10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
or
o	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: 0-51547

WebMD Health Corp.

(Exact name of registrant as specified in its charter)

Delaware	20-2783228
(State of incorporation)	(I.R.S. employer identification no.)
111 Eighth Avenue New York, New York (Address of principal executive office)	10011 (Zip code)

(212) 624-3700

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, par value $.01 per share

(Title of each class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o     No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.  Yes o     No þ

As of December 30, 2005, the last business day of the registrant’s most recently completed fiscal quarter, there were 7,954,426 shares of registrant’s Class A Common Stock outstanding and 48,100,000 shares of registrant’s Class B Common Stock outstanding, and the aggregate market value of such shares held by non-affiliates of the registrant was approximately $216,029,454 (based on the closing price of the common stock of $29.05 per share on that date, as reported on the Nasdaq Stock Market’s National Market and, for purposes of this computation only, the assumption that all of the registrant’s directors and executive officers are affiliates).

As of March 10, 2006, the registrant had 7,954,426 shares of Class A Common Stock and 48,100,000 shares of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in the registrant’s definitive proxy statement to be filed with the Commission relating to the registrant’s 2006 Annual Meeting of Stockholders is incorporated by reference into Part III.

TABLE OF CONTENTS

		Page
Forward-Looking Statements			2
Definitions of Certain Measures of Usage of The WebMD Health Network			2
PART I
Item 1.	Business		4
Item 1A.	Risk Factors		27
Item 1B.	Unresolved Staff Comments		42
Item 2.	Properties		42
Item 3.	Legal Proceedings		43
Item 4.	Submission of Matters to a Vote of Security Holders		44
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		45
Item 6.	Selected Financial Data		47
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		48
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		63
Item 8.	Financial Statements and Supplementary Data		63
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		63
Item 9A.	Controls and Procedures		64
Item 9B.	Other Information		64
PART III
Item 10.	Directors and Executive Officers of the Registrant		65
Item 11.	Executive Compensation		65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		65
Item 13.	Certain Relationships and Related Transactions		65
Item 14.	Principal Accountant Fees and Services		65
PART IV
Item 15.	Exhibits and Financial Statement Schedules		66
Signatures			67
Financial Statements			F-1
Index to Exhibits			E-1
EX-10.27 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
EX-10.60 ASSET PURCHASE AGREEMENT
EX-21 SUBSIDIARIES OF THE REGISTRANT
EX-23.1 CONSENT OF ERNST & YOUNG LLP
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

WebMD^®, WebMD Health^®, Medscape^®, CME Circle^®, Medpulse^®, eMedicine^®, MedicineNet^®, theheart.org^®, RxList^®, The Little Blue Book^tm and Select Quality Care^® are trademarks of WebMD Health Corp. or its subsidiaries.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be, forward-looking statements. For example, statements concerning projections, predictions, expectations, estimates or forecasts and statements that describe our objectives, future performance, plans or goals are, or may be, forward-looking statements. These forward-looking statements reflect management’s current expectations concerning future results and events and can generally be identified by the use of expressions such as “may,” “will,” “should,” “could,” “would,” “likely,” “predict,” “potential,” “continue,” “future,” “estimate,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” and other similar words or phrases, as well as statements in the future tense.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. The following important risks and uncertainties could affect our future results, causing those results to differ materially from those expressed in our forward-looking statements:

•  the failure to achieve sufficient levels of usage of our public portals;

•  the inability to successfully deploy new or updated applications or services;

•  the anticipated benefits from acquisitions not being fully realized or not being realized within the expected time frames;

•  the inability to attract and retain qualified personnel;

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

•  the Risk Factors described in Item 1A of this Annual Report.

These factors 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 Annual Report on Form 10-K are made only as of the date of this Annual Report. We expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

DEFINITIONS OF CERTAIN MEASURES OF USAGE OF THE WEBMD HEALTH NETWORK

In this Annual Report, we provide information regarding usage of The WebMD Health Network that we have determined using internal technology that identifies and monitors usage by individual computers. As used in this Annual Report:

•  A “unique user” during any calendar month is an individual computer that accesses a Web site in The WebMD Health Network during the course of such calendar month, as determined by our internal tracking technology. Accordingly, with respect to such calendar month, once an individual computer accesses that Web site in The WebMD Health Network, that computer will generally be included in the total number of “unique users” for that month, regardless of the method by which such computer accesses that Web site (i.e., whether directed by an individual or by automated software programs). Similarly, with respect to any calendar month, a computer accessing a specific Web site in The WebMD Health Network may only be counted once as a single “unique user” regardless of the number of times such computer accesses that Web site or the number of individuals who may use such computer. However, if that computer accesses more than one site within The WebMD Health Network during a calendar month, it will be counted once for each such site. A computer that does not access any of the Web sites in The WebMD Health Network during a particular calendar month is not included in the

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total number of “unique users” for that calendar month, even if such computer has in the past accessed one or more of these Web sites. In addition, if a computer blocks our tracking technology, it will be counted as a unique user in a particular month each time it visits one of our Web sites.

•  A “page view” is a Web page that is sent to the browser of a computer upon a request made by such computer and received by a server in The WebMD Health Network. The number of “page views” in The WebMD Health Network is not limited by its number of “unique users.” Accordingly, each “unique user” may generate multiple “page views.”

•  With respect to any given time period, “aggregate page views” are the total number of “page views” during such time period on all of the Web sites in The WebMD Health Network. “Aggregate page views” do not include page views from our private portals.

Third party services that measure usage of Internet sites may provide different usage statistics than those reported by our internal tracking technology. These discrepancies may occur as a result of differences in methodologies applied and differences in measurement periods. For example, third party services typically apply their own proprietary methods of calculating usage, which may include surveying users and estimating site usage based on surveys, rather than based upon our internal tracking technology. Regardless of the measure of usage, if usage data is prepared using a consistent methodology between measurement periods, we believe that it provides useful information over time.

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PART I

Item 1.   Business

INTRODUCTION

General Information

WebMD Health Corp. is a Delaware corporation that was incorporated on May 3, 2005 under the name WebMD Health Holdings, Inc. We were created as a holding company for what was then referred to as the “WebMD Health” business segment of Emdeon Corporation in order to conduct an initial public offering of equity securities. On September 6, 2005, Emdeon contributed to us, as a contribution to capital, the subsidiaries that comprised its WebMD segment and certain related assets and liabilities. Emdeon, which was previously known as WebMD Corporation, changed its name in connection with our initial public offering and agreed that we would have the sole right to use the “WebMD” name and related trademarks.

Our Class A Common Stock, which has one vote per share, began trading on the Nasdaq National Market under the symbol “WBMD” on September 29, 2005. As of the date of this Annual Report, Emdeon owns all 48,100,000 shares of our Class B Common Stock, which has five votes per share. Emdeon’s holdings represent 85.8% of our outstanding common stock and 96.7% of the combined voting power of our outstanding common stock. For additional information regarding our initial public offering, see Notes 1 and 3 to the Consolidated Financial Statements included in this Annual Report.

Our principal executive offices are located at 111 Eighth Avenue, New York, New York 10011 and our telephone number is (212) 624-3700.

We make available free of charge at www.wbmd.com (in the “Investor Relations” section) copies of materials we file with, or furnish to, the Securities and Exchange Commission, or SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC.

Overview of Our Businesses

We are a leading provider of health information services to consumers, physicians and other healthcare professionals, employers and health plans through our public and private online portals and health-focused publications. The online healthcare information, decision-support applications and communications services that we provide:

•  enable consumers to obtain detailed information on a particular disease or condition, analyze symptoms, locate physicians, store individual healthcare information, receive periodic e-newsletters on topics of individual interest, enroll in interactive courses and participate in online communities with peers and experts;

•  make it easier for physicians and healthcare professionals to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn continuing medical education (or CME) credit and communicate with peers; and

•  enable employers and other health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, provider and treatment choices.

The WebMD Health Network consists of the public portals that we own, such as www.WebMD.com (which we sometimes refer to as WebMD Health), our primary public portal for consumers, and www.Medscape.com (which we sometimes refer to as Medscape from WebMD), our primary public portal for physicians and other healthcare professionals, as well as third party sites through which we provide our branded health and wellness content, tools and services, such as the health and diet channel on the America Online service. The WebMD Health Network does not include our private portals for employers and health plans, which are described

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below. In 2005, The WebMD Health Network had an average of over 24 million unique monthly users and generated over 2.3 billion aggregate page views.

WebMD.com and our other consumer portals help consumers take an active role in managing their health by providing objective healthcare and lifestyle information. WebMD content offerings for consumers include access to health and wellness news articles and features, and decision-support services that help them make better informed decisions about treatment options, health risks and healthcare providers. Medscape from WebMD and our other portals for healthcare professionals help them improve their clinical knowledge and practice of medicine. The original content of our professional sites, including daily medical news, commentary, conference coverage, expert columns and CME activities, are written by authors from widely respected academic institutions and edited and managed by our in-house editorial staff.

Our public portals generate revenue primarily through the sale of advertising and sponsorship products, including CME services. We do not charge user fees for access to our public portals. Our advertisers and sponsors are able to reach, educate and inform target audiences of health-involved consumers and clinically-active physicians through The WebMD Health Network. We work closely with our customers to develop programs to reach specific groups of consumers, physicians and other healthcare professionals and give them placement on the most relevant areas of our portals. Our advertisers and sponsors consist primarily of pharmaceutical, biotechnology and medical device companies and consumer products companies whose products relate to health, wellness, diet, fitness, lifestyle, safety and illness prevention.

Our private portals enable employees and health plan members to make more informed benefit, treatment and provider decisions. We provide a secure, personalized user experience by integrating individual user data (including personal health information), plan-specific data from our employer or health plan clients and much of the content, decision-support technology and personal communication services that we make available through our public portals. Our applications are typically accessed through a client’s Web site or intranet and provide secure access for employees and plan members. We market our products through both our direct sales force and through selected distributors and resellers. We generate revenue from private portals through the licensing of our products to employers, such as American Airlines, Inc., Microsoft Corporation, PepsiCo, Inc., International Business Machines Corporation and EMC Corporation, and to health plans, such as Cigna, Empire Blue Cross and Blue Shield, Horizon Blue Cross and Blue Shield and Wellpoint, Inc., either directly or through our distributors. Our private portals do not generate revenue from advertising or sponsorship. Our public portals and our private portals constitute our Online Services segment.

In addition to our online presence, we have a Publishing and Other Services segment that provides complementary offline health content. Our offline publications also increase awareness of our brand among consumers, physicians and other healthcare professionals. These publications include The Little Blue Book, a physician directory, ACP Medicine and ACS Surgery: Principles of Practice, our medical reference textbooks, and WebMD the Magazine, a consumer publication launched in early 2005 that we distribute free of charge to physician office waiting rooms. Also, with the acquisition of the assets of Conceptis Technologies, Inc. (which we refer to as Conceptis) in December 2005, as discussed below, we also conduct in-person CME.

For additional information regarding the results of operations of each of our segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations by Operating Segment” and Note 7 to our Consolidated Financial Statements included in this Annual Report.

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OUR ONLINE SERVICES

Our Public Portals: The WebMD Health Network

Overview

Our content and services have made our public portals the leading online health destinations for consumers, physicians and other healthcare professionals. The WebMD Health Network consists of public portals that we own and third party portals through which we provide our branded health and wellness content, tools and services.

Owned Web Sites.  A substantial majority of the traffic to and utilization of The WebMD Health Network derive from Web sites that we own. During 2005, sites we own accounted for approximately 88% of The WebMD Health Network’s page views. The following provides a brief description of each of our owned public portals:

Portal Site	Description
www.webmd.com	WebMD Health, our flagship consumer portal.
www.medicinenet.com	A health information site for consumers that is written and edited by practicing physicians, including an online medical dictionary with more than 16,000 medical terms.
www.rxlist.com	An online drug directory with over 1,400 drug monographs, which are comprehensive descriptions of pharmaceutical products (including chemical name, brand names, molecular structure, clinical pharmacology, directions and dosage, side effects, drug interactions and precautions).
www.medscape.com	Our Web site for physicians and other healthcare professionals.
www.emedicine.com	A site for physicians and other healthcare professionals containing articles on 7,000 diseases and disorders.
www.emedicinehealth.com	A health information site containing articles written and edited by physicians for patients and consumers.
www.medgenmed.com	The world’s first online-only, primary source, peer-reviewed general medical journal.
www.theheart.org	One of the leading cardiology Web sites, known for its depth and breadth of content in this area.

Other Sites.  The third party portals that we support include AOL Health with WebMD, the health channels of other AOL properties, the online FoxNews Health Channel with WebMD, Psychologytoday.com and HealthBoards.com.  During 2005, third party Web sites included in The WebMD Health Network accounted for approximately 12% of The WebMD Health Network’s page views. We sell the advertising and program the content on the portions of the third party Web sites that we support.

Consumer Portals in The WebMD Health Network

Introduction.  Healthcare consumers increasingly seek to educate themselves online about their healthcare related issues, motivated in part by the continued availability of new treatment options and in part by the larger share of healthcare expenditures they are being asked to bear due to changes in the benefit designs being offered by health plans and employers. The Internet has fundamentally changed the way consumers obtain information, enabling them to have immediate access to searchable information and dynamic interactive content.

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Overview of Content and Service Offerings.  Our goal is to provide consumers with an objective and trusted source of information that helps them play an active role in managing their health. WebMD Health and the other consumer portals in The WebMD Health Network provide our users with health and wellness related information, tools and applications in a variety of content formats. These content offerings include access to health and wellness news articles and features, special reports, interactive guides, self-assessment questionnaires, expert led Q&A’s and encyclopedic references, all of which are written, edited and published by our 90-person in-house staff, which includes professional writers, editors, designers and board-certified staff physicians. Our in-house staff is supplemented by medical advisors and authors from widely respected academic institutions. The news stories and other original content and reporting presented in The WebMD Health Network are based on our editors’ selections of the most important and relevant public health events occurring on any given day, obtained from an array of credible sources, including peer-reviewed medical journals, medical conferences, federal or state government actions and materials derived from interviews with medical experts. We offer searchable access to the full contents of our Web sites, including licensed content and reference-based content.

WebMD Health includes the following features:

Feature	Description
WebMD News Center	Offers daily health news articles that are written by health journalists and reviewed by our professional staff. Content focuses on “news you can use” and topics for stories reflect national news stories of interest in the popular media that day with original perspective from health and medical experts. The News Center also features letters and feedback from users. 10 to 15 stories are generated per day.
WebMD Editorial Features	Content focusing on a comprehensive look at major health issues that are in the news or otherwise contemporary, with emphasis on health trends and national health issues. We generate four to five editorial features per week.
	Our features on National Health Observances contain special reports based upon public health initiatives, such as Breast Cancer Awareness Month or Heart Month, as well as seasonal holidays and other seasonal health-related issues, such as 4th of July Safety, Super Bowl Weight Gain, Back to School, Getting Ready for Camp or College and Valentine’s Day Chocolate Guide for Health.
WebMD Daily	Originally produced multi-media content served on WebMD’s custom video player. WebMD Daily delivers a three to five minute health-related video of real patient stories and expert interviews, among other things, and includes narration, graphics and links to additional content on a given health topic. Sponsors are able to stream commercials and promotional messages within the video feature itself or within the surrounding viewing area.

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Feature	Description
General Medical Information	Our medical library allows consumers to research current information, some of which we license from third parties, relating to diseases and common health conditions by providing searchable access and easy-to-read content, including:
	— self-care articles
	— drug and supplement references from leading publications, including First Data Bank®
	— clinical trials and research study information
	— a patient’s guide to medical tests
	— Health Topics A-Z, an alphabetical listing of articles on specific health conditions and concerns
	— interactive, illustrated presentations that visually explain common health conditions and diseases
	— step-by-step, in-depth interactive condition guides on 35 major conditions
	— a medical dictionary with approximately 16,000 terms
	— doctors’ views on important health topics
Health and Wellness Centers	Centralized locations for content and services for both WebMD Health editorial offerings and sponsor/advertiser offerings that are specific to prevention and wellness topics. Each topic is showcased in its own “Resource Center.” There are 15 major centers, including Women’s Health, Men’s Health, Nutrition, Fitness, Healthy Aging, Skin and Beauty and Dental Health.
Disease and Condition Centers	Centralized locations for content and services for both WebMD Health editorial offerings and sponsor/advertiser offerings that are specific to disease and condition topics. Each topic is showcased in its own “Resource Center.” Each separate topic center is designed to guide users through all aspects of diagnosis, description of disease, treatment options and management, and to enable users to stay current on the latest research. There are 50 major centers, including Allergy, Asthma, Cholesterol, Diabetes, Epilepsy, GI Disorders and Hypertension.

Decision-Support Services.  Our decision-support services help consumers make better-informed decisions about treatment options, health risks and healthcare providers, and assist consumers in their management and monitoring of specific conditions or treatment regimens on an ongoing basis.

Feature	Description
Personalized Self Assessment	Clinical, algorithm-based self assessments for major conditions yielding personalized risk score based upon individual characteristics (e.g., gender, age, behavioral risks, heredity), along with customized recommendations for further education, treatment alternatives and a doctor report to share with the individual’s physician.

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Feature	Description
Symptom Checker	An interface that allows users to select an area on the male or female body where symptoms are occurring to lead users to relevant educational information.
Health-E-Tools	Provides access to over 80 interactive calculators, quizzes and slide shows to assess or demonstrate health topics, including a target heart rate calculator, body mass index calculator, pregnancy calculator and ovulation calendar.
WebMD® Physician Finder	Allows consumers to search by physician or practice name, specialty, zip code and distance.
Managing Healthcare & Benefits	Offerings that educate users on issues surrounding choosing and using health plans and managing their healthcare from a financial and quality perspective. Other coverage topics, such as Medicare, are addressed and resources and tools are available to users.
WebMD Health Manager	WebMD Health Manager is an online direct-to- consumer subscription service featuring a personal health record (an application that assists consumers in gathering, storing, and sharing essential health data), secure message center, personal health risk assessments for overall health as well as 15 condition-specific assessments, doctor reports, medication summaries, health calendar with reminders and alerts, printable health emergency card, family member health record keeping, weight loss, fitness and smoking cessation programs, and fully personalized e-newsletter.

Membership; Online Communities.  We also provide interactive communication services to our registered members. For example, members can opt-in to receive e-newsletters on health-related topics or specific conditions and to access topic-specific events and online communities. Our online communities allow our members to participate in real-time discussions in chat rooms or on message boards, and allow them to share experiences and exchange information with other members who share common health conditions or concerns.

Feature	Description
WebMD Live Events	Offers scheduled live chat events, including audio and video Webcasts, with healthcare experts and celebrity guests discussing relevant health issues, with archives from each event added to our searchable database.
Member Communities	Provides access to over 50 online support communities allowing consumers to share experiences and exchange information with other members with the same health condition or concern. Users may access moderated chat rooms, message boards and posted member columns focused on chronic health conditions and relevant health topics.
e-Newsletters	Allows consumers to receive personalized e-mail newsletters on general health-related subjects and topics targeted to their particular health concerns. In 2005, we offered newsletters, clinical alerts and e-mail reports covering approximately 30 topic areas, which we delivered to approximately 11 million registered members.

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Feature	Description
Expert Blogs	Online “journals” of healthcare professionals that we select in which they address some of the most common questions and misconceptions that they encounter in their daily practices.
“Ask an Expert”	A forum within which users can post their health questions for experts. Provides over five new events each week and contains an archive of approximately 800 transcripts.

There are no membership fees and no general usage charges for access to our online communities or to receive our e-newsletters. However, we do offer a limited number of consumer paid subscription services in the areas of diet and fertility and paid membership in WebMD Health Manager.

Recent Site Design and Infrastructure Initiatives.  During the second half of 2005, we began the first phase of a redesign of WebMD.com and the implementation of a new content management system. The benefits of these initiatives include: increasing the search engine optimization of our content; improving the navigation of the site for users; enhancing our search functionality; and enhancing and expanding advertising and revenue opportunities.

We have recently implemented the first upgrade phase of our WebMD Health Search product which is intended to deliver more relevant search results to our users and to increase the speed at which search results are delivered.

In the fourth quarter of 2005, we launched a redesigned and re-architected WebMD.com home page that improves user navigation of the site. In addition, we created new content features such as WebMD Daily, the Top 12 Health Topics list and a daily poll. Simultaneous with the redesign, and updated on an ongoing monthly basis, we redesigned and launched key navigational pages that aggregate traffic. We expect to launch redesigns of all site pages throughout 2006.

Relationship with AOL.  In May 2001, we entered into an agreement for a strategic alliance with the AOL division of Time Warner, Inc., which we refer to as AOL. The original term of the agreement was three years expiring May 9, 2004, and we have exercised our right to extend the original agreement for an additional three-year renewal term ending May 8, 2007. Under the agreement, we are the primary provider of healthcare content, tools and services on certain AOL properties and we distribute a co-branded interactive site to certain AOL properties. In the event of a change of control resulting in our company being controlled by a competitor of AOL, AOL has the right to terminate the agreement during the sixty (60) day period following such change of control.

We share with AOL certain revenue from advertising, commerce and programming on the health channels of the AOL properties and on the co-branded service created by us for AOL. We receive between 60% and 80% of revenue generated on the co-branded AOL sites that we program. AOL has guaranteed that we will receive a minimum of $12,000 during each year of the renewal term for our share of advertising revenue.

Included in the accompanying consolidated statements of operations for the years ended December 31, 2005, 2004 and 2003 is revenue of $7,805, $7,242 and $5,087, respectively, which represents sales to third parties of advertising and sponsorship on the AOL health channels, primarily sold through our sales efforts. Also included in revenue during the period from May 2004 (inception of the renewal term) through December 31, 2004 and for the year ended December 31, 2005 is $3,754 and $5,951, respectively, which represents the shortfall from the prorated minimum guarantee related to each contract year discussed above.

Professional Portals in The WebMD Health Network

Introduction.  The Internet has become a primary source of information for physicians and other healthcare professionals, and is growing relative to other sources, such as conferences, meetings and offline journals. We believe that our professional portals, which include Medscape from WebMD, theheart.org and eMedicine, reach more physicians than any other professional Web sites. We believe we are well positioned to

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increase usage by existing and new members because we offer physicians and other healthcare professionals a broad range of current clinical information and resources across more than 30 medical specialties. We believe that Medscape from WebMD and our other professional portals should benefit from the general trend towards increased reliance on, and usage of, the Internet by physicians and other healthcare professionals.

We generate revenue from our professional portals by selling advertising and sponsorship programs primarily to companies that wish to target physicians and other healthcare professionals, and also through educational grants. Users of the professional portal do not pay any fees to us for the right to access any of our services.

Medscape from WebMD enables physicians and other healthcare professionals to stay abreast of the latest clinical information through access to resources that include:

•  timely medical news relating to a variety of specialty areas and coverage of professional meetings and conferences;

•  CME activities; and

•  full-text medical journal articles and drug and medical literature databases.

Content.  Original content includes daily medical news, commentary, conference coverage, expert columns and CME activities written by authors from widely respected academic institutions and edited and managed by our in-house editorial staff. We regularly produce in-depth interviews with medical experts and newsmakers, and provide alerts on critical clinical issues, including pharmaceutical recalls and product advisories. We also provide access to wire service stories and other news-related content and CME programs. We develop the majority of our content internally and supplement with third party content in areas such as drug information and full-text journal articles.

We also publish an original electronic-only journal, Medscape General Medicine (which we refer to as MedGenMed), indexed in the National Library of Medicine’s MEDLINE reference database. MedGenMed, the world’s first online-only, primary source, peer-reviewed general medical journal, was established in April 1999. Visitors to www.medgenmed.com also can access MedGenMed’s innovative Webcast Video Editorials as well as specialty content sections.

Membership.  Users must register to access the content and features of our professional portals. Registration by users enables us to deliver targeted medical content based on such users’ registration profiles. Our professional portals are generally organized by specialty and profession, and include sites for nurses, pharmacists, medical students, and members interested in medical policy and business of medicine topics. The registration process enables professional members to choose a home page tailored to their medical specialty or interest. We offer more than 30 specialty areas for our users. There are no membership fees and no general usage charges for our professional portals. Medscape members receive MedPulse^®, our weekly e-mail newsletter, which is published in more than 30 specialty-specific editions and highlights new information and CME activities on the Medscape site.

Continuing Medical Education (CME).  We are the leading distributor of online CME to physicians and other healthcare professionals, offering a wide selection of free, regularly updated online CME activities designed to educate healthcare professionals about important diagnostic and therapeutic issues. Our CME programs include both original programs and third-party programs that we distribute on our professional sites. In addition, our CME Live offerings provide real-time Webcasts of CME programs on key topics and conditions. These live Webcasts combine streaming audio and slide presentations and allow participants to interact with faculty. Based on data published by the Accreditation Council for Continuing Medical Education (or ACCME), which oversees providers of CME credit and other applicable accreditation standards, Medscape provided approximately 67% of all CME programs completed online in 2004. In 2005, over 1.3 million physicians and other healthcare professionals completed continuing education programs (a majority of which were physician CME) on Medscape, an increase of 41% over 2004.

We have organized the operations of our professional portals to provide for appropriate separation of our education and promotion programs. Our educational activities for healthcare professionals are managed by

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Medscape, LLC, our professional education subsidiary, including the activities of the CME unit of Conceptis, Crescendo Medical Education. Individuals who work on educational matters are not involved with promotional programs.

Our CME activities are planned and implemented in accordance with the Essential Areas and Policies of ACCME. In addition, some of our programs have been produced in collaboration with other ACCME-accredited CME providers. We received provisional ACCME accreditation as a CME provider in July 2002 and full accreditation, for the maximum six-year period, beginning in July 2004. Such accreditation allows Medscape to continue to certify online CME activities. In September 2004, ACCME revised its standards for commercial support of CME. The revised standards are intended to ensure that CME activities of ACCME-accredited providers are independent of providers of healthcare goods and services that fund the development of CME. ACCME required accredited providers to implement these standards by May 2005. We believe that we have modified our procedures as appropriate to meet the revised standards. In order for us to renew our accreditation at the end of July 2010, we will be required to demonstrate to ACCME that we continue to meet ACCME requirements. For more information relating to ACCME’s new CME standards, see “Government Regulation — Regulation of Drug and Medical Device Advertising and Promotion.”

Recent Public Portals Acquisitions

On December 2, 2005, we acquired the assets of and assumed certain liabilities of Conceptis, a Montreal-based provider of online and offline medical education and promotion aimed at physicians and other healthcare professionals, for $19.0 million in cash. Conceptis has developed a strong online presence in the cardiology community primarily through its flagship site, www.theheart.org. Through our acquisition of Conceptis, we now have the capability to conduct in-person CME and produce and capture live presentations and panel discussions of CME. See “Publishing and Other Services — Offline CME Services.” For additional information about this acquisition, see Note 5 to the Consolidated Financial Statements included in this Annual Report.

On January 17, 2006, we acquired eMedicine.com, Inc. (which we refer to as eMedicine), an online publisher of medical reference information for physicians and other healthcare professionals, for $25.5 million in cash. Thousands of physician authors and editors contribute to the eMedicine Clinical Knowledge Base, which contains articles on 7,000 diseases and disorders. The evidence-based content, updated regularly, provides the latest practice guidelines in 59 medical specialties. eMedicine’s consumer site, www.eMedicineHealth.com, contains articles written by physicians for consumers.

Advertising and Sponsorship

We believe that The WebMD Health Network offers an efficient means for advertisers and sponsors to reach a large audience of health-involved consumers, clinically-active physicians and other healthcare professionals. The WebMD Health Network enables advertisers and sponsors to reach either our entire audience or specific groups of consumers, physicians and other healthcare professionals based on their interests or specialties. Currently, the majority of our advertisers and sponsors are pharmaceutical, biotechnology or medical device firms or consumer products companies. These companies currently spend only a very small portion of their marketing and educational budgets on online media. However, we expect their online spending to increase as a result of increased recognition of its potential advantages over offline marketing and educational activities. The WebMD Health Network ran 570 branded or sponsored programs for its customers during 2005, 380 such programs during 2004 and 325 such programs during 2003.

We typically enter into contracts with advertisers and sponsors to develop customized marketing campaigns that go beyond traditional Internet advertising media. We work with our advertisers and sponsors to develop marketing programs that are appropriately customized to target health-involved consumers, physicians or healthcare professionals. Our agreements with customers for our public portal services are typically priced at an aggregate price that takes into account the overall scope of the services provided and variations based upon the amount of content, tools and features we supply as well as the degree of customization that we provide for the program. To a much lesser extent, we also sell advertising on a CPM (cost per thousand impressions) basis, where an advertiser can purchase a set amount of impressions (an impression is a single instance of an ad appearing on a Web page) on a cost per thousand basis.

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Key benefits that The WebMD Health Network offers healthcare advertisers and other sponsors include:

•  we displayed over 2.3 billion pages of healthcare information to users visiting our sites in 2005, which we believe is a much larger number of pages than was published by any other sponsor supported health-oriented Web portal;

•  our ability to help advertisers and sponsors reach specific groups of consumers and physicians by specialty, product, disease, condition or wellness topic, which typically produces a more efficient and productive marketing campaign;

•  our ability to provide advertisers and other sponsors with objective measures of the effectiveness of their online marketing, such as activity levels within the sponsored content area; and

•  the broad reach of Medscape’s educational related activities for physicians and other healthcare professionals.

The contracts that we enter into with our advertisers and sponsors often include guarantees with respect to the number of visitors that visit the client sponsored-area, but do not generally include assurances with respect to the number of clicks or actions taken through such Web sites.

We provide healthcare advertisers and other sponsors with the means to communicate with targeted groups of consumers and physicians by offering placements and programs in the most relevant locations on our portals. The following are some of the types of placements and programs we offer to advertisers and sponsors:

•  Media Solutions.  These are traditional online advertising solutions, such as banners, used to reach health-involved consumers. In addition, clients can sponsor a variety of condition-specific or specialty-specific e-newsletters, keyword searches and specific educational programs.

•  Sponsored Content Solutions.  These are customized collections of articles, topics, and decision-support tools and applications, sponsored by clients and distributed within WebMD Health.

•  Patient Education Centers.  Patient education centers are sponsored destinations on Medscape for physicians to access patient education materials on a particular topic or condition.

Our private portals do not generate revenue from advertising or sponsorship. See “— Private Portals” below.

