prospectus forming a part thereof to be usable by Holders until the earliest of (1) the sale of all Registrable Securities registered under such Shelf Registration Statement; (2) the expiration of the period referred to in Rule 144(k) of the Act with respect to all Registrable Securities held by Persons that are not Affiliates of the Company; (3) two years from the last date of original issuance of any Registrable Securities; and (4) the date when there are no Registrable Securities outstanding (such period being referred to herein as the “Effectiveness Period”); and

     (ii) after the Effective Time of the initial Shelf Registration Statement, as promptly as practicable but in any event within ten Business Days or, if the Company is required to file with the Commission a new Shelf Registration Statement, 30 calendar days, of the receipt of a completed Notice and Questionnaire from any Holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such Holder to use the Prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such Holder as a selling securityholder in a Shelf Registration Statement; provided, however, that nothing in this subparagraph shall relieve such Holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(ii) hereof.

The Company shall be deemed not to have used its reasonable best efforts to keep any Shelf Registration Statement effective during the Effectiveness Period if the Company voluntarily takes

4

any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell any of such Registrable Securities during that period, unless such action is (A) required by applicable law and the Company thereafter promptly complies with the requirements of paragraph 3(j) below or (B) permitted pursuant to Section 2(c) below.

     (c)  The Company may suspend the use of any Prospectus for a period not to exceed 45 days in any 90-day period or an aggregate of 90 days in any 12-month period, during the period beginning on the issue date and ending on or prior to the second anniversary of the last issue date of any Securities (each, a “Suspension Period”) if the Board of Directors of the Company shall have determined in good faith that because of valid business reasons (not including avoidance of the Company’s obligations hereunder), including the acquisition or divestiture of assets, pending corporate developments and similar events or because of filings with the Commission, it is in the best interests of the Company to suspend such use, and prior to suspending such use the Company provides the Holders with written notice of such suspension, which notice need not specify the nature of the event giving rise to such suspension.

     3.     Registration Procedures. In connection with the Shelf Registration Statements, the following provisions shall apply:

     (a) (i) Not less than 30 calendar days prior to the intended Effective Time of the initial Shelf Registration Statement, the Company shall distribute the Notice and Questionnaire to the Holders of Registrable Securities. The Company shall take action to name each Holder that is an Electing Holder as of the date that is five Business Days prior to the effectiveness of the initial Shelf Registration Statement as a selling securityholder in the initial Shelf Registration Statement at the time of its effectiveness so that such Holder is permitted to deliver the Prospectus forming a part thereof as of such time to purchasers of such Holder’s Registrable Securities in accordance with applicable law. The Company shall not be required to take any action to name any Holder as a selling securityholder in the initial Shelf Registration Statement or to enable any Holder to use the Prospectus forming a part thereof for resales of Registrable Securities until such Holder has returned a completed and signed Notice and Questionnaire to the Company.

     (ii) After the Effective Time of the initial Shelf Registration Statement, the Company shall, upon the request of any Holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such Holder. From and after the Effective Time of the initial Shelf Registration Statement, the Company shall (A) as promptly as is practicable after the date a completed and signed Notice and Questionnaire is delivered to the Company, and in any event within ten Business Days or, if the Company is required to file with the Commission a new Shelf Registration, 30 calendar days, after such date, prepare and file with the Commission (x) a supplement to the Prospectus or, if required by applicable law, a post-effective amendment to the Shelf Registration Statement or an additional Shelf Registration Statement and (y) any other document required by applicable law, so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in a Shelf Registration Statement and is permitted to deliver the Prospectus to purchasers of such Holder’s Registrable

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Securities in accordance with applicable law, and (B) if the Company shall file a post-effective amendment to the Shelf Registration Statement, or an additional Shelf Registration Statement, use its reasonable best efforts to cause such post-effective amendment or such additional Shelf Registration Statement to become effective under the Securities Act as promptly as is practicable, but in any event by the date that is (i) ten Business Days after the date such post-effective amendment or (ii) 45 calendar days after the date such additional Shelf Registration Statement is required to be filed; provided, however, that if a Notice and Questionnaire is delivered to the Company during a Suspension Period, the Company shall not be obligated to take the actions set forth in this clause (ii) until the termination of such Suspension Period. Notwithstanding the foregoing, on and after such time that a second Shelf Registration Statement shall have been declared effective, if Holders of Registrable Securities who are not the Electing Holders in a previous Shelf Registration Statement deliver completed Notice and Questionnaires within 30 calendar days of the date of effectiveness of the most recent Shelf Registration Statement, the Company shall not be required to take any action pursuant to the immediately preceding sentence for a period of up to an additional 30 calendar days if the aggregate amount of Registrable Securities set forth in such Notice and Questionnaires is less than $2,000,000.

     (iii) The term “Electing Holder” shall mean any Holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(i) or 3(a)(ii) hereof.

     (b)  The Company shall furnish to one counsel for the Purchaser, prior to the Effective Time, a copy of each Shelf Registration Statement initially filed with the Commission, and shall furnish to such counsel, prior to the filing thereof with the Commission, copies of each amendment thereto and each amendment or supplement, if any, to the Prospectus included therein, and shall use its best efforts to reflect in each such document, at the Effective Time or when so filed with the Commission, as the case may be, such comments as the Holders and their counsel reasonably may propose.

     (c)  The Company shall promptly take such action as may be necessary so that (i) each of the Shelf Registration Statements and any amendment thereto and the Prospectus forming a part thereof and any amendment or supplement thereto (and each report or other document incorporated therein by reference in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, (ii) each of the Shelf Registration Statements and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (iii) each of the Prospectus forming a part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not at any time during the Effectiveness Period include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

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     (d)  The Company shall promptly advise each Electing Holder, and shall confirm such advice in writing if so requested by any such Electing Holder:

     (i) when the initial Shelf Registration Statement has been filed with the Commission and when the initial Shelf Registration Statement has become effective, in each case making a public announcement thereof by release made to Dow Jones & Company, Inc. or Bloomberg Business News or other similarly broad public medium that is customary for such releases;

     (ii) when any Prospectus supplement, Shelf Registration Statement or post-effective amendment to a Shelf Registration has been filed with the Commission and, with respect to a Shelf Registration Statement or any post-effective amendment, when the same has been declared effective by the Commission;

     (iii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information;

     (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for such purpose;

     (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in the Shelf Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and

     (vi) of the happening of any event or the existence of any state of facts that requires the making of any changes in the Shelf Registration Statement or the Prospectus included therein so that, as of such date, such Shelf Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to such Holders to suspend the use of the Prospectus until the requisite changes have been made, which notice need not specify the nature of the event giving rise to such suspension).

     (e)  The Company shall use its reasonable best efforts to prevent the issuance, and if issued to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of any Shelf Registration Statement.

     (f)  The Company shall furnish to each Electing Holder, without charge, at least one copy of the applicable Shelf Registration Statement and all post-effective amendments thereto, including financial statements and schedules, and, if such Electing Holder so requests in writing, all reports, other documents and exhibits that are filed with or incorporated by reference in such Shelf Registration Statement.

