8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

FORM 8‑K

___________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  July 27, 2016 (July 27, 2016)

HEALTHWAYS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-19364	62-1117144
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

701 Cool Springs Boulevard Franklin, Tennessee	37067
(Address of principal executive offices)	(Zip Code)

(615) 614-4929

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.  Entry into a Material Definitive Agreement.

Purchase Agreement for the Sale of Total Population Health Services Business

On July 27, 2016, Healthways, Inc., a Delaware corporation (the "Company"), entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Sharecare, Inc., a Delaware corporation ("Sharecare"), and Healthways SC, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of the Company ("Healthways SC"), pursuant to which Sharecare will acquire the total population health services business currently conducted by the Company (the "TPHS Business"). The sale of the TPHS Business will be effected by (i) the contribution by the Company and certain of its subsidiaries of all of the assets used exclusively in the TPHS Business (including the equity interests in certain of the Company's foreign subsidiaries) to Healthways SC and (ii) the subsequent sale to Sharecare of all of the outstanding equity interests in Healthways SC. The consummation of the transactions contemplated by the Purchase Agreement (collectively, the "Transactions"), which is subject to customary closing conditions, is expected to occur on or before August 31, 2016 (the "Closing").

Pursuant to the Purchase Agreement, at the Closing, Sharecare will deliver to the Company an Adjustable Convertible Equity Right (the "ACER") with an initial face value of $30,000,000, which will be convertible into shares of common stock of Sharecare 24 months after the Closing, at an initial conversion price of $249.87 per share, subject to customary adjustment for stock splits, stock dividends and other reorganizations of Sharecare. Additionally, pursuant to the Purchase Agreement, the Company will make the following payments to Sharecare: (i) $25,000,000 in cash at the Closing to fund projected losses of the TPHS Business during the year following the Closing (the "Transition Year"); and (ii) two-thirds of the Company's remaining payment obligations in respect of the purchase price to be paid in connection with the acquisition of additional membership interest in the joint venture between the Company and Gallup Inc. (which obligation is currently expected to result in aggregate payments by the Company of approximately $4,166,667, payable in five equal quarterly installments beginning in the third quarter of the 2016 calendar year and ending in the third quarter of the 2017 calendar year). The Purchase Agreement provides for post-closing adjustments based on (i) net working capital (which may result in a cash payment by the Company to Sharecare in the event of a net working capital deficit, or an increase in the face amount of the ACER in the event of a net working capital surplus), (ii) negative cash flows of the TPHS Business during the Transition Year in excess of $25,000,000 (which may result in a reduction in the face amount of the ACER up to a maximum reduction of $20,000,000), and (iii) any successful claims for indemnification by Sharecare (which may result in a reduction in the face amount of the ACER, unless the Company elects, in its sole discretion, to satisfy any such successful claims with cash payments).

The Purchase Agreement contains certain customary representations and warranties made by the Company and Sharecare. The parties have agreed to various customary covenants, including (but not limited to) covenants regarding the conduct of the TPHS Business prior to the Closing. The Purchase Agreement provides for post-Closing indemnification with respect to breaches of representations, warranties and covenants by the parties, as well as indemnification with respect to certain other matters specified in the Purchase Agreement. The Purchase Agreement also contains non-solicitation and non-competition provisions pursuant to which the Company agreed (i) not to solicit any employees, managers, directors or advisors to terminate their relationships with Healthways SC or its subsidiaries, (ii) not to solicit any customers or suppliers of the TPHS Business to terminate their business relationships with Healthways SC or its subsidiaries and (iii) not to engage in or acquire ownership of certain businesses that are competitive with the TPHS Business, in each case, for a period of two years following the Closing. The Purchase Agreement also contains certain termination rights for each of the Company and Sharecare subject to the conditions set forth in the Purchase Agreement.

In connection with, and as a condition to the Closing, the Purchase Agreement contemplates that the Company will enter into a transition services agreement with Healthways SC, pursuant to which, among other things, the Company will provide, at its cost, (i) certain administrative and information technology services for a limited period of time following the Closing (generally three to six months) and (ii) network solutions services to shared customers for longer periods corresponding to the terms of existing contracts. The Purchase Agreement also contemplates that the parties will enter into certain other ancillary agreements in connection with, and as a condition to the Closing, including office space subleases and a contribution and assumption agreement.

The Purchase Agreement is not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission and it is not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. In particular, the representations, warranties and covenants set forth in the Purchase Agreement (i) were made solely for purposes of the Purchase Agreement and the Transactions and solely for the benefit of the contracting parties (except with respect to the rights of specific third parties enumerated in the Purchase Agreement), (ii) may be subject to limitations agreed upon by the contracting parties, including certain disclosure schedules, (iii) are qualified in certain circumstances by a materiality standard which may differ from what may be viewed as material by investors, (iv) were made only as of the date(s) specified in the Purchase Agreement, and (v) may have been included in the Purchase Agreement for the purpose of allocating risk between the parties rather than establishing matters as facts. Investors are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the parties. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement.