We receive revenue for the creation and distribution of CME and other educational programs sponsored by pharmaceutical and medical device companies, as well as foundations and government agencies. The following are some of the CME products for which we receive funding:

•  Conference Coverage.  Coverage of major medical conferences.

•  CME Circle.  Third party CME activities, including symposia, monographs and CD-ROMs, which we distribute online.

•  CME Live.  Original online events featuring live streaming video, audio and synchronized visual presentation by experts.

•  CME Cases.  Original CME activities presented by healthcare professionals in a patient case format.

•  Resource Centers.  Grant-based collections of content relating to conditions such as congestive heart failure or breast cancer. These centers include news, expert columns, guidelines and reference material.

Sales and Marketing

Our sales, marketing and account management personnel work with pharmaceutical, medical device, biotechnology and consumer products companies to place their advertisements and other sponsored products on our public portals and in some of our publications. These individuals work closely with clients and potential clients to develop innovative means of bringing their companies and their products and services to

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the attention of targeted groups of consumers and healthcare professionals, and to create channels of communication with these audiences.

We seek to attract traffic and new members to our consumer Web sites through a variety of methods to increase the awareness of our brand. We include a number of third party Web sites that we support as part of The WebMD Health Network. During 2005, third party sites accounted for approximately 12% of The WebMD Health Network’s aggregate page views. For all third party Web sites that are included in The WebMD Health Network, we control the content and sell the advertising on the portions of the sites that we program.

Under our agreement with News Corporation, the company that owns FoxNews, which runs through August 2010, we receive advertising services, principally on the News Corporation television and cable properties. Approximately $30 million of advertising services have been made available for the 12 months ending August 2005 and $12 million of advertising will be available in each of the next five contract years thereafter ending August 2010. We use this advertising for the purpose of building brand awareness and as a complement to our online programs.

Private Portals

Introduction

In response to increasing healthcare costs, employers and payers have been enhancing wellness programs, educating employees, changing benefit plan designs to increase deductibles, co-payments and other out-of-pocket costs and taking other steps to motivate their members and employees to use healthcare in a cost-effective manner. The new plan designs include high deductible health plans that increase consumer responsibility for healthcare costs and healthcare decision-making. These are often referred to as consumer-directed health plans. Consumer-directed health plans generally combine high deductible health insurance with a cash account, such as a health reimbursement arrangement (HRA) or a health savings account (HSA), containing pre-tax funds that employees can spend on covered healthcare expenses. The goal is to put employees in control of the first dollars they spend on healthcare each year and give them pertinent information about healthcare costs and quality, so that they are able to make financially responsible and informed healthcare purchasing decisions.

In connection with the shift to employees of a greater portion of decision-making and responsibility for healthcare costs, employers and health plans generally also make available health and benefits information and decision-support tools to educate and help their employees make informed decisions about treatment options, health risks and healthcare providers. We believe that our WebMD Health and Benefits Manager private portals provide the tools and information employees and plan members need to take a more active role in their healthcare. Our cost-effective, online solutions complement the employer’s or payer’s existing benefit-related services and offline educational efforts. As part of this increase in the use of information technology in healthcare on the part of employees and plan members, employers and plans have recognized that the creation of the personal health record for an employee or plan member is an important application to centralize the employee or plan member experience in order to achieve the objectives of improved quality and lower cost of care. We believe that our WebMD Health and Benefits Manager tools, including our personal health record application, are well positioned to play a role in such efforts. By making the needed information and decision-support tools available through a convenient and easy-to-use online service, employers and payers can help their employees and members make choices that reduce both administrative and benefits costs. A 2005 study commissioned by the Blue Cross and Blue Shield Association and conducted by the RAND Corporation concluded that Web-based treatment decision-support tools can play an important role in assisting in consumer treatment decisions to foster improved outcomes. For example, RAND cited studies that showed consumers who use decision-support tools are less likely to choose elective surgery in favor of less invasive procedures and are more likely to get preventive care.

For the reasons described above, we believe that the increased shift to employees of a greater share of decision-making and responsibility for health care costs, including increased enrollment in high deductible consumer-directed health plans and increased use of information technology (including personal health records) to assist employees in making informed decisions about healthcare, will be a significant driver for the

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growth of our private portals during the next several years. In addition, as described in more detail below, we believe that there are benefits to employers and health plans, regardless of health plan design considerations, in making the WebMD Health and Benefits Manager services available to their employees and members, including reduced benefits administration costs, communication and customer service costs, as well as more efficient coordination of messaging through the use of integrated employee or member profiles and an increase in appropriate utilization of third party services like disease management, health coaching or pharmacy benefit management.

Membership for each of our private portals is limited to the employees and members of the respective employer and health plan clients. Each member must initially register on the private portal provided to them, at which point they are given a unique user identification name and passcode that they must utilize to achieve a secure sign-on each time they enter the private portal.

The WebMD Health and Benefits Manager

We provide proprietary health and benefit management services through private online portals that we host for employers and health plan sponsors. Our WebMD Health and Benefits Manager private portals provide a personalized user experience by integrating individual user data (including personal health information) and plan-specific data from our employer or health plan client, with much of the content, decision-support technology and personal communication services we make available through our public portals. Our applications are typically accessed through a client’s Web site or intranet and provide secure access for employees and plan members. We also offer a software platform that allows us to seamlessly integrate third party applications and data. The portal is presented to each employee or health plan member as a personal home page, with direct access to relevant content, tools and other resources specific to the individual’s eligibility, coverage and health profile. The WebMD Health and Benefits Manager provides a user-friendly experience that enables the employee or member to access and manage the individually tailored health and benefits information and decision-support technology in one place, with a common look and feel, and with a single sign-on. The components of the WebMD Health and Benefits Manager include:

•  WebMD Personal Health Manager.  WebMD Personal Health Manager includes health risk assessment tools, an electronic personal health record and a suite of treatment decision-support applications. These services enable employees and plan members to understand their risks with regard to specific conditions and store this information as well as other medical data, including medication and treatment history, in an electronic health record. Our services enable employees and plan members to receive targeted information, programs or messages specific to the individual employee’s or plan member’s needs, based upon the information they store in their master profile.

•  WebMD Benefit Manager.  WebMD Benefit Manager is a set of benefit decision-support applications that explain and provide comparisons of health plan benefit choices, facilitating informed selection and use of the employee’s benefit options. For example, CostCompare allows an employee to forecast and model individual premium and out-of-pocket costs for the different types of benefit programs the plan sponsor may offer. A newly developed product, The Cost Estimator, will provide a yearlong resource for consumers to estimate the total treatment costs of over 300 procedures, interventions or tests.

•  WebMD Integration Services.  WebMD offers a set of sophisticated integration services that facilitates seamless access from the WebMD Health and Benefits Manager to third party Web sites. This functionality allows employers and health plans to present their benefit programs within a single, unified interface, enabling end-users to access third party Web sites without leaving our secure portals. Users of our application integration services are able to, among other things, view medical claims at their health plan sites, re-order medication from a pharmacy site and import medical, pharmacy and lab claims data. In addition, our Data Interchange services import data from medical, pharmacy and lab claims information into the WebMD Health and Benefits Manager.

•  WebMD Provider Decision-Support.  As a result of our acquisition of HealthShare Technology, Inc. (or HealthShare) in March 2005, our decision-support suite now provides the capability for employees and health plan members to compare relative cost and quality measures of hospitals in order to select the

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hospital they believe is most suited to their individual needs. These comparisons are based on evidence-based measures, such as volume of patients treated for particular illnesses or procedures, mortality rates, unfavorable outcomes for specific problems, average number of days patients stayed in hospitals and average hospital charges for procedures or illnesses.

•  WebMD Site Manager.  WebMD Site Manager is our online service and administrative suite of applications that enables our clients to manage many of the WebMD Health and Benefits Manager functions locally without assistance from WebMD staff. With Site Manager, employers and health plans are able to analyze aggregate health data, address population health risks more effectively and proactively implement preventive programs. Site Manager’s messaging capabilities also allow employers to streamline their communication with their employees.

We believe that our services provide the following potential benefits to an employer or health plan:

•  reduced benefits administration, communication, and customer service costs;

•  more efficient coordination of messaging through the use of integrated member profiles;

•  increased tax savings through increased employee participation in Flexible Spending Accounts or HSAs;

•  reduced hospital, physician and drug costs through more informed utilization of the benefit plan;

•  increased enrollment in health management programs including disease management or health coaching;

•  increased member satisfaction with the employer and the benefit plan; and

•  increased conformance with benefit plan and clinical protocols.

In addition, we believe that our services provide the following potential benefits to employees or plan members:

•  increased tax savings through increased participation in Flexible Spending Accounts;

•  reduced benefit costs through more informed choice of benefit plan options and more informed use of the chosen benefit plan;

•  improved health outcomes through more informed choice of providers and treatment choices; and

•  improved understanding and management of health conditions through access to support tools and educational information.

Relationships with Private Portal Licensees

We generate revenue from our private portals through licensing content and technology to employers and to health plans either directly or through our distributors. Companies utilizing our private portal applications include employers, such as American Airlines, Inc., Microsoft Corporation, PepsiCo, Inc. International Business Machines Corporation and EMC Corporation, and health plans, such as Cigna, Empire Blue Cross and Blue Shield and Horizon Blue Cross and Blue Shield. In addition, we have entered into a multi-year agreement to license our online health and benefits platform to Wellpoint, Inc., the largest publicly traded commercial health and benefits company in terms of membership. Under this agreement, Wellpoint is integrating our private portal services into its member portals.

A typical contract for a private portal license provides for a multi-year term. The pricing of these contracts is generally based on several factors, including the complexity involved in installing and integrating our private portal platform, the number of our private portal tools and applications, the services being provided, the degree of customization of the services involved and the anticipated number of employees or members covered by such license. Our private portals are not part of The WebMD Health Network and do not involve advertising or sponsorship by third parties; we do not include private portal users or page views when we measure The WebMD Health Network’s traffic volume.

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Relationship with Fidelity Human Resources Services Company LLC

In February 2004, we entered into a relationship with Fidelity Human Resources Services Company LLC, or FHRS, a provider of human resources and benefits outsourcing administration services. Pursuant to the agreement, FHRS serves as a distributor of our private portal services, and in connection therewith, FHRS integrates our products with FHRS’s products to offer employer customers of FHRS an integrated solution through FHRS’s NetBenefits^® Web site. FHRS’s integrated solutions provide employees with employer-provided health plan information and our personal health management tools allow employees to access a personalized view of their health care options so that they can make more informed healthcare decisions.

Pursuant to the agreement, we have agreed to cooperate in marketing and selling to clients that are purchasing FHRS’s health and welfare benefits outsourcing services. For those clients, the NetBenefits site is marketed as the preferred delivery mechanism for the WebMD private portal applications. However, a client always retains the right to contract directly with us, and we are permitted to provide our services directly to a client if a client so requests. Under our agreement with FHRS, FHRS has retained the right to terminate the distribution of the WebMD private portal tools to an individual client at any time.

The initial term of the agreement runs through August 31, 2007, and FHRS has the right to renew the agreement for additional terms of one year after the initial term (not to exceed four (4) one-year renewal terms). FHRS has agreed to certain minimum levels of employees to be covered under the agreement. FHRS is an affiliate of FMR Corp, which reported beneficial ownership of approximately 2.7% of our common stock at December 31, 2005, and 15.5% and 10.8% of Emdeon’s common stock at December 31, 2005 and December 31, 2004, respectively.

Sales and Marketing

We market our private online portals to employers and health plans through a dedicated sales, marketing and account management team and through relationships with employee benefits consultants, distributors and other companies that assist employers in purchasing or managing employee benefits, including FHRS. See “— Relationship with Fidelity Human Resources Services Company LLC” above for more information regarding our relationship with FHRS.

Technological Infrastructure

Our Internet-based services are delivered through Web sites designed to address the healthcare information needs of consumers and healthcare professionals with easy-to-use interfaces, search functions and navigation capabilities. We use customized content management and publishing technology to develop, edit, publish, manage, and organize the content for our Web sites. We use ad-serving technology to store, manage and serve online advertisements in a contextually relevant manner to the extent possible. We also use specialized software for delivering personalized content through the WebMD Health and Benefits Manager and, for registered members, through our public Web sites. We have invested and intend to continue to invest in software and systems that allow us to meets the demands of our users and sponsors. Our development and engineering expense totaled $5.8 million in 2005, $4.5 million in 2004, and $4.8 million in 2003.

Continued development of our technological infrastructure is critical to our success. Our development teams work closely with marketing and account management employees to create content management capabilities, interactive tools and other applications for use across all of our portals. The goal of our current and planned investments is to further develop our content and technology platform serving various end-users, including consumers and physicians, and to create innovative services that provide value for healthcare advertisers, employers, payers, and other sponsors. See “Our Public Portals: The WebMD Health Network — Consumer Portals in The WebMD Health Network — Recent Site Design and Infrastructure Initiatives” above and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” below.

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User Privacy and Trust

General.  We have adopted internal policies and practices relating to, among other things, content standards and user privacy, designed to foster our relationships with our users. Some of those policies are described below. In addition, we participate in the following external, independent verification programs:

•  URAC.  We were awarded e-Health accreditation from URAC, an independent accrediting body that has reviewed and approved the WebMD.com site and our private portal deployment of WebMD Health Personal Manager for compliance with its more than 50 quality and ethics standards.

•  TRUSTe.  We are a licensee of the TRUSTe Privacy Program. TRUSTe is an independent, non-profit organization whose goal is to build users’ trust and confidence in the Internet. In January 2005, a panel of privacy experts, sponsored by TRUSTe, ranked us among the ten most trusted companies in America for privacy.

•  Health on the Net Foundation.  Our WebMD.com and MedicineNet.com sites comply with the principles of the HON Code of Conduct established by the Health on the Net Foundation.

Privacy Policies.  We understand how important the privacy of personal information is to our users. Our Privacy Policies are posted on our Web sites and inform users regarding the information we collect about them and about their use of our portals and our services. Our Privacy Policies also explain the choices users have about how their personal information is used and how we protect that information.

Advertising and Promotion Policies.  We have sole discretion for determining the types of advertising that we accept on our Web sites. All advertisements, sponsorships and promotions that appear on our Web sites must comply with our advertising and promotions policies. We do not accept advertising that, in our opinion, is not factually accurate or is not in good taste. We also recognize and maintain a distinct separation between advertising content that appears on our Web sites and editorial content that we publish. We believe that we take appropriate steps to ensure that our users can easily distinguish between sponsored content and our news reporting and other editorial content.

PUBLISHING AND OTHER SERVICES

Offline Publications

Our offline publications for consumers, physicians and other healthcare professionals include:

The Little Blue Book.  In 2003, we acquired The Little Blue Book. The Little Blue Book is a physician directory published annually in 146 distinct geographic editions, and contains practice information on an aggregate of approximately 412,000 physicians. Physicians utilize The Little Blue Book for local and up-to-date physician, pharmacy and hospital contact information. Physicians are listed free of charge in their local area edition, along with their specialties, HMO affiliations, office addresses and telephone numbers. We also use the information used to produce The Little Blue Book to generate both online and offline directory and information products.

Reference Publications.  We publish medical reference publications, including ACP Medicine and ACS Surgery: Principles and Practice. ACP Medicine and ACS Surgery are official publications of the American College of Physicians and the American College of Surgeons, respectively, although we wholly own the rights to each of these publications. They are available for sale by subscription to individual physicians and to institutions in multiple formats (print, CD-ROM and Online). ACP Medicine has been a comprehensive and regularly updated internal medicine reference for over 27 years.

WebMD the Magazine.  We launched WebMD the Magazine in April 2005 with an initial distribution of 1,000,000 copies. WebMD the Magazine is a full size, consumer publication delivered free of charge to approximately 85% of physicians’ offices in the United States. The editorial format of WebMD the Magazine is specifically designed for the physician’s waiting room. Its editorial features and highly interactive format of assessments, quizzes and questions are designed to inform consumers about important health and wellness

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topics. Its distribution allows sponsors to extend their advertising’s reach and to deliver their message when consumers are actively engaged in the healthcare process, and allows us to extend our brand into offline channels and attract incremental advertising dollars.

Offline CME Services

As a result of our acquisition of the assets of Conceptis in December 2005, we now have the capability to conduct in-person CME.

Sales and Marketing

We market The Little Blue Book through a team of third party marketers, as well as WebMD Health sales persons. In addition, we also market WebMD the Magazine through a team of third party marketers.

COMPETITION

The markets we participate in are intensely competitive, continually evolving and, in some cases, subject to rapid change. Some of our competitors have greater financial, technical, marketing and other resources than we do and some are better known than we are. We cannot provide assurance that we will be able to compete successfully against these organizations. We also compete, in some cases, with joint ventures or other alliances formed by two or more of our competitors or by our competitors with other third parties. Since there are no substantial barriers to entry into the markets in which we participate, we expect that additional competitors will continue to enter these markets.

Public Portals

Our public portals face competition from numerous other companies, both in attracting users and in generating revenue from advertisers and sponsors. We compete with online services and Web sites that provide health-related information, including both commercial sites and not-for-profit sites. These competitors include Web sites like yahoo.com, msn.com and About.com that provide general purpose consumer online services and portals and other high-traffic Web sites that include healthcare-related and non-healthcare-related content and services. Our competitors also include more specialized providers of online services, tools and applications for healthcare consumers, such as iVillage.com, DrKoop.com and drugs.com. Our competitors that provide services, tools and applications to physicians include merkmedicus.com, uptodate.com and mdconsult.com. We also face competition from governmental and non-profit sites, such as NIH.gov and CDC.gov.

Other competitors for advertising and sponsorship revenue include:

•  publishers and distributors of traditional offline media, including television and magazines targeted to consumers, as well as print journals and other specialized media targeted to healthcare professionals, many of which have established or may establish their own Web sites or partner with other Web sites;

•  offline medical conferences, CME programs and symposia; and

•  vendors of healthcare information, products and services distributed through other means, including direct sales, mail and fax messaging.

We may, in the future, also face competition for advertising and sponsorship revenue from companies that currently carry our content, including AOL.

Competitors for the attention of healthcare professionals and consumers include:

•  the competitors for advertisers and sponsors described above; and

•  public sector, non-profit and other Web sites that provide healthcare information without advertising or sponsorships from third parties.

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Private Portals

Our private portals compete with various providers and vendors in the licensing of content and in the sale of decision-support services and tools. Our competitors in this market include:

•  providers of decision-support tools, such as Hewitt Associates LLP and Subimo, LLC;

•  wellness and disease management vendors, including Mayo Foundation for Medical Education and Research and Staywell Productions/MediMedia USA, Inc.;

•  suppliers of online health management applications, including HealthMedia, Health A-Z and Consumer Health Interactive; and

•  health information services and health management offerings of health plans and their affiliates, including those of Humana, Aetna and United Healthcare.

Offline Publications

Our offline publications compete with numerous other online and offline sources of healthcare information, including traditional medical reference publications, print journals and other specialized publications targeted to physicians, some of which have a more complete range of titles and better access to traditional distribution channels than we have.

OTHER INFORMATION

Employees

As of December 31, 2005, we had approximately 720 employees. Since our initial public offering, we have continued to be dependent on Emdeon to provide us with services for our business pursuant to the Services Agreement we entered into with Emdeon in September 2005. We expect that we would have to hire additional employees in order to provide all such services internally.

Intellectual Property

We rely upon a combination of patent, trade secret, copyright and trademark laws, license agreements, confidentiality procedures, employee and client nondisclosure agreements and technical measures to protect the intellectual property used in our business.

We use trademarks, trade names and service marks for healthcare information services and technology solutions, including WebMD^®, WebMD Health^®, Medscape^®, CME Circle^®, The Little Blue Book^tm, MedicineNet^®, Theheart.org^®, eMedicine^®, RxList^® and Select Quality Care^®. We also use other registered and unregistered trademarks and service marks for our various products and services. In addition to our trademark registrations and applications, we have registered the domain names that either are or may be relevant to conducting our business names, including “webmd.com,” “my.webmd.com” and “medscape.com.” We also rely on a variety of intellectual property rights that we license from third parties, including our Internet server software, and healthcare content used on our Web sites. In addition, the American College of Physicians permits WebMD to use the ACP name in the title of ACP Medicine and the American College of Surgeons permits WebMD to use the name ACS in the title of ACS Surgery: Principles and Practice. Our right to use the name ACP expires in January 2009 and our right to use the name ACS expires in August 2008. We hold all rights to the trademarks, trade names and service marks we use.

Seasonality

For a discussion of seasonality affecting our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Seasonality.”

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GOVERNMENT REGULATION

Introduction

General.  This section of the Annual Report contains a description of laws and regulations applicable to us, either directly or through their effect on our healthcare industry customers. Both existing and future laws and regulations affecting the healthcare, information technology and Internet industries could create unexpected liabilities for us, could cause us to incur additional costs and could restrict our operations. Many of the laws that affect us, and particularly those applying to healthcare, are very complex and may be subject to varying interpretations by courts and other governmental authorities. Our failure, or the failure of our business partners, to accurately anticipate the application of these laws and regulations, or other failure to comply, could create liability for us, result in adverse publicity and negatively affect our businesses.

Healthcare Regulation.  Most of our revenue flows either directly from the healthcare industry or from other sources that could be affected by changes affecting healthcare spending. 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 as well as the behavior and attitudes of consumers. Federal and state legislatures and agencies periodically consider programs to reform or revise aspects of 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 products and services. We are unable to predict future proposals with any certainty or to predict the effect they would have on our businesses.

Many healthcare laws are complex, and their application to specific products and services may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the healthcare information services that we provide. However, these laws and regulations may nonetheless be applied to our products and services.

Other Regulation.  This section of the Annual Report also contains a description of other laws and regulations, including general consumer protection laws and Internet-related laws that affect some of our businesses. Laws and regulations have been adopted, and may be adopted in the future, that address Internet-related issues, including online content, privacy, online marketing, unsolicited commercial e-mail, taxation, pricing, and quality of products and services. Some of these laws and regulations, particularly those that relate specifically to the Internet, were adopted relatively recently, and their scope and application may still be subject to uncertainties. Interpretations of these laws, as well as any new or revised law or regulation, could decrease demand for our services, increase our cost of doing business, or otherwise cause our business to suffer.

Regulation of Drug and Medical Device Advertising and Promotion

The FDA and the FTC regulate the form, content and dissemination of labeling, advertising and promotional materials prepared by, or for, pharmaceutical or medical device companies, including direct-to-consumer (or DTC) prescription drug and medical device advertising. The FTC regulates over-the-counter drug advertising and, in some cases, medical device advertising. Generally, based on FDA requirements, regulated companies must limit advertising and promotional materials to discussions of FDA-approved uses and claims. In limited circumstances, regulated companies may disseminate certain non-promotional scientific information regarding product uses or claims not yet approved by the FDA.

Information that promotes the use of pharmaceutical products or medical devices that is put on our Web sites is subject to the full array of the FDA and FTC requirements and enforcement actions and information regarding other products and services is subject to FTC requirements. Areas of our Web sites that could be the primary focus of the FDA and FTC include pages and programs that discuss use of an FDA-regulated product or that the regulators believe may lack editorial independence from the influence of sponsoring pharmaceutical or medical device companies. Our television broadcast advertisements may also be subject to FTC regulation

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and FDA regulation depending on the content. The FDA and the FTC place the principal burden of compliance with advertising and promotional regulations on advertisers and sponsors to make truthful, substantiated claims. If the FDA or the FTC finds that any information on our Web site violates FDA or FTC regulations, they may take regulatory or judicial action against us or the advertiser or sponsor of that information. State attorneys general may also take similar action based on their state’s consumer protection statutes.

Drug Advertising.  The Federal Food, Drug, and Cosmetic Act, or FDC Act, requires that prescription drugs (including biological products) be approved for a specific medical indication by the FDA prior to marketing. It is a violation of the FDC Act and of FDA regulations to market, advertise or otherwise commercialize such products prior to approval. The FDA does allow for preapproval exchange of scientific information, provided it is nonpromotional in nature and does not draw conclusions regarding the ultimate safety or effectiveness of the unapproved drug. Upon approval, the FDA’s regulatory authority extends to the labeling and advertising of prescription drugs offered in interstate commerce. Such products may only be promoted and advertised for approved indications. In addition, the labeling and advertising can be neither false nor misleading, and must present all material information, including risk information, in a balanced manner. Labeling and advertising that violate these legal standards are subject to FDA enforcement action.

The FDA regulates the safety, effectiveness, and labeling of over-the-counter drugs, or OTC drugs, under the FDC Act either through specific product approvals or through regulations that define approved claims for specific categories of such products. The FTC regulates the advertising of OTC drugs under the section of the Federal Trade Commission Act that prohibits unfair or deceptive trade practices. Together, the FDA and FTC regulatory framework requires that OTC drugs be formulated and labeled in accordance with FDA approvals or regulations and promoted in a manner that is truthful, adequately substantiated, and consistent with the labeled uses. OTC drugs that do not meet these requirements are subject to FDA or FTC enforcement action depending on the nature of the violation. In addition, state attorneys general can also bring enforcement actions for alleged unfair or deceptive advertising.

There are several administrative, civil and criminal sanctions available to the FDA for violations of the FDC Act or FDA regulations as they relate to labeling and advertising. Administrative sanctions may include a written request that violative advertising or promotion cease and/or that corrective action be taken, such as requiring a company to provide to healthcare providers and/or consumers information to correct misinformation previously conveyed. In addition, the FDA may use publicity, such as press releases, to warn the public about false and misleading information concerning a drug or medical device product. More serious civil sanctions include seizures, injunctions and consent decrees. Such measures could prevent a company from introducing or maintaining its product in the marketplace. Criminal penalties for severe violations can result in a prison term and/or substantial fines. State attorneys general have similar investigative tools and sanctions available to them as well. The National Association of Attorneys General has formed a Prescription Drug Task Force that has been active in addressing issues related to prescription drugs.

Any increase in FDA regulation of the Internet or other media for DTC advertisements of prescription drugs could make it more difficult for us to obtain advertising and sponsorship revenue. In the last 15 years, the FDA has gradually relaxed its formerly restrictive policies on DTC advertising of prescription drugs. Companies can now advertise prescription drugs to consumers in any medium provided that they satisfy FDA requirements. However, legislators, physician groups and others have criticized the FDA’s current policies, and have called for restrictions on advertising of prescription drugs to consumers and increased FDA enforcement. These critics point to both public health concerns and to the laws of many other countries that make DTC advertising of prescription drugs a criminal offense. Scrutiny of DTC advertising increased after Vioxx^® was withdrawn from the market due to potential safety concerns in September 2004. Industry trade groups, such as the Pharmaceuticals Research and Manufacturers of America, have implemented voluntary guidelines for DTC advertising in response to public concerns. The FDA has been actively considering revisions to its DTC advertising policy. In November 2005, it hosted a two-day public meeting to solicit input on the impact of DTC advertising on the public health and, as recently as January 2006, announced that it will propose a study on the impact of price incentives, such as coupons, in DTC advertising. Congress has also shown interest in the issue. Despite recent industry efforts to address the issue, there is a reasonable possibility that Congress,

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the FDA or the FTC may alter its present policies on DTC advertising of prescription drugs or medical devices in a material way. We cannot predict what effect any such changes would have on our business.

Continuing Medical Education.  Activities and information provided in the context of a medical or scientific educational program, including CME, are not regulated by the FDA if they are non-promotional. The FDA does, however, evaluate such activities to determine whether they are independent of the promotional influence of the drug or medical device sponsor or whether they are promotional activities subject to the FDA’s advertising and labeling requirements. To determine whether a company’s activities are sufficiently independent, the FDA looks at a number of factors related to the planning, content, speakers and audience selection of such activities. To the extent that the FDA concludes that such activities are not independent from a manufacturer, such content must fully comply with the FDA’s requirements. If the FDA or other regulatory agency finds that an educational program violates the applicable requirements, we may face regulatory action or the loss of accreditation.

During the past several years, educational programs directed toward physicians, including CME, have been subject to increased scrutiny to ensure that sponsors do not influence or control the content of the program. In response to governmental and industry initiatives, pharmaceutical companies have been developing and implementing internal controls and procedures that promote adherence to applicable regulations and requirements. In implementing these controls and procedures, different clients may interpret the regulations and requirements differently and may implement procedures or requirements that vary from client to client. These controls and procedures:

•  may discourage pharmaceutical companies from engaging in educational activities;

•  may slow their internal approval for such programs;

•  may reduce the volume of sponsored educational programs implemented through our Medscape Web site to levels that are lower than in the past; and

•  may require us to make changes to how we offer or provide educational programs, including CME.

In addition, future changes to existing regulations or accreditation standards, or to the internal compliance programs of potential clients, may further discourage or prohibit potential clients from engaging in educational activities with us, or may require us to make further changes in the way we offer or provide educational programs.

Medical Professional Regulation

The practice of most healthcare professions requires licensing under applicable state law. In addition, the laws in some states prohibit business entities from practicing medicine, which is referred to as the prohibition against the corporate practice of medicine. We do not believe that we engage in the practice of medicine, and we have attempted to structure our Web site, strategic relationships and other operations to avoid violating these state licensing and professional practice laws. We do not believe that we provide professional medical advice, diagnosis or treatment. We employ and contract with physicians who provide only medical information to consumers, and we have no intention to provide medical care or advice. A state, however, may determine that some portion of our business violates these laws and may seek to have us discontinue those portions or subject us to penalties or licensure requirements. Any determination that we are a healthcare provider and acted improperly as a healthcare provider may result in liability to us. Many states regulate the ability of medical professionals to advertise or maintain referral services. We do not represent that a physician’s use of our Web site will comply with these or other state laws regulating professional practice. It is possible a state or a court may determine we are responsible for any non-compliance with these laws, which could affect our ability to offer this service to our customers.