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     (g)  The Company shall, during the Effectiveness Period, deliver to each Electing Holder, without charge, as many copies of each Prospectus in which the Electing Holder is listed as a selling securityholder (including each preliminary Prospectus) included in the applicable Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder may reasonably request; and the Company consents (except during a Suspension Period or during the continuance of any event described in Section 3(d) (iii)-(v) above) to the use of the Prospectus and any amendment or supplement thereto by each of the Electing Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus and any amendment or supplement thereto during the Effectiveness Period.

     (h)  Prior to any offering of Registrable Securities pursuant to a Shelf Registration Statement, the Company shall (i) register or qualify or cooperate with the Electing Holders and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any Electing Holder may reasonably request, (ii) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any Electing Holder or underwriter, if any, to complete its distribution of Registrable Securities pursuant to such Shelf Registration Statement, and (iii) take any and all other actions necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided, however, that in no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(h) or (B) file any general consent to service of process in any jurisdiction where it is not as of the date hereof so subject.

     (i)  Unless any Registrable Securities shall be in book-entry only form, the Company shall cooperate with the Electing Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Shelf Registration Statement, which certificates, if so required by any securities market or exchange upon which any Registrable Securities are quoted or listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall be free of any restrictive legends and in such permitted denominations and registered in such names as Electing Holders may request in connection with the sale of Registrable Securities pursuant to such Shelf Registration Statement.

     (j)  Upon the occurrence of any fact or event contemplated by paragraph 3(d)(v) above, subject to Section 2(c) hereof, the Company shall promptly, but in any event within five Business Days following such occurrence, prepare, file (and have declared effective) a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus included therein or file any other document with the Commission so that, as thereafter delivered to purchasers of the Registrable Securities, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company notifies the Electing Holders of the occurrence of any fact or event contemplated

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by paragraph 3(d)(v) above, the Electing Holder shall suspend the use of the Prospectus until the requisite changes to the Prospectus have been made.

     (k)  Not later than the Effective Time of a Shelf Registration Statement, the Company shall provide a CUSIP number for the Registrable Securities that are debt securities.

     (l)  The Company shall use its reasonable best efforts to comply with all applicable Rules and Regulations, and to make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of a Shelf Registration Statement, (ii) the effective date of each post-effective amendment to such Shelf Registration Statement, and (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in such Shelf Registration Statement, an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158).

     (m)  Not later than the Effective Time of the initial Shelf Registration Statement, the Company shall cause the Indenture to be qualified under the Trust Indenture Act; in connection with such qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as defined in the Indenture) to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the Company shall execute, and shall use all reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. In the event that any such amendment or modification referred to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

     (n)  The Company shall enter into such customary agreements and take all such other necessary actions in connection therewith (including those reasonably requested by the holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate disposition of such Registrable Securities; provided, that the Company shall not be required to take any action in connection with an underwritten offering without its consent.

     (o)  The Company shall make reasonably available for inspection by the Electing Holders, any underwriter participating in any disposition pursuant to any Shelf Registration Statement, and any attorney, accountant or other agent retained by such Electing Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and (B) cause the Company’s officers, directors and employees to supply all information reasonably requested by such Electing Holders or any such underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that such persons shall, at the Company’s request, first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by

9

such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless such disclosure is made in connection with a court proceeding or required by law, or such records, information or documents become available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that, if the foregoing inspection and information gathering would otherwise disrupt the Company’s conduct of its business, such inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of the Electing Holders and the other parties entitled thereto by one counsel designated by and on behalf of the Electing Holders and other parties;

     (p)  The Company will use its best efforts to cause the Common Stock issuable upon conversion of the Securities to be quoted or listed on the Nasdaq National Market or other market or stock exchange on which the Common Stock primarily trades on or prior to the Effective Time of each Shelf Registration Statement hereunder.

     (q)  The Company will cooperate and assist in any filings or by taking any other actions required to be made or taken with or by NASD, Inc.

     (r)  The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration, offering and sale of the Registrable Securities covered by each Shelf Registration Statement contemplated hereby.

     4.     Registration Expenses. Except as otherwise provided in Section 3, the Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 2 and 3 hereof and shall bear or reimburse the Electing Holders for the reasonable fees and disbursements of a single counsel selected by a plurality of all Electing Holders who own an aggregate of not less than 25% of the principal amount of the Registrable Securities covered by a Shelf Registration Statement to act as counsel therefore in connection therewith. Each Electing Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Electing Holder’s Registrable Securities pursuant to such Shelf Registration Statement.

     5.     Indemnification and Contribution.

     (a)  Indemnification by the Company. Upon the registration of the Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify and hold harmless each Electing Holder and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities, and each of their respective officers and directors and each person who controls such Electing Holder, underwriter, selling agent or other securities professional within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes referred to as an “Indemnified Person”) against any losses, claims, damages, expenses or liabilities, joint or several, to which such Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement under which such Registrable Securities are to be registered under

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the Securities Act, or any Prospectus contained therein or furnished by the Company to any Indemnified Person, or any amendment or supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the Company hereby agrees to reimburse such Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such Indemnified Person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Shelf Registration Statement or Prospectus, or amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Indemnified Person expressly for use therein; provided, further, however, that the Company shall not be liable to any indemnified person in any such case to the extent that such loss, damage, expense, liability or claim (i) arises from an offer or sale by an Electing Holder of Registrable Securities occurring during a Suspension Period, if the indemnified party is an Electing Holder that received from the Company a notice of commencement of any Suspension Period prior to the making of such offer or sale or (2) the Electing Holder fails to deliver at or prior to written confirmation of sale, the most recent Prospectus, as amended or supplemented, and such Prospectus, as amended or supplemented, would have corrected such untrue statement or omission or alleged untrue statement or omission of a material fact and the Company had previously provided to such Electing Holder such most recent Prospectus, as amended or supplemented, in a timely manner and in requisite quantities so as to timely permit such delivery by the Electing Holder.

     (b)  Indemnification by the Electing Holders and any Agents and Underwriters. Each Electing Holder agrees, as a consequence of the inclusion of any of such Electing Holder’s Registrable Securities in such Shelf Registration Statement, and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities shall agree, as a consequence of facilitating such disposition of Registrable Securities, severally and not jointly, to (i) indemnify and hold harmless the Company, its directors, officers who sign any Shelf Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company or such other persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such Shelf Registration Statement or Prospectus, or any amendment or supplement, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder, underwriter, selling agent or other securities professional expressly for use therein, and (ii) reimburse the Company for any legal or other expenses reasonably incurred by

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the Company in connection with investigating or defending any such action or claim as such expenses are incurred.

     (c)  Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section 5, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by subsection (a) or (b) above. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), including the payment of all fees and expenses. Such indemnified party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless the employment of such counsel shall have been authorized in writing by such indemnifying party in connection with the defense of such proceeding or such indemnifying party shall not have employed counsel to have charge of the defense that is reasonably satisfactory to the indemnified party of such proceeding within 60 days of the receipt of notice thereof or such indemnified party shall have reasonably concluded upon written advice of counsel that there may be defenses available to it that are different from, additional to, or in conflict with those available to such indemnifying party (in which case such indemnifying party shall not have the right to direct that portion of the defense of such proceeding on behalf of such indemnified party, but such indemnifying party may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnifying party), in any of which events such reasonable fees and expenses shall be borne by such indemnifying party and paid as incurred (it being understood, however, that such indemnifying party shall not be liable for the expenses of more than one separate counsel in any one proceeding or series of related proceedings together with reasonably necessary local counsel representing the indemnified parties who are parties to such proceeding). An indemnifying party shall not be liable for any settlement or compromise of any such proceeding effected without its written consent, but if settled or compromised with the written consent of such indemnifying party, such indemnifying party agrees to indemnify and hold harmless an indemnified party from and against any loss or liability by reason of such settlement. An indemnifying party shall not, without the prior written consent of any indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and does not include an admission of fault, culpability or a failure to act, by or on behalf of such indemnified party.