Discontinued Operations and Expected Loss

The Company will classify the TPHS Business as held for sale as of June 30, 2016, and the results of the TPHS Business will be presented as discontinued operations in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016. Upon the classification of the disposal group as held for sale, under the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 360-10-35, long lived assets held for sale are measured at the lower of carrying amount or fair value less costs to sell.  The Company expects to include a pre-tax loss in the range of $150 million to $160 million within its results of discontinued operations for the quarter ended June 30, 2016 as a result of the application of ASC 360-10-35 to the disposal group comprised of the TPHS Business.  Upon the Closing, the Company will make adjustments required to the previously recorded loss to reflect the specific business terms of the Transactions.

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Following the Closing of the Transactions, Alfred Lumsdaine, the Company's Executive Vice President, Chief Financial and Administrative Officer, will accept employment with Sharecare, and in connection with such transition, his Amended and Restated Employment Agreement with the Company, dated November 30, 2012 ("Employment Agreement"), will terminate at the Closing.  Mr. Lumsdaine will remain employed by the Company until September 30, 2016 (the "Separation Date") pursuant to the terms of a Separation and General Release Agreement (the "Separation Agreement") which will become effective at the Closing.

The Separation Agreement will provide that Mr. Lumsdaine will continue to receive his current salary and benefits through the Separation Date and that the Company will not terminate his employment prior to the Separation Date other than for Cause (as such term is defined in the Employment Agreement). Additionally, the Separation Agreement will provide that, in connection with the Transactions, (i) all of the market stock units held by Mr. Lumsdaine will be vested at the target award amount and all options and restricted stock units held by Mr. Lumsdaine will be fully vested, in each case, effective as of the Closing; and (ii) all amounts contributed by the Company under the Company's Amended and Restated Corporate and Subsidiary Capital Accumulation Plan for the benefit of Mr. Lumsdaine will be vested in full as of the Closing.  The Separation Agreement will further provide that Mr. Lumsdaine will be eligible to receive (i) a portion of his short-term cash incentive award for 2016 (the "STI Award") that is based upon his performance against individual performance objectives during the period beginning on January 1, 2016 and ending on June 30, 2016 and (ii) a pro rata portion of the STI Award (pro-rated based on his 2016 eligible earnings through September 30, 2016) that is based upon the achievement by the Company of the adjusted EBITDA target for 2016 established by the Compensation Committee of the Company's Board of Directors, with the actual amount of such payment to be determined after the end of 2016 in accordance with the terms of the applicable short-term incentive program.

The Separation Agreement will also include other customary terms, including a general release by Mr. Lumsdaine of the Company and its affiliates with respect to all liabilities for claims that Mr. Lumsdaine may have as of the effective date of the Separation Agreement, subject to customary exceptions.

Item 8.01.  Other Events.

On July 27, 2016, the Company issued a press release announcing the completion by its Board of Directors of a strategic assessment process and the execution of the Purchase Agreement. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

Safe Harbor Provisions

This Current Report on Form 8-K contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that the Company or its management believes or anticipates may occur in the future, including the Closing. All forward-looking statements are based upon the Company's current expectations, various assumptions and data available from third parties. The Company's expectations and assumptions are expressed in good faith and the Company believes there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those set out in the forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events. For any forward-looking statements contained in this or any other document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and the Company assumes no obligation to update any such statement.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1 Press Release, dated July 27, 2016

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 hereunto duly authorized.

HEALTHWAYS, INC.
By:	/s/ Alfred Lumsdaine
	Alfred Lumsdaine
	Chief Financial Officer

Date:  July 27, 2016

EXHIBIT INDEX

Exhibit 99.1 Press Release, dated July 27, 2016

EX-99.1

Exhibit 99.1

Investor Relations Contact:

Chip Wochomurka

(615) 614-4493

chip.wochomurka@healthways.com

HEALTHWAYS COMPLETES STRATEGIC ASSESSMENT

Expects Significantly Improved Financial Performance Through Focus on its

Network Solutions Business

Signs Definitive Agreement to Sell Total Population Health Services Business to Sharecare

NASHVILLE, Tenn. (July 27, 2016)– Healthways (NASDAQ: HWAY) today announced it completed its strategic assessment that began in October 2015. Moving forward, the company expects to achieve significantly improved financial performance through its Network Solutions business, which includes Silver Sneakers^® Fitness, Prime^® Fitness and Physical Medicine. As a result of the assessment, Healthways has signed a definitive agreement to sell its Total Population Health Services (TPHS) business to Sharecare, Inc., the Atlanta-based digital health company helping people manage all their healthcare in one place. The sale also includes Healthways' two Emerging Solutions businesses, Blue Zones Project by Healthways™ and Dr. Ornish's Program for Reversing Heart Disease^®. The transaction is expected to close by July 31, 2016.