Anti-Kickback Laws

There are federal and state laws that govern patient referrals, physician financial relationships and inducements to healthcare providers and patients. The federal healthcare program’s anti-kickback law prohibits

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any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. These laws are applicable to manufacturers and distributors and, therefore, may restrict how we and some of our customers market products to healthcare providers. Also, in 2002, the Office of the Inspector General (or OIG) of the United States Department of Health and Human Services (or HHS), the federal government agency responsible for interpreting the federal anti-kickback law, issued an advisory opinion that concluded that the sale of advertising and sponsorships to healthcare providers and vendors by Web-based information services implicates the federal anti-kickback law. However, the advisory opinion suggests that enforcement action will not result if the fees paid represent fair market value for the advertising/sponsorship arrangements, the fees do not vary based on the volume or value of business generated by the advertising and the advertising/sponsorship relationships are clearly identified as such to users. We carefully review our practices with regulatory experts in an effort to ensure that we comply with all applicable laws. However, the laws in this area are both broad and vague, and it is often difficult or impossible to determine precisely how the laws will be applied, particularly to new services. Penalties for violating the federal anti-kickback law include imprisonment, fines and exclusion from participating, directly or indirectly, in Medicare, Medicaid and other federal healthcare programs. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to civil or criminal penalties and require us to change or terminate some portions of our business and could have an adverse effect on our business. Even an unsuccessful challenge by regulatory authorities of our practices could cause us adverse publicity and be costly for us to respond to.

HIPAA Privacy Standards

The Privacy Standards under the Health Insurance Portability and Accountability Act of 1996 (or HIPAA) establish a set of basic national privacy standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses, healthcare providers and their business associates. The Privacy Standards do not apply directly to us. However, portions of our business such as those managing employee or plan member health information for employers or health plans, are bound by certain contracts and agreements to use and disclose protected health information in a manner consistent with the Privacy Standards. Only covered entities are subject to potential civil and criminal liability under the Privacy Standards. However, depending on the facts and circumstances, we could be subject to criminal liability for aiding and abetting or conspiring with a covered entity to violate the Privacy Standards. We cannot assure you that we will adequately address the risks created by the Privacy Standards 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 might be made in the future or how those changes could affect our business.

Other Restrictions Regarding Confidentiality and Privacy of Patient Information

In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of patient health information. In addition, some states are considering new laws and regulations that further protect the privacy and confidentiality of medical records or medical information. In many cases, these state laws are not preempted by the HIPAA Privacy Standards and may be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our customers and strategic partners. These laws at a state or federal level, or new interpretations of these laws, could create liability for us, could impose additional operational requirements on our business, could affect the manner in which we use and transmit patient information and could increase our cost of doing business. In addition, parties may also have contractual rights that provide additional limits on our collection, dissemination, use, access to and confidentiality of patient health information. Claims of violations of privacy rights or contractual breaches, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

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International Data Regulation

Our public portals are not directed to non-U.S. users. Nearly all of the users of our private portals are U.S. employees or plan members. As a result, we do not believe that we currently conduct our business in a manner that subjects us to international data regulation in any material respect. However, other countries also have, or are developing, their own laws governing the collection, use, storage and dissemination of personal information or patient data. Those governments may attempt to apply such laws extraterritorially or through treaties or other arrangements with U.S. governmental entities. We might unintentionally violate such laws, such laws may be modified, and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to accurately anticipate the application or interpretation of these laws could create liability to us, result in adverse publicity and negatively affect our businesses, impose additional operational requirements or restrictions on our business, affect the manner in which we use or transmit data and increase our cost of doing business.

Consumer Protection Regulation

General.  Advertising and promotional activities presented to visitors on our Web sites are subject to federal and state consumer protection laws which regulate unfair and deceptive practices. We are also subject to various other federal and state consumer protection laws, including the ones described below.

CAN-SPAM Act.  On January 1, 2004, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, became effective. The CAN-SPAM Act regulates commercial emails, provides a right on the part of the recipient to request the sender to stop sending messages, and establishes penalties for the sending of email messages which are intended to deceive the recipient as to source or content. Under the CAN-SPAM Act, senders of commercial emails (and other persons who initiate those emails) are required to make sure that those emails do not contain false or misleading transmission information. Commercial emails are required to include a valid return email address and other subject heading information so that the sender and the Internet location from which the message has been sent are accurately identified. Recipients must be furnished with an electronic method of informing the sender of the recipient’s decision to not receive further commercial emails. In addition, the email must include a postal address of the sender and notice that the email is an advertisement. The CAN-SPAM Act may apply to the e-newsletters that our public portals distribute to members and to some of our other commercial email communications. However, there may be additional FTC regulations indicating that our e-newsletters are outside the scope of the CAN-SPAM Act. At this time, we are applying the CAN-SPAM requirements to these email communications, and believe that our email practices comply with the requirements of the CAN-SPAM Act. Many states have also enacted anti-spam laws. The CAN-SPAM Act preempts many of these statutes. To the extent that these laws are not preempted, we believe that our email practices comply with these laws.

Regulation of Advertisements Sent by Fax.  Section 227 of the Communications Act, which codifies the provisions of the Telephone Consumer Protection Act of 1991 (or TCPA), prohibits the transmission of an “unsolicited advertisement” via facsimile to a third party without the consent of that third party. An “unsolicited advertisement” is defined broadly to include any material advertising the commercial availability or quality of any property, goods or services. In 2005, the Junk Fax Prevention Act (or JFPA) was signed into law, which codified a previous interpretation of the TCPA by the Federal Communications Commission (or FCC) that a commercial fax is not “unsolicited” if the transmitting entity has an “established business relationship,” as defined by the JFPA and applicable FCC regulations, with the recipient. The FCC has initiated a proceeding to incorporate the terms of the JFPA into its rules and to implement the JFPA’s other provisions, which include certain disclosure and opt-out requirements. The FCC is expected to issue its final rules by April 5, 2006.

States from time to time have enacted, or have attempted to enact, their own requirements pertaining to the transmission of commercial faxes. To the extent these state requirements have conflicted with federal requirements, they have to date been successfully challenged. California recently attempted to enact a more restrictive fax advertising law. The law would require that interstate and intrastate facsimile senders obtain express written permission from a recipient before sending an unsolicited advertisement via fax to any person

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or business, regardless of whether the fax recipient is an existing customer. A federal court has determined, however, that California cannot impose such a requirement on interstate fax transmissions, and has stayed the enactment of this law pending further deliberations on its application to intrastate fax transmissions.

We cannot predict the outcome of the FCC’s rulemaking proceeding or the extent to which California or other states may successfully enact more restrictive commercial fax laws in the future. We transmit commercial faxes to physician office practices in connection with our Little Blue Book business, and we intend to comply with all applicable federal and state requirements governing the transmission of such faxes.

COPPA.  The Children’s Online Privacy Protection Act, or COPPA, applies to operators of commercial Web sites and online services directed to U.S. children under the age of 13 that collect personal information from children, and to operators of general audience sites with actual knowledge that they are collecting information from U.S. children under the age of 13. Our sites are not directed at children and our general audience site, WebMD Health, states that no one under the applicable age is entitled to use the site. In addition, we employ a kick-out procedure whereby anyone identifying themselves as being under the age of 13 during the registration process is not allowed to register for the site’s member only services, such as message boards and live chat events. COPPA, however, can be applied broadly and is subject to interpretation by courts and other governmental authorities. The failure to accurately anticipate the application or interpretation of this law could create liability for us, result in adverse publicity and negatively affect our business.

Regulation of Contests and Sweepstakes.  We conduct contests and sweepstakes in some of our marketing channels. The federal Deceptive Mail Prevention and Enforcement Act and some state prize, gift or sweepstakes statutes may apply to these promotions. We believe that we are in compliance with any applicable law or regulation when we run these promotions.

FACTA.  In an effort to reduce the risk of identity theft from the improper disposal of consumer information, Congress recently passed the Fair and Accurate Credit Transactions Act (or FACTA) which requires businesses to take reasonable measures to prevent unauthorized access to such information. FACTA’s disposal standards are flexible and allows businesses discretion in determining what measures are reasonable based upon the sensitivity of the information, the costs and benefits of different disposal methods and relevant changes in technology. We believe that we are in compliance with FACTA.

Data Protection Regulation.  With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, many states have passed laws regulating the actions that a business must take if it experiences a data breach, such as prompt disclosure to affected customers. Generally, these laws are limited to electronic data and make some exemptions for smaller breaches. Congress has also been considering similar federal legislation relating to data breaches. The FTC has also prosecuted some data breach cases as unfair or deceptive acts or practices under the Federal Trade Commission Act. We intend to continue to comprehensively protect all consumer data and to comply with all applicable laws regarding the protection of this data.

Other Consumer Protection Regulation.  The FTC and many state attorneys general are applying federal and state consumer protection laws to require that the online collection, use and dissemination of data, and the presentation of Web site content, comply with certain standards for notice, choice, security and access. Courts may also adopt these developing standards. In many cases, the specific limitations imposed by these standards are subject to interpretation by courts and other governmental authorities. We believe that we are in compliance with these consumer protection standards, but a determination by a state or federal agency or court that any of our practices do not meet these standards could result in liability and adversely affect our business. New interpretations of these standards could also require us to incur additional costs and restrict our business operations.

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Item 1A.  Risk Factors

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 our Class A Common Stock that we have issued or securities we may issue in the future. We have also included a detailed discussion of risks and uncertainties arising from governmental regulation of our businesses, one of the most significant risks we face, in the section “Business — Governmental Regulation” above. The risks and uncertainties described in this Annual Report are not the only ones facing us. 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 Operations and Financial Performance

We have incurred and may continue to incur losses

Our operating results have fluctuated significantly in the past from quarter to quarter and may continue to do so in the future. Our net losses from 2001 to 2003 totaled approximately $2.6 billion. Our online businesses participate in relatively new and rapidly evolving markets. Many companies with business plans based on providing healthcare information through the Internet have failed to be profitable and some have filed for bankruptcy and/or ceased operations. Even if demand from users exists, we cannot assure you that our business will be profitable.

In addition, our online businesses have a limited operating history and participate in relatively new and rapidly growing markets. These businesses have undergone significant changes during their short history as a result of changes in the types of services provided, technological changes, changes in market conditions, and changes in ownership and management, and are expected to continue to change for similar reasons.

If we are unable to provide content that attracts and retains users to The WebMD Health Network at a level that is attractive to advertisers and sponsors, our revenue will be reduced

We believe that interest in our public portals for consumers, physicians and other healthcare professionals is based upon our ability to make available health content, decision-support applications and other services that meet the needs of our users. Our ability to do so depends, in turn, on:

•  our ability to hire and retain qualified authors, journalists and independent writers;

•  our ability to license quality content from third parties; and

•  our ability to monitor and respond to increases and decreases in user interest in specific topics.

We cannot assure you that we will be able to continue to develop or acquire needed content at a reasonable cost. If we are unable to provide content that attracts and retains users at a level that is attractive to advertisers and sponsors, our revenue will be reduced. In addition, our ability to deploy new interactive tools and other features will require us to continue to improve the technology underlying our Web sites. The required changes may be significant and expensive, and we cannot assure you that we will be able to execute them quickly and efficiently.

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 change.

•  Our public portals face competition from numerous other companies, both in attracting users and in generating revenue from advertisers and sponsors. We compete for users with online services and Web sites that provide health-related information, including both commercial sites and not-for-profit sites. We compete for advertisers and sponsors with both health-related Web sites and general purpose

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consumer online services and portals and other high-traffic Web sites that include both healthcare-related and non-healthcare-related content and services.

•  Our private portals compete with: providers of healthcare decision-support tools and online health management applications; wellness and disease management vendors; and health information services and health management offerings of health plans and their affiliates.

•  Our Publishing and Other Services segment’s products and services compete with numerous other online and offline sources of healthcare information, including traditional medical reference publications, print journals and other specialized publications targeted to physicians, some of which have a more complete range of titles and better access to traditional distribution channels than we have.

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 or users 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. Since there are no substantial barriers to entry into the markets in which our public portals participate, we expect that competitors will continue to enter these markets.

If we are unable to provide healthcare content for our offline publications that attracts and retains users, our revenue will be reduced

Interest in our publications for physicians, such as The Little Blue Book and ACP Medicine and ACS Surgery: Principles and Practice, is based upon our ability to make available up-to-date health content that meets the needs of our physician users. Although we have been able to continue to update and maintain the physician practice information that we publish in The Little Blue Book, if we are unable to continue to do so for any reason, the value of The Little Blue Book would diminish and interest in this publication and advertising in this publication would be adversely affected.

Similarly, our ability to maintain or increase the subscriptions to ACP Medicine and ACS Surgery is based upon our ability to make available up-to-date content which depends on our ability to retain qualified physician authors and writers in the disciplines covered by these publications. We cannot assure you that we will be able to retain qualified physician editors or authors to provide and review needed content at a reasonable cost. If we are unable to provide content that attracts and retains subscribers, subscriptions to these products will be reduced. In addition, the American College of Physicians permits WebMD to use the ACP name in the title of ACP Medicine and the American College of Surgeons permits WebMD to use the name ACS in the title of ACS Surgery: Principles and Practice. If we lose the right to use the ACP or ACS name in our publications, subscribers may find the publication less attractive and cease to subscribe to these publications.

WebMD the Magazine was launched in April 2005 and as a result has a very short operating history. We cannot assure you that WebMD the Magazine will be able to attract advertisers to make this publication successful in the long term.

The timing of our advertising and sponsorship revenue may vary significantly from quarter to quarter

Our advertising and sponsorship revenue, which accounted for approximately 72% of our total Online Services segment revenue for the year ended December 31, 2005, may vary significantly from quarter to quarter due to a number of factors, not all of which are in our control, and any of which may be difficult to forecast accurately. The majority of our advertising and sponsorship contracts are for terms of approximately four to 12 months. We have relatively few longer term contracts. We cannot assure you that our current customers will continue to use our services beyond the terms of their existing contracts or that they will enter into any additional contracts.

In addition, the time between the date of initial contact with a potential advertiser or sponsor regarding a specific program and the execution of a contract with the advertiser or sponsor for that program may be lengthy, especially for larger contracts, and may be subject to delays over which we have little or no control,

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including as a result of budgetary constraints of the advertiser or sponsor or their need for internal approvals. Other factors that could affect the timing of our revenue from advertisers and sponsors include:

•  the timing of FDA approval for new products or for new approved uses for existing products;

•  seasonal factors relating to the prevalence of specific health conditions and other seasonal factors that may affect the timing of promotional campaigns for specific products; and

•  the scheduling of conferences for physicians and other healthcare professionals.

Developing and implementing new or updated products and services may take longer and cost more than expected

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 and implementation 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. If we are unable to develop new or updated products and services on a timely basis and implement them without significant disruptions to the existing systems and processes of our customers, we may lose potential sales and harm our relationships with current or potential customers.

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

Achieving market acceptance for new or updated 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 updated 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 updated products and services will justify amounts spent for their development, marketing and roll-out.

Lengthy sales and implementation cycles for our private online portals make it difficult to forecast our revenues from these applications and, as a result, may have an adverse impact on our business

The period from our initial contact with a potential client for a private online portal and the first purchase of our solution by the client is difficult to predict. In the past, this period has generally ranged from six to 12 months, but in some cases has been longer. These sales may be subject to delays due to a client’s internal procedures for approving large expenditures and other factors beyond our control. The time it takes to implement a private online portal is also difficult to predict and has lasted as long as six months from contract execution to the commencement of live operation. Implementation may be subject to delays based on the availability of the internal resources of the client that are needed and other factors outside of our control. As a result, we have limited ability to forecast the timing of revenue from new clients. This, in turn, makes it more difficult to predict our financial performance from quarter to quarter.

During the sales cycle and the implementation period, we may expend substantial time, effort and money preparing contract proposals, negotiating contracts and implementing the private online portal without receiving any related revenue. In addition, many of the expenses related to providing private online portals are relatively fixed in the short term, including personnel costs and technology and infrastructure costs. Even if our revenue is lower than expected, we may not be able to reduce our short-term spending in response. Any shortfall in revenue would have a direct impact on our results of operations.

Prior to our IPO, we had not been operated as an entity separate from Emdeon, and, as a result, our historical and pro forma financial information may not be indicative of our historical financial results on a stand-alone basis or future financial performance

Our consolidated financial information included in this Annual Report assumes that, for the periods presented, we had existed as a separate legal entity, and has been derived from the consolidated financial statements of Emdeon. Some costs have been reflected in the consolidated financial statements that are not

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necessarily indicative of the costs that we would have incurred had we operated as an independent, stand-alone entity for all periods presented. These costs include allocated portions of Emdeon’s corporate services and employee healthcare expenses, interest expense and income taxes. Our consolidated financial information included in this Annual Report may not be indicative of our future financial performance, because these statements do not necessarily reflect our historical financial condition, results of operations and cash flows as they would have been had we been operated during the periods presented as a separate, stand-alone entity.

In addition, since the IPO, we have continued to rely on Emdeon to provide us with certain services pursuant to the services agreement we have entered into with Emdeon. We reimburse Emdeon under agreed upon formulas that allocate to us a portion of Emdeon’s aggregate costs related to those services. With respect to most of the services provided under the services agreement, we believe that it is likely that it would cost us more to provide or contract for them on our own because we benefit from Emdeon’s economies of scale as a larger corporation. See also “Risks Related to our Relationship with Emdeon — We continue to be dependent on Emdeon to provide us with services for our business.”

We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation or from the evaluation that will be conducted by our auditors could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2006, we will be required to include a report by our management on our internal control over financial reporting. Such report will contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Such report must also contain a statement that our auditors have issued an attestation report on management’s assessment of such internal controls.

We are currently in the process of preparing to comply with Section 404. We have some experience with documenting, testing and evaluating internal control over financial reporting because our business is a segment of Emdeon, which has already been required to evaluate its internal control over financial reporting under Section 404. However, we have not been through this process for WebMD itself and, because WebMD is a smaller company, certain of the materiality thresholds applicable in WebMD’s internal control over financial reporting will be lower than those applicable to Emdeon. In addition, we are currently preparing to perform financial reporting processes that are separate from those of Emdeon, using different financial reporting software than Emdeon uses. We will need to document, test and evaluate our internal control over financial reporting in connection with such implementation.

If our management identifies one or more material weaknesses in our internal control over financial reporting as of December 31, 2006, we will be unable to assert such internal control is effective in our initial management report on such internal control. If we are unable to make that assertion (or if our auditors are unable to attest that our management’s report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls), investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

We expect that accounting for employee stock options using the fair value method will have a material impact on our consolidated results of operations and earnings per share

In December 2004, the FASB issued SFAS 123R, which requires all share-based payments to employees, including grants of stock options by us and Emdeon to our employees, to be recognized in the financial statements based on their fair values, beginning with the fiscal year that begins after June 15, 2005. As permitted by SFAS No. 123, we accounted for share-based payments to employees using the intrinsic value method prescribed in APB Opinion No. 25 for all prior year periods. We adopted SFAS 123R on January 1, 2006. See Note 2 to the audited Consolidated Financial Statements included in this Annual Report for more information regarding accounting for stock-based compensation plans.

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As described in Note 2 to the audited Consolidated Financial Statements included in this Annual Report, we adopted the modified prospective transition method utilizing a standard option pricing model. The adoption of SFAS 123R will have a material impact on our consolidated results of operations and earnings per share in 2006.

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

We have been built, in large part, through a series of acquisitions. We intend to continue 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 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, and to obtain adequate 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 Class A Common Stock, preferred stock, convertible debt or other securities.

The issuance of additional equity or debt 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;

•  subject us to the risks associated with increased leverage, including a reduction in our ability to obtain financing or an increase in the cost of any financing we obtain;

•  subject us to restrictive covenants that could limit our flexibility in conducting future business activities; 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, regulation or the terms of then 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, including potential synergies between our company and the acquired business, 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 retain or replace key personnel;

•  potential conflicts in sponsor or advertising relationships;

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

•  compliance with regulatory requirements.

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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, that we are able to obtain from the sellers.

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, and potential future acquisitions. 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.

Our failure to attract and retain qualified executives and employees may have a material adverse effect on our business

Our business depends largely on the skills, experience and performance of key members of our management team. We also depend, in part, on our ability to attract and retain qualified writers and editors, software developers and other technical personnel and sales and marketing personnel. Competition for qualified personnel in the healthcare information services and Internet industries is intense. We cannot assure you that we will be able to hire or retain a sufficient number of qualified personnel to meet our requirements, or that we will be able to do so at salary and benefit costs that are acceptable to us. Failure to do so may have an adverse effect on our business.

Risks Related to Our Relationships with Clients

Developments in the healthcare industry could adversely affect our business

Most of our revenue is derived from the healthcare industry and could be affected by changes affecting healthcare spending. 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;

•  consolidation of healthcare industry participants;

•  reductions in governmental funding for healthcare; and

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

We are particularly dependent on pharmaceutical, biotechnology and medical device companies for our advertising and sponsorship revenue. Our business will be adversely impacted if business or economic conditions result in the reduction of purchases by our customers if they decide not to renew their commitments or decide to renew their commitments at lower levels. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending in some

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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 design of health insurance plans;

•  a decrease in the number of new drugs or medical devices coming to market; and

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

In addition, our customers’ expectations 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 assure you 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 WebMD Health Network includes Web sites that we supply content to, but do not own, and the termination of our relationship with the owners of these Web sites may negatively affect our results of operations

Although the substantial majority of the visitors to The WebMD Health Network and the page views we generate on The WebMD Health Network are from Web sites we own, some are from Web sites owned by third parties that carry our content and, as a result, our traffic may vary based on the amount of traffic to Web sites of these third parties and other factors outside our control. During the year ended December 31, 2005, third party Web sites accounted for approximately 23% of The WebMD Health Network’s unique users and approximately 12% of its aggregate page views. In the event that any of our relationships with our third party Web sites are terminated, The WebMD Health Network’s user traffic and page views may be negatively affected, which may negatively affect our results of operations.

We may not be able to attract visitors to our Web sites on a consistent basis, which could have a material adverse effect on our results of operations

Since users of our public portals may be attracted to The WebMD Health Network as a result of a specific condition or for a specific purpose, it is difficult for us to predict the rate at which users will return to the public portals. Further, users of The WebMD Health Network have numerous other online and offline sources of healthcare information services, and some users may visit The WebMD Health Network as a result of our existing third party relationships. If one or more of these third parties engages in conduct that negatively affects users of those third party Web sites, users that come to The WebMD Health Network through these third party Web sites may decrease.

Because we generate revenue by, among other things, selling sponsorships of specific pages, sections or events on The WebMD Health Network for healthcare providers and consumers and related e-newsletters, a decline in user traffic levels or a reduction in the number of pages viewed by users could cause our revenue to decrease and could have a material adverse effect on our results of operations.

We may be unsuccessful in our efforts to increase advertising and sponsorship revenue from consumer products companies

Most of our advertising and sponsorship revenue has, in the past, come from pharmaceutical, biotechnology and medical device companies. During the past year, we have been focusing on increasing sponsorship revenue from consumer products companies that are interested in communicating health-related or safety-related information about their products to our audience. However, while a number of consumer products companies have indicated an intent to increase the portion of their promotional spending used on the Internet, we cannot assure you that these advertisers and sponsors will find our consumer Web site to be as effective as other Web sites or traditional media for promoting their products and services. If we encounter difficulties in

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competing with the other alternatives available to consumer products companies, this portion of our business may develop more slowly than we expect or may fail to develop.

We could be subject to breach of warranty or other claims by clients of our online portals if the software and systems we use to provide them contain errors or experience failures

Errors in the software and systems we use could cause serious problems for clients of our online portals. We may fail to meet contractual performance standards or fail to meet expectations that our clients have for them. Clients of our online portals may seek compensation from us or 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. In addition, we could face breach of warranty or other claims by clients or additional development costs. Our software and systems are inherently complex and, despite testing and quality control, we cannot be certain that they are error free.

We attempt to limit, by contract, our liability to our clients for damages arising from our 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 liability insurance coverage, including coverage for errors and omissions. However, it is possible that claims could exceed the amount of our applicable insurance coverage, if any, or that this coverage may not continue to be available on acceptable terms or in sufficient amounts. 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 or hinder market acceptance of our services, including unrelated services.

Risks Related to Use of the Internet and to Our Technological Infrastructure

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 reliability and performance of the Internet may be harmed by increased usage or by denial-of-service attacks.

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

We rely on bandwidth providers, data center providers, other third parties and our own systems for key aspects of the process of providing products and services to our users, and any failure or interruption in the services provided by these third parties or our own systems could harm our business

Our online services are designed to operate 24 hours a day, seven days a week, without interruption. However, we have experienced and expect that we will experience interruptions and delays in services and

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availability from time to time. We rely on internal systems as well as third party vendors, including data center providers and bandwidth providers, to provide our online services. We do not maintain redundant systems or facilities for some of these services. In the event of a catastrophic event at one of our data centers, we may experience an extended period of system unavailability, which could negatively impact our relationship with users and adversely affect our brand and our business. 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 and crashes;

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

•  other potential interruptions.

Any disruption in the network access or co-location services provided by these third party providers or any failure of or by these third party providers or our own systems to handle current or higher volume of use could significantly harm our business. We exercise little control over these third party vendors, which increases our vulnerability to problems with services they provide.

Any errors, failures, interruptions or delays experienced in connection with these third party technologies and information services or our own systems could negatively impact our relationships with users and adversely affect our brand and our business and could expose us to liabilities to third parties. Although we maintain insurance for our business, the coverage under our policies may not be adequate to compensate us for all losses that may occur. In addition, we cannot provide assurance that we will continue to be able to obtain adequate insurance coverage at an acceptable cost.

Implementation of changes in hardware and software platforms used to deliver our online services may result in performance problems and may not provide the additional functionality that was expected

From time to time, we implement changes to the hardware and software platforms we use for providing our online services. During and after the implementation of those changes, a platform may not perform as expected, which could result in interruptions in operations, an increase in response time or an inability to track performance metrics. Any significant interruption in our ability to operate any of our online services could have an adverse effect on our relationships with users and clients and, as a result, on our financial results.

We rely on a combination of purchasing, licensing, internal development, and acquisitions to develop our hardware and software platforms. Our implementation of changes in these platforms may cost more than originally expected, may take longer than originally expected, and may require more testing than originally anticipated. In addition, we cannot provide assurance that changes in these platforms will provide the additional functionality and other benefits that were originally expected.

If the systems we use to provide online portals experience security breaches or are otherwise perceived to be insecure, our business could suffer

We retain and transmit confidential information, including personal health records, in the processing centers and other facilities we use to provide online services. It is critical that these facilities and infrastructure remain secure and be perceived by the marketplace as secure. A security breach could damage our reputation or result in liability. 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, denial-of-service attacks or other attacks by third parties or similar disruptive problems. Any compromise of our security, whether as a result of our own systems or the systems that they

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interface with, could reduce demand for our services, and could subject us to legal claims from our clients and users, including for breach of contract or breach of warranty.

Risks Related to the Legal and Regulatory Environment in Which We Operate

Government regulation of healthcare creates risks and challenges with respect to our compliance efforts and our business strategies

The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory and other influences. Existing and new laws and regulations affecting the healthcare industry could create unexpected liabilities for us, cause us to incur additional costs and could restrict our operations. Many healthcare laws are complex and their application to specific products and services may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the healthcare information services that we provide. However, these laws and regulations may nonetheless be applied to our products and services. Our failure to accurately anticipate the application of these laws and regulations, or other failure to comply, could create liability for us, result in adverse publicity and negatively affect our businesses. Some of the risks we face from healthcare regulation are as follows:

•  Regulation of Drug and Medical Device Advertising and Promotion. The WebMD Health Network provides services involving advertising and promotion of prescription and over-the-counter drugs and medical devices. If the FDA or the FTC finds that any information on our Web sites violates FDA or FTC regulations, they may take regulatory or judicial action against us and/or the advertiser or sponsor of that information. State attorneys general may also take similar action based on their state’s consumer protection statutes. Any increase in regulation of drug or medical device advertising and promotion could make it more difficult for us to contract for sponsorships and advertising. Physician groups and others have criticized the FDA’s current policies, and have called for restrictions on advertising of prescription drugs to consumers and increased FDA enforcement. We cannot predict what actions the FDA or industry participants may take in response to these criticisms. It is also possible that new laws would be enacted that impose restrictions on such advertising. Our advertising and sponsorship revenue could be materially reduced by additional restrictions on the advertising of prescription drugs and medical devices to consumers, whether imposed by law or regulation or by policies adopted by industry members.

•  Anti-kickback Laws.  There are federal and state laws that govern patient referrals, physician financial relationships and inducements to healthcare providers and patients. The federal healthcare programs anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. These laws are applicable to manufacturers and distributors and, therefore, may restrict how we and some of our customers market products to healthcare providers. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to civil or criminal penalties and require us to change or terminate some portions of our business and could have an adverse effect on our business. Even an unsuccessful challenge by regulatory authorities of our practices could result in adverse publicity and be costly for us to respond to.

•  Medical Professional Regulation.  The practice of most healthcare professions requires licensing under applicable state law. In addition, the laws in some states prohibit business entities from practicing medicine. If a state determines that some portion of our business violates these laws, it may seek to have us discontinue those portions or subject us to penalties or licensure requirements. Any determination that we are a healthcare provider and have acted improperly as a healthcare provider may result in liability to us.

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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 or third party providers, to accurately anticipate the application of laws and regulations affecting our products and services and the manner in which we deliver them, or any other failure to comply with such laws and regulations, could create liability for us, result in adverse publicity and 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.

We face potential liability related to the privacy and security of personal information we collect from consumer and healthcare professionals through our Web sites

Internet user privacy has become a major issue both in the United States and abroad. We have privacy policies posted on our Web sites 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 cannot assure you that the privacy policies and other statements on our Web sites or our practices will be found sufficient to protect us from liability or adverse publicity in this area.

Changes in industry guidelines or government regulation could adversely affect our online CME offerings

Our CME activities are planned and implemented in accordance with the Essential Areas and Policies of the Accreditation Council for Continuing Medical Education, or ACCME, which oversees providers of CME credit, and other applicable accreditation standards. In September 2004, ACCME revised its standards for commercial support of CME. The revised standards are intended to ensure, among other things, that CME activities of ACCME-accredited providers are independent of providers of healthcare goods and services that fund the development of CME. ACCME required accredited providers to implement these standards by May 2005. Implementation has required additional disclosures to CME participants about those in a position to influence content and other adjustments to the management and operations of our CME programs. We believe we have modified our procedures as appropriate to meet the revised standards. However, we cannot be certain whether these adjustments will ensure that we meet the new standards or predict whether ACCME may impose additional requirements.