     (d)  Contribution. If the indemnification provided for in this Section 5 is unavailable to an indemnified party under subsection (a) or (b) above in respect of any losses, claims,

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damages, expenses or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The relative benefit to such indemnifying party and indemnified party shall be determined in such proportion as is appropriate to reflect the benefits received by the Company on the one hand and the Holders on the other hand from the offering of the Registrable Securities. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation (even if the Electing Holders or any underwriters, selling agents or other securities professionals or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, expenses or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Electing Holders and any underwriters, selling agents or other securities professionals in this Section 5(d) to contribute shall be several in proportion to the percentage of principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint.

     (e)  Notwithstanding any other provision of this Section 5, in no event will any (i) Electing Holder be required to undertake liability to any person under this Section 5 for any amounts in excess of the dollar amount of the proceeds to be received by such Holder from the sale of such Holder’s Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Shelf Registration Statement under which such Registrable Securities are to be registered under the Securities Act and (ii) underwriter, selling agent or other securities professional be required to undertake liability to any person hereunder for any amounts in excess of the discount, commission or other compensation payable to such underwriter, selling agent or other securities professional with respect to the Registrable Securities underwritten by it and distributed to the public.

     (f)  The obligations of the Company under this Section 5 shall be in addition to any liability which the Company may otherwise have to any Indemnified Person and the obligations of any Indemnified Person under this Section 5 shall be in addition to any liability which such Indemnified Person may otherwise have to the Company. The remedies provided in this

13

Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to an indemnified party at law or in equity.

     6.     Holder’s Obligations. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Shelf Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 3(a)(ii) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Electing Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Electing Holder not misleading and any other information regarding such Electing Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Electing Holder shall constitute a representation and warranty by such Electing Holder that the information relating to such Electing Holder and its plan of distribution is as set forth in the Prospectus delivered by such Electing Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Electing Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Electing Holder or its plan of distribution necessary in order to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading.

     7.     Liquidated Damages.

     (a)  Notwithstanding any postponement of the effectiveness pursuant to Section 2(a) hereof, if (i) on or prior to the 90th day following the Issue Date, a Shelf Registration Statement has not been filed with the Commission, (ii) on or prior to the 180th day following the Issue Date, such initial Shelf Registration Statement is not declared effective by the Commission or (iii) if, after the effectiveness date of any Shelf Registration Statement, (x) such Shelf Registration Statement ceases to be effective or usable for the offer and sale of Registrable Securities (other than due to a Suspension Period), and the Company fails to file (and have declared effective), within five Business Days, a post-effective amendment to such Shelf Registration Statement or amendment or supplement to the Prospectus contained therein or such other document with the Commission to make such Shelf Registration Statement effective or such Prospectus usable, or (y) the Suspension Periods exceed 45 days, whether or not consecutive, in any 90-day period, or more than 90 days, whether or not consecutive, during any 12-month period during the Effectiveness Period (each, a “Registration Default”), the Company shall be required to pay liquidated damages (“Liquidated Damages”), from and including the day following such Registration Default to but excluding the day on which such Registration Default is cured, at a rate per annum equal to an additional one-quarter of one percent (0.25%) of the Applicable Amount to and including the 90th day following such Registration Default, and one-half of one percent (0.5%) thereof from and after the 91st day following such Registration Default.

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     (b)  A Holder will not be entitled to Liquidated Damages until such time as it has provided to the Company a completed Notice and Questionnaire.

     (c)  Any amounts to be paid as Liquidated Damages pursuant to paragraph (a) of this Section 7 shall be paid in cash semiannually in arrears, with the first semiannual payment due on the first interest payment date following the date on which such Liquidated Damages begin to accrue, to the persons in whose name the Securities or Common Stock issued upon conversion of the Securities are registered at the close of business on June 1 or December 1, whether or not a Business Day, immediately preceding the relevant interest payment date.

     (d)  Except as provided in Section 8(a) hereof, the Liquidated Damages as set forth in this Section 7 shall be the exclusive monetary remedy available to the Holders of Registrable Securities for such Registration Default. In no event shall the Company be required to pay Liquidated Damages in excess of the applicable maximum amount of one-half of one percent (0.5%) set forth above, regardless of whether one or multiple Registration Defaults exist.

     8.     Miscellaneous.

     (a)  Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations hereunder and that the Purchaser and the Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that the Purchaser and such Holders, in addition to any other remedy to which they may be entitled at law or in equity and without limiting the remedies available to the Electing Holders under Section 7 hereof, shall be entitled to compel specific performance of the obligations of the Company under this Registration Rights Agreement in accordance with the terms and conditions of this Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction.

     (b)  Amendments and Waivers. This Agreement, including this Section 8(b), may be amended, and waivers or consents to departures from the provisions hereof may be given, only by a written instrument duly executed by the Company and the Holders of a majority in aggregate principal amount of Registrable Securities then outstanding. Each Holder of Registrable Securities outstanding at the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, waiver or consent appears on the Registrable Securities or is delivered to such Holder.

     (c)  Notices. All notices and other communications provided for or permitted hereunder shall be given as provided in the Indenture.

     (d)  Parties in Interest. The parties to this Agreement intend that all Holders of Registrable Securities shall be entitled to receive the benefits of this Agreement and that any Electing Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities which are included in a Shelf Registration Statement. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties

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hereto and any Holder from time to time of the Registrable Securities to the aforesaid extent. In the event that any transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be entitled to receive the benefits of and, if an Electing Holder, be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement to the aforesaid extent.

     (e)  Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

     (f)  Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

     (g)  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

     (h)  Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

     (i)  Survival. The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Electing Holder, any director, officer or partner of such Holder, any agent or underwriter, any director, officer or partner of such agent or underwriter, or any controlling person of any of the foregoing, and shall survive the transfer and registration of the Registrable Securities of such Holder.

     9.     Submission to Jurisdiction; Appointment of Agent for Service

     The Company agrees that any suit, action or proceeding against the Company arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any State or Federal court in The City of New York, New York, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding. The Company expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company agrees that a final judgment in any such proceeding brought in any such court shall be conclusive and binding thereupon and may be enforced in any other court in the jurisdiction to which the Company is or may be subject by suit upon such judgment.

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          Please confirm that the foregoing correctly sets forth the agreement between the Company and you.