The financial aspects of the agreement are as follows:

· Sharecare will issue to Healthways an equity right convertible into up to $30 million of Sharecare common stock at the valuation implied in Sharecare's most recent financing.

· Healthways will pay Sharecare $25 million at closing to fund expected negative cash flow for the 12-month period following the closing.

· The right to acquire $30 million of Sharecare common stock is subject to reduction on a dollar-for-dollar basis by up to $20 million for the amount of negative cash flow in excess of $25 million for the acquired business in the 12-month period following the closing.

New Financial Profile

The Company expects to complete a restructuring of its corporate support infrastructure by the end of 2016 to appropriately support the focus on its Network Solutions business. Following the close of the transaction and the corporate restructuring, the Company expects to end 2016 with annualized revenue greater than $500 million, EBITDA margins in excess of 20% and an organic growth rate in at least the upper-single digit range, consistent with the past several years for this business.

The Company is currently working with its senior lenders to recalibrate covenants and conditions under its credit agreement to reflect the one-time nature of the results of the transaction and the Company's expected improved operating profile on an ongoing basis.  In addition, based on the reduced capital requirements of the go-forward business and the Company's expectation that its tax loss-carry forwards convert to substantial cash tax savings, Healthways expects to be in a position to deleverage rapidly over the 18-month period beginning with the start of 2017.

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July 27, 2016

Given the impact of the pending transaction and restructuring of the corporate support infrastructure, the Company is withdrawing its previous financial guidance for 2016.

Strategic Assessment Process

"The Healthways Board, with the assistance of management and the Company's financial advisor, undertook a comprehensive strategic assessment after beginning a structural reorganization and cost rationalization program in October 2015. The focus of our assessment was to explore strategies for growth and capital allocation, based on the criteria of whether each Healthways unit could achieve a differentiated and sustainable market leadership position while generating an acceptable return on investment. We made the decision to invest in business areas where we expect to achieve these objectives and to exit business areas where we could not achieve those outcomes," said Healthways Chief Executive Officer, Donato Tramuto. "Specifically, for TPHS, the continuing investment and the expected timeframe required to achieve acceptable returns were not aligned with our criteria for continuing to operate the business within Healthways. Through our analysis, it was clear that we could create the most value for shareholders, customers and colleagues by focusing exclusively on, and investing in, our growing and profitable Network Solutions business, which is a more targeted population approach for our go forward business model."

Total Population Health Services (TPHS) and Sharecare Combination and Leadership

"We believe this transaction provides valuable customer service continuity for our TPHS and Network Solutions business customers," continued Mr. Tramuto. "Sharecare has demonstrated world-class expertise in digital engagement and innovation. We also believe the combination of technologies and distribution channels of this business in the hands of Sharecare will create new growth opportunities for the TPHS business."

At transaction close, Mr. Tramuto, Healthways' ongoing CEO, will join the Sharecare Board of Directors, providing continuity of customer relationship support.  In addition, TPHS president Sean Slovenski will join Sharecare as president of its population health business. Healthways' CFO Alfred Lumsdaine will also join the Sharecare team as chief operating and financial officer of its population health business 60 days after the close of the transaction. Mr. Tramuto added, "We have launched an external search for a new CFO. I expect that we will find, and have in place before year-end, an experienced financial leader with meaningful public company experience to help us in the implementation of our strategy moving forward. In the meantime, I have full confidence in our current senior financial leaders."

Jeff Arnold, Sharecare founder, CEO and chairman of its board of directors, said, "Our relationship with Healthways is about more than just an acquisition - it's about forming a strategic relationship with a shared goal to provide people, whether patient, employee or member, with the personalized resources they need to help them live their healthiest lives. The combination of Healthways' impressive roster of employer and payor contracts and proven ability to drive improved outcomes, and Sharecare's strong track record of digital innovation and ability to seamlessly integrate legacy technologies into our engagement platform gets us closer than ever to delivering employers and payors with a truly comprehensive, fully integrated health engagement solution."

Healthways Go Forward Growth Plan

Healthways strategic plan to drive growth and strong financial performance will center on its Network Solutions business, which is a leading provider of network development and management solutions in

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July 27, 2016

healthcare. Its three primary networks are SilverSneakers^® Fitness, Prime® Fitness and Physical Medicine.