In the event that ACCME concludes that we have not met its revised standards relating to CME, we would not be permitted to offer accredited ACCME activities to physicians and other healthcare professionals, and we may be required, instead, to use third parties to accredit such CME-related services on Medscape from WebMD. In addition, any failure to maintain our status as an accredited ACCME provider as a result of a failure to comply with existing or new ACCME standards could discourage potential sponsors from engaging in CME or education related activities with us, which could have a material adverse effect on our business.

CME activities may also be subject to government regulation by the FDA, the OIG, or HHS, the federal agency responsible for interpreting certain federal laws relating to healthcare, and state regulatory agencies.

During the past several years, educational programs, including CME, directed toward physicians have been subject to increased scrutiny to ensure that sponsors do not influence or control the content of the program. In response to governmental and industry initiatives, pharmaceutical companies and medical device companies have been developing and implementing internal controls and procedures that promote adherence to applicable regulations and requirements. In implementing these controls and procedures, different clients may

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interpret the regulations and requirements differently and may implement procedures or requirements that vary from client to client. These controls and procedures:

•  may discourage pharmaceutical companies from engaging in educational activities;

•  may slow their internal approval for such programs;

•  may reduce the volume of sponsored educational programs implemented through our Medscape Web site to levels that are lower than in the past; and

•  may require us to make changes to how we offer or provide educational programs, including CME.

In addition, future changes to existing regulations or accreditation standards, or to the internal compliance programs of potential clients, may further discourage or prohibit potential clients from engaging in educational activities with us, or may require us to make further changes in the way we offer or provide educational programs.

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

Our intellectual property is important to 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 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.

We cannot assure you 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, we cannot assure you 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 providing certain services, which may harm our business

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.

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 the online terms and conditions for use of our Web sites, including disclaimers or limitations of liability, are unenforceable. A finding by a court that these terms and conditions or other online agreements are invalid could harm our business.

We may be subject to claims brought against us as a result of content we provide

Consumers access health-related information through our online services, including information regarding particular medical conditions and possible adverse reactions or side effects from medications. If our content, or content we obtain from third parties, contains inaccuracies, it is possible that consumers, employees, health plan members or others may sue us for various causes of action. Although our Web sites contain terms and

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conditions, including disclaimers of liability, that are intended to reduce or eliminate our liability, 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 public or private portals are unenforceable. A finding by a court that these agreements are invalid and that we are subject to liability could harm our business and require costly changes to our business.

We have editorial procedures in place to provide quality control of the information that we publish or provide. However, we cannot assure you that our editorial and other quality control procedures will be sufficient to ensure that there are no errors or omissions in particular content. Even if potential 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. In addition, our business is based on establishing the reputation of our portals as trustworthy and dependable sources of healthcare information. Allegations of impropriety or inaccuracy, even if unfounded, could therefore harm our reputation and business.

Risks Related to Our Relationship With Emdeon

The concentrated ownership of our common stock by Emdeon and certain corporate governance arrangements prevent our other stockholders from influencing significant corporate decisions

We have two classes of common stock:

•  Class A Common Stock, which entitles the holder to one vote per share on all matters submitted to our stockholders; and

•  Class B Common Stock, which entitles the holder to five votes per share on all matters submitted to our stockholders.

Emdeon owns 100% of our Class B Common Stock, which represents 85.8% of our outstanding common stock. These Class B shares collectively represent 96.7% of the combined voting power of our outstanding common stock. Given its ownership interest, Emdeon is able to control the outcome of all matters submitted to our shareholders for approval, including the election of directors. Accordingly, either in its capacity as a stockholder or through its control of our Board of Directors, Emdeon is able to control all key decisions regarding our company, including mergers or other business combinations and acquisitions, dispositions of assets, future issuances of our common stock or other securities, the incurrence of debt by us, the payment of dividends on our common stock (including the frequency and the amount of dividends that would be payable on our common stock, a substantial majority of which Emdeon owns) and amendments to our certificate of incorporation and bylaws. Further, as long as Emdeon and its subsidiaries (excluding our company and our subsidiaries) continue to beneficially own shares representing at least a majority of the votes entitled to be cast by the holders of our outstanding voting stock, it may take actions required to be taken at a meeting of stockholders without a meeting or a vote and without prior notice to holders of our Class A Common Stock. In addition, Emdeon’s controlling interest may discourage a change of control that the holders of our Class A Common Stock may favor. Any of these provisions could be used by Emdeon for its own advantage to the detriment of our other stockholders and our company. This in turn may have an adverse affect on the market price of our Class A Common Stock.

Provisions in our charter documents and Delaware law may inhibit a takeover, which could adversely affect the value of our Class A Common Stock

Our certificate of incorporation and bylaws, as well as Delaware corporate law, contain provisions that could delay or prevent a change of control or changes in our management and board of directors that a holder of our Class A Common Stock might consider favorable and may prevent you from receiving a takeover premium for your shares. These provisions include, for example, our classified board structure, the disproportionate voting rights of the Class B Common Stock (relative to the Class A Common Stock) and the authorization of our Board of Directors to issue up to 50 million shares of preferred stock without a stockholder vote. In addition, our restated certificate of incorporation provides that after the time Emdeon and

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its affiliates cease to own, in the aggregate, a majority of the combined voting power of our outstanding capital stock, stockholders may not act by written consent and may not call special meetings. These provisions apply even if the offer may be considered beneficial by some of our stockholders. If a change of control or change in management is delayed or prevented, the market price of our Class A Common Stock could decline.

The interests of Emdeon may conflict with the interests of our other stockholders

We cannot assure you that the interests of Emdeon will coincide with the interests of the other holders of our common stock. For example, Emdeon could cause us to make acquisitions that increase the amount of our indebtedness or outstanding shares of common stock or sell revenue-generating assets. Also, Emdeon or its directors and officers may allocate corporate opportunities to itself or direct them to other affiliates, which, prior to the IPO, could have been directed to us. So long as Emdeon continues to own shares of our common stock with significant voting power, Emdeon will continue to be able to strongly influence or effectively control our decisions.

Some of our directors, officers and employees may have potential conflicts of interest as a result of having positions with, or owning equity interests in, Emdeon

Martin J. Wygod, in addition to being Chairman of the Board of our company, is Chairman of the Board of Emdeon. Some of our other directors, officers and employees also serve as directors, officers or employees of Emdeon. In addition, some of our directors, officers and employees own shares of Emdeon’s common stock. Furthermore, because our officers and employees have participated in Emdeon’s equity compensation plans and because service at our company will, so long as we are a majority-owned subsidiary of Emdeon, qualify those persons for continued participation and continued vesting of equity awards under Emdeon’s equity plans, many of our officers and employees and some of our directors hold, and may continue to hold, options to purchase Emdeon’s common stock and shares of Emdeon’s restricted stock.

These arrangements and ownership interests or cash- or equity-based awards could create, or appear to create, potential conflicts of interest when directors or officers who own Emdeon’s stock or stock options or who participate in Emdeon’s benefit plans are faced with decisions that could have different implications for Emdeon than they do for us. We cannot assure you that the provisions in our restated certificate of incorporation will adequately address potential conflicts of interest or that potential conflicts of interest will be resolved in our favor.

We continue to be dependent on Emdeon to provide us with services for our business

Prior to our IPO, we had been operated as a wholly owned subsidiary of Emdeon, and many key services required by us for the operation of our business were and continue to be provided to us by Emdeon. As a result, we are dependent on our relationship with Emdeon for these important services.

In connection with our IPO, we entered into agreements with Emdeon relating to certain intercompany transactions between us and Emdeon, including, among others, a services agreement, a registration rights agreement, an indemnity agreement, a tax sharing agreement and an intellectual property license agreement. The terms and provisions of these agreements may be less favorable to us than terms and provisions that we could have obtained in arm’s length negotiations with unaffiliated third parties. Under the services agreement, Emdeon provides us with administrative services, including services relating to payroll, accounting, tax planning and compliance, employee benefit plans, legal matters and information processing. Our services agreement with Emdeon is for a term of up to five years, however, we have the option to terminate these services, in whole or in part, at any time we choose to do so, generally by providing, with respect to the specified services or groups of services, 60 days’ notice and, in some cases, paying a termination fee of not more than $30,000 to cover the costs of Emdeon relating to the termination. Emdeon has the right to terminate the services that it provides to us, in whole or in part, if it ceases to provide such services itself, upon at least 180 days notice to us. If the services agreement expires or is otherwise terminated, or if Emdeon does not or is unable to perform its obligations under the services agreement, we will be required to provide some or all these services ourselves or to obtain substitute arrangements with third parties. We reimburse Emdeon under

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agreed upon formulas that allocate to us a portion of Emdeon’s aggregate costs related to those services. However, the costs we are charged under the services agreement are not necessarily indicative of the costs that we would incur if we had to provide or contract for those services on a stand-alone basis. With respect to most of the services provided under the services agreement, we believe that it is likely that it would cost us more to provide or contract for them on our own because we benefit from Emdeon’s economies of scale as a larger corporation. In addition, we may be unable to provide some or all these services because of financial or other constraints or be unable to timely implement substitute arrangements on terms that are favorable to us, or at all, which could have an adverse effect on our business, financial condition and results of operations.

We may be prevented from issuing stock to raise capital, to effectuate acquisitions or to provide equity incentives to members of our management and Board of Directors

Beneficial ownership of at least 80% of the total voting power and value of our capital stock is required in order for Emdeon to continue to include us in its consolidated group for federal income tax purposes, and beneficial ownership of at least 80% of the total voting power of our capital stock and 80% of each class of any non-voting capital stock that we may issue is required in order for Emdeon to effect a tax-free split-off, spin-off or other similar transaction. As of the date of this Annual Report, Emdeon does not intend or plan to undertake a split-off or spin-off of our capital stock to Emdeon’s shareholders or to deconsolidate us from Emdeon’s consolidated group. Under the terms of the tax sharing agreement that we have entered into with Emdeon, however, we have agreed that we will not knowingly take or fail to take any action that could reasonably be expected to preclude Emdeon’s ability to undertake a tax-free split-off or spin-off. This may prevent us from issuing additional equity securities to raise capital, to effectuate acquisitions or to provide management or director equity incentives.

If certain transactions occur with respect to our capital stock or Emdeon’s capital stock, we may be unable to utilize our net operating loss carryforwards and tax credits to reduce our income taxes

As of December 31, 2005, we had net operating loss carryforwards of approximately $643 million for federal income tax purposes and federal tax credits of approximately $1.7 million. If certain transactions occur with respect to our capital stock or Emdeon’s capital stock, including issuances, redemptions, recapitalizations, exercises of options, conversions of convertible debt, purchases or sales by 5%-or-greater shareholders and similar transactions, that result in a cumulative change of more than 50% of the ownership of our capital stock, taking into account indirect changes in ownership of our stock as a result of changes in ownership in or Emdeon’s capital stock, over a three-year period (including a period commencing prior to the IPO), as determined under rules prescribed by the U.S. Internal Revenue Code and applicable Treasury regulations, an annual limitation would be imposed with respect to our ability to utilize our net operating loss carryforwards and federal tax credits against any taxable income that we achieve in future periods. As of the date of this Annual Report, Emdeon has indicated that it has no current intention to sell or otherwise dispose of its Class B Common Stock. However, Emdeon is not subject to any contractual obligation to retain any of its Class B Common Stock, except that it has agreed not to sell or otherwise dispose of any of our common stock for a period of 180 days ending on March 27, 2006, without the prior written consent of the representatives of the underwriters, as described in the section entitled “Underwriting” in our IPO Prospectus. Moreover, there can be no assurance that limitations on the use of our net operating loss carryforwards and federal tax credits will not occur as a result of changes in the ownership of Emdeon’s capital stock (which changes may be beyond the control of us and Emdeon).

We are included in Emdeon’s consolidated tax return and, as a result, both we and Emdeon may use each other’s net operating loss carryforwards

Due to provisions of the U.S. Internal Revenue Code and applicable Treasury regulations relating to the manner and order in which net operating loss carryforwards are utilized when filing consolidated tax returns, a portion of our net operating loss carryforwards may be required to be utilized by Emdeon before Emdeon would be permitted to utilize its own net operating loss carryforwards. Correspondingly, in some situations, such as where Emdeon’s net operating loss carryforwards were generated first, we may be required to utilize a

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portion of Emdeon’s net operating loss carryforwards before we would have to utilize our own net operating loss carryforwards. Under our tax sharing agreement with Emdeon, neither we nor Emdeon is obligated to reimburse the other for the tax savings attributable to the utilization of the other party’s net operating loss carryforwards, and furthermore, Emdeon has agreed to compensate us for any use of our net operating losses that may result from certain extraordinary transactions, including a sale of its Business Services or Practice Services operating segments. Accordingly, although we may obtain a benefit if we are required to utilize Emdeon’s net operating loss carryforwards, we may suffer a detriment to the extent that Emdeon is required to utilize our net operating loss carryforwards. The amount of each of our and Emdeon’s net operating loss carryforwards that ultimately could be utilized by the other party will depend on the timing and amount of taxable income earned by us and Emdeon in the future, which we are unable to predict. Correspondingly, we are not able to predict whether we or Emdeon will be able to utilize our respective net operating loss carryforwards before they expire or whether there will be a net benefit to Emdeon or to us.

We will be included in Emdeon’s consolidated group for federal income tax purposes and, as a result, may be liable for any shortfall in Emdeon’s federal income tax payments

For so long as Emdeon continues to own 80% of the total voting power and value of our capital stock, we will be included in Emdeon’s consolidated group for federal income tax purposes. By virtue of its controlling ownership and our tax sharing agreement with Emdeon, Emdeon effectively controls all our tax decisions. Moreover, notwithstanding the tax sharing agreement, federal tax law provides that each member of a consolidated group is jointly and severally liable for the group’s entire federal income tax obligation. Thus, to the extent Emdeon or other members of the group fail to make any federal income tax payments required of them by law, we would be liable for the shortfall. Similar principles generally apply for income tax purposes in some state, local and foreign jurisdictions.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.   Properties

Facilities

We lease approximately 100,000 square feet of office space in New York, New York for our corporate headquarters and our editorial and marketing operations under a lease that expires in November 2015. We also lease office space in:

•  Avon, Connecticut;

•  Atlanta, Georgia;

•  Acton, Massachusetts;

•  Fords, New Jersey;

•  Montreal, Canada;

•  North Syracuse, New York;

•  Omaha, Nebraska;

•  Portland, Oregon; and

•  San Clemente, California.

We believe that our offices and other facilities are, in general, in good operating condition and adequate for our current operations and that additional leased space can be obtained on acceptable terms if needed.

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Item 3.   Legal Proceedings

Department of Justice and SEC Investigations of Emdeon

As previously disclosed, the United States Attorney for the District of South Carolina is conducting an investigation of Emdeon, which Emdeon first learned about on September 3, 2003. Based on the information available to Emdeon, Emdeon believes that the investigation relates principally to issues of financial accounting improprieties for Medical Manager Corporation, a predecessor of Emdeon (by its merger into Emdeon in September 2000), and, more specifically, its Medical Manager Health Systems, Inc. subsidiary, a predecessor to its Emdeon Practice Services, Inc. subsidiary (which we refer to as “Medical Manager Health Systems”).

While Emdeon is not sure of the investigation’s exact scope, it does not believe that the investigation relates to the business of our company or any of our subsidiaries. Emdeon believes that the investigation relates principally to issues of financial accounting improprieties relating to Medical Manager Health Systems, including activities that artificially inflated revenues and earnings of Medical Manager Health Systems. Emdeon has been cooperating and intends to continue to cooperate fully with the U.S. Attorney’s Office. Emdeon’s Board of Directors has formed a Special Committee consisting solely of independent directors to oversee this matter, with the sole authority to direct Emdeon’s response to the allegations that have been raised.

In January 2005, certain former employees of Emdeon Practice Services agreed to plead guilty to mail fraud and tax evasion as a result of the investigation by the U.S. Attorney. According to the Informations, Plea Agreements and Factual Summaries filed by the U.S. Attorney in, and available from, the District Court of the United States for the District of South Carolina — Beaufort Division, on January 7, 2005, the three former employees and other then unnamed co-schemers were engaged in schemes between 1997 and 2002 that included causing companies acquired by Medical Manager Health Systems to pay the former vice president in charge of acquisitions for Medical Manager Health Systems and co-schemers kickbacks which were funded through increases in the purchase price paid by Medical Manager Health Systems to the acquired company and that included fraudulent accounting practices to inflate artificially the quarterly revenues and earnings of Medical Manager Health Systems when it was an independent public company called Medical Manager Corporation from 1997 through 1999, when and after it became acquired by Synetic, Inc. in July 1999 and when and after it became a subsidiary of Emdeon in September 2000. A fourth former officer of Medical Manager Health Systems pleaded guilty to similar activities later in 2005.

On December 15, 2005, the U.S. Attorney announced indictments of the following former officers and employees of Medical Manager Health Systems: Ted W. Dorman, a former Regional Vice President of Medical Manager Health Systems,who was employed until March 2003; Charles L. Hutchinson, a former Controller of Medical Manager Health Systems, who was employed until June 2001; Maxie L. Juzang, a former Vice President of Medical Manager Health Systems, who was employed until August 2005; John H. Kang, a former President of Medical Manager Health Systems, who was employed until May 2001; Frederick B. Karl, Jr., a former General Counsel of Medical Manager Health Systems, who was employed until April 2000; Franklyn B. Krieger, a former Associate General Counsel of Medical Manager Health Systems, who was employed until February 2002; Lee A. Robbins, a former Vice President and Chief Financial Officer of Medical Manager Health Systems, who was employed until September 2000; John P. Sessions, a former President and Chief Operating Officer of Medical Manager Health Systems,who was employed until September 2003; Michael A. Singer, a former Chief Executive Officer of Medical Manager Health Systems and a former director of Emdeon, who was most recently employed by Emdeon as its Executive Vice President, Physician Software Strategies until February 2005; and David Ward, a former Vice President of Medical Manager Health Systems, who was employed until June 2005. The Indictment charges the persons listed above with conspiracy to commit mail, wire and securities fraud, a violation of Title 18, United States Code, Section 371 and conspiracy to commit money laundering, a violation of Title 18, United States Code, Section 1956(h). The indictment charges Messrs. Sessions and Ward with substantive counts of money laundering, violations of Title 18, United States Code, Section 1957. The allegations set forth in the Indictment describe activities that are substantially similar to those described above with respect to the January 2005 plea agreements.

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Based on the information it has obtained to date, including that contained in the court documents filed by the United States Attorney in South Carolina, Emdeon does not believe that any member of its senior management whose duties were not primarily related to the operations of Medical Manager Health Systems engaged in any of the violations or improprieties described in those court documents. Emdeon understands, however, that in light of the nature of the allegations involved, the U.S. Attorney’s Office has been investigating all levels of Emdeon’s management. Some members of our company’s senior management are also serving or have served as members of senior management of Emdeon. In the event members of our senior management were to be implicated in any wrongdoing, it could have an adverse impact on our company.

Emdeon understands that the SEC is also conducting a formal investigation into this matter.

The terms of an indemnity agreement between Emdeon and our company provide that Emdeon will indemnify our company against any and all liabilities arising from or based on this investigation.

Ari Weitzner, M.D., P.C. et al. v. National Physicians Datasource LLC

On May 24, 2005, a lawsuit was filed by Dr. Ari Weitzner individually, and as a class action, under the Telephone Consumer Protection Act (or TCPA), in the U.S. District Court, Eastern District of New York against National Physicians Datasource LLC (or NPD), one of our subsidiaries. The lawsuit claims that faxes allegedly sent by NPD, which publishes The Little Blue Book, were sent in violation of the TCPA. The lawsuit potentially seeks damages in excess of $5,000,000. The Court had temporarily stayed the lawsuit pending resolution of relevant issues in a related case. On February 21, 2006, the Court lifted the stay. The case is now expected to proceed to the responsive pleading stage.

Other Legal Proceedings

In the normal course of business, we are involved in various other claims and legal proceedings. While the ultimate resolution of these matters, and those discussed above, has yet to be determined, we do not believe that their outcome will have a material adverse effect on our financial position, results of operations or liquidity.

Item 4.   Submission of Matters to a Vote of Security Holders

During the fourth quarter of 2005, no matters were submitted to a vote of security holders of WebMD.

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PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

We completed the initial public offering of our Class A Common Stock on September 28, 2005. Our Class A Common Stock has been traded on the Nasdaq National Market under the symbol “WBMD” since September 29, 2005. Prior to that time, there was no public market for our stock.

The following table sets forth the high and low prices for the indicated periods:

	High		Low
2005
Third quarter	$	30.00	$	19.80
Fourth quarter		32.89		22.60

Our Class B Common Stock is neither publicly listed nor traded.

On March 1, 2006, there were 11 holders of record of our Class A Common Stock (excluding directors and employees holding unvested restricted Class A Common Stock) and Emdeon was the only holder of our Class B Common Stock. Because many of the shares of our Class A Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to determine the total number of stockholders represented by these record holders, but we believe there are approximately 4,000 holders of our Class A Common Stock.

The market price of our Class A Common Stock has fluctuated since the date of our initial public offering and is likely to fluctuate in the future. Changes in the market price of our Class A Common Stock may result from, among other things:

•  quarter-to-quarter variations in operating results;

•  operating results being different from analysts’ estimates;

•  changes in analysts’ earnings estimates or opinions;

•  announcements of new technologies, products and services or pricing policies by us or our competitors;

•  announcements of acquisitions or strategic partnerships by us or our competitors;

•  developments in existing customer or strategic relationships;

•  actual or perceived changes in our business strategy;

•  developments in new or pending litigation and claims;

•  sales of large amounts of our Class A Common Stock;

•  changes in market conditions in the healthcare, information technology or the Internet industries;

•  changes in general economic conditions; and

•  fluctuations in the securities markets in general.

In addition, the market prices of Internet and healthcare information technology stocks in general, and of our Class A Common Stock in particular, have experienced large fluctuations, sometimes quite rapidly. These fluctuations often may be unrelated or disproportionate to the operating performance of these companies. Any negative change in the public’s perception of the prospects of these companies, as well as other broad market and industry factors, may result in changes in the price of our Class A Common Stock.

We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying cash dividends in the foreseeable future.

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Repurchases of Equity Securities During the Fourth Quarter of 2005

None.

Sales of Unregistered Securities During the Fourth Quarter of 2005

None.

Use of Proceeds

On September 28, 2005, a registration statement (Registration No. 333-124832) relating to our initial public offering of our Class A Common Stock was declared effective by the Securities and Exchange Commission. Under this registration statement, we registered 6,900,000 shares of our Class A Common Stock, and another 1,035,000 shares subject to the underwriters’ over-allotment option. All 7,935,000 shares of Class A Common Stock registered under the registration statement, including the 1,035,000 shares covered by the over-allotment option, were sold at a price to the public of $17.50 per share for an aggregate price of $138,862,500. The offering closed on November 4, 2005.

In connection with our initial public offering, we received proceeds of $125,392,000 net of underwriting discounts of $9,721,000 and costs of the initial public offering. The costs of the offering, not including the underwriting discounts, were approximately $5,800,000. Approximately $2,000,000 of this amount was paid by Emdeon prior to the initial public offering. The proceeds from the initial public offering and the $40,000,000 cash capital contribution from Emdeon in September 2005 have been invested in U.S. Treasury Notes and auction rate securities, used to fund the Conceptis and eMedicine acquisitions and used to fund working capital requirements. Emdeon continues to own 85.8% of our outstanding common stock and to hold 96.7% of the combined voting power of our outstanding common stock.

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Item 6.   Selected Financial Data

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and notes thereto, which are included elsewhere in this Annual Report.

	Year Ended December 31,
	2005		2004		2003			2002			2001
											(unaudited)
	(In thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue	$	168,938	$	134,148	$	110,152		$	84,203		$	74,626
Costs and expenses:
Cost of operations		70,538		52,377		46,998			47,888			76,082
Sales and marketing		51,756		47,358		47,917			49,033			85,207
General and administrative		29,550		22,122		18,016			15,690			28,332
Depreciation and amortization		10,653		5,620		4,463			2,486			883,923
Impairment of long-lived and other assets		—		—		—			—			1,415,888
Restructuring and integration charge (benefit)		—		—		—			(5,850	)		114,918
Other income		—		—		—			(823	)		—
Interest income		1,790		—		—			—			—
Income (loss) before income tax provision		8,231		6,671		(7,242	)		(24,221	)		(2,529,724	)
Income tax provision		486		210		183			140			104
Net income (loss)	$	7,745	$	6,461	$	(7,425	)	$	(24,361	)	$	(2,529,828	)
Net income (loss) per common share:
Basic and diluted	$	0.15	$	0.13	$	(0.15	)	$	(0.51	)	$	(52.60	)
Weighted-average shares outstanding used in computing net income (loss) per common share:
Basic		50,132		48,100		48,100			48,100			48,100
Diluted		50,532		48,100		48,100			48,100			48,100

	As of December 31,
	2005		2004		2003		2002			2001
			(In thousands)							(unaudited)
Consolidated Balance Sheets Data:
Cash, cash equivalents and short-term investments	$	153,777	$	3,456	$	358	$	149		$	520
Working capital (deficit)		151,856		9,119		3,384		(547	)		(3,642	)
Total assets		376,889		146,496		120,630		127,529			132,522
Other long-term liabilities		7,010		—		—		—			—
Stockholders’ equity and owner’s net investment		299,312		100,737		85,527		86,426			92,045

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” and included elsewhere in this Annual Report. In this MD&A, dollar amounts are stated in thousands.

Overview

MD&A is a supplement to our consolidated financial statements and notes thereto included elsewhere in this Annual Report, and is provided to enhance your understanding of our results of operations and financial condition. Our MD&A is organized as follows:

•  Introduction.  This section provides a general description of our company and operating segments, background information on certain trends, strategies and other matters discussed in this MD&A, a description of the basis of presentation of our financial statements, a summary discussion of our recent acquisitions and a discussion of how seasonal factors may impact the timing of our revenue.

•  Critical Accounting Policies and Estimates.  This section discusses those accounting policies that are considered important to the evaluation and reporting of our financial condition and results of operations, and whose application requires us to exercise subjective and often complex judgments in making estimates and assumptions. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 2 to the consolidated financial statements included in this Annual Report.

•  Transactions with Emdeon.  This section describes the services that we receive from Emdeon and the costs of these services, as well as the fees we charge Emdeon for our services.

•  Results of Operations and Results of Operations by Operating Segment.  These sections provide our analysis and outlook for the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on both a consolidated basis and an operating segment basis.

•  Liquidity and Capital Resources.  This section provides an analysis of our liquidity and cash flows, as well as a discussion of our commitments that existed as of December 31, 2005.

•  Recent Accounting Pronouncements.  This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our company or may be adopted in the future.

Introduction

Our Company

We are a leading provider of health information services to consumers, physicians and other healthcare professionals, employers and health plans. We have organized our business into two operating segments as follows:

•  Online Services.  We provide both public and private online portals. Our public portals enable consumers to become more informed about healthcare choices and assist them in playing an active role in managing their health. The public portals also enable physicians and other healthcare professionals to improve their clinical knowledge and practice of medicine, as well as their communication with patients. Our public portals generate revenue primarily through the sale of advertising and sponsorship products, including CME services. Our sponsors and advertisers include pharmaceutical, biotechnology, medical device and consumer products companies. Our private portals for employers and health plans

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provide information and services that enable their employees and members, respectively, to make more informed benefit, treatment and provider decisions. We generate revenue from private portals through the licensing of our private portals to employers and health plans either directly or through distributors. We also distribute our online content and services to other entities and generate revenue from these arrangements through the sale of advertising and sponsorship products and content syndication fees.

•  Publishing and Other Services.  We publish several offline resources; ACP Medicine and ACS Surgery: Principles of Practice, our medical reference textbooks, The Little Blue Book, a physician directory and WebMD the Magazine, a consumer-targeted publication launched in early 2005 that we distribute free of charge to physician office waiting rooms. We generate revenue from sales of subscriptions to our medical reference publications, sales of The Little Blue Book directories and advertisements in those directories, as well as from sales of advertisements in WebMD the Magazine. We also conduct in-person CME as a result of the acquisition of the assets of Conceptis in December 2005. Our Publishing and Other Services segment is a complementary business to our Online Services and extends the reach of our brand and our influence with health-involved consumers and clinically-active physicians.

Background Information on Certain Trends and Strategies

Several key trends in the healthcare and Internet industries are influencing the use of healthcare information services of the types we provide or are developing. Those trends, and the strategies we have developed in response, are described briefly below:

•  The Internet has emerged as a major communications medium and has already fundamentally changed many sectors of the economy, including the marketing and sales of financial services, travel, and entertainment, among others. The Internet is also changing the healthcare industry and has transformed how consumers and physicians find and utilize healthcare information. As consumers are required to assume greater financial responsibility for rising healthcare costs, the Internet serves as a valuable resource by providing them with immediate access to searchable and dynamic interactive content to check symptoms, assess risks, understand diseases, find providers and evaluate treatment options. The Internet has also become a primary source of information for physicians seeking to improve clinical practice and is growing relative to traditional information sources, such as conferences, meetings and offline journals.

•  Increased Online Marketing and Education Spending for Healthcare Products.  Pharmaceutical, biotechnology and medical device companies spend large amounts each year marketing their products and educating consumers and physicians about them, however, only a small portion of this amount is currently spent on online services. We believe that these companies, who comprise the majority of our advertisers and sponsors, are becoming increasingly aware of the effectiveness of the Internet relative to traditional media in providing health, clinical and product-related information to consumers and physicians, and this increasing awareness will result in increasing demand for our services.

•  Changes in Health Plan Design.  According to the Centers for Medicare & Medicaid Services, or CMS, healthcare spending in the United States rose to $1.9 trillion in 2004 (or $6,280 per person), up from $1.7 trillion in 2003, $1.6 trillion in 2002, $1.4 trillion in 2001 and $1.3 trillion in 2000. The CMS report indicated a growth rate in healthcare spending of 7.9% in 2004, compared to 8.2% for 2003, and 9.1% for 2002. In addition, CMS indicated that healthcare’s share of gross domestic product was 16.0% for 2004. Another study recently released by CMS predicted that U.S. healthcare spending will increase by an average of 7.2% annually until 2015, at which time such spending will reach $4 trillion (or $12,320 per person) and account for 20% of the gross domestic product. While overall healthcare costs are rising at a rapid annual rate, employers’ costs of providing healthcare benefits to their employees are increasing at an even faster rate. In response to these increases, employers are seeking to shift a greater portion of healthcare costs onto their employees and to redefine traditional health benefits. Employers and health plans want to motivate their members and employees to evaluate their healthcare decisions more carefully in order to be more cost-effective. As employers continue to implement high deductible and consumer-directed healthcare plans to achieve these goals, we believe

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that we will be able to attract more employers and health plans to use our private online portals. Additionally, we believe that as consumers are required to bear increased financial responsibility for their healthcare, our public portals will benefit as consumers utilize the decision-support and personal health information applications to better manage their health decisions.