Very truly yours, WebMD Corporation
By:	/s/ Kirk G. Layman
	Name: Kirk G. Layman
	Title: Executive Vice President,
	Administration and Acting Chief Financial Officer

Accepted as of the date hereof:

     Banc of America Securities LLC

  By:  /s/ Thomas Morrison
 Name: Thomas Morrison
 Title: Managing Director

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WEBMD CORPORATION
FORM OF SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
1.75% CONVERTIBLE SUBORDINATED NOTES DUE 2023

     The undersigned beneficial owner of 1.75% Convertible Subordinated Notes due 2023 (the “Notes”) of WebMD Corporation (the “Company” or “Registrant”) or Common Stock, par value $.0001 per share (the “Common Stock” and, together with the Notes, the “Registrable Securities”), of the Company understands that the Registrant has filed or intends to file with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of June 25, 2003 (the “Registration Rights Agreement”), between the Company and the initial purchaser named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

     Each beneficial owner of Registrable Securities is entitled to the benefits of the Registration Rights Agreement. In order to sell or otherwise dispose of any Registrable Securities pursuant to the Shelf Registration Statement, a beneficial owner of Registrable Securities generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of Registrable Securities and be bound by the provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions described below). Beneficial owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling securityholders in the prospectus and therefore will not be permitted to sell any Registrable Securities pursuant to the Shelf Registration Statement. Beneficial owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the Shelf Registration Statement so that such beneficial owners may be named as selling securityholders in the related prospectus. Upon receipt of a completed Notice and Questionnaire from a beneficial owner following the effectiveness of the Shelf Registration Statement, the Company will, as promptly as practicable but in any event within (i) ten business days of such receipt, file such amendments to the Shelf Registration Statement or supplements to the related prospectus, or (ii) 30 calendar days of such receipt, file a new Shelf Registration Statement with the Commission if required to do so, in each case as are necessary to permit such holder to deliver such prospectus to purchasers of Registrable Securities. The Company has agreed to pay liquidated damages pursuant to the Registration Rights Agreement under certain circumstances set forth therein.

     Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and the related prospectus.

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NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) pursuant to the Shelf Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

     Pursuant to the Registration Rights Agreement, the undersigned has agreed to indemnify and hold harmless the Company’s directors and officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from and against certain losses arising in connection with statements concerning the undersigned made in the Company’s Shelf Registration Statement or the related prospectus in reliance upon the information provided in this Notice and Questionnaire.

     If the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item 3 below after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.

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QUESTIONNAIRE

     Please respond to every item, even if your response is “none.” If you need more space for any response, please attach additional sheets of paper. Please be sure to indicate your name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the following questions.

     If you have any questions about the contents of this Questionnaire or as to who should complete this Questionnaire, please contact Mr. Lewis H. Leicher at WebMD Corporation at telephone number: (858) 759-6008.

COMPLETED QUESTIONNAIRES SHOULD BE RETURNED TO WEBMD CORPORATION
AS FOLLOWS:

1 COPY BY FACSIMILE TO JERRI DAVIS, SENIOR PARALEGAL, FAX: (404) 541-0164

WITH THE ORIGINAL COPY TO FOLLOW TO:
WEBMD CORPORATION 1175 PEACHTREE STREET, NE
100 COLONY SQUARE, SUITE 2400 ATLANTA, GA 30361
ATTENTION: JERRI DAVIS, SENIOR PARALEGAL
TEL: (404) 541-0130

     The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

1. YOUR IDENTITY AND BACKGROUND AS THE BENEFICIAL OWNER OF THE REGISTRABLE SECURITIES

(a)	Your full legal name:
(b)	Your business address (including street address) (or residence if no business address), telephone number and facsimile number:

Address:

Telephone No.:

Fax No.:

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(c)	Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?
	o Yes.
	o No.
(d)	If your response to Item 1(c) above is no, are you an “affiliate” of a broker-dealer registered pursuant to Section 15 of the Exchange Act?
	o Yes.
	o No.
	For the purposes of this Item 1(d), an “affiliate” of a registered broker-dealer shall include any company that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such broker-dealer, and does not include any individuals employed by such broker-dealer or its affiliates.
(e)	Full legal name of person through which you hold the Registrable Securities (i.e., name of your broker or the DTC participant, if applicable, through which your Registered Securities are held):

Name of broker:

DTC No.:

Contact person:

Telephone No.:

2. YOUR RELATIONSHIP WITH WEBMD

(a)	Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office, or have you had any other material relationship with, WebMD (or its predecessors or affiliates) within the past three years?
	o Yes.
	o No.
(b)	If your response to Item 2(a) above is yes, please state the nature and duration of your relationship with WebMD:

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3. YOUR INTEREST IN THE REGISTRABLE SECURITIES

(a)	State the type of Registrable Securities (Notes or Common Stock) and the principal amount or number of such Registrable Securities beneficially owned by you. Check any of the following that applies to you.
	o I own Notes:
	Principal amount and CUSIP No. of the Notes beneficially owned:
	CUSIP No(s):
	o I own shares of Common Stock that were issued upon conversion of the Notes:
	Number of shares and CUSIP No. of the Common Stock beneficially owned:
	CUSIP No(s):
(b)	Other than as set forth in your response to Item 3(a) above, do you beneficially own any other securities of WebMD (including any Notes previously registered under the Securities Act)?
	o Yes.
	o No.
(c)	If your answer to Item 3(b) above is yes, state the type, the aggregate amount and CUSIP No. of such other securities of WebMD beneficially owned by you:

Type:

Aggregate amount:

CUSIP No.:

(d)	Did you acquire the securities listed in Item 3(a) above in the ordinary course of business?
	o Yes.
	o No.

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(e)	At the time of your purchase of the securities listed in Item 3(a) above, did you have any agreements or understandings, directly or indirectly, with any person to distribute the securities?
	o Yes.
	o No.
(f)	If your response to Item 3(e) above is yes, please describe such agreements or understandings:

4. NATURE OF YOUR BENEFICIAL OWNERSHIP

(a)	If the name of the beneficial owner of the Registrable Securities set forth in your response to Item 1(a) above is that of a limited partnership, state the names of the general partners of such limited partnership:
(b)	With respect to each general partner listed in Item 4(a) above who is not a natural person, and is not publicly held, name each shareholder (or holder of partnership interests, if applicable) of such general partner. If any of these named shareholders is not a natural person or publicly held entity, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.
(c)	Name your controlling shareholder(s) (the “Controlling Entity”). If the Controlling Entity is not a natural person and is not a publicly held entity, name each shareholder of such Controlling Entity. If any of these named shareholders are not natural persons or publicly held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.

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(A)(i)	Full legal name of Controlling Entity(ies) or natural person(s) with whom have sole or shared voting or dispositive power over the Registrable Securities:
(ii)	Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:

Telephone:

Fax:

(iii)	Name of shareholders:
(B)(i)	Full legal name of Controlling Entity(ies):
(ii)	Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:

Telephone:

Fax:

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(iii) Name of shareholder:

If you need more space for this response, please attach additional sheets of paper. Please be sure to indicate your name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the following questions.

5. PLAN OF DISTRIBUTION

Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Registrable Securities listed above in Item 3 pursuant to the Shelf Registration Statement only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Registrable Securities are sold through underwriters, broker-dealers or agents, the Selling Securityholder will be responsible for underwriting discounts or commissions or agents’ commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging positions they assume. The undersigned may also sell Registrable Securities short and deliver Registrable Securities to close out short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities.

State any exceptions here:

Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company.

     The undersigned acknowledges its obligation to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities pursuant to the Registration Rights Agreement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

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     The undersigned beneficial owner and selling securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as set forth therein. Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify the undersigned beneficial owner and selling securityholder against certain liabilities.