· SilverSneakers^® Fitness Profile

o 20+ years of experience

o 13+ million eligible members

o 60+ health plan clients

o 15K+ participating locations including fitness centers and alternative venues

· Prime^® Fitness Profile

o 8+ years of experience

o 40+ million eligible members

o 10K+ participating fitness centers

· Physical Medicine Profile

o 30+ years of experience

o 20+ million eligible members

o 88K+ providers and practitioners

"Our strategic review of the business has confirmed that our Network Solutions business has an attractive financial profile, high-quality assets and an excellent platform for growth," commented Mr. Tramuto. "We will have greater focus and the flexibility to invest in what we believe has been an underappreciated, high growth set of services and capabilities. With our three existing networks as a starting point, we intend to make investments with three clear priorities. First, with 11,000 individuals turning 65 every single day, we believe our Silver Sneakers business has significant room for membership growth.  Second, we will grow the core networks with targeted approaches to increase engagement and develop new programming, which will increase yield from existing clients.  Third, we will leverage the core networks to add services and/or products both organically and through partnerships that will add new revenue streams.  With strong growth opportunities and assets we can leverage, we believe Network Solutions will generate strong sustainable returns to shareholders over the long term."

Conference Call

Healthways will hold a conference call to discuss this release later today, July 27th at 5:00 p.m. Eastern Time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.healthways.com and clicking Investors at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719-457-0820, code 4831885, and the replay will also be available on the Company's web site for the next 12 months

Additional Communications

Healthways announced on July 14^th that its financial results for the second quarter ending June 30, 2016, will be released after market close on Tuesday, August 9, 2016, followed the same day by a conference call and live webcast scheduled for 5:00 p.m. Eastern Time.

Healthways also announced today that it will hold an Analyst and Investor Day centered on the Company's strategy following the completed transaction with Sharecare. The event will take place on Thursday, August 11, 2016 from 8:30 a.m. to 11:30 a.m. Eastern Time at The Westin New York at Times Square.

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Safe Harbor Provisions

This press release contains forward-looking statements, including our guidance and financial expectations for future periods, which are based upon current expectations, involve a number of risks and uncertainties and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company, including, without limitation, all statements regarding the Company's future earnings and results of operations. Those forward-looking statements are subject to the finalization of the Company's quarterly financial accounting procedures and may be affected by certain risks and uncertainties, including, but not limited to:

· the Company's ability to consummate the announced divestiture of its Total Population Health Services business on the terms outlined herein;

· the Company's ability to recognize the benefits of the announced transaction, including realization of the cost savings and potential growth and profitability for the Network Solutions business following consummation of the proposed transaction;

· the Company's ability to estimate the costs associated with, and to implement and realize the anticipated benefits of, the restructuring of its organization as a result of the announced transaction;

· the effectiveness of management's strategies and decisions;

· the Company's ability to sign and implement new contracts for our solutions;

· the Company's ability to accurately forecast the costs required to successfully implement new contracts;

· the Company's ability to accurately forecast the costs necessary to integrate new or acquired businesses, services (including outsourced services) or technologies into the Company's business;

· the Company's ability to achieve estimated annualized revenue in backlog in the manner and within the timeframe we expect, which is based on certain estimates regarding the implementation of our services;

· the Company's ability to anticipate change and respond to emerging trends in the domestic and international markets for healthcare and the impact of the same on demand for the Company's services;

· the Company's ability to implement its integrated data and technology solutions platform within the required time frame and expected cost estimates and to develop and enhance this platform and/or other technologies to meet evolving customer and market needs;

· the Company's ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations;

· the Company's ability to accurately forecast the Company's revenues, margins, earnings and net income, as well as any potential charges that the Company may incur as a result of changes in its business and leadership;

· the Company's ability to accurately forecast performance and the timing of revenue recognition under the terms of its customer contracts ahead of data collection and reconciliation;

· the Company's ability to accurately forecast enrollment and participation rates in services and programs offered within the Company's contracts;

· the risks associated with deriving a significant concentration of revenues from a limited number of customers;

· the risks associated with foreign currency exchange rate fluctuations;

· the ability of the Company's customers to provide timely and accurate data that is essential to the operation and measurement of the Company's performance;

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· the Company's ability to achieve the contractually required cost savings and clinical outcomes improvements and reach mutual agreement with customers with respect to cost savings, or to achieve such savings and improvements within the time frames it contemplates;

· the risks associated with changes in macroeconomic conditions;

· the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of our information systems or those of third-party vendors or other service providers, which may result in unauthorized access by third parties to customer, employee or Company information or patient health information and lead to enforcement actions, fines and other litigation against the Company;

· the Company's ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed our resources;

· the Company's ability to service its debt and remain in compliance with its debt covenants;

· counterparty risk associated with our interest rate swap agreements and foreign currency exchanged contracts;

· the impact of litigation involving the Company and/or its subsidiaries;

· the impact of future state, federal and international legislation and regulations applicable to the Company's business, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 on the Company's operations and/or demand for its services; and

· other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and other filings with the Securities and Exchange Commission.

The Company undertakes no obligation to update or revise any such forward-looking statements.

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