•  Health Management Initiatives.  Health plans and employers have begun to recognize that encouraging the good health of their members and employees not only benefits the members and employees but also has financial benefits for the health plans and employers. Healthier people generally need less care and fewer costly services. Thus, controlling costs by keeping people healthier and better managing chronic conditions has become a significant focus for America’s healthcare system. As part of the initiatives to keep members and employees healthier and to allow them to better manage chronic conditions, health plans and employers are offering their members and employees online access to health and wellness information and decision-support tools. We believe that we are well positioned to benefit from these trends because our private portals provide the tools and information employees and plan members need in order to make more informed decisions about healthcare provider, benefit and treatment options.

The healthcare industry in the United States and relationships among healthcare payers, providers and consumers are very complicated. In addition, the Internet and the market for online services are relatively new and still evolving. Accordingly, there can be no assurance that the trends identified above will continue or that the expected benefits to our businesses from our responses to those trends will be achieved. In addition, the market for healthcare information services is highly competitive and not only are our existing competitors seeking to benefit from these same trends, but the trends may also attract additional competitors.

Basis of Presentation

Our company is a Delaware corporation that was incorporated on May 3, 2005. On that date, 3,000 shares of our company’s common stock, par value $0.01 per share, were authorized. On May 4, 2005, 100 shares were issued to Emdeon. Our company was formed as a wholly owned subsidiary of Emdeon in preparation for an initial public offering (“IPO”) of equity securities in Emdeon’s WebMD segment. On September 6, 2005, Emdeon contributed to us, as a contribution to capital, the subsidiaries that comprise Emdeon’s WebMD segment and certain related assets and liabilities. During 2005, Emdeon contributed $64,857 in cash of which $40,000 was a capital contribution in September 2005. On September 27, 2005, we restated our Certificate of Incorporation: (a) to increase the authorized number of shares from 3,000 to 700,000,000 divided into three classes (50,000,000 shares of Preferred Stock, 500,000,000 shares of Class A Common Stock and 150,000,000 shares of Class B Common Stock); and (b) to convert the 100 shares of then outstanding common stock, all of which were held by Emdeon, into an aggregate of 48,100,000 shares of Class B Common Stock. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to five votes. In connection with our IPO, we issued 7,935,000 shares of Class A Common Stock. All of our share and per share references in the accompanying consolidated financial statements have been adjusted retroactively to present the 48,100,000 shares of Class B Common Stock, outstanding as a result of the issuance of 100 shares of common stock on May 4, 2005 and the conversion of those shares on September 27, 2005 into Class B Common Stock, as if they had been outstanding for all prior periods.

Acquisitions

During 2005, we acquired two companies, Conceptis Technologies, Inc. (which we refer to as Conceptis) and HealthShare Technology, Inc. (which we refer to as HealthShare), which we refer to together as the 2005 Acquisitions:

•  On December 2, 2005, we acquired the assets of and assumed certain liabilities of Conceptis, a Montreal-based provider of online and offline medical education and promotion aimed at physicians and other healthcare professionals. The total purchase consideration of Conceptis was approximately $19,603, comprised of $19,000 in cash and $603 of estimated acquisition costs. The results of operations of Conceptis have been included in the Online Services and the Publishing and Other Services segments from December 2, 2005, the closing date of the acquisition.

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•  On March 14, 2005, we acquired HealthShare, which provides online tools that compare the cost and quality measures of hospitals for use by consumers, providers and health plans. We acquired HealthShare for a total purchase consideration of approximately $29,883, comprised of $29,533 in cash, net of cash acquired and $350 of estimated acquisition costs. The results of operations of HealthShare are included in our Online Services segment beginning March 14, 2005, the closing date of the acquisition.

During 2004, we acquired two companies, MedicineNet, Inc. (which we refer to as MedicineNet) and RxList, LLC (which we refer to as RxList), which we refer to together as the 2004 Acquisitions:

•  On December 24, 2004, we acquired MedicineNet, a health information site for consumers, for a total purchase consideration of approximately $17,223, comprised of $16,732 in cash, net of cash acquired, and $491 of acquisition costs. In addition, we have agreed to pay up to an additional $15,000 during the three months ending March 31, 2006, if the number of page views on MedicineNet’s Web sites exceeds certain thresholds during the calendar year 2005. We accrued $7,250 as of December 31, 2005 for the expected cash payment during the quarter ended March 31, 2006 related to MedicineNet’s achievement of page views exceeding certain thresholds during 2005. The results of operations of MedicineNet are included in our Online Services segment.

•  On October 1, 2004, we acquired RxList, a privately held operator of an online drug directory, for a total purchase consideration of approximately $5,216, comprised of $4,500 in cash, $500 to be paid during the three months ended March 31, 2006 and $216 of acquisition costs. In addition, we have agreed to pay up to an additional $2,500 during each of the three month periods ending March 31, 2006 and 2007, if the number of page views on RxList’s Web sites exceeds certain thresholds during each of the three month periods ending December 31, 2005 and 2006, respectively. We accrued $2,387 as of December 31, 2005 for the cash payment made in February 2006 related to RxList’s achievement of page views exceeding certain thresholds during the three months ended December 31, 2005. The results of operations of RxList are included in our Online Services segment.

During 2003, we acquired the companies that comprise The Little Blue Book and we acquired the assets of Optate, Inc. (which we refer to as Optate), which we refer to together as the 2003 Acquisitions:

•  On May 29, 2003, we acquired The Little Blue Book, a company that maintains a database containing physician practice information and publishes a pocket-sized reference book containing physician practice and contact information, for a total purchase consideration of approximately $10,061, comprised of $9,926 in cash, net of cash acquired and $135 of acquisition costs. In addition, we paid an additional purchase price of $1,000 and $1,500 in April 2005 and 2004, respectively, as a result of achieving certain financial milestones during 2004 and 2003. The results of operations of The Little Blue Book are included in our Publishing and Other Services segment.

•  On April 30, 2003, we acquired the assets and assumed certain liabilities of Optate, a provider of healthcare benefit decision-support tools and solutions to its clients through online technology, for a total purchase consideration of approximately $4,052, comprised of $4,000 in cash and $52 of acquisition costs. The results of operations of Optate are included in our Online Services segment.

Seasonality

The timing of our revenue is affected by seasonal factors. Advertising and sponsorship revenue within our Online Services segment is seasonal, primarily due to the annual budget approval process of the advertising and sponsorship clients of our public portals. This portion of our revenue is usually the lowest in the first quarter of each calendar year, and increases during each consecutive quarter throughout the year. Our private portal licensing revenue is historically higher in the second half of the year as new customers are typically added during this period in conjunction with their annual open enrollment periods for employee benefits. Finally, the annual distribution cycle within our Publishing and Other Services segment results in a significant portion of our revenue in this segment being recognized in the second and third quarter of each calendar year. The timing of revenue in relation to our expenses, much of which do not vary directly with revenue, has an

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impact on cost of operations, sales and marketing and general and administrative expenses as a percentage of revenue in each calendar quarter.

Critical Accounting Policies and Estimates

Our MD&A is based upon our consolidated financial statements and notes to consolidated financial statements, which were prepared in conformity with U.S. generally accepted accounting principles. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience, current business factors, and various other assumptions that we believe are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities and disclosure of contingent assets and liabilities. We are subject to uncertainties such as the impact of future events, economic and political factors, and changes in our business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in preparation of our financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to our consolidated financial statements.

We evaluate our estimates on an ongoing basis, including those related to revenue recognition, the allowance for doubtful accounts, the carrying value of prepaid advertising, 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 and Web site development costs, the provision for income taxes and related deferred tax accounts, certain accrued expenses and contingencies, share-based awards to employees and transactions with Emdeon.

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

•  Revenue Recognition.  Revenue from advertising is recognized as advertisements are delivered or as publications are distributed. Revenue from sponsorship arrangements, content syndication and distribution arrangements, and licenses of healthcare management tools and private portals are recognized ratably over the term of the applicable agreement. Revenue from the sponsorship of CME is recognized over the period we substantially complete our contractual deliverables as determined by the applicable agreements. Subscription revenue is recognized over the subscription period. When contractual arrangements contain multiple elements, revenue is allocated to each element based on its relative fair value determined using prices charged when elements are sold separately. In certain instances where fair value does not exist for all the elements, the amount of revenue allocated to the delivered elements equals the total consideration less the fair value of the undelivered elements.

•  Long-Lived Assets.  Our long-lived assets consist of property and equipment, goodwill and other intangible assets. Goodwill and other intangible assets arise from the acquisitions we have made. The amount assigned to intangible assets is subjective and based on our estimates of the future benefit of the intangible assets using accepted valuation techniques, such as discounted cash flow and replacement cost models. Our long-lived assets, excluding goodwill, are amortized over their estimated useful lives, which we 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, and whenever indicators of impairment are present. We use a discounted cash flow approach to determine the fair value of goodwill. There was no impairment of goodwill noted as a result of our impairment testing in 2005.

•  Deferred Tax Assets.  Our deferred tax assets are comprised primarily of net operating loss carryforwards. At December 31, 2005, we had net operating loss carryforwards of approximately $642,563. Subject to certain limitations, these loss carryforwards may be used to offset taxable income in future

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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 allowance would be made which may increase income in the period that such determination is made, and may decrease income in subsequent periods.

•  Transactions with Emdeon.  As discussed further below, our expenses reflect a services fee for an allocation of costs for corporate services provided by Emdeon. Our expenses also reflect the allocation of a portion of the cost of Emdeon’s healthcare plans and the allocation of stock-based compensation expense related to restricted stock awards and other stock-based compensation. Our sales and marketing expense reflects an allocation to Emdeon for the utilization by it of advertising services available to us from News Corporation. Additionally, our revenue include revenue from Emdeon for services we provide.

Transactions with Emdeon

Prior to September 28, 2005, Emdeon allocated certain corporate expenses, including accounting, tax, treasury, legal, human resources, certain information technology functions and other services. These expense allocations were determined on a basis that we and Emdeon considered to be a reasonable assessment of the cost of providing these services exclusive of any profit margin. The basis we and Emdeon used to determine these expense allocations required management to make certain judgments and assumptions. Upon the IPO, we and Emdeon entered into a Services Agreement pursuant to which Emdeon provides us with specified services, and we reimburse Emdeon for the cost of these services. The allocation and cost methodologies used prior to the IPO were the basis for the calculation of the services fee charges. Emdeon has agreed to make the services available to us for up to five years; however, we are not required to continue to obtain services from Emdeon and are able to terminate services, in whole or in part, at any time, generally by providing, with respect to the specified services or groups of services, 60 days’ prior notice and, in some cases, paying a nominal termination fee to cover costs relating to the termination. The terms of the Services Agreement provide that Emdeon has the option to terminate the services that it provides for us, in whole or in part, if it ceases to provide such services for itself, upon at least 180 days’ written notice to us.

In addition to the agreements that govern our relationship with Emdeon, we have also entered into several agreements pursuant to which Emdeon or one or more of its subsidiaries will be a customer for some of our services, including our private portal services. The terms of these agreements are substantially similar to agreements we have or could have with third parties with respect to those services.

We and Emdeon entered into a Tax Sharing Agreement, dated as of September 23, 2005 (“Original Tax Sharing Agreement”). On February 15, 2006, effective for tax years beginning on and after January 1, 2006, we and Emdeon entered into an Amended and Restated Tax Sharing agreement (“Amended Tax Sharing Agreement”) that supersedes the Original Tax Sharing Agreement. Under the Amended Tax Sharing Agreement, Emdeon has agreed to compensate us for any use of our net operating losses that may result from certain extraordinary transactions, including a sale by Emdeon of its Business Services and Practice Services operating segments.

On January 31, 2006, we entered into additional agreements with Emdeon in which we agreed to support each other’s product development and marketing efforts relating to specific product lines for agreed upon fees as defined in the agreements. The new agreements cover a term of five years.

The consolidated financial statements include allocations for the following:

Charges from the Company to Emdeon

•  Revenue.  Our revenue includes revenue from Emdeon for services we provide to other Emdeon businesses for licensing of our private portal services, revenue for licensing of our database of

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physicians, and advertising by Emdeon in The Little Blue Book, our physician directory. We record these revenue at rates comparable to those charged to third parties for comparable services.

•  Advertising Expense.  Emdeon utilized the advertising services available to us from News Corporation, which are included in prepaid advertising within the accompanying consolidated balance sheets. We allocated costs to Emdeon based on its utilization of this asset. This charge included a proportional allocation based on the number of Emdeon operating segments identified in each advertisement and an allocation of cost to Emdeon for the promotion of the WebMD brand. Our portion of the advertising services utilized is reflected in sales and marketing expense and is reported net of the amount charged to Emdeon. On August 5, 2005, Emdeon and other businesses of Emdeon began to use “Emdeon” as their primary brand, instead of “WebMD.” Accordingly, we no longer allocate any advertising expense to Emdeon, or other businesses of Emdeon, related to any advertising that promotes the WebMD brand. If Emdeon uses our prepaid advertising for promotion of the Emdeon brand or other brands used by its other businesses, we will allocate the related cost to Emdeon; however, the amount of such future usage, if any, is currently unknown.

Charges from Emdeon to Our Company

•  Corporate Services.  We are charged a services fee for costs related to corporate services provided by Emdeon. These amounts are reflected in general and administrative expenses within our consolidated statements of operations, net of any costs we may incur on behalf of Emdeon. Certain of our employees that had previously been associated with Emdeon were transferred to us during the third quarter of 2005 thus, our specific identification services fee, which historically reflected the expense of those employees, has been eliminated.

•  Healthcare Expense.  We are charged healthcare expense for our employees’ participation in Emdeon’s healthcare plans. Healthcare expense is charged based on the total number of employees of our company and reflects Emdeon’s average cost of these benefits per employee. Healthcare expense is reflected in our consolidated statements of operations in the same expense caption as the related salary costs of those employees. We expect healthcare expense to vary in accordance with increases or decreases in our employee base and consistent with the cost of Emdeon’s healthcare plans.

•  Stock-based Compensation Expense.  Stock-based compensation expense is related to restricted stock awards of our Class A Common Stock and of Emdeon’s common stock that have been granted to certain of our employees. Stock-based compensation expense is also related to shares of our Class A Common Stock issued to non-employee directors for their annual board and committee retainers and stock options assumed or issued to employees in connection with certain acquisitions in 2000 with exercise prices less than the fair market value of Emdeon’s common stock on the date of grant. Stock-based compensation expenses are allocated on a specific employee identification basis. Stock-based compensation expense is reflected in our consolidated statements of operations in the same expense captions as the related salary costs of those employees. Stock-based compensation expense associated with non-employee directors is included in general and administrative expenses. Stock-based compensation expense allocated to us by Emdeon will increase significantly due to our adoption of SFAS 123R on January 1, 2006, as discussed in Note 2 to the consolidated financial statements included in this Annual Report.

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The following table summarizes the allocations reflected in our consolidated financial statements:

	Year Ended December 31,
	2005		2004		2003
Charges from the Company to Emdeon:
Intercompany revenue	$	336	$	—	$	—
Advertising expense		1,877		4,702		7,807
Charges from Emdeon to the Company:
Corporate services — specific identification		1,756		3,618		3,377
Corporate services — shared services allocation		3,361		2,973		2,882
Healthcare expense		2,728		2,357		1,743
Stock-based compensation expense		1,356		1,749		1,597

Results of Operations

The following table sets forth our consolidated statements of operations data and expresses that data as a percentage of revenue for the periods presented:

	Year Ended December 31,
	2005				2004				2003
	$		%		$		%		$			%
Revenue	$	168,938		100.0	$	134,148		100.0	$	110,152			100.0
Costs and expenses:
Cost of operations		70,538		41.8		52,377		39.0		46,998			42.7
Sales and marketing		51,756		30.6		47,358		35.3		47,917			43.5
General and administrative		29,550		17.5		22,122		16.5		18,016			16.4
Depreciation and amortization		10,653		6.3		5,620		4.2		4,463			4.0
Interest income		1,790		1.1		—		—		—			—
Income (loss) before income tax provision		8,231		4.9		6,671		5.0		(7,242	)		(6.6	)
Income tax provision		486		0.3		210		0.2		183			0.1
Net income (loss)	$	7,745		4.6	$	6,461		4.8	$	(7,425	)		(6.7	)

Revenue is derived from our two business segments: Online Services, and Publishing and Other Services. Our Online Services segment derives revenue from advertising, sponsorship (including online CME services), content syndication and distribution, and licenses of private online portals to employers, healthcare payers and others. Our Publishing and Other Services segment derives revenue from sales of, and advertising in, our physician directories, subscriptions to our professional medical reference textbooks, and advertisements in WebMD the Magazine. As a result of the acquisition of the assets of Conceptis, we also generate revenue from in-person CME programs. Included in our Online Services’ revenue are revenue related to our agreements with News Corporation and AOL:

•  We had licensed our content to News Corporation for use across its media properties for four years ending in January 2005, for cash payments totaling $12,000 per contract year.

•  Our company and AOL share revenue from advertising, commerce and programming on the health channels of certain AOL online sites and on a co-branded service we created for AOL. Under the terms of the current agreement which expires in May 2007, our revenue share is subject to a minimum annual guarantee. Included in the accompanying consolidated statements of operations, for the years ended December 31, 2005, 2004 and 2003 is revenue of $7,805, $7,242 and $5,087, respectively, which represents sales to third parties of advertising and sponsorship on the AOL health channels, primarily sold through our sales team. Also included in revenue during the years ended December 31, 2005 and 2004 is $5,951 and $3,754, respectively, related to the guarantee discussed above.

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Our customers include pharmaceutical, biotechnology, medical device and consumer products companies, as well as employers and health plans. Our customers also include physicians and other healthcare providers who buy our physician directories and reference text books.

Our discussions throughout this MD&A reference certain non-cash expenses. The following is a summary of our principal non-cash expenses:

•  Non-cash advertising expense.  Expense related to the use of our prepaid advertising inventory that we received from News Corporation in exchange for equity instruments that Emdeon issued in connection with an agreement it entered into with News Corporation in 1999 and subsequently amended in 2000. This non-cash advertising expense is included in cost of operations when we utilize this advertising inventory in conjunction with offline advertising and sponsorship programs and is included in sales and marketing expense when we use the asset for promotion of our brand. The portion of the non-cash expense that is reflected in sales and marketing expense is reflected net of the expense we charge to Emdeon in connection with its use of this asset.

•  Non-cash distribution expense.  Expense related to the amortization of a warrant that Emdeon issued in 2001 to AOL as part of a strategic alliance Emdeon entered into with Time Warner in May 2001, under which our company became the primary provider of healthcare content, tools and services for use on certain AOL properties. This expense is included in sales and marketing expense.

•  Non-cash stock-based compensation expense.  Expense related to awards of our restricted Class A Common Stock and awards of restricted Emdeon common stock that have been granted to certain of our employees. Expense also related to shares issued to our non-employee directors as well as stock options assumed or issued to employees in connection with certain acquisitions in 2000 with exercise prices less than the fair market value of Emdeon’s common stock on the date of grant. Non-cash stock-based compensation expense is reflected in the same expense captions as the related salary costs of the respective employees.

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 public and private portals. These costs relate to editorial and production, Web site operations, non-capitalized Web site development costs, and costs related to the production and distribution of our publications. These costs consist of expenses related to compensation, non-cash stock-based compensation, creating and licensing content, telecommunications, leased properties, printing and distribution, and non-cash advertising expenses related to the sale of offline advertising through our media partners.

Sales and marketing expense consists primarily of advertising, product and brand promotion, salaries and related expenses, and non-cash stock-based compensation. These expenses include items related to salaries and related expenses of account executives, account management and marketing personnel, costs and expenses for marketing programs, and fees for professional marketing and advertising services. Also included in sales and marketing expense are the non-cash advertising and distribution expenses discussed above.

General and administrative expense consists primarily of salaries, non-cash stock-based compensation and related expenses of administrative, finance, legal, information technology, human resources and executive personnel. These expenses include costs of general insurance and costs of accounting and internal control systems to support our operations, a services fee for our portion of certain expenses shared across all segments of Emdeon, as well as facilities expense.

2005 and 2004

The following discussion is a comparison of our results of operations on a consolidated basis for the year ended December 31, 2005 to the year ended December 31, 2004.

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Revenue

Our total revenue increased 25.9% to $168,938 in 2005, from $134,148 in 2004. Online Services accounted for $32,013 or 92.0% of the revenue increase for 2005. Publishing and Other Services accounted for $2,777 or 8.0% of the revenue increase for 2005. Our revenue from customers acquired through our acquisitions in 2005 and 2004 contributed $10,538 to the overall increase in revenue for 2005. Our content syndication revenue and earnings for the year ended December 31, 2005 also reflect a $11,000 decline relating to the expiration in January 2005 of our content syndication agreement with News Corporation, which had no corresponding incremental expenses.

Costs and Expenses

Cost of Operations.  Cost of operations increased to $70,538 in 2005 from $52,377 in 2004. As a percentage of revenue, cost of operations was 41.8% in 2005, compared to 39.0% in 2004. The increase as a percentage of revenue was primarily due to a change in revenue mix, as the News Corporation content syndication revenue, which had no corresponding incremental expenses, was replaced with revenue that has normal cost of operations. In addition, the increase was attributable to increases in compensation related costs due to higher staffing levels and outside personnel expenses relating to our Web site operations, non-capitalized Web site development costs, increased costs associated with creating and licensing our content and severance costs of approximately $700. Included in cost of operations were non-cash advertising costs of $336 in 2005 and $901 in 2004 related to the sale and fulfillment of online advertising.

Sales and Marketing.  Sales and marketing expense increased to $51,756 in 2005 from $47,358 in 2004. Included in sales and marketing expense in 2005 were non-cash expenses related to advertising and distribution services of $8,656, a decrease from $11,246 in 2004. The decrease in non-cash expenses was due to lower advertising expense related to our utilization of our prepaid advertising inventory as well as a decline in the expense related to our distribution arrangement with AOL, which was fully amortized in May 2004. We allocated $1,877 of advertising expense in 2005 to Emdeon related to its utilization of this asset as compared to $6,679 in 2004. As discussed elsewhere in this MD&A, our non-cash advertising expense is reflected net of what is charged to Emdeon for its utilization of the prepaid advertising. On August 5, 2005, Emdeon and other businesses of Emdeon began to use “Emdeon” as their primary brand, instead of “WebMD.” Accordingly, we will no longer allocate any advertising expense to Emdeon, or other businesses of Emdeon, related to any advertising that promotes the WebMD brand.

Sales and marketing expense, excluding non-cash advertising and distribution expense, was $43,100 or 25.5% of revenue in 2005, compared to $36,112 or 26.9% of revenue in 2004. Although we experienced increases in compensation related costs due to increased staffing and sales commissions related to higher revenue, the decrease as a percentage of revenue in 2005 was primarily due to our ability to achieve the increase in revenue without incurring a proportional increase in expenses. This was due to the fact that, with the exception of increased staffing and additional sales commissions, incremental revenue generally did not require additional sales and marketing expenses.

General and Administrative.  General and administrative expense increased to $29,550 in 2005 from $22,122 in 2004. Included in general and administrative expense were non-cash expenses related to stock-based compensation expense of $1,551 in 2005 and $636 in 2004. The increase in stock-based compensation expense primarily related to restricted stock issued in conjunction with the IPO.

General and administrative expense, excluding non-cash stock-based compensation expense discussed above, was $27,999 or 16.6% of revenue in 2005 compared to $21,486 or 16.0% of revenue in 2004. The increase compared to last year was primarily due to increases in personnel related expenses, including the increases as a result of acquisitions which were completed in the fourth quarter of 2004 and the first quarter of 2005 and approximately $2,200 of expense in connection with the resignation of our former CEO and recruitment of our Executive Vice President of Product and Programming and Chief Technology Officer. These items were partially offset by the elimination of expense related to the termination of a sponsorship agreement in 2004.

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Depreciation and Amortization.  Depreciation and amortization expense increased to $10,653 in 2005 from $5,620 in 2004. The increase over the prior year period was primarily due to amortization of intangible assets relating to the 2005 Acquisitions and the 2004 Acquisitions as well as the increase in depreciation expense relating to the build out of our new corporate offices, which we completed in June 2005.

Interest Income.  Interest income relates to our investment of a portion of the proceeds from our IPO and a portion of the $40,000 cash capital contribution from Emdeon in U.S. Treasury Notes and auction rate securities.

Income Tax Provision.  Income tax provision primarily represents taxes from profitable operations in certain jurisdictions in which we do not have net operating losses to offset that income. Accordingly, we provided for taxes of $486 related to state and other jurisdictions in 2005, compared to $210 in 2004.

2004 and 2003

The following discussion is a comparison of our results of operations on a consolidated basis for the year ended December 31, 2004 to the year ended December 31, 2003.

Revenue

Our total revenue increased 21.8% to $134,148 in 2004 from $110,152 in 2003. Online Services and Publishing and Other Services accounted for $20,136 or 83.9% and $3,860 or 16.1%, of the revenue increase, respectively. The increase in Publishing and Other Services revenue was primarily due to $3,564 from the full year impact of the 2003 acquisition of The Little Blue Book. Revenue from customers acquired through our acquisitions in 2004 were not a significant portion of our 2004 revenue because these acquisitions occurred late in 2004. Included in our 2004 and 2003 revenue are $12,000 per year relating to our content syndication agreement with News Corporation, which expired in January 2005.

Costs and Expenses

Cost of Operations.  Cost of operations increased to $52,377 in 2004 from $46,998 in 2003. Our cost of operations represented 39.0% of revenue in 2004, compared to 42.7% of revenue in 2003. Included in cost of operations were non-cash advertising costs of $901 and $2,757 for 2004 and 2003, respectively, which reflects lower sales of offline advertising in 2004. Excluding the non-cash advertising costs, cost of operations increased to $51,476 in 2004 or 38.4% of revenue from $44,241 in 2003 or 40.2% of revenue. The $7,235 increase was attributable to increased spending on information technology and, to a lesser extent, the full year impact in 2004 of printing and distribution costs as a result of the 2003 acquisition of The Little Blue Book.

Sales and Marketing.  Sales and marketing expense decreased to $47,358 in 2004, from $47,917 in 2003. Included in sales and marketing expense were non-cash expenses related to advertising and distribution services of $11,246 in 2004, a decrease from $16,211 in 2003. This decrease was primarily due to a decline in the expense related to our distribution arrangement with AOL which was fully amortized in May 2004. Sales and marketing expense excluding these non-cash expenses was $36,112, or 26.9% of revenue in 2004, compared to $31,706, or 28.8% of revenue in 2003. The $4,406 increase is due to compensation related costs due to a combination of increased commissions and increased staffing, and the full year impact in 2004 of the acquisition of The Little Blue Book.

General and Administrative.  General and administrative expense increased to $22,122 in 2004 from $18,016 in 2003. Included in general and administrative expense were non-cash expenses related to stock-based compensation expense of $636 in 2004 and $603 in 2003.

General and administrative expense, excluding non-cash stock-based compensation expense discussed above, was $21,486 or 16.0% of revenue in 2004 compared to $17,413 or 15.8% of revenue in 2003. The increase compared to last year was primarily due to increases in personnel related expenses resulting from an increase in the number of our staff, including the full year impact in 2004 of the 2003 acquisition of The Little Blue Book.

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Depreciation and Amortization.  Depreciation and amortization expense increased to $5,620 in 2004 from $4,463 in 2003. The increase was primarily due to intangible assets relating to the 2004 Acquisitions and 2003 Acquisitions.

Income Tax Provision.  Income tax provision in 2004 and 2003 primarily represents taxes from profitable operations in certain jurisdictions in which we do not have net operating losses to offset that income. Accordingly, we provided for taxes of $210 and $183 related to state and other jurisdictions during 2004 and 2003, respectively.

Results of Operations by Operating Segment

We monitor the performance of our business based on earnings before interest, taxes, depreciation, amortization and other non-cash items. Other non-cash items include non-cash advertising and distribution expenses and non-cash stock-based compensation expense. Corporate and other overhead functions are allocated to segments on a specifically identifiable basis or other reasonable method of allocation. We consider these allocations to be a reasonable reflection of the utilization of costs incurred. We do not disaggregate assets for internal management reporting and, therefore, such information is not presented. There are no inter-segment revenue transactions.

The following table presents the results of our operations for each of our operating segments and a reconciliation to net income:

	Year Ended December 31,
	2005			2004			2003
Revenue
Online Services:
Advertising and sponsorship	$	109,977		$	83,828		$	71,618
Licensing		34,113			15,841			8,923
Content syndication and other		8,210			20,618			19,610
Total Online Services		152,300			120,287			100,151
Publishing and Other Services		16,638			13,861			10,001
	$	168,938		$	134,148		$	110,152
Earnings before interest, taxes, depreciation, amortization and other non-cash items
Online Services	$	28,313		$	24,902		$	16,145
Publishing and Other Services		88			1,285			1,641
		28,401			26,187			17,786
Interest, taxes, depreciation, amortization and other non-cash items
Interest income		1,790			—			—
Depreciation and amortization		(10,653	)		(5,620	)		(4,463	)
Non-cash advertising and distribution services		(8,992	)		(12,147	)		(18,968	)
Non-cash stock-based compensation		(2,315	)		(1,749	)		(1,597	)
Income tax provision		(486	)		(210	)		(183	)
Net income (loss)	$	7,745		$	6,461		$	(7,425	)

2005 and 2004

The following discussion is a comparison of the results of operations for our two operating segments for the year ended December 31, 2005 to the year ended December 31, 2004.