     In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective.

     All notices to the beneficial owner hereunder and pursuant to the Registration Rights Agreement shall be made in writing to the undersigned at the address set forth in Item 1(b) of this Notice and Questionnaire.

     By signing below, the undersigned acknowledges that it is the beneficial owner of the Registrable Securities set forth herein, represents that the information provided herein is accurate, consents to the disclosure of the information contained in this Notice and Questionnaire and the inclusion of such information in the Shelf Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related prospectus.

     Once this Notice and Questionnaire is executed by the undersigned beneficial owner and received by the Company, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the undersigned beneficial owner. This Agreement shall be governed in all respects by the laws of the State of New York.

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     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

NAME OF BENEFICIAL OWNER:
	(Please Print)
Signature:
Date:

10 EX-4.3 7 g84264exv4w3.htm EX-4.3 REGISTRATION RIGHTS AGREEMENT JULY 17, 2003

Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is dated as of July 17, 2003, by and among WebMD Corporation, a Delaware corporation (“Company”), Joseph Q. DiMartini, individually and as Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002, Eric J. Schaefer, an individual, Daniel A. Schmitt, individually and as Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999, and as Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002, and Dru A. Schmitt, individually and as Trustee U/A dated October 20, 1997 f/b/o Dru A. Schmitt.

RECITALS

          A. The parties listed in the preamble are also parties to that certain Stock Purchase Agreement dated as of June 15, 2003 (the “Purchase Agreement”), pursuant to which the Transferring Sellers have sold to Company on the date hereof all of the outstanding stock of Advanced Business Fulfillment, Inc. Each Transferring Seller is also sometimes referred to herein individually as a “Stockholder”; the Transferring Sellers are also sometimes referred to herein collectively as “Stockholders.”

          B. The individuals listed in the preamble (the “Individuals”) are parties to this Agreement both in their individual capacities and in their capacities as Transferring Sellers (collectively, “Sellers”).

          C. The Purchase Agreement provides for certain Contingent Payments (as defined in the Purchase Agreement) to be paid by Company to the Transferring Sellers, which Contingent Payments may be paid in the form of shares of common stock of Company (“Common Stock”).

          D. The parties desire for the Transferring Sellers to have certain registration rights and be subject to certain sale limitations with respect to certain shares of Common Stock issued to them pursuant to the Purchase Agreement (the “Shares”).

          E. The execution of this Agreement is a closing condition to the Purchase Agreement.

AGREEMENT

          In consideration of the above recitals and the mutual covenants and conditions contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE 1
DEFINITIONS.

          1.1 General Rules of Construction. For all purposes of this Agreement: (i) the terms defined in this Agreement include the plural as well as the singular; (ii) all references in this Agreement to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of the body of this Agreement; (iii) pronouns of either gender or neuter include, as appropriate, the other pronoun forms; (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (v) “or” is not exclusive; (vi) “including” and “includes” will be deemed to be followed by “but not limited to” and “but is not limited to,” respectively; (vii) any definition of or reference to any law, act, agreement, instrument or other document herein will be construed as referring to such law, act, agreement, instrument or other document as from time to time amended, supplemented or otherwise modified; and (viii) any definition of or reference to any statute will be construed as referring also to any rules and regulations promulgated thereunder.

          1.2 Definitions. For purposes of this Agreement, the following terms have the meanings specified or referenced below.

          “Additional Registrable Securities” is defined in Section 2.1(d).

          “Agreement” is defined in the preamble to this Agreement.

          “Blackout Period” is defined in Section 2.3.

          “Closing Date” means the date of this Agreement.

          “Common Stock” is defined in the Recitals to this Agreement.

          “Company” is defined in the preamble to this Agreement.

          “Exchange Act” means the Securities Exchange Act of 1934.

          “First Common Stock Issuance Date” means the first date on which Common Stock is issued to Stockholders pursuant to the Contingent Payment provisions set forth in Section 2.4 of the Purchase Agreement.

          “Permitted Transferee” means with respect to any Stockholder (i) the Individual that is its trustee or (ii) any trust solely for the benefit of an Individual or one or more of such Individual’s family members for which an Individual is the trustee, in each case which Permitted Transferee agrees in writing to be bound by the terms and conditions of this Agreement.

          “Prospectus” means the prospectus included in the Shelf Registration Statement, as amended or supplemented including, without limitation, by any post-effective amendments thereto, and all material incorporated by reference into such prospectus.

          “Purchase Agreement” is defined in the recitals to this Agreement.

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          “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

          “Requisite Information” is defined in Section 2.4(a).

          “Rule 144” means Rule 144 promulgated under the Securities Act (or any successor rule or similar provision then in effect).

          “Rule 415” means Rule 415 promulgated under the Securities Act (or any successor rule or similar provision then in effect).

          “SEC” means the Securities and Exchange Commission.

          “Securities Act” means the Securities Act of 1933.

          “Sellers” is defined in the recitals to this Agreement.

          “Sellers Representative” has the meaning set forth in the Purchase Agreement.

          “Shares” is defined in the recitals to this Agreement.

          “Shelf Registration Statement” is defined in Section 2.1(a).

          “Stockholder” and “Stockholders” are defined in the recitals to this Agreement.

          “Subsequent Common Stock Issuance Date” means any date subsequent to the First Common Stock Issuance Date on which Common Stock is issued to Stockholders pursuant to the Contingent Payment provisions set forth in Section 2.4 of the Purchase Agreement.

          “Termination Date” is defined in Section 2.1(a).

          “Transferring Seller” has the meaning set forth in the Purchase Agreement.

          “Violation” is defined in Section 2.6.

ARTICLE 2

REGISTRATION RIGHTS.

          2.1 Shelf Registration and Related Matters.

          (a) Obligation to Register. Company will file by the date that is 90 days before the First Common Stock Issuance Date, and will use all reasonable efforts to cause to be effective on or before the First Common Stock Issuance Date, a registration statement on Form S-3 for an offering to be made on a continuous basis under Rule 415 under the Securities Act, covering a number of shares of Common Stock determined by Company, but not less than Company’s good faith estimate of the total number of shares of Common Stock to be issued to Stockholders on the First Common Stock Issuance Date (a “Shelf Registration Statement”). If

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on the 90^th day prior to the date of any Subsequent Common Stock Issuance Date, a Shelf Registration Statement is not effective and the Shares issued to the Stockholders are not otherwise eligible for sale to the public under Rule 144 without registration on such Subsequent Common Stock Issuance Date, Company will use all reasonable efforts to cause to be effective a Shelf Registration Statement for such Shares on or before such Subsequent Common Stock Issuance Date. Each Shelf Registration Statement will include a plan of distribution as reasonably determined by Company, but including all methods of distribution reasonably requested by any Stockholder. Company will use all reasonable efforts to maintain the effectiveness of each Shelf Registration Statement pursuant to which any of the Shares covered by such Shelf Registration Statement are being offered until the earlier of (i) the date on which such Shares become eligible for sale to the public under Rule 144 without registration and (ii) the date on which such Shares covered by the applicable registration statement or Rule 144 will have been sold by the Stockholders (the earlier of such dates, a “Termination Date”). Notwithstanding anything in this Agreement to the contrary, Company may, in its sole discretion, continue the effectiveness of a Shelf Registration Statement for such time as is permissible under the Securities Act.