Online Services.  Revenue was $152,300 in 2005, an increase of $32,013 or 26.6% from 2004. The increase was related to increased advertising and sponsorship revenue related to our public portals and

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licensing revenue from our private online portals, offset by a decline in content syndication and other revenue primarily due to a $11,000 decline in revenue in 2005 relating to the expiration of our content syndication agreement with News Corporation in January 2005. The increase was due to the number of brands and sponsored programs promoted on our sites. The number of such programs grew to 570 in 2005 compared to 380 in 2004. Also, supporting the increase in revenue was the increase in the number of companies using our private online portal which increased to 78 from 62 companies in the prior year. Included in revenue during the year ended December 31, 2005 was $7,661 and $933 related to the acquisitions of HealthShare and Conceptis, respectively. HealthShare had approximately 90 licensing customers as of December 31, 2005.

Earnings before interest, taxes, depreciation, amortization and other non-cash items was $28,313 or 18.6% of revenue in 2005, compared to $24,902 or 20.7% of revenue in 2004. This decline as a percentage of revenue was due primarily to charges of approximately $3,100 related to the resignation of our former CEO and other personnel and the recruitment of our Executive Vice President of Product and Programming and Chief Technology Officer. Higher information technology, as well as higher sales and marketing expenses and the decline in content syndication revenue from News Corporation, which had no corresponding incremental expenses, also contributed to this decline. These items contributing to the decline as a percentage of revenue were offset by the elimination of expenses related to the termination of a sponsorship agreement in 2004.

Publishing and Other Services.  Revenue was $16,638 in 2005, compared to $13,861 in 2004. The increase was attributable to increased revenue from the launch of WebMD the Magazine and to a lesser extent the acquisition of Conceptis, offset by slight declines in our other offline publications.

Earnings before interest, taxes, depreciation, amortization and other non-cash items was $88 in 2005, compared to $1,285 in 2004. The decrease was due to the launch of WebMD the Magazine in April 2005, as well as the decline in advertising revenue in The Little Blue Book directories.

2004 and 2003

The following discussion is a comparison of the results of operations for our two operating segments for the year ended December 31, 2004 to the year ended December 31, 2003.

Online Services.  Revenue was $120,287 in 2004, an increase of $20,136 or 20.1% from 2003. The increase was related to increased advertising and sponsorship revenue related to our public portals and licensing revenue from our private online portals. The revenue increase was primarily due to increased demand for our public and private portals. The increase was due to the number of brands and sponsored programs promoted on our sites. The number of such programs grew to 380 in 2004 compared to 325 in 2003. Additionally, the number of companies using our private portal platform grew to 62 at the end of 2004 compared to 40 in 2003. Included in content syndication and other revenue for 2004 and 2003 was $12,000 per year related to our content syndication agreement with News Corporation which expired in January 2005. Earnings before interest, taxes, depreciation, amortization and other non-cash items was $24,902 in 2004, an increase of $8,757 or 54.2% from 2003. As a percentage of revenue, earnings before interest, taxes, depreciation, amortization and other non-cash items was 20.7% in 2004, compared to 16.1% in 2003. The growth in earnings and margins was due to our ability to deliver the increased revenue without incurring a proportionate increase in overall expenses.

Publishing and Other Services.  Revenue was $13,861 in 2004, compared to $10,001 for 2003. The increase was attributable to the full year impact of the May 2003 acquisition of The Little Blue Book. Earnings before interest, taxes, depreciation, amortization and other non-cash items was $1,285 in 2004, a decrease of $356 from 2003. Our Publishing and Other Services segment is seasonal, where approximately 70% of our revenue was generated during the second and third quarter of 2004 when the majority of our physician directories are delivered. Due to the full year impact of The Little Blue Book acquisition on 2004 fixed expenses, as a percentage of revenue, earnings before interest, taxes, depreciation, amortization and other non-cash items declined to 9.3% in 2004, compared to 16.4% in 2003.

60

Liquidity and Capital Resources

Through September 28, 2005, we were a subsidiary of and wholly owned by Emdeon. Our shares began trading on the Nasdaq National Market under the ticker symbol “WBMD” on September 29, 2005. We closed and received proceeds from the IPO, of $125,392, net of underwriting discounts and expenses of $13,471. Up to the date of the IPO, our primary source of financing had been net cash amounts received from Emdeon, including $65,000 in cash during 2005 of which $40,000 was contributed during September 2005. Subsequent to the IPO, Emdeon has no obligation to provide us with any additional financing. We intend to use the net proceeds received from the IPO and the capital contribution from Emdeon for working capital and general corporate purposes, including capital expenditures and acquisitions. We plan to continue to enhance the relevance of our online services to our audience and sponsors and will continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We intend to grow each of our existing businesses and enter into complementary ones through both internal investments and acquisitions.

As of December 31, 2005, we had $153,777 of cash and cash equivalents and short-term investments. Our working capital as of December 31, 2005 was $151,856. Our working capital is affected by the timing of each period end in relation to items such as payments received from customers and payments made to vendors, internal payroll and billing cycles, as well as the seasonality within our business. Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period.

Cash provided by operating activities in 2005 was $28,605, which related to net income of $7,745 adjusted for non-cash expenses of $21,960, which included depreciation and amortization, non-cash advertising and distribution expense and non-cash stock-based compensation expense. Additionally, changes in working capital utilized cash flow of $1,100, primarily due to an increase in accounts receivable of $13,974, partially offset by increases in accrued expenses of $3,711, a deferred credit related to lease incentives of $4,398 and amounts due to Emdeon of $3,672. Cash provided by operating activities in 2004 was $18,138 which was primarily due to net income of $6,461 adjusted for $19,516 of non-cash expenses. Changes in working capital during 2004 utilized $7,839 of cash flow primarily due to a net increase in accounts receivable of $17,125, partially offset by an increase in deferred revenue of $4,878 and an increase in accrued expenses of $2,952 resulting from the timing of payments made to vendors in relation to the period end.

Cash used in investing activities in 2005 was $146,606, which primarily related to net purchases of available-for-sale securities of $77,728, the acquisitions of HealthShare and Conceptis and investments in property and equipment primarily as a result of the build-out of our new corporate offices in New York. Cash flow used in investing activities was $26,742 in 2004, which primarily related to the acquisitions of MedicineNet and Rx List and investments in property and equipment of $4,321.

Cash provided by financing activities in 2005 principally relates to the proceeds received from the IPO and net cash amounts received from, or transferred to, Emdeon.

The following table summarizes our principal commitments as of December 31, 2005 for future specified contractual obligations that have not been accrued for in our consolidated balance sheet, as well as the estimated timing of the cash payments associated with these obligations. Management has used estimates and assumptions as to the timing of the cash flows associated with these commitments. Management’s estimates of the timing of future cash flows are largely based on historical experience, and accordingly, actual timing of cash flows may vary from these estimates.

61

			Less Than						More Than
	Total		1 Year		1-3 Years		4-5 Years		5 Years
	(In thousands)
Leases	$	37,341	$	4,351	$	7,515	$	7,296	$	18,179
Purchase obligations(1)		874		874		—		—		—
Advertising relationship(2)		625		500		125		—		—
Total	$	38,840	$	5,725	$	7,640	$	7,296	$	18,179

(1)	Purchase obligations include amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery.
(2)	This advertising relationship represents a commitment for advertising placements to promote our brand.

Potential future cash commitments not included in the specified contractual obligations table above or accrued for in our consolidated balance sheet include a contingent consideration payment of up to $2,500 for RxList which will be determined based on 2006 measurements and our anticipated 2006 capital expenditure requirements which we currently estimate at $20,000 to $25,000. Our anticipated capital expenditures will be to enhance our Web site in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers. The table above also does not include the cash payments totaling $25,500 during the first quarter of 2006 in connection with the acquisition of eMedicine. We believe that our available cash resources and future cash flow from operations, will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. 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. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

Recent Accounting Pronouncements

On November 3, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The guidance in this FSP addresses the determination of when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance is to be applied prospectively in periods beginning after December 15, 2005. We believe the adoption of this FSP will not have a material impact on our financial position or results of operations.

In June 2005, we adopted EITF Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements,” which provides new guidance for assessing amortization periods for leasehold improvements placed in service significantly after and not contemplated at or near the beginning of the initial lease term and acquired in a business combination. The guidance requires that the amortization of the leasehold improvement be based on the shorter of the useful life of the assets or a term that includes required lease periods and reasonably assured renewal periods. We believe the adoption of this EITF will not have a material impact on our financial position or results of operations.

62

In December 2004, FASB issued SFAS No. 123, “(Revised 2004): Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123 and supersedes APB No. 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the fiscal year that begins after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. We have adopted SFAS 123R beginning January 1, 2006. We have adopted the modified prospective transition method utilizing the Black-Scholes option pricing model to measure the fair value of stock options granted to employees. The modified prospective method requires that we begin recording compensation expense for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R using the same grant date fair value and same expense attribution method used under SFAS 123. Additionally, we have applied the straight-line attribution method for all equity grants subsequent to January 1, 2006 rather than the accelerated method that we have used for all grants prior to January 1, 2006. The adoption of SFAS 123R will have a material impact on the consolidated financial statements. The future stock-based compensation expenses will be materially different than the pro forma expenses disclosed in accordance with SFAS 123 in our consolidated financial statements due to the stock options and restricted stock awards issued in connection with the IPO are outstanding from September 25, 2005 through December 31, 2005.

Item 7A.   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 types of 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 will maintain a 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 $79.0 million during 2006.

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, with the acquisition of the assets of Conceptis, we are exposed to fluctuations in foreign currency exchange rates, primarily the rate of exchange of the United States dollar against the Canadian dollar. This exposure arises primarily as a result of translating the results of Conceptis’ foreign operations to the United States dollar at exchange rates that have fluctuated from the beginning of the accounting period. As Conceptis was purchased in December 2005, there was not a material impact on our results of operations as a result of foreign currency translation.

We believe that future exchange rate sensitivity related to Conceptis will not have a material effect on our financial condition or results of operations.

Item 8.   Financial Statements and Supplementary Data

Financial Statements

Our financial statements required by this item are contained on pages F-1 through F-34 of this Annual Report on Form 10-K. See Item 15(a)(1) for a listing of financial statements provided.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

63

Item 9A.   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 December 31, 2005. 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 Annual Report has been made known to them in a timely fashion.

In connection with the evaluation required by Exchange Act Rule 13a-15(d), WebMD management, including the Chief Executive Officer and Chief Financial Officer, concluded that no changes in WebMD’s internal control over financial reporting occurred during the fourth quarter of 2005 that have materially affected, or are reasonably likely to materially affect, WebMD’s internal control over financial reporting.

Item 9B.   Other Information

None.

64

PART III

Information required by Items 10, 11, 12, 13 and 14 of Part III is omitted from this Annual Report and will be filed in a definitive proxy statement or by an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

Item 10.   Directors and Executive Officers of the Registrant

We will provide information that is responsive to this Item 10 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Directors and Executive Officers,” and possibly elsewhere therein. That information is incorporated in this Item 10 by reference.

Item 11.   Executive Compensation

We will provide information that is responsive to this Item 11 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Executive Compensation,” and possibly elsewhere therein. That information is incorporated in this Item 11 by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We will provide information that is responsive to this Item 12 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” and possibly elsewhere therein. That information is incorporated in this Item 12 by reference.

Item 13.   Certain Relationships and Related Transactions

We will provide information that is responsive to this Item 13 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Certain Relationships and Related Transactions,” and possibly elsewhere therein. That information is incorporated in this Item 13 by reference.

Item 14.   Principal Accountant Fees and Services

We will provide information that is responsive to this Item 14 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Services and Fees of Ernst & Young,” and possibly elsewhere therein. That information is incorporated in this Item 14 by reference.

65

PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a)(1)-(2) Financial Statements and Schedules

The financial statements and schedules listed in the accompanying Index to Consolidated Financial Statements and Supplemental Data on page F-1 are filed as part of this Report.

(a)(3) Exhibits

See “Index to Exhibits” beginning on page E-1, which is incorporated by reference herein. The Index to Exhibits lists all exhibits filed with this Report and identifies which of those exhibits are management contracts and compensation plans.

66

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 16th day of March, 2006.

WebMD Health Corp.
By:	/s/ Anthony Vuolo
	Anthony Vuolo
	Executive Vice President and Chief Financial Officer

POWER OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Anthony Vuolo, Lewis H. Leicher and Douglas W. Wamsley, and each one of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Signature	Capacity	Date
/s/  Wayne T. Gattinella Wayne T. Gattinella		Director; President and Chief Executive Officer (principal executive officer)	March 16, 2006
/s/  Anthony Vuolo Anthony Vuolo		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	March 16, 2006
/s/  Mark J. Adler, M.D. Mark J. Adler, M.D.		Director	March 16, 2006
/s/  Neil F. Dimick Neil F. Dimick		Director	March 16, 2006
/s/  Jerome C. Keller Jerome C. Keller		Director	March 16, 2006
/s/  James V. Manning James V. Manning		Director	March 16, 2006
/s/  Abdool Rahim Moossa, M.D. Abdool Rahim Moossa, M.D.		Director	March 16, 2006

67

	Signature	Capacity	Date
/s/  Stanley S. Trotman, Jr. Stanley S. Trotman, Jr.		Director	March 16, 2006
/s/  Martin J. Wygod Martin J. Wygod		Director	March 16, 2006

68

WEBMD HEALTH CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The following financial statements of the Company and its subsidiaries required to be included in Item 15(a) (1) of Form 10-K are listed below:

	Page
WebMD Health Corp.
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2005 and 2004		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003		F-4
Consolidated Statements of Stockholders’ Equity and Owner’s Net Investment for the Years Ended December 31, 2005, 2004 and 2003		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003		F-6
Notes to Consolidated Financial Statements		F-7
Supplemental Financial Data:
The following supplementary financial data of the Registrant and its subsidiaries required to be included in Item 15 (a) (2) of Form 10-K are listed below:
Schedule II — Valuation and Qualifying Accounts		S-1

All other schedules not listed above have been omitted as not applicable or because the required information is included in the Consolidated Financial Statements or in the notes thereto. Columns omitted from the schedule filed have been omitted because the information is not applicable.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

WebMD Health Corp.

We have audited the accompanying consolidated balance sheets of WebMD Health Corp. as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and owner’s net investment, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index on page F-1. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of WebMD Health Corp. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/  Ernst & Young LLP

MetroPark, New Jersey

March 16, 2006

F-2

WEBMD HEALTH CORP.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

	December 31,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	75,704		$	3,456
Short-term investments		78,073			—
Accounts receivable, net of allowance for doubtful accounts of $859 at December 31, 2005 and $798 at December 31, 2004		57,245			38,453
Current portion of prepaid advertising		7,424			10,350
Other current assets		3,977			2,619
Total current assets		222,423			54,878
Property and equipment, net		21,014			6,316
Prepaid advertising		12,104			20,047
Goodwill		100,669			52,614
Intangible assets, net		20,503			12,065
Other assets		176			576
	$	376,889		$	146,496
LIABILITIES, STOCKHOLDERS’ EQUITY AND OWNER’S NET INVESTMENT
Current liabilities:
Accrued expenses	$	34,072		$	15,874
Deferred revenue		32,823			29,885
Due to Emdeon		3,672			—
Total current liabilities		70,567			45,759
Other long-term liabilities		7,010			—
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 50,000,000 shares authorized; no shares issued and outstanding		—			—
Class A Common Stock, $0.01 par value per share, 500,000,000 shares authorized; 7,954,426 shares issued and outstanding at December 31, 2005; no shares issued and outstanding at December 31, 2004		80			—
Class B Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 48,100,000 shares issued and outstanding at December 31, 2005; no shares issued and outstanding at December 31, 2004		481			—
Deferred stock compensation		(5,736	)		—
Additional paid-in capital		296,266			—
Accumulated other comprehensive income		(112	)		—
Retained earnings		8,333			—
Owner’s net investment		—			100,737
Total stockholders’ equity and owner’s net investment		299,312			100,737
	$	376,889		$	146,496

See accompanying notes.

F-3

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Years Ended December 31,
	2005		2004		2003
Revenue	$	168,938	$	134,148	$	110,152
Costs and expenses:
Cost of operations		70,538		52,377		46,998
Sales and marketing		51,756		47,358		47,917
General and administrative		29,550		22,122		18,016
Depreciation and amortization		10,653		5,620		4,463
Interest income		1,790		—		—
Income (loss) before income tax provision		8,231		6,671		(7,242	)
Income tax provision		486		210		183
Net income (loss)	$	7,745	$	6,461	$	(7,425	)
Net income (loss) per common share:
Basic and diluted	$	0.15	$	0.13	$	(0.15	)
Weighted-average shares outstanding used in computing net income (loss) per common share:
Basic		50,132		48,100		48,100
Diluted		50,532		48,100		48,100

See accompanying notes.

F-4

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND OWNER’S NET INVESTMENT

(In thousands, except share amounts)

				Stockholders’ Equity
																	Accumulated
				Class A				Class B									Other
	Owner’s Net			Common Stock				Common Stock				Deferred			Additional		Comprehensive			Retained
	Investment			Shares		Amount		Shares		Amount		Compensation			Paid-In-Capital		Income			Earnings			Total
Balance at December 31, 2002	$	86,426			—	$	—		—	$	—	$	—		$	—	$	—		$	—		$	86,426
Net Loss		(7,425	)		—		—		—		—		—			—		—			—			(7,425	)
Net transfers from Emdeon		6,526			—		—		—		—		—			—		—			—			6,526
Balances at December 31, 2003		85,527			—		—		—		—		—			—		—			—			85,527
Net Income		6,461			—		—		—		—		—			—		—			—			6,461
Net transfers from Emdeon		8,749			—		—		—		—		—			—		—			—			8,749
Balances at December 31, 2004		100,737			—		—		—		—		——			—		—			—			100,737
Net income (loss)		(1,705	)		—		—		—		—		——			—		—			9,450			7,745
Changes in unrealized losses on securities		—			—		—		—		—		—			—		(112	)		—			(112	)
Comprehensive Income		—			—		—		—		—		—			—		—			—			7,633
Transfers from Emdeon, including non-cash transfers		63,976			—		—		—		—		—			360		—			—			64,336
Contribution		(163,008	)		—		—		48,100,000		481		—			162,527		—			—			—
Issuance of Class A Common Stock, net of costs		—			7,954,426		80		—		—		—			125,652		—			—			125,732
Stock options issued to Emdeon employees		—			—		—		—		—		—			1,117		—			(1,117	)		—
Deferred stock compensation		—			—		—		—		—		(6,610	)		6,610		—			—			—
Amortization of deferred stock compensation		—			—		—		—		—		874			—		—			—			874
Balances at December 31, 2005	$	—			7,954,426	$	80		48,100,000	$	481	$	(5,736	)	$	296,266	$	(112	)	$	8,333		$	299,312

See accompanying notes.

F-5

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2005			2004			2003
Cash flows from operating activities:
Net income (loss)	$	7,745		$	6,461		$	(7,425	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		10,653			5,620			4,463
Non-cash advertising and distribution services		8,992			12,147			18,968
Non-cash stock-based compensation		2,315			1,749			1,597
Changes in operating assets and liabilities:
Accounts receivable		(13,974	)		(17,125	)		(1,452	)
Other assets		(567	)		1,456			(1,663	)
Accrued expenses		3,711			2,952			(7,815	)
Due to Emdeon		3,672			—			—
Deferred revenue		(952	)		4,878			(3,756	)
Other long-term liabilities		7,010			—			—
Net cash provided by operating activities		28,605			18,138			2,917
Cash flows from investing activities:
Proceeds from maturities and sales of available-for-sale securities		87,450			—			—
Purchases of available-for-sale securities		(165,178	)		—			—
Purchases of property and equipment		(18,126	)		(4,321	)		(1,518	)
Cash paid in business combinations, net of cash acquired		(50,752	)		(22,421	)		(13,926	)
Net cash used in investing activities		(146,606	)		(26,742	)		(15,444	)
Cash flows from financing activities:
Issuance of Class A Common Stock		125,392			—			—
Net cash transfers from Emdeon		64,857			11,702			12,736
Net cash provided by financing activities		190,249			11,702			12,736
Net increase in cash and cash equivalents		72,248			3,098			209
Cash and cash equivalents at beginning of period		3,456			358			149
Cash and cash equivalents at end of period	$	75,704		$	3,456		$	358

See accompanying notes.

F-6

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

1.   Background and Basis of Presentation

Background

WebMD Health Corp. (the “Company”) is a Delaware corporation that was formed as a wholly owned subsidiary of Emdeon Corporation (“Emdeon”) in preparation for an initial public offering (“IPO”) of equity securities in Emdeon’s WebMD segment. The Company was incorporated on May 3, 2005 and on that date, 3,000 shares of the Company’s common stock, par value $0.01 per share, were authorized. On May 4, 2005, 100 shares were issued to Emdeon, then known as WebMD Corporation. In September 2005, Emdeon contributed to the Company, as a contribution to capital, the subsidiaries that comprise Emdeon’s WebMD segment and certain related assets and liabilities. During 2005, Emdeon contributed $64,857 in cash of which $40,000 was a capital contribution in September 2005. On September 27, 2005, the Company restated its Certificate of Incorporation (a) to increase the authorized number of shares from 3,000 to 700,000,000 divided into three classes (50,000,000 shares of Preferred Stock, 500,000,000 shares of Class A Common Stock and 150,000,000 shares of Class B Common Stock) and (b) to convert the 100 shares of then outstanding common stock, all of which were held by Emdeon, into an aggregate of 48,100,000 shares of Class B Common Stock. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to five votes. In connection with the Company’s IPO, the Company issued 7,935,000 shares of Class A Common Stock. All of the Company’s share and per share references in the accompanying consolidated financial statements have been adjusted retroactively to present the 48,100,000 shares of Class B Common Stock, outstanding as a result of the issuance of 100 shares of common stock on May 4, 2005 and the conversion of those shares on September 27, 2005 into Class B Common Stock, as if they had been outstanding for all prior periods.

The Company provides health information services to consumers, physicians and other healthcare professionals, employers and health plans through the Company’s public and private online portals and health-focused publications. The Company’s two operating segments are:

•  Online Services.  The Company provides both public and private online portals. The Company’s public portals for consumers enable them to obtain detailed information on a particular disease or condition, analyze symptoms, locate physicians, store individual healthcare information, receive periodic e-newsletters on topics of individual interest, enroll in interactive courses and participate in online communities with peers and experts. The Company’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn continuing medical education (“CME”) credit and communicate with peers. The Company’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, provider and treatment choices.

•  Publishing and Other Services.  The Company publishes: medical reference textbooks; The Little Blue Book, a physician directory: and, since 2005, WebMD the Magazine, a consumer magazine distributed to physician office waiting rooms. The Company also conducts in-person CME as a result of the acquisition of the assets of Conceptis Technologies, Inc. in December 2005.

Basis of Presentation

The consolidated financial statements have been derived from the consolidated financial statements and accounting records of Emdeon, principally representing its WebMD segment, and are based on the historical results of operations, and historical basis of assets and liabilities of this segment. Management believes the assumptions underlying the consolidated financial statements are reasonable. However, the consolidated financial statements included herein may not necessarily reflect the Company’s results of operations, financial

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

position and cash flows in the future or what its results of operations, financial position and cash flows would have been had the Company been a stand-alone company during the periods presented. As of December 31, 2004, Emdeon’s net investment in the Company, including intercompany debt, is shown as owner’s net investment in lieu of stockholders’ equity in the consolidated financial statements, because a direct ownership relationship did not exist among all of the various entities comprising the Company during this period. In September 2005, Emdeon’s net investment in the Company was reclassified to additional paid-in capital. Transactions between the Company and Emdeon have been identified in the consolidated financial statements as transactions with Emdeon (see Note 4).

2.   Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, and have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The results of operations for companies acquired are included in the consolidated financial statements from the effective date of acquisition. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Seasonality

The timing of the Company’s revenue is affected by seasonal factors. Advertising and sponsorship revenue within the Online Services segment is seasonal, primarily as a result of the annual budget approval process of the advertising and sponsorship clients of the public portals. This portion of the Company’s revenue is usually the lowest in the first quarter of each calendar year, and increases during each consecutive quarter throughout the year. The Company’s private portal licensing revenue is historically higher in the second half of the year as new customers are typically added during this period in conjunction with their annual open enrollment periods for employee benefits. Finally, the annual distribution cycle within the Publishing and Other Services segment results in a significant portion of the Company’s revenue in this segment being recognized in the second and third quarter of each calendar year.

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities and disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect: revenue recognition, the allowance for doubtful accounts, the carrying value of prepaid advertising, 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 and Web site development costs, the provision for income taxes and related deferred tax accounts, certain accrued expenses and contingencies, share-based awards to employees and transactions with Emdeon.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. The Company’s cash and cash equivalents are primarily invested in various money market accounts.

Marketable Securities

The Company classifies its investments in marketable securities as available-for-sale at the time of purchase and re-evaluates such classifications at each balance sheet date. Available-for-sale securities are carried at fair value as of the balance sheet date. As of December 31, 2005, all marketable securities were classified as available-for-sale and were primarily invested in U.S. Treasury Notes and auction rate securities. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income in stockholders’ equity. The cost of securities is based on the specific identification method.

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence.

Internal Use Software

The Company accounts for internal use software development costs in accordance with Statement of Position (“SOP”) No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP 98-1”). Software development costs that are incurred in the preliminary project stage are expensed as incurred. Once certain criteria of SOP 98-1 have been met, internal and external direct costs incurred in developing or obtaining computer software are capitalized. Capitalized internal use software development costs are included in property and equipment in the accompanying consolidated balance sheet. Training and data conversion costs are expensed as incurred. Capitalized software costs are amortized over a three-year period.

Web Site Development Costs

In accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-2 “Accounting for Web Site Development Costs,” costs related to the planning and post implementation phases of the Company’s Web site development efforts, as well as minor enhancements and maintenance, are expensed as incurred. Direct costs incurred in the development phase are capitalized. The Company capitalized $1,222 during the year ended December 31, 2005. These capitalized costs are included in property and equipment in the accompanying consolidated balance sheet and are amortized over a three-year period. Amounts capitalized for Web site development costs were not material during the years ended December 31, 2004 or 2003.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-Lived Assets

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. The useful lives are generally as follows:

Computer equipment	3 to 5 years
Office equipment, furniture and fixtures	4 to 7 years
Software	3 to 5 years
Web site development costs	3 years
Leasehold improvements	Shorter of useful life or lease term

Expenditures for maintenance, repair and renewals of minor items are expensed as incurred. Major betterments are capitalized.

Goodwill and Intangible Assets

Goodwill and intangible assets result from acquisitions accounted for under the purchase method. Intangible assets with definite lives are amortized on a straight-line basis over the estimated useful lives of the related asset as follows:

Content	3 to 5 years
Customer relationships	2 to 5 years
Acquired technology and patents	3 years
Trade names	3 to 7 years

Recoverability

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), the Company reviews the carrying value of goodwill annually and whenever indicators of impairment are present. The Company measures impairment losses by comparing the carrying value of its reporting units to the fair value of its reporting units determined using an income approach valuation. The Company’s reporting units are determined in accordance with SFAS No. 142, which defines a reporting unit as an operating segment or one level below an operating segment.

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell.

Leases

The Company recognizes lease expense on a straight-line basis, including predetermined fixed escalations, over the initial lease term, including reasonably assured renewal periods, net of lease incentives, from the time that the Company controls the leased property. Leasehold improvements made at the inception of the lease are amortized over the shorter of useful life or lease term. Lease incentives are recorded as a deferred rent credit and recognized as a reduction to rent expense on a straight-line basis over the lease term as described above.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

Revenue is derived from the Company’s Online Services and Publishing and Other Services segments:

•  Online Services.  The Company generates revenue from its public portals through the sale of advertising and sponsorship products. The Company generates revenue from private portals through the licensing of its content and technology to employers, payers and others. The Company also distributes its online content and services to other entities and generates revenue from these arrangements from the sale of advertising and sponsorship products and from content syndication fees.

•  Publishing and Other Services.  The Company generates revenue from sales of subscriptions to its medical reference publications, from sales of The Little Blue Book physician directory and from sales of advertisements in those directories and WebMD the Magazine.  As a result of the acquisition of the assets of Conceptis Technologies, Inc. in December 2005, the Company also generates revenue from in-person CME programs.

Revenue from advertising is recognized as advertisements are delivered or as publications are distributed. Revenue from sponsorship arrangements, content syndication and distribution arrangements, and licenses of healthcare management tools and private portals are recognized ratably over the term of the applicable agreement. Revenue from the sponsorship of CME is recognized over the period the Company substantially completes its contractual deliverables as determined by the applicable agreements. Subscription revenue is recognized over the subscription period. When contractual arrangements contain multiple elements, revenue is allocated to each element based on its relative fair value determined using prices charged when elements are sold separately. In certain instances where fair value does not exist for all the elements, the amount of revenue allocated to the delivered elements equals the total consideration less the fair value of the undelivered elements.

Accounting for Stock-Based Compensation

As discussed more fully in Note 12, the Company accounts for employee options to purchase Company and Emdeon stock and restricted stock and for employee participation in the Emdeon employee stock purchase plan 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 income (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.” The following table illustrates the effect on net income (loss) and pro forma net income (loss) per common share if

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation at the beginning of each period:

	Years Ended December 31,
	2005			2004			2003
Net income (loss) as reported	$	7,745		$	6,461		$	(7,425	)
Add: Stock-based employee compensation expense included in reported net income (loss)		2,315			1,749			1,597
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(15,771	)		(10,608	)		(11,477	)
Pro forma loss	$	(5,711	)	$	(2,398	)	$	(17,305	)
Net income (loss) per common share:
Basic and diluted — as reported	$	0.15		$	0.13		$	(0.15	)
Basic and diluted — pro forma	$	(0.11	)	$	(0.05	)	$	(0.36	)

The pro forma results above reflect stock-based compensation expense related to employee stock options and restricted stock issued in conjunction with the Company’s IPO from the date of issuance on September 28, 2005 through December 31, 2005. The pro forma results above are not intended to be indicative of or a projection of future results. Refer to Note 12 for assumptions used in computing the fair value amounts above.

Advertising Costs

Advertising costs are generally expensed as incurred and included in sales and marketing expense in the accompanying consolidated statements of operations. Advertising expense totaled $13,156, $13,920 and $17,380 in 2005, 2004 and 2003, respectively. Included in these amounts are non-cash advertising costs of $8,655, $9,302 and $10,378 in 2005, 2004 and 2003, respectively, related to the advertising services received from News Corporation.

Concentration of Credit Risk

None of the Company’s customers individually accounted for more than 10% of the Company’s revenue in 2005 or 2004 or more than 10% of the Company’s accounts receivable as of December 31, 2005 or 2004.

During 2003, two customers accounted for more than 10% of the Company’s revenue. As of December 31, 2003, one customer accounted for more than 10% of the Company’s accounts receivable.

	% of Revenue
	Year Ended			% of Accounts Receivable
	December 31,			December 31,
	2003			2003
Customer A		17.3	%		12.0	%
Customer B		10.9	%		n/a

Each of the customers identified above relate to the Online Services operating segment.

The Company’s revenue is principally generated in the United States. An adverse change in economic conditions in the United States could negatively affect the Company’s revenue and results of operations. In connection with the acquisition of Conceptis Technologies Inc., the Company recorded revenue from foreign customers of $405 during the year ended December 31, 2005.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company places its short-term investments in a variety of financial instruments and, by policy, limits the amount of credit exposure through diversification and by restricting its investments to highly rated securities.

Income Taxes

Income taxes are accounted for using the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred income taxes are recognized for the future tax consequence of differences between the tax and financial reporting basis of assets and liabilities at each reporting period. A valuation allowance is established to reduce deferred tax assets to the amounts expected to be realized.

Foreign Currency

The financial statements and transactions of the Company’s foreign facilities are maintained in their local currency. In accordance with SFAS No. 52, “Foreign Currency Translation,” the translation of foreign currencies into United States dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average exchange rates during the current year. The gains or losses resulting from translation are included as a component of accumulated other comprehensive income within stockholders’ equity and were not material in any of the periods presented. Foreign currency transaction gains and losses are included in net income (loss) and were not material in any of the periods presented.

Income (Loss) Per Share

Basic and diluted income (loss) per common share are presented in conformity with SFAS No. 128, “Earnings Per Share” (“SFAS No. 128”). In accordance with SFAS No. 128, basic income (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the periods presented. Diluted income (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the periods, increased to give effect to potentially dilutive securities.

	Years Ended December 31,
	2005		2004		2003
Numerator:
Net income (loss)	$	7,745	$	6,461	$	(7,425	)
Denominator: (shares in thousands)
Weighted-average shares — Basic		50,132		48,100		48,100
Employee stock options and restricted stock		400		—		—
Adjusted weighted-average shares
after assumed conversions — Diluted		50,532		48,100		48,100
Net income (loss) per common share:
Basic and diluted	$	0.15	$	0.13	$	(0.15	)

There were 328,900 shares issuable pursuant to stock options excluded from the year ended December 31, 2005 calculation of diluted income (loss) per common share because these securities were anti-dilutive in accordance with their terms.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

On November 3, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The guidance in this FSP addresses the determination of when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance is to be applied prospectively in periods beginning after December 15, 2005. The Company believes the adoption of this FSP will not have a material impact on its financial position or results of operations.

In June 2005, the Company adopted EITF Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements,” which provides new guidance for assessing amortization periods for leasehold improvements placed in service significantly after and not contemplated at or near the beginning of the initial lease term and acquired in a business combination. The guidance requires that the amortization of the leasehold improvement be based on the shorter of the useful life of the assets or a term that includes required lease periods and reasonably assured renewal periods. The Company believes the adoption of this EITF will not have a material impact on its financial position or results of operations.

In December 2004, FASB issued SFAS No. 123, “(Revised 2004): Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123 and supersedes APB No. 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the fiscal year that begins after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. The Company has adopted SFAS 123R beginning January 1, 2006. The Company has adopted the modified prospective transition method utilizing the Black-Scholes option pricing model to measure the fair value of stock options granted to employees. The modified prospective method requires that the Company begins to record compensation expense for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R using the same grant date fair value and same attribution method used under SFAS 123. Additionally, we have applied the straight-line attribution method for all equity grants subsequent to January 1, 2006 rather than the accelerated method that we have used for all grants prior to January 1, 2006. The adoption of SFAS 123R will have a material impact on the consolidated financial statements. The future stock-based compensation expenses will be materially different than the pro forma expenses disclosed above due to the stock options and restricted stock awards issued in connection with the IPO are outstanding from September 28, 2005 through December 31, 2005.

Reclassifications

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

3.   Initial Public Offering

The Company was a subsidiary of and wholly owned by Emdeon through September 28, 2005. The Company’s Class A Common Stock began trading on the Nasdaq National Market under the ticker symbol “WBMD” on September 29, 2005. The Company closed and received proceeds from the IPO on October 4, 2005. The IPO consisted of 7,935,000 shares of Class A Common Stock. Since the IPO, Emdeon has continued to own all 48,100,000 shares of the Company’s Class B Common Stock, representing 85.8% of the Company’s outstanding common stock and 96.7% of the combined voting power of the Company’s outstanding common stock. Each share of the Company’s Class B Common Stock is convertible at Emdeon’s option into one share of the Company’s Class A Common Stock. In addition, shares of the Class B Common Stock will automatically be converted, on a one-for-one basis, into shares of Class A Common Stock on a transfer to any person other than a majority owned subsidiary of Emdeon or a successor of Emdeon. On the fifth anniversary

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the closing date of the IPO, all then outstanding shares of Class B Common Stock will automatically be converted, on a one-for-one basis, into shares of Class A Common Stock. See Note 4 for a description of certain agreements governing the relationships between Emdeon and the Company following the IPO.

The Company received proceeds from the IPO of $125,392, net of underwriting discounts of $9,721 and costs of the IPO. The costs of the IPO, not including the underwriting discounts, were approximately $5,800. Approximately $2,000 of this amount was paid by Emdeon prior to the IPO. The Company intends to use the remaining net proceeds from the IPO for working capital and general corporate purposes, including capital expenditures and acquisitions.

4.   Transactions with Emdeon

Agreements with Emdeon

In connection with the IPO, the Company entered into a number of agreements with Emdeon governing the future relationship of the companies, including a Services Agreement, a Tax Sharing Agreement and an Indemnity Agreement. These agreements cover a variety of matters, including responsibility for certain liabilities, including tax liabilities, as well as matters related to Emdeon providing the Company with administrative services, such as payroll, accounting, tax, employee benefit plan, employee insurance, intellectual property, legal and information processing services. Under the Services Agreement, the Company has agreed to reimburse Emdeon an amount that reasonably approximates Emdeon’s cost of providing services to the Company. Emdeon has agreed to make the services available to the Company for up to five years; however, the Company is not required, under the Services Agreement, to continue to obtain services from Emdeon and is able to terminate services, in whole or in part, at any time generally by providing, with respect to the specified services or groups of services, 60 days’ prior notice and, in some cases, paying a nominal termination fee to cover costs relating to the termination. The terms of the Services Agreement provide that Emdeon has the option to terminate the services that it provides for the Company, in whole or in part, if it ceases to provide such services for itself, upon at least 180 days’ written notice to the Company.

On January 31, 2006, the Company entered into additional agreements with Emdeon in which both parties agreed to support each other’s product development and marketing efforts of specific product lines for agreed upon fees as defined in the agreements. The new agreements cover a term of five years.

On February 15, 2006, the Tax Sharing Agreement was amended to provide that Emdeon will compensate the Company for any use of the Company’s net operating losses that may result from certain extraordinary transactions, as defined in the Tax Sharing Agreement, including a sale by Emdeon of its Business Services and Practice Services operating segments.

Charges from the Company to Emdeon:

Revenue:  The Company sells certain of its products and services to Emdeon businesses. These amounts are included in revenue during the year ended December 31, 2005. The Company charges Emdeon rates comparable to those charged to third parties for similar products and services.

Advertising Expense:  The Company allocated costs to Emdeon based on its utilization of the Company’s advertising services. This charge included a proportional allocation based on the number of Emdeon operating segments identified in each advertisement and an allocation of cost to Emdeon for the promotion of the WebMD brand prior to Emdeon’s name change. On August 5, 2005, Emdeon and other businesses of Emdeon began to use “Emdeon” as their primary brand, instead of “WebMD.” Accordingly, the Company no longer allocates any advertising expense to Emdeon, or other businesses of Emdeon, related to any advertising that promotes the WebMD brand. The Company’s portion of the advertising services utilized is included in sales and marketing expense within the accompanying consolidated statements of operations, and is reported net of amounts charged to Emdeon.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Charges from Emdeon to the Company:

Corporate Services:  The Company is charged a services fee (the “Services Fee”) for costs related to corporate services provided by Emdeon. These expenses include certain accounting, tax, treasury, legal, human resources, certain information technology functions and other services. Costs allocated include compensation related costs, insurance and audit fees, outside personnel, facilities costs, professional fees, software maintenance and telecommunication costs. The Services Fee is based on Emdeon’s incurred costs of such services utilized by the Company, net of any costs incurred by the Company for the benefit of Emdeon. Included in the Services Fee are costs identified for dedicated employees managed centrally by Emdeon for certain of its functions across all of its segments. During the quarter ended September 30, 2005, these dedicated employees were transferred to the Company and accordingly, there was no charge for these dedicated employees from Emdeon to the Company during the quarter ended December 31, 2005 and there will be no such charge from Emdeon going forward. The amount reflected below under the caption “Corporate services — specific identification” reflects the costs for these employees through their date of transfer. The portion of the Services Fee charged for dedicated employees included a charge for their salaries, plus an overhead charge for these employees calculated based on a pro rata portion of their salaries to total salaries within the function. The Services Fee also includes an estimate of the cost of shared services utilized by the Company, calculated based on an allocation of total employees of both the Company and Emdeon or other reasonable measures of allocation. These amounts are reflected in general and administrative expenses within the accompanying consolidated statements of operations.

Healthcare Expense:  The Company is charged for its employees’ participation in Emdeon’s healthcare plans. Healthcare expense is charged based on the number of total employees of the Company and reflects Emdeon’s average cost of these benefits per employee. Healthcare expense is reflected in the accompanying consolidated statements of operations in the same expense captions as the related salary costs of those employees.

Stock-Based Compensation Expense:  Stock-based compensation expense is primarily related to restricted stock awards of the Company’s Class A Common Stock and of Emdeon’s Common Stock that have been granted to certain employees of the Company. Stock-based compensation expense is also related to shares issued to non-employee directors and stock options assumed or issued to employees in connection with certain acquisitions in 2000 with exercise prices less than the fair market value of Emdeon’s common stock on the date of grant. Stock-based compensation expenses are allocated on a specific employee identification basis. The expense associated with employees is reflected in the accompanying consolidated statements of operations in the same expense captions as the related salary costs of those employees. The expense associated with non-employee directors is included in general and administrative expenses.

The following table summarizes the allocations reflected in the Company’s consolidated financial statements:

	Years Ended December 31,
	2005		2004		2003
Charges from the Company to Emdeon:
Intercompany revenue	$	336	$	—	$	—
Advertising expense		1,877		4,702		7,807
Charges from Emdeon to the Company:
Corporate services — specific identification		1,756		3,618		3,377
Corporate services — shared services allocation		3,361		2,973		2,882
Healthcare expense		2,728		2,357		1,743
Stock-based compensation expense		1,356		1,749		1,597

Prior to September 28, 2005, Emdeon allocated to the Company certain of the corporate expenses discussed above. These expense allocations were determined on a basis that Emdeon and the Company considered to be a reasonable assessment of the cost of providing these services, exclusive of any profit

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

margin. The basis Emdeon and the Company used to determine these expense allocations required management to make certain judgments and assumptions. Since the IPO, the Company has reimbursed Emdeon for the cost of these functions pursuant to the Services Agreement. The allocation and cost methodologies used to calculate the reimbursement amounts under the Services Agreement are based on the methodologies used prior to the IPO.

Emdeon uses a centralized approach to cash management. Prior to the IPO, all related activity between the Company and Emdeon was reflected as transactions in owner’s net investment in the Company’s consolidated balance sheet. Types of intercompany transactions between the Company and Emdeon included (i) cash deposits from the Company’s businesses which were transferred to Emdeon’s bank account on a regular basis, (ii) cash borrowings from Emdeon used to fund operations, capital expenditures, or acquisitions, and (iii) costs and benefits to and from Emdeon identified above. Certain intercompany transactions between Emdeon and the Company were non-cash in nature. Accordingly, these non-cash transactions were included within the change in owner’s net investment but did not affect the amounts of the net cash transfers from Emdeon included in the accompanying consolidated statements of cash flows. The following table summarizes the cash and non-cash components within owner’s net investment:

	Years Ended December 31,
	2005			2004			2003
Cash:
Transferred from Emdeon to the Company	$	64,857		$	11,702		$	12,736
Non Cash:
Advertising utilization charged to Emdeon		(1,877	)		(4,702	)		(7,807	)
Stock-based compensation expense charged to the Company		1,356			1,749			1,597
Increase in owner’s net investment	$	64,336		$	8,749		$	6,526

On September 6, 2005, owner’s net investment was reclassified to additional paid-in capital within the accompanying consolidated balance sheet. From the date of the IPO, all cash intercompany transactions between the Company and Emdeon are settled on a timely basis. As of December 31, 2005, the Company owed Emdeon approximately $3,672.

5.   Business Combinations

  2005 Acquisitions

On December 2, 2005, the Company acquired the assets of and assumed certain liabilities of Conceptis Technologies, Inc. (“Conceptis”), a privately held Montreal-based provider of online and offline medical education and promotion aimed at physicians and other healthcare professionals. The total purchase consideration for Conceptis was approximately $19,603, comprised of $19,000 in cash and $603 of estimated acquisition costs. 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 and intangible asset valuation, goodwill of $12,938 and an intangible asset subject to amortization of $7,000 were recorded. The Company expects that the goodwill and intangible asset recorded will be deductible for tax purposes. The intangible asset recorded was content with an estimated useful life of three years. The results of operations of Conceptis have been included in the financial statements of the Company from December 2, 2005, the closing date of the acquisition, and are included in the Online Services and the Publishing and Other Services segments. In connection with the Conceptis acquisition, the Company had long-lived assets based in foreign facilities of $24,626 as of December 31, 2005.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 14, 2005, the Company acquired HealthShare Technology, Inc. (“HealthShare”), a privately held company that provides online tools that compare the cost and quality measures of hospitals for use by consumers, providers and health plans. The total purchase consideration for HealthShare was approximately $29,883, comprised of $29,533 in cash, net of cash acquired and $350 of estimated acquisition costs. 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 and intangible asset valuation, goodwill of $24,692 and intangible assets subject to amortization of $8,500 were recorded. The Company does not expect that the goodwill or intangible assets recorded will be deductible for tax purposes. The intangible assets are comprised of $7,500 relating to customer relationships with estimated useful lives of five years and $1,000 relating to acquired technology with an estimated useful life of three years. The results of operations of HealthShare have been included in the financial statements of the Company from March 14, 2005, the closing date of the acquisition, and are included in the Online Services segment.

  2004 Acquisitions

On December 24, 2004, the Company acquired MedicineNet, Inc. (“MedicineNet”), a privately held health information Web site for consumers. The initial purchase consideration for MedicineNet was approximately $17,223 comprised of $16,732 in cash, net of cash acquired, and $491 of acquisition costs. In addition, the Company has agreed to pay up to an additional $15,000 during the three months ended March 31, 2006, if the number of page views on MedicineNet’s Web sites exceeds certain thresholds for the year ended December 31, 2005. The Company accrued $7,250 as of December 31, 2005 for the expected cash payment during the quarter ended March 31, 2006 related to MedicineNet’s achievement of page views exceeding certain thresholds during 2005. The accrual resulted in an increase to goodwill. 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. Excluding the anticipated contingent consideration payment discussed above, goodwill of $9,991 and intangible assets subject to amortization of $6,600 were recorded in connection with the initial allocation of the purchase price. The Company does not expect that the goodwill or intangible assets recorded will be deductible for tax purposes. The intangible assets are comprised of $5,600 relating to content with an estimated useful life of three years, $300 relating to customer relationships with estimated useful lives of two years and $700 relating to acquired technology with an estimated useful life of three years. The results of operations of MedicineNet have been included in the Online Services segment. The results of operations of MedicineNet from the closing date of the acquisition through December 31, 2004 were not material.

On October 1, 2004, the Company acquired RxList, LLC (“RxList”), a privately held provider of an online drug directory for consumers and healthcare professionals. The initial purchase consideration for RxList was approximately $5,216 comprised of $4,500 in cash, $500 to be paid during the three months ended March 31, 2006 and $216 of acquisition costs. In addition, the Company has agreed to pay up to an additional $2,500 during each of the three month periods ended March 31, 2006 and 2007, if the number of page views on RxList’s Web sites exceeds certain thresholds for each of the three month periods ended December 31, 2005 and 2006, respectively. The Company accrued $2,387 as of December 31, 2005 for the cash payment made in February 2006 related to RxList’s achievement of page views exceeding certain thresholds during the quarter ended December 31, 2005. The accrual resulted in an increase to goodwill. 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. Excluding the anticipated contingent consideration payment discussed above, goodwill of $4,181 and an intangible asset subject to amortization of $1,054 were recorded in connection with the initial allocation of the purchase price. The Company expects that substantially all of the goodwill and intangible asset recorded will be deductible for tax purposes. The intangible asset consists of content with an estimated useful life of

F-18

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

five years. The results of operations of RxList have been included in the financial statements of the Company from October 1, 2004, the closing date of the acquisition, and are included in the Online Services segment.

  2003 Acquisitions

On May 29, 2003, the Company acquired The Little Blue Book (“LBB”), a company that maintains a database containing physician practice information and publishes a pocket-sized reference book containing physician practice and contact information. The total purchase consideration for LBB was approximately $10,061, comprised of $9,926 in cash, net of the cash acquired, and acquisition costs of $135. Additionally, the Company paid an additional $1,000 in April 2005 and an additional $1,500 in April 2004 as a result of LBB achieving certain financial milestones during the years ending December 31, 2004 and 2003, respectively. These payments resulted in increases to goodwill. 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 initial allocation of the purchase price, goodwill of $8,545 and intangible assets subject to amortization of $2,815 were recorded. The Company expects that substantially all of the goodwill and intangible assets recorded will be deductible for tax purposes. The intangible assets are comprised of $1,787 relating to a 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 LBB have been included in the financial statements of the Company from May 29, 2003, the closing date of the acquisition, and are included in the Publishing and Other Services segment.

On April 30, 2003, the Company acquired the assets and assumed certain liabilities of Optate, Inc. (“Optate”), a provider of healthcare benefit decision-support tools and solutions to its clients through online technology. The total purchase consideration for this acquisition was approximately $4,052, comprised of $4,000 in cash and acquisition costs of $52. 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 allocation of the purchase price, goodwill of $4,070 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 with estimated useful lives 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 are included in the Online Services segment.

Condensed Balance Sheet Data

The following table summarizes the tangible and intangible assets acquired, the liabilities assumed and the consideration paid for each acquisition:

													The Little
	Conceptis			HealthShare			MedicineNet			RxList			Blue Book			Optate
Accounts receivable	$	2,893		$	1,925		$	1,081		$	—		$	2,568		$	—
Deferred revenue		(2,940	)		(4,622	)		(64	)		—			(3,465	)		(812	)
Other tangible assets (liabilities), net		(288	)		(612	)		(385	)		(19	)		(402	)		84
Intangible assets		7,000			8,500			6,600			1,054			2,815			710
Goodwill		12,938			24,692			17,241			6,568			11,045			4,070
Total purchase price	$	19,603		$	29,883		$	24,473		$	7,603		$	12,561		$	4,052

F-19

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Unaudited Pro Forma Information

The following unaudited pro forma financial information for the years ended December 31, 2005 and 2004 gives effect to the acquisitions of Conceptis, HealthShare, MedicineNet and RxList including the amortization of intangible assets, as if they had occurred on January 1, 2004. The information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transactions had been consummated at the dates indicated, nor is it necessarily indicative of future operating results of the combined companies, and should not be construed as representative of these results for any future period.

	Years Ended December 31,
	2005		2004
Revenue	$	183,728	$	159,411
Net income	$	5,077	$	2,259
Net income per common share:
Basic and diluted	$	0.10	$	0.05

6.   Significant Transactions

America Online, Inc.

In May 2001, Emdeon entered into an agreement for a strategic alliance with Time Warner, Inc. (“Time Warner”). Under the agreement, the Company is the primary provider of healthcare content, tools and services for use on certain America Online (“AOL”) properties. The Company and AOL share certain revenue from advertising, commerce and programming on the health channels of the AOL properties and on a co-branded service created for AOL by the Company. In connection with the strategic alliance, Emdeon issued to Time Warner a warrant to purchase 2,408,908 shares of Emdeon’s common stock at an exercise price of $9.25 per share. The warrant was valued at approximately $17,500 using the Black-Scholes option pricing model and was amortized through May 2004, the original term of the agreement, as a non-cash distribution expense included in sales and marketing expense.

The original term of the agreement was for three years expiring in May 2004. The Company had the right to extend the original agreement for an additional three-year term under certain circumstances. The Company exercised its right to extend the contract term until May 2007. Under the terms of the extension, the Company is entitled to share in revenue and is guaranteed a minimum of $12,000 during each year of the renewal term for its share of advertising revenue. Included in the accompanying consolidated statements of operations, for the years ended December 31, 2005, 2004 and 2003 is revenue of $7,805, $7,242 and $5,087, respectively, which represents sales to third parties of advertising and sponsorship on the AOL health channels, primarily sold through the Company’s sales team. Also included in revenue during the years ended December 31, 2005 and 2004 is $5,951 and $3,754, respectively, related to the guarantee discussed above.

News Corporation

In connection with a strategic relationship with News Corporation that Emdeon entered into in 2000 and amended in 2001, Emdeon received rights to an aggregate of $205,000 advertising services from News Corporation to be used over ten years expiring in 2010 in exchange for equity securities issued by Emdeon. In September 2005, the rights to these advertising services were contributed to the Company in connection with the IPO. The amount of advertising services received in any contract year is based on the current market rates in effect at the time the advertisement is placed. Additionally, the amount of advertising services that can be used in any contract year is subject to contractual limitations. The advertising services were recorded at fair value determined using a discounted cash flow methodology. The remaining portion of these advertising services is included in prepaid advertising in the accompanying consolidated balance sheets. Also, as part of

F-20

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the same relationship the Company licensed its content to News Corporation for use across News Corporation’s media properties for four years, ending in January 2005, for cash payments totaling $12,000 per contract year.

Fidelity Human Resources Services Company LLC

In 2004, the Company entered into an agreement with Fidelity Human Resources Services Company LLC (“FHRS”) to integrate the Company’s private portals product into the services FHRS provides to its clients. FHRS provides human resources administration and benefit administration services to employers. The Company recorded revenue of $2,960 in 2005 and $817 in 2004 and $1,068 and $984 were included in accounts receivable as of December 31, 2005 and December 31, 2004, respectively, related to the FHRS agreement. FHRS is an affiliate of FMR Corp, which reported beneficial ownership of approximately 2.7% of the Company’s common stock at December 31, 2005, and 15.5% and 10.8% of Emdeon’s common stock at December 31, 2005 and December 31, 2004, respectively.

7.   Segment Information

The Company provides health information services to consumers, physicians, healthcare professionals, employers and health plans through the Company’s public and private online portals and health-focused publications. The Company’s two operating segments are:

•  Online Services.  The Company provides both public and private online portals. The Company’s public portals for consumers enable them to obtain detailed information on a particular disease or condition, analyze symptoms, locate physicians, store individual healthcare information, receive periodic e-newsletters on topics of individual interest, enroll in interactive courses and participate in online communities with peers and experts. The Company’s public portals for physicians and healthcare professionals make it easier for them to access clinical reference sources, stay abreast of the latest clinical information, learn about new treatment options, earn CME credit and communicate with peers. The Company’s private portals enable employers and health plans to provide their employees and plan members with access to personalized health and benefit information and decision-support technology that helps them make more informed benefit, provider and treatment choices.

•  Publishing and Other Services.  The Company publishes: medical reference textbooks; The Little Blue Book, a physician directory: and, since 2005, WebMD the Magazine, a consumer magazine distributed to physician office waiting rooms. The Company also conducts in-person CME as a result of the acquisition of the assets of Conceptis Technologies, Inc. in December 2005.

The performance of the Company’s business is monitored based on earnings before interest, taxes, depreciation, amortization and other non-cash items. Other non-cash items include non-cash advertising and distribution expense and non-cash stock-based compensation expense. Corporate and other overhead functions are allocated to segments on a specifically identifiable basis or other reasonable method of allocation. The Company considers these allocations to be a reasonable reflection of the utilization of costs incurred. The Company does not disaggregate assets for internal management reporting and, therefore, such information is not presented. There are no inter-segment revenue transactions.

F-21

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

	Years Ended December 31,
	2005			2004			2003
Revenue
Online Services:
Advertising and sponsorship	$	109,977		$	83,828		$	71,618
Licensing		34,113			15,841			8,923
Content syndication and other		8,210			20,618			19,610
Total Online Services		152,300			120,287			100,151
Publishing and Other Services		16,638			13,861			10,001
	$	168,938		$	134,148		$	110,152
Earnings before interest, taxes, depreciation, amortization and other non-cash items
Online Services	$	28,313		$	24,902		$	16,145
Publishing and Other Services		88			1,285			1,641
		28,401			26,187			17,786
Interest, taxes, depreciation, amortization and other non-cash items
Interest income		1,790			—			—
Depreciation and amortization		(10,653	)		(5,620	)		(4,463	)
Non-cash advertising and distribution services		(8,992	)		(12,147	)		(18,968	)
Non-cash stock-based compensation		(2,315	)		(1,749	)		(1,597	)
Income tax provision		(486	)		(210	)		(183	)
Net income (loss)	$	7,745		$	6,461		$	(7,425	)

8.   Long-Lived Assets

  Property and Equipment

Property and equipment consist of the following:

	December 31,
	2005			2004
Computer equipment	$	7,495		$	4,317
Office equipment, furniture and fixtures		3,830			1,219
Software		3,694			4,306
Leasehold improvements		12,610			3,252
Web site development costs		1,222			—
Construction in process		1,019			731
		29,870			13,825
Less: accumulated depreciation		(8,856	)		(7,509	)
Property and equipment, net	$	21,014		$	6,316

Depreciation expense was $4,153, $3,440 and $2,588 in 2005, 2004 and 2003, respectively.

F-22

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

  Goodwill and Intangible Assets

SFAS No. 142 requires that goodwill and certain intangibles be tested for impairment at least annually or when indicators of impairment are present. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144. Based on the Company’s analysis, there was no impairment of goodwill in connection with the annual impairment tests that were performed during the years ended December 31, 2005, 2004 and 2003.

The changes in the carrying amount of goodwill during the years ended December 31, 2005 and 2004 are as follows:

			Publishing
	Online		and Other
	Services		Services			Total
Balance as of January 1, 2004	$	28,182	$	8,661		$	36,843
Acquisitions during the period		13,387		—			13,387
Contingent consideration payments for prior period acquisitions(a)		—		2,500			2,500
Adjustments to finalize purchase price allocations		—		(116	)		(116	)
Balance as of December 31, 2004		41,569		11,045			52,614
Acquisitions during the period		36,079		—			36,079
Contingent consideration payments for prior period acquisitions(b)		9,637		—			9,637
Adjustments to finalize purchase price allocations		2,339		—			2,339
Balance as of December 31, 2005	$	89,624	$	11,045		$	100,669

(a)	During the year ended December 31, 2004, the Company accrued for contingent consideration of $1,000 for the LBB acquisition. This payment was made in the second quarter of 2005.
(b)	During the year ended December 31, 2005, the Company accrued for contingent consideration of $7,250 and $2,387 for the MedicineNet and RxList acquisitions, respectively. The RxList payment was made in February 2006 and the MedicineNet payment will be made in the first quarter of 2006.

Intangible assets subject to amortization consist of the following:

	December 31, 2005							December 31, 2004
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Content	$	13,654	$	(2,361	)	$	11,293	$	6,616	$	(51	)	$	6,565
Customer relationships		10,891		(4,030	)		6,861		3,991		(1,450	)		2,541
Acquired technology and patents		4,667		(3,446	)		1,221		3,667		(2,091	)		1,576
Trade names		2,587		(1,459	)		1,128		2,587		(1,204	)		1,383
Total	$	31,799	$	(11,296	)	$	20,503	$	16,861	$	(4,796	)	$	12,065

F-23

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization expense was $6,500, $2,180 and $1,875 in 2005, 2004 and 2003, respectively. Aggregate amortization expense for intangible assets is estimated to be:

Year Ending December 31,
2006	$	7,194
2007		6,891
2008		4,195
2009		1,824
2010		399

9.   Accrued Expenses

Accrued expenses consist of the following:

	December 31,
	2005		2004
Accrued compensation	$	11,449	$	7,402
Accrued outside services		1,461		2,245
Accrued marketing and distribution		1,600		2,671
Accrued contingent consideration		9,637		1,000
Due to Emdeon		3,672		—
Other accrued liabilities		6,253		2,556
Total accrued expenses	$	34,072	$	15,874

10.   Other Long-term Liabilities

Included in other long-term liabilities as of December 31, 2005 was a deferred rent credit of $4,398 related to lease incentives and $2,612 related to the difference between rent expense and the rental amount payable for leases with fixed escalations.

11.   Commitments and Contingencies

Legal Proceedings

Ari Weitzner, M.D., P.C. et al. v. National Physicians Datasource LLC

On May 24, 2005, a lawsuit was filed by Dr. Ari Weitzner individually, and as a class action, under the Telephone Consumer Protection Act (the “TCPA”), in the U.S. District Court, Eastern District of New York against National Physicians Datasource LLC (“NPD”), one of the Company’s subsidiaries. The lawsuit claims that faxes allegedly sent by NPD, which publishes The Little Blue Book, were sent in violation of the TCPA. The lawsuit potentially seeks damages in excess of $5,000. The Court had temporarily stayed the lawsuit pending resolution of relevant issues in a related case. On February 21, 2006, the Court lifted the stay. The case is now expected to proceed to the responsive pleading stage.

Department of Justice and SEC Investigations of Emdeon

As previously disclosed, the United States Attorney for the District of South Carolina is conducting an investigation of Emdeon, which Emdeon first learned about on September 3, 2003. Based on the information available to Emdeon, Emdeon believes that the investigation relates principally to issues of financial accounting improprieties for Medical Manager Corporation, a predecessor of Emdeon (by its merger into Emdeon in September 2000), and, more specifically, its Medical Manager Health Systems, Inc. subsidiary, a

F-24

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

predecessor to its Emdeon Practice Services, Inc. subsidiary (which we refer to as “Medical Manager Health Systems”).