          (b) Amendment of Shelf Registration Statement. To the extent necessary, immediately after the First Common Stock Issuance Date or any Subsequent Common Stock Issuance Date, Company will promptly file following the receipt of notice from Sellers Representative which includes the Requisite Information with respect to each Stockholder, a Prospectus supplement pursuant to the Securities Act to amend or supplement the relevant Shelf Registration Statement to include in such Shelf Registration Statement such information as to each Stockholder (and the Shares held by each such Stockholder). Company will promptly provide Sellers Representative a copy of each Prospectus as so amended or supplemented containing the Requisite Information in order to permit each Stockholder to comply with the prospectus delivery requirements of the Securities Act in a timely manner with respect to any proposed disposition of such Stockholder’s Shares.

          (c) Company Directs Manner of Sale. Company will select the managing underwriter or broker to be used by a Stockholder to sell such Stockholders’ Shares, and will determine the method of sale thereof (with respect to any sales to be made by a Stockholder under a Shelf Registration Statement, choosing from among the options described in the plan of distribution included therein); provided that any such selection and determination will be subject to the consent of Stockholders, which consent will not be unreasonably delayed or withheld, it being understood that a reasonable basis to so withhold consent is Stockholders’ reasonable belief that such selection or determination would materially delay or decrease the number of Shares desired to be sold by a Stockholder under such Shelf Registration Statement. A Stockholder desiring to sell Shares will so advise Company’s Chief Financial Officer in writing, and the Chief Financial Officer will advise such Stockholder as to Company’s proposed method of sale within five Business Days following his receipt of such Stockholder’s written notice.

          (d) Increase in Registrable Shares. In the event that the number of Shares covered by a Shelf Registration Statement pursuant to Section 2.1(a) is less than the number of Shares that Stockholders ultimately receive pursuant to the Contingent Payment provisions set forth in Section 2.4 of the Purchase Agreement as a result of the resolution of a dispute as to the amount of the Contingent Payment or otherwise (such additional Shares, the “Additional

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Registrable Securities”), and in the event that such Additional Registrable Securities are not eligible for sale to the public under Rule 144 without registration, then Company will, in its sole discretion, either promptly amend the existing Shelf Registration Statement, if any, or file a new Shelf Registration Statement, to register the Additional Registrable Securities thereon and cause such amended, or new, as the case may be, Shelf Registration Statement, to remain effective until the relevant Termination Date.

          2.2 Obligations of Company. Company will use all reasonable efforts to do the following:

          (a) On or prior to the First Common Stock Issuance Date or a Subsequent Common Stock Issuance Date, to the extent that Shares are not otherwise eligible for sale to the public under Rule 144 without registration, cause a Shelf Registration Statement to be effective, and file such post-effective amendments as may be necessary to keep such registration statement effective until the relevant Termination Date.

          (b) Prepare and file with the SEC such post-effective amendments and supplements to a Shelf Registration Statement and the Prospectus as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Shares covered by such Shelf Registration Statement and to keep such Shelf Registration Statement effective and cause the Prospectus as so supplemented to be filed pursuant to the Securities Act in a timely manner and to comply fully with the applicable provisions of the Securities Act and use all reasonable efforts to comply with the provisions of the Securities Act with respect to the disposition of all Shares covered by such Shelf Registration Statement in accordance with the intended method of distribution as set forth therein, in each case subject to all reasonably requested cooperation of Sellers.

          (c) Furnish to Stockholders without charge such numbers of copies of each Shelf Registration Statement (including documents incorporated by reference therein and exhibits thereto) and Prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request from time to time in order to facilitate the disposition of the Shares held by them.

          (d) Register and qualify the Shares covered by a Shelf Registration Statement under such state securities laws of such jurisdictions as reasonably requested by Stockholders and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Shares covered by such Shelf Registration Statement; provided that Company will not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

          (e) Promptly notify Stockholders at any time when a Prospectus is required to be delivered under the Securities Act of the happening of any event as a result of which the Prospectus, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and following such notification promptly prepare and file an appropriate supplement or amendment to the relevant

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Shelf Registration Statement and cause such supplement or amendment to be declared effective (to the extent required under the Securities Act) and/or promptly prepare and furnish to Stockholders a reasonable number of copies of a supplement to or an amendment of the Prospectus as may be necessary so that, as thereafter delivered to the purchasers of shares covered by such Shelf Registration Statement, the Prospectus will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing.

          (f) Furnish to Sellers Representative, before filing with the SEC, copies of each Shelf Registration Statement and the Prospectus, and any pre-effective or post-effective amendments thereof, which documents will be subject to the review of Sellers Representative; and consider any requests for additions to or modifications of such Shelf Registration Statement and the Prospectus and any pre-effective or post-effective amendments thereto reasonably made by Sellers Representative within two Business Days of Company’s delivery of the copies thereof.

          (g) Promptly notify Sellers Representative, (i) when the Prospectus, any Prospectus supplement or any post-effective amendment to a Shelf Registration Statement has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (ii) of any request by the SEC for amendments to a Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, or (iii) of the issuance by the SEC of any stop order suspending the effectiveness of a Shelf Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Shares covered by such Shelf Registration Statement for offering or sale in any jurisdiction or of the initiation of any proceeding for any of the preceding purposes.

          (h) If at any time the SEC issues any stop order suspending the effectiveness of a Shelf Registration Statement, or any state securities commission issues an order suspending the qualification or exemption from qualification of the Shares covered by such Shelf Registration Statement under state securities or Blue Sky laws, use all reasonable efforts to obtain the withdrawal of lifting of such order at the earliest possible time.

          (i) If made by Sellers Representative prior to the relevant Termination Date, consider any reasonable requests to incorporate information in a Shelf Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment, if necessary, and further consider making the required filings of any such Prospectus supplement or post-effective amendment as soon as practicable after Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment.

          (j) Cause the Shares covered by a Shelf Registration Statement to be listed or traded on the New York Stock Exchange, The Nasdaq National Market or such other national securities exchange or automated quotation system on which the Common Stock is then listed or quoted.

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          2.3 Seller Covenants.

          (a) No Hedging or Short Selling. Beginning on the date hereof and ending on the earlier to occur of (i) December 31, 2006 and (ii) the date upon which all of the Shares have been sold, each Seller agrees not to enter into a Hedging Transaction (as defined below). Each Seller represents and warrants to Company that it has not entered into any Hedging Transaction prior to the date hereof. “Hedging Transaction” means with respect to any Shares, (A) any short sale, the grant of any option for the purchase thereof or any other transaction which is designed to or is reasonably expected to lead to or result in a disposition of Shares other than as contemplated by this Agreement and (B) entering into a derivative contract or any other transaction that would have the economic effect of eliminating or substantially reducing any Seller’s market risk with respect to any Shares.

          (b) No Sales Except Pursuant to this Agreement. Each Stockholder agrees not to sell, transfer or otherwise dispose of any Shares issued or issuable under the Purchase Agreement except pursuant to the terms of this Agreement.

          (c) Compliance of Transferring Sellers. Each individual who is a party to this Agreement will cause the Transferring Seller of which it is the trustee to comply with or perform all of such Transferring Seller’s obligations under this Agreement.

          (d) Blackout Periods. Company will be entitled to suspend for a period of time, not to exceed 60 days (each, a “Blackout Period”), any offer or sale of Shares pursuant to a Shelf Registration Statement (other than transfers to Permitted Transferees), if Company reasonably determines that the offering of any such Shares would impede, delay or interfere with any financing, offer or sale of securities, acquisition, corporate reorganization or other material transaction involving Company or any of its affiliates, or require disclosure of material information as to which disclosure at that time would not be in the best interest of Company and its stockholders; provided, however, that the Blackout Period will earlier terminate upon public disclosure by Company of such material information or completion or abandonment of such a transaction. Upon notice by Company to Sellers of such determination, each Seller agrees to (i) keep the fact of any such notice strictly confidential, (ii) promptly halt any offer, sale, trading or transfer by such Seller of Common Stock for the duration of the Blackout Period set forth in such notice (or until earlier terminated by Company) (other than transfers to Permitted Transferees), and (iii) promptly halt any use, publication, dissemination or distribution of the Shelf Registration Statement, the Prospectus, and any amendment or supplement thereto for the duration of the Blackout Period set forth in such notice (or until earlier terminated by Company).

          2.4 Furnish Information; No Obligation.

          (a) It will be a condition precedent to the obligations of Company to take any action pursuant to this Article 2 with respect to any Shares that Stockholders will furnish to Company such information regarding themselves and the Shares held (or to be held) by them, as will be required by applicable rules and regulations of the SEC to effect the registration of the Shares (the “Requisite Information”) (including the completion and delivery to Company of a Stockholder questionnaire).

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          (b) Each Seller will: (i) not knowingly take any action that would prevent the distribution of Shares covered by a Shelf Registration Statement to be made in accordance with the plan of distribution set forth in such registration statement and with all applicable rules and regulations of the SEC; (ii) not sell any Shares covered by a Shelf Registration Statement after Stockholders have received a notification pursuant to Section 2.2(e) until Company has filed an amendment or supplement to the Prospectus so that it no longer includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and (iii) notify Company promptly in writing upon the sale by Stockholder of any Shares covered by a Shelf Registration Statement.

          2.5 Expenses of Registration. All expenses (other than underwriting discounts and commissions and stock transfer taxes applicable to shares registered by Stockholders as well as the cost of counsel of Sellers, which will be borne exclusively by Sellers), incurred in connection with registrations made pursuant to this Article 2, including all registration, filing and qualification fees, printers’ and accounting fees and fees and disbursements of counsel for Company, will be borne by Company.

          2.6 Indemnification. The following will apply to any Shares included in a registration statement under this Article 2.

          (a) In connection with the registration of any Shares under this Agreement, Company will indemnify and hold harmless Stockholders against any expenses, losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such expenses, losses, claims, damages, or liabilities (or actions, proceedings or settlements in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in a Shelf Registration Statement under which such Shares were registered, Prospectus or other document incident thereto, any preliminary Prospectus or final Prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with such Shelf Registration Statement. Company will pay to Stockholders, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such expense, loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.6(a) will not apply to amounts paid in settlement of any such expense, loss, claim, damage, liability, or action if such settlement is effected without the written consent of Company (which consent will not be unreasonably withheld or delayed), nor will Company be liable to any Stockholder for any such expense, loss, claim, damage, liability, or action to the extent that it arises out of or is based upon (A) a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by Stockholders or (B) a breach of this Agreement by any Seller.

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          (b) In connection with the registration of any Shares under this Agreement, Sellers will jointly and severally indemnify and hold harmless Company, each of its directors and officers (in each case, other than any individual that is a party to this Agreement), each person, if any, who controls Company within the meaning of the Securities Act, against any expenses, losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such expenses, losses, claims, damages, or liabilities (or actions, proceedings or settlements in respect thereto) arise out of or are based upon (A) a Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by Stockholders expressly for use in connection with such registration or (B) a breach of this Agreement by any Seller; and Stockholders will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 2.6(b), in connection with investigating or defending any such expense, loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.6(b) will not apply to amounts paid in settlement of any such expense, loss, claim, damage, liability or action if such settlement is effected without the written consent of any Seller (which consent will not be unreasonably withheld or delayed); and provided, further, however, in no event will any indemnity under this Section 2.6(b) exceed the aggregate net proceeds actually received by Stockholders from the sale of Shares effected pursuant to such registration, except in the case of fraud by such Stockholder.

          (c) Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties, and the indemnified party may participate in such defense at such party’s expense; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) will have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, will relieve such indemnifying party of any liability to the indemnified party under this Section 2.6 to the extent of such material prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6.

          (d) If the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, will contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand

9

and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event will any contribution by a Stockholder under this Section 2.6(d) exceed the net proceeds actually received by such Stockholder from the sale of Shares effected pursuant to a Shelf Registration Statement, except in the case of fraud by such Stockholder. The relative fault of the indemnifying party and of the indemnified party will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

          (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in an underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement will control. No indemnifying party, in the defense of any such claim or litigation, will, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

          (f) The obligations of Company and Sellers under this Section 2.6 will survive the completion of any offering of Shares under this Article 2.

          2.7 No Assignment. The rights of Stockholders and Company under this Agreement may not be assigned or otherwise transferred, except to a Permitted Transferee or, with respect to Company, in connection with a change of control of Company where Stockholders are entitled to receive the stock of an entity other than Company pursuant to the Purchase Agreement.

          2.8 Termination of Registration Rights. Except as set forth in Section 2.6(f), no Stockholder will be entitled to exercise any right provided for in this Article 2 once all Shares held by and issuable to such Stockholder may be sold to the public under Rule 144 without registration. Notwithstanding anything in this Agreement to the contrary, but except as set forth in Section 2.6(f), the obligations of and restrictions upon each Stockholder under this Agreement, including those set forth in Sections 2.1(c) and 2.3, will survive until the earlier to occur of (i) December 31, 2006 and (ii) the date upon which all of the Shares have been sold.

ARTICLE 3

MISCELLANEOUS.

          3.1 Rights Cumulative; Waiver. Except as explicitly provided in this Agreement, the rights and remedies of the parties under this Agreement are cumulative and not alternative and are not exclusive of any right or remedies that any party may otherwise have at law or in equity. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege

10

or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (i) no waiver that may be given by a party will be applicable except in the specific instance for which it is given and (ii) no notice to or demand on one party will be deemed to be a waiver of any right of the party giving such notice or demand to take further action without notice or demand.

          3.2 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other telecommunications mechanism will be effective as delivery of a manually executed counterpart of this Agreement.

          3.3 Further Assurances. Each party agrees to cooperate fully with the other parties, to take such actions, to execute such further instruments, documents and agreements, and to give such further written assurances, as may be reasonably requested by any other party to evidence and reflect the transactions described herein and contemplated hereby, and to carry into effect the intents and purposes of this Agreement.

          3.4 Governing Law; Consent to Jurisdiction and Jury Trial Waiver.

          (a)  This Agreement and the legal relations between the parties will be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be performed in such State and without regard to conflicts of law doctrines unless certain matters are preempted by federal law.

          (b)  All actions and proceedings arising out of or relating to this Agreement will be heard and determined in a New York State or a federal court sitting in the Southern District of New York, and the parties to this Agreement hereby irrevocably submit to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. The parties hereby consent to service of process by mail (in accordance with Section 3.5) or any other manner permitted by law.

          (c)  COMPANY AND EACH SELLER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF COMPANY OR ANY SELLER OR THEIR RESPECTIVE REPRESENTATIVES IN THE NEGOTIATION OR PERFORMANCE HEREOF.

          3.5 Notices. Unless otherwise specified, any notice or other communication hereunder must be given in writing and: (i) delivered in person; (ii) transmitted by facsimile or other telecommunications mechanism; (iii) delivered via an overnight courier service of national reputation; or (iv) mailed by certified or registered mail, postage prepaid, receipt requested as follows:

11

          If to any Seller, to:

Dru A. Schmitt
147 West Coconut Palm Road
Boca Raton, Florida 33432
Facsimile: (561) 347-6627

          with a copy (which will not constitute notice) to:

Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Tom W. Zook, Esq.
Facsimile: (314) 612-7671

          If to Company:

WebMD Corporation
River Drive Center 2
669 River Drive
Elmwood Park, New Jersey 07407-1371
Attention: General Counsel
Facsimile: (201) 703-3443

          with copies (which will not constitute notice) to:

WebMD Corporation
River Drive Center 2
669 River Drive
Elmwood Park, New Jersey 07407-1371
Attention: Chief Financial Officer
Facsimile: (201) 398-2615

          and to:

O’Melveny & Myers LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: Steven L. Grossman, Esq.
Facsimile: (310) 246-6779

or to such other address or to such other Person as Company or any Seller has last designated by such notice to the other parties. Each such notice or other communication will be effective: (i) if given by facsimile or other telecommunication, when transmitted to the applicable number so specified in this Section 3.5 and an appropriate confirmation is received; (ii) if given by mail, three Business Days after such communication is deposited in the mails with first class postage prepaid, addressed as above; (iii) if given by overnight courier service of national reputation, one

12

Business Day after such communication is deposited with such courier service; or (iv) if given by any other means, when actually received at such address.

          3.6 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party in any material respect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

          3.7 No Presumption. The parties acknowledge that each party has been represented by counsel, or has had the opportunity to consult with counsel of its choice and has waived such opportunity, in connection with this Agreement and the transactions contemplated by this Agreement. Regardless of anything else contained herein, any rule of law, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any party or its counsel.

          3.8 Entire Agreement; Amendment. This Agreement together with the Purchase Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by Company and Sellers.

          3.9 Titles and Subtitles. The headings and subheadings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

          3.10 Successors and Assigns. Except as otherwise provided in this Agreement, including the restrictions set forth in Section 2.7, the terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties (including transferees of any of Common Stock).

          3.11 No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties and their permitted assigns, and nothing herein, express or implied, is intended to or will confer upon any other person any legal or equitable benefit, claim, cause of action, remedy or right of any kind.

          3.12 Rule 144 Reporting. With a view to making available to the Stockholders the benefits of certain rules and regulations of the SEC that may permit the sale of the Shares to the public without registration, Company agrees to use commercially reasonable efforts until the Shares issued to Transferring Sellers under the Purchase Agreement meet the

13

requirements of Rule 144(k) in the sole discretion of Company to (i) make and keep public information available, as those terms are understood and defined in Rule 144; and (ii) file with the SEC, in a timely manner, all reports and other documents required of Company under the Exchange Act.

14

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

WebMD Corporation,
a Delaware corporation

By: /s/ DAVID C. AMBURGEY	/s/ JOSEPH Q. DIMARTINI
Name: David C. Amburgey Title: Senior Vice President	Joseph Q. DiMartini Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini
/s/ JOSEPH Q. DIMARTINI	/s/ JOSEPH Q. DIMARTINI
Joseph Q. DiMartini	Joseph Q. DiMartini, Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated October 14, 2002
/s/ ERIC J. SCHAEFER	/s/ DANIEL A. SCHMITT
Eric J. Schaefer	Daniel A. Schmitt, Trustee of the Daniel A. Schmitt Revocable Trust dated March 26, 1999
/s/ DANIEL A. SCHMITT	/s/ DANIEL A. SCHMITT
Daniel A. Schmitt	Daniel A. Schmitt, Trustee of the Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002
/s/ DRU A. SCHMITT	/s/ DRU A. SCHMITT
Dru A. Schmitt	Dru A. Schmitt Trustee, U/A dated October 20, 1997 f/b/o Dru A. Schmitt

EX-4.1

EX-4.1 INDENTURE WEBMD CORPORATION & BANK OF NY

EX-4.2

EX-4.2 REGISTRATION RIGHTS AGREEMENT JUNE 25, 2003

EX-4.3

EX-4.3 REGISTRATION RIGHTS AGREEMENT JULY 17, 2003

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Roger C. Holstein, certify that:

     1.     I have reviewed this quarterly report on Form 10-Q of WebMD Corporation;

     2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

/s/ Roger C. Holstein

Roger C. Holstein

Chief Executive Officer

(Principal executive officer)

-2- EX-31.2 9 g84264exv31w2.htm EX-31.2 SECTION 302 CERTIFICATION OF CFO

Exhibit 31.2

CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Kirk G. Layman, certify that:

     1.     I have reviewed this quarterly report on Form 10-Q of WebMD Corporation;

     2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

-3-

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

/s/ Kirk G. Layman

Kirk G. Layman

Executive Vice President,

Administration and Acting Chief

Financial Officer

(Principal accounting officer)

-4- EX-32.1 10 g84264exv32w1.htm EX-32.1 SECTION 906 CERTIFICATION OF CEO

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER OF
WEBMD CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of WebMD Corporation (“WebMD”) on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roger C. Holstein, Chief Executive Officer of WebMD, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of WebMD.

Dated: August 13, 2003	/s/ Roger C. Holstein
	Roger C. Holstein
	Chief Executive Officer

The foregoing certification is being furnished to accompany WebMD Corporation’s Report on Form 10-Q for the Quarterly Period ended June 30, 2003 (the “Report”) solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a separate disclosure document and shall not be deemed incorporated by reference into any other filing of WebMD Corporation that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to WebMD Corporation and will be retained by WebMD Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 11 g84264exv32w2.htm EX-32.2 SECTION 906 CERTIFICATION OF CFO

Exhibit 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER OF
WEBMD CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of WebMD Corporation (“WebMD”) on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kirk G. Layman, Executive Vice President, Administration and Acting Chief Financial Officer of WebMD, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of WebMD.

Dated: August 13, 2003	/s/ Kirk G. Layman
	Kirk G. Layman
	Executive Vice President, Administration and
	Acting Chief Financial Officer

The foregoing certification is being furnished to accompany WebMD Corporation’s Report on Form 10-Q for the Quarterly Period ended June 30, 2003 (the “Report”) solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a separate disclosure document and shall not be deemed incorporated by reference into any other filing of WebMD Corporation that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to WebMD Corporation and will be retained by WebMD Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

-----END PRIVACY-ENHANCED MESSAGE-----

EX-31.2

EX-31.2 SECTION 302 CERTIFICATION OF CFO

EX-32.1

EX-32.1 SECTION 906 CERTIFICATION OF CEO

EX-32.2

EX-32.2 SECTION 906 CERTIFICATION OF CFO