While Emdeon is not sure of the investigation’s exact scope, it does not believe that the investigation relates to the business of the Company. Emdeon believes that the investigation relates principally to issues of financial accounting improprieties relating to Medical Manager Health Systems, including activities that artificially inflated revenues and earnings of Medical Manager Health Systems. Emdeon has been cooperating and intends to continue to cooperate fully with the U.S. Attorney’s Office. Emdeon’s Board of Directors has formed a Special Committee consisting solely of independent directors to oversee this matter, with the sole authority to direct Emdeon’s response to the allegations that have been raised.

In January 2005, certain former employees of Emdeon Practice Services agreed to plead guilty to mail fraud and tax evasion as a result of the investigation by the U.S. Attorney. According to the Informations, Plea Agreements and Factual Summaries filed by the U.S. Attorney in, and available from, the District Court of the United States for the District of South Carolina — Beaufort Division, on January 7, 2005, the three former employees and other then unnamed co-schemers were engaged in schemes between 1997 and 2002 that included causing companies acquired by Medical Manager Health Systems to pay the former vice president in charge of acquisitions for Medical Manager Health Systems and co-schemers kickbacks which were funded through increases in the purchase price paid by Medical Manager Health Systems to the acquired company and that included fraudulent accounting practices to inflate artificially the quarterly revenues and earnings of Medical Manager Health Systems when it was an independent public company called Medical Manager Corporation from 1997 through 1999, when and after it became acquired by Synetic, Inc. in July 1999 and when and after it became a subsidiary of Emdeon in September 2000. A fourth former officer of Medical Manager Health Systems pleaded guilty to similar activities later in 2005.

On December 15, 2005, the U.S. Attorney announced indictments of the following former officers and employees of Medical Manager Health Systems: Ted W. Dorman, a former Regional Vice President of Medical Manager Health Systems,who was employed until March 2003; Charles L. Hutchinson, a former Controller of Medical Manager Health Systems, who was employed until June 2001; Maxie L. Juzang, a former Vice President of Medical Manager Health Systems, who was employed until August 2005; John H. Kang, a former President of Medical Manager Health Systems, who was employed until May 2001; Frederick B. Karl, Jr., a former General Counsel of Medical Manager Health Systems, who was employed until April 2000; Franklyn B. Krieger, a former Associate General Counsel of Medical Manager Health Systems, who was employed until February 2002; Lee A. Robbins, a former Vice President and Chief Financial Officer of Medical Manager Health Systems, who was employed until September 2000; John P. Sessions, a former President and Chief Operating Officer of Medical Manager Health Systems,who was employed until September 2003; Michael A. Singer, a former Chief Executive Officer of Medical Manager Health Systems and a former director of Emdeon, who was most recently employed by Emdeon as its Executive Vice President, Physician Software Strategies until February 2005; and David Ward, a former Vice President of Medical Manager Health Systems, who was employed until June 2005. The Indictment charges the persons listed above with conspiracy to commit mail, wire and securities fraud, a violation of Title 18, United States Code, Section 371 and conspiracy to commit money laundering, a violation of Title 18, United States Code, Section 1956(h). The indictment charges Messrs. Sessions and Ward with substantive counts of money laundering, violations of Title 18, United States Code, Section 1957. The allegations set forth in the Indictment describe activities that are substantially similar to those described above with respect to the January 2005 plea agreements.

Based on the information it has obtained to date, including that contained in the court documents filed by the United States Attorney in South Carolina, Emdeon does not believe that any member of its senior management whose duties were not primarily related to the operations of Medical Manager Health Systems engaged in any of the violations or improprieties described in those court documents. Emdeon understands, however, that in light of the nature of the allegations involved, the U.S. Attorney’s Office has been

F-25

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

investigating all levels of Emdeon’s management. Some members of the Company’s senior management are also serving or have served as members of senior management of Emdeon. In the event members of the Company’s senior management were to be implicated in any wrongdoing, it could have an adverse impact on the Company.

Emdeon understands that the SEC is also conducting a formal investigation into this matter.

The terms of an indemnity agreement between Emdeon and the Company provide that Emdeon will indemnify the Company against any and all liabilities arising from or based on this investigation.

Other Legal Proceedings

In the normal course of business, the Company is involved in various other claims and legal proceedings. While the ultimate resolution of these matters, and those discussed above, has yet to be determined, the Company does not believe that their outcomes will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Leases

During 2004, the Company entered into a ten-year and ten month lease agreement for its headquarters in New York, New York. In connection with this lease the Company received ten months of rent abatement and will receive a landlord contribution totaling approximately $5,400 in connection with leasehold improvements. The Company recorded $4,854 as a deferred rent credit during 2005 related to this contribution. The balance of this deferred rent credit is $4,398 as of December 31, 2005. According to the terms of the lease, the Company began making payments in December 2005. Payments will increase approximately 2% per annum with a one-time increase in December 2010 of approximately 15%. The lease terminates on November 30, 2015; however, the Company may exercise a five-year renewal option at its discretion.

The Company leases its offices under operating lease agreements that expire at various dates through 2015. Total rent expense for all operating leases was approximately $4,675, $2,818 and $2,702 in 2005, 2004 and 2003, respectively. Future minimum lease commitments under non-cancelable lease agreements at December 31, 2005 were as follows:

Year Ending December 31,
2006	$	4,351
2007		3,793
2008		3,722
2009		3,719
2010		3,577
Thereafter		18,179
Total minimum lease payments	$	37,341

Other Contingencies

The Company provides certain indemnification provisions within its license agreements to protect the other party from any liabilities or damages resulting from a claim of misappropriation or infringement by third parties relating to its products and services. The Company has not incurred a liability relating to any of these indemnification provisions in the past and management believes that the likelihood of any future payment relating to these provisions is unlikely. Therefore, the Company has not recorded a liability during any period for these indemnification provisions.

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WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.   Stock-Based Compensation Plans

Emdeon Stock Plans

Certain WebMD employees participate in the stock-based compensation plans of Emdeon (collectively, “Emdeon Plans”). Under the Emdeon Plans certain of the Company employees have received grants of options to purchase Emdeon common stock and restricted Emdeon common stock. Additionally, all eligible WebMD employees are provided the opportunity to participate in Emdeon’s employee stock purchase plan. All unvested options to purchase Emdeon common stock and restricted Emdeon common stock held by the Company’s employees as of the effective date of the IPO continue to vest under the original terms of those awards. An aggregate of 11,298,097 shares of Emdeon common stock remained available for grant under the Emdeon Plans at December 31, 2005.

Stock Options:  Under the Emdeon Plans, options to acquire shares of Emdeon common stock have been made available for grant to certain Company employees. Each option granted during 2005, 2004 and 2003 had an exercise price equal to the market value of Emdeon common stock on the date of grant, and accordingly, no compensation expense has been recognized for these option grants. However, the Company recorded stock-based compensation expense of $188 and $622 for the years ended December 31, 2004 and 2003, respectively, as a result of stock options assumed in connection with certain acquisitions in 2000 and options to purchase Emdeon common stock granted in 2000 with exercise prices less than the fair market value of Emdeon’s stock on the date of the grant. As all of these stock options were fully vested as of December 31, 2004, no stock-based compensation expense related to stock options was recorded during the year ended December 31, 2005. The majority of these options have contractual lives of ten years and vest and become exercisable ratably over a four year period. The following table summarizes information regarding options to purchase Emdeon common stock held by the Company’s employees during the years ended December 31, 2005, 2004 and 2003:

	Years Ended December 31,
	2005					2004					2003
				Weighted					Weighted					Weighted
				Average					Average					Average
	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding at the beginning of the year		17,671,405		$	11.21		15,541,928		$	11.67		15,003,315		$	11.54
Net transfers from Emdeon		4,120,991			12.80		—			—		—			—
Granted		1,444,850			9.30		3,984,500			8.43		2,279,500			9.20
Exercised		(2,468,174	)		4.68		(855,371	)		6.63		(1,093,160	)		5.22
Cancelled		(1,140,866	)		19.22		(999,652	)		11.23		(647,727	)		10.93
Outstanding at the end of the year		19,628,206		$	11.75		17,671,405		$	11.21		15,541,928		$	11.67
Exercisable at the end of the year		13,892,712		$	13.09		11,160,759		$	12.78		9,161,989		$	13.66

The net transfers from Emdeon included in the table above reflects stock options granted to the Company’s employees that were transferred to the Company from Emdeon in connection with the IPO.

F-27

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information, as of December 31, 2005, with respect to options to purchase Emdeon common stock that were outstanding and those that were exercisable:

	Outstanding						Exercisable
					Weighted
					Average
			Weighted		Remaining				Weighted
			Average		Contractual Life				Average
Exercise Price	Shares		Exercise Price		(In Years)		Shares		Exercise Price
$0.81-$5.60		1,331,826	$	4.20		5.73		1,282,308	$	4.20
$5.71-$8.58		2,496,563		7.07		7.40		1,240,995		7.03
$8.59		3,078,000		8.59		8.21		944,138		8.59
$8.60-$10.89		3,511,128		9.25		7.87		1,216,456		9.16
$11.55-$12.0625		3,158,750		11.64		4.51		3,158,376		11.64
$12.19-$17.4375		4,017,736		14.07		4.40		4,016,236		14.07
$18.0625-$25.07		1,344,186		20.30		4.77		1,344,186		20.30
$28.10-$94.69		690,017		40.55		3.85		690,017		40.55
		19,628,206	$	11.75		6.11		13,892,712	$	13.09

The pro forma information presented in Note 2 has been determined as if employee stock options were accounted for under the fair value method of SFAS No. 123 using an accelerated attribution method. The weighted-average fair value for these options of $3.81, $3.55 and $5.52 for the years ended December 31, 2005, 2004 and 2003, respectively, was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Years Ended December 31,
	2005			2004			2003
Expected dividend yield		0	%		0	%		0	%
Expected volatility		0.50			0.58			0.89
Risk free interest rate		3.43	%		1.67	%		1.38	%
Expected post vesting option lives (years)		0.75-3.0			0.75-3.0			0.75-3.0

Restricted Stock:  Restricted stock consists of shares of Emdeon’s common stock which have been granted to the Company’s employees. The grants are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the employee until they vest. Generally, restricted stock awards vest ratably over a three to four year period based on their individual award dates. The Company recorded stock compensation expense related to restricted stock awards of $1,356, $1,561 and $975, for the years ended December 31, 2005, 2004 and 2003, respectively, based on the graded vesting method over the respective vesting periods of the awards.

Emdeon granted awards of restricted Emdeon common stock to the Company’s employees of 100,000 and 355,800, during 2005 and 2004, respectively, with a weighted average fair value per share of $9.52 and $8.57, respectively. There were no such restricted stock awards granted to the Company’s employees during 2003. During 2005 and 2004, approximately 187,000 and 71,000 awards of restricted Emdeon common stock vested, respectively. Approximately 64,000, 9,000 and 87,000 awards of restricted Emdeon common stock were cancelled during 2005, 2004 and 2003, respectively. There were approximately 424,000 awards of restricted Emdeon common stock that were unvested as of December 31, 2005. Also, included in the 424,000 awards of total restricted Emdeon common stock that were unvested were approximately 83,000 shares related to the transfer of Emdeon employees to WebMD.

F-28

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Stock Purchase Plan:  Emdeon’s employee stock purchase plan (“ESPP”) allows eligible employees of the Company the opportunity to purchase shares of Emdeon’s common stock through payroll deductions, up to 15% of a participant’s annual compensation with a maximum of 5,000 shares available per participant during each purchase period. The purchase price of the stock is 85% of the fair market value on the last day of each purchase period. A total of 59,862, 37,876 and 27,160 shares were issued to the Company’s employees under Emdeon’s ESPP during 2005, 2004 and 2003, respectively.

WebMD Health Corp. Stock Plans

The Company’s Board of Directors has adopted the WebMD Health Corp. 2005 Long-Term Incentive Plan (the “Plan”), which was established in connection with the IPO. Under the Plan, the Company may grant stock options, restricted stock, stock appreciation rights and other awards based on the Company’s Class A Common Stock, as well as performance-based annual and long-term incentive awards. Up to 7,130,574 shares of the Company’s Class A Common Stock may be issued under the Plan.

Stock Options.  In connection with the IPO, the Company granted options to purchase 4,195,700 shares of its Class A Common Stock at an exercise price equal to the IPO price of $17.50 per share. Stock options consist of options to purchase shares of the Company’s Class A Common Stock which have been awarded to employees and non-employee directors. Stock options granted vest and become exercisable ratably over a four year period based on their individual grant dates. These options will expire ten years from the date of the grant. The Company records deferred stock compensation related to stock options as a component of stockholders’ equity when the exercise price is lower than the deemed fair value of such Common Stock on the date stock options are granted. No deferred stock compensation or stock compensation expense related to Company stock options was recorded in any period presented. Included in the Company’s total grants of options were 112,750 options to purchase shares of its Class A Common Stock issued to Emdeon employees. This transaction was recorded as a dividend, which reduced retained earnings by $1,117.

The following table summarizes information regarding options to purchase the Company’s Class A Common Stock held by the Company’s employees during the year ended December 31, 2005:

	Year Ended December 31, 2005
				Weighted
				Average
	Shares			Exercise Price
Outstanding at the beginning of the year		—		$	—
Granted		4,574,900			18.31
Exercised		—			—
Cancelled		(41,800	)		17.50
Outstanding at the end of the year		4,533,100		$	18.31
Exercisable at the end of the year		—		$	—

The following table summarizes information with respect to options outstanding at December 31, 2005 (none of which were exercisable on that date):

	Outstanding
					Weighted
					Average
			Weighted		Remaining
			Average		Contractual Life
Exercise Prices	Shares		Exercise Price		(In Years)
$17.50		4,153,900	$	17.50		9.75
$24.00 — $30.59		379,200		27.23		9.93
		4,533,100	$	18.31		9.76

F-29

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The pro forma information presented in Note 2 has been determined as if employee stock options were accounted for under the fair value method of SFAS No. 123 using an accelerated attribution method. The pro forma information in Note 2 reflects stock-based compensation expense related to employee stock options and restricted stock issued in conjunction with the Company’s IPO from the date of issuance on September 28, 2005 through the end of 2005. The weighted-average fair value for these options of $8.75 for the year ended December 31, 2005 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Year Ended
	December 31, 2005
Expected dividend yield		0	%
Expected volatility		0.60
Risk free interest rate		4.05	%
Expected post vesting option lives (years)		0.75-3.0

Restricted Stock Awards.  The Company awarded 374,900 shares of restricted Class A Common Stock on September 28, 2005 and an additional 1,721 during the three months ended December 31, 2005. Restricted stock consists of shares of Class A Common Stock which have been awarded to employees. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the employee until they vest. Generally, restricted stock awards vest ratably over a four year period based on their individual award dates. The Company records deferred stock compensation related to restricted stock awards as a component of stockholders’ equity based on the fair market value of the Class A Common Stock on the date of the award. Deferred stock compensation related to restricted stock awards of $6,561 was recorded concurrent with the closing of the IPO. In addition, $49 was recorded during the quarter ended December 31, 2005. The Company recorded stock compensation expense related to restricted stock awards to employees of $874 during the year ended December 31, 2005 based on the graded vesting method over the respective vesting periods of the awards.

In addition, at the time of the IPO the Company issued shares of its Class A Common Stock to each non-employee director with a value equal to their annual board and committee retainers. The Company recorded $85 of stock-based compensation expense during the year ended December 31, 2005 in connection with these issuances.

13.   Retirement Plans

Emdeon maintains a defined contribution retirement plan (the “Retirement Plan”) that covers substantially all of the Company’s employees. This Retirement Plan provides for discretionary contributions and during 2005 was amended to provide for matching contributions. Prior to 2005 this Retirement Plan did not provide for Company matching. The Company has recorded expense related to this Retirement Plan of $404 in 2005.

14.   Income Taxes

The Company’s results of operations have been included in Emdeon’s consolidated U.S. federal and state income tax returns. The provision for income taxes included in the accompanying consolidated financial statements has been determined on a separate return basis using the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred income taxes are recognized for the future tax consequence of differences between the tax and financial reporting basis of assets and liabilities at each reporting period. The Company is required to assess its deferred tax assets and the need for a valuation allowance on a separate return basis, and exclude from that assessment the utilization of all or a portion of those losses by Emdeon under the separate return method. This assessment requires considerable judgment on the part of management with respect to benefits that could be realized from future taxable income, as well as other positive and negative factors.

F-30

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) were as follows:

	December 31,
	2005			2004
Deferred tax assets:
Net operating loss carryforwards	$	257,025		$	242,710
Research and development tax credits		1,657			1,576
Other accrued expenses		5,386			5,285
Allowance for doubtful accounts		278			319
Depreciation		2,647			3,387
Intangible assets		—			1,278
Prepaid assets		9,811			11,376
Other, net		697			5,283
Total deferred tax assets		277,501			271,214
Valuation allowance		(276,998	)		(271,214	)
Net deferred tax assets		503			—
Deferred tax liabilities:
Intangible assets		(503	)		—
Total deferred tax liabilities		(503	)		—
Net deferred tax assets and liabilities	$	—		$	—
Included in:
Current deferred tax assets and liabilities	$	6,630		$	11,623
Valuation allowance		(6,630	)		(11,623	)
Current deferred tax assets and liabilities, net		—			—
Non-current deferred tax assets and liabilities		270,368			259,591
Valuation allowance		(270,368	)		(259,591	)
Non-current deferred tax assets and liabilities, net		—			—
Net deferred tax assets and liabilities	$	—		$	—

The income tax provision was as follows:

	2005		2004		2003
Current:
State	$	486	$	210	$	183
Current income tax provision		486		210		183
Deferred income tax provision		—		—		—
Total income tax provision	$	486	$	210	$	183

F-31

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation between the federal statutory rate and the effective income tax rate is as follows:

	Years Ended December 31,
	2005			2004			2003
United States federal statutory rate		35.0	%		34.0	%		(34.0	)%
State income taxes (net of federal benefit)		12.6			8.1			9.9
Valuation allowance released in lieu of equity deductions		(64.9	)		(32.6	)		(47.5	)
Losses benefited to (from) Emdeon		21.0			(4.4	)		76.0
Other		2.2			(1.9	)		(1.9	)
Effective income tax rate		5.9	%		3.2	%		2.5	%

A valuation allowance has been established for 100% of the net deferred tax assets because of the uncertainty of realization of the deferred tax assets due to a lack of earnings history. Realization is dependent upon generating sufficient taxable income prior to the expiration of the net operating loss carryforwards in future periods. Although realization is not currently assured, management evaluates the need for a valuation allowance each quarter, and in the future, should management determine that realization of net deferred tax assets is more likely than not, some or all of the valuation allowance will be reversed, and the Company’s effective tax rate will be reduced. The valuation allowance for deferred tax assets increased by $5,784 in 2005 and decreased by $771 in 2004.

At December 31, 2005, the Company had net operating loss carryforwards for federal income tax purposes of approximately $642,563, which expire in 2006 through 2026, and federal tax credits of approximately $1,657, which expire in 2012 through 2026. Approximately $201,592 and $13,307 of these net operating loss carryforwards were recorded through additional paid in capital and goodwill, respectively. Therefore, if in the future the Company believes that it is more likely than not that these tax benefits will be realized, this portion of the valuation allowance will be reversed against additional paid in capital and goodwill, respectively.

Under the U.S. Internal Revenue Code and applicable Treasury regulations relating to manner and order in which net operating loss carryforwards are utilized when filing consolidated tax returns, a portion of the Company’s net operating loss carryforwards may be required to be utilized by Emdeon before Emdeon would be permitted to utilize its own net operating loss carryforwards. Correspondingly, in some situations, such as where Emdeon’s net operating loss carryforwards were the first to be generated, the Company may be required to utilize a portion of Emdeon’s net operating loss carryforwards before the Company would have to utilize its net operating loss carryforwards. Under the Tax Sharing Agreement with Emdeon, as amended (described in Note 4 above), Emdeon has agreed to make payments to the Company if it uses the Company’s net operating loss carryforwards to offset income or gain from the sale of assets (including a subsidiary) by Emdeon outside the ordinary course of business. However, neither we nor Emdeon have any general obligation to make payments to the other as a result of the utilization of the other party’s net operating losses or loss carryforwards in connection with filing consolidated tax returns.

A portion of net operating loss carryforwards and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods due to the “change of ownership” provisions of the Internal Revenue Code and similar state provisions. A portion of these carryforwards may expire before becoming available to reduce future income tax liabilities.

Some of the Company’s operating companies are profitable in certain states in which the Company does not have net operating losses to offset that income. Accordingly, the Company provided for taxes of $486, $210, and $183 related to state and other jurisdictions during the years ended December 31, 2005, 2004, and 2003, respectively. Of these amounts, $222 is included in the due to Emdeon balance in the accompanying consolidated balance sheets.

F-32

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15.   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 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.

	December 31, 2005				December 31, 2004
	Cost Basis		Fair Value		Cost Basis		Fair Value
Cash and cash equivalents	$	75,704	$	75,704	$	3,456	$	3,456
Short-term investments		78,185		78,073		—		—

The gross unrealized losses related to short-term investments of $112 are primarily due to a decrease in the fair value of debt securities as a result of an increase in interest rates during the year ended December 31, 2005. The Company has determined that the gross unrealized losses on its short-term investments at December 31, 2005 are temporary in nature. The Company reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, credit quality and the Company’s ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

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

Amortized cost basis and estimated fair value by maturity:

	Cost or
	Amortized
	Cost		Fair Value
Due in one year or less	$	78,185	$	78,073

16.   Supplemental Disclosure of Cash Flow Information

	Years Ended December 31,
Supplemental Disclosure of Cash Flow Information:	2005		2004		2003
Taxes paid, net of refunds	$	119	$	—	$	—
Supplemental Schedule of Non-Cash Financing Activities:
Deferred stock compensation related to restricted stock awards	$	6,610	$	—	$	—

F-33

WEBMD HEALTH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17.   Quarterly Financial Data (Unaudited)

The following tables summarize the quarterly financial data for 2005 and 2004:

	2005
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter
Revenue	$	33,761		$	40,979		$	45,094	$	49,104
Costs and expenses:
Cost of operations		14,895			18,616			18,020		19,007
Sales and marketing		10,988			12,141			13,534		15,093
General and administrative		6,540			8,665			6,582		7,763
Depreciation and amortization		2,233			3,019			2,733		2,668
Interest income		—			—			10		1,780
Income (loss) before income tax provision		(895	)		(1,462	)		4,235		6,353
Income tax provision		61			91			112		222
Net income (loss)	$	(956	)	$	(1,553	)	$	4,123	$	6,131
Net income (loss) per common share:
Basic and diluted	$	(0.02	)	$	(0.03	)	$	0.09	$	0.11
Weighted-average shares outstanding used in computing net income (loss) per common share:
Basic		48,100			48,100			48,273		56,054
Diluted		48,100			48,100			48,302		57,627

	2004
	First			Second		Third		Fourth
	Quarter			Quarter		Quarter		Quarter
Revenue	$	26,266		$	31,810	$	36,975	$	39,097
Costs and expenses:
Cost of operations		11,207			13,228		13,336		14,606
Sales and marketing		11,585			11,661		12,080		12,032
General and administrative		4,979			5,034		5,493		6,616
Depreciation and amortization		1,204			1,311		1,247		1,858
Income (loss) before income tax provision		(2,709	)		576		4,819		3,985
Income tax provision		44			47		61		58
Net income (loss)	$	(2,753	)	$	529	$	4,758	$	3,927
Net income (loss) per common share:
Basic and diluted	$	(0.06	)	$	0.01	$	0.10	$	0.08
Weighted-average shares outstanding used in computing net income (loss) per common share:
Basic and diluted		48,100			48,100		48,100		48,100

18.   Subsequent Event

On January 17, 2006, the Company acquired eMedicine.com, Inc. (“eMedicine”), a privately held online publisher of medical reference information for physicians and other healthcare professionals, for $25,500. The results of operations of eMedicine will be included in the Online Services segment.

F-34

Schedule II.  Valuation and Qualifying Accounts

	Years Ended December 31, 2005, 2004 and 2003
	Balance at		Charged to
	Beginning		Costs and											Balance at
	of Year		Expenses			Acquired			Write-offs			Other(a)		End of Year
	(In thousands)
December 31, 2005
Allowance for Doubtful Accounts	$	798	$	302		$	60		$	(301	)	$	—	$	859
Valuation Allowance for Deferred Tax Assets		271,214		(5,416	)		5,914			—			5,286		276,998
December 31, 2004
Allowance for Doubtful Accounts		921		202			—			(325	)		—		798
Valuation Allowance for Deferred Tax Assets		271,985		(2,105	)		97			—			1,237		271,214
December 31, 2003
Allowance for Doubtful Accounts		836		175			—			(90	)		—		921
Valuation Allowance for Deferred Tax Assets		272,252		(3,528	)		(62	)		—			3,323		271,985

(a) Represents valuation allowance created through equity as a result of stock option and warrant exercises.

S-1

INDEX TO EXHIBITS

Exhibit No.			Description
	3	.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form 8-A filed by the Registrant on September 29, 2005 (which we refer to as the “Form 8-A”))
	3	.2	Bylaws of Registrant (incorporated by reference to Exhibit 99.2 to the Form 8-A)
	4	.1	Specimen Certificate evidencing shares of the Registrant’s Class A Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No. 333-124832) (which we refer to as the “IPO Registration Statement”))
	4	.2	Form of Registration Rights Agreement between Emdeon Corporation (“Emdeon”) and the Registrant (incorporated by reference to Exhibit 4.2 to the IPO Registration Statement)
	10	.1	Amended and Restated Tax Sharing Agreement between the Registrant and Emdeon (incorporated by reference to Exhibit 10.1 to Emdeon’s Current Report on Form 8-K filed on February 16, 2006)
	10	.2	Services Agreement between Emdeon and the Registrant (incorporated by reference to Exhibit 10.2 to the IPO Registration Statement)
	10	.3	Indemnity Agreement between Emdeon and the Registrant (incorporated by reference to Exhibit 10.3 to the IPO Registration Statement)
	10	.4	Intellectual Property License Agreement between Emdeon and the Registrant (incorporated by reference to Exhibit 10.4 to the IPO Registration Statement)
	10	.5	Contribution, Assignment and Assumption Agreement, dated as of September 6, 2005, by and between Emdeon and the Registrant (incorporated by reference to Exhibit 10.5 to the IPO Registration Statement)
	10	.6	Private Portal Services Agreement between Emdeon and WebMD, Inc. (incorporated by reference to Exhibit 10.6 to the IPO Registration Statement)
	10	.7	Content License Agreement between Emdeon and WebMD, Inc. (incorporated by reference to Exhibit 10.7 to the IPO Registration Statement)
	10	.8	Form of Database Agreement between Emdeon and WebMD, Inc. (incorporated by reference to Exhibit 10.8 to the IPO Registration Statement)
	10	.9	Form of Indemnification Agreement to be entered into by the Registrant with its directors and officers (incorporated by reference to Exhibit 10.9 to the IPO Registration Statement)
	10	.10*	Amended and Restated Employment Agreement, dated as of August 3, 2005, between Emdeon and Martin J. Wygod (incorporated by reference to Exhibit 10.1 to Emdeon’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2005)
	10	.11*	Employment Agreement, dated as of April 28, 2005, between WebMD, Inc. and Wayne T. Gattinella (incorporated by reference to Exhibit 99.1 to Emdeon’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2005)
	10	.12*	Employment Agreement, dated as of April 28, 2005, between WebMD, Inc. and David Gang (incorporated by reference to Exhibit 99.2 to Emdeon’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2005)
	10	.13*	Amendment, dated as of July 13, 2005, to the Employment Agreement, dated as of April 28, 2005, between WebMD, Inc. and David Gang (incorporated by reference to Exhibit 99.1 to Emdeon’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2005)
	10	.14*	Amended and Restated Employment Agreement, dated as of July 14, 2005, between WebMD Health Corp. and Anthony Vuolo (incorporated by reference to Exhibit 99.2 to Emdeon’s Current Report on Form 8-K, as amended, filed with the Securities and Exchange Commission on July 19, 2005)
	10	.15*	Employment Agreement between WebMD Health Holdings, Inc. and Douglas W. Wamsley (incorporated by reference to Exhibit 10.15 to the IPO Registration Statement)
	10	.16*	Employment Agreement between WebMD Health Holdings, Inc. and Nan-Kirsten Forte (incorporated by reference to Exhibit 10.16 to the IPO Registration Statement)
	10	.17*	Employment Agreement between WebMD Health Holdings, Inc. and Steven Zatz, M.D. (incorporated by reference to Exhibit 10.17 to the IPO Registration Statement)

E-1

Exhibit No.			Description
	10	.18*	Employment Agreement between WebMD Health Holdings, Inc. and Craig Froude (incorporated by reference to Exhibit 10.18 to the IPO Registration Statement)
	10	.19*	Employment Agreement dated as of October 23, 2002 between Emdeon and Roger C. Holstein (incorporated by reference to Exhibit 10.14 to Emdeon’s Annual Report on Form 10-K for the year ended December 31, 2002)
	10	.20*	Letter Agreement, dated as of April 27, 2005, between Emdeon and Roger C. Holstein (incorporated by reference to Exhibit 99.3 to Emdeon’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2005)
	10	.21*	Amended and Restated Stock Option Agreement dated August 21, 2000 between Emdeon (as successor to Medical Manager Corporation) and Martin J. Wygod (incorporated by reference to Exhibit 10.21 to Emdeon’s Annual Report on Form 10-K for the year ended December 31, 2000, as amended by Amendment No. 1 on Form 10-K/A)
	10	.22*	Stock Option Agreement between Emdeon and Wayne Gattinella dated August 20, 2001 (incorporated by reference to Exhibit 4.8 to Emdeon’s Registration Statement on Form S-8 (No. 333-888420) filed May 16, 2002)
	10	.23*	Form of Amended and Restated Stock Option Agreement dated August 21, 2000, between Emdeon (as successor to Medical Manager Corporation) and Anthony Vuolo (incorporated by reference to Exhibit 10.54 to Emdeon’s Annual Report on Form 10-K for the year ended December 31, 2001, as amended by Amendment No. 1 on Form 10-K/A)
	10	.24*	Emdeon 1996 Stock Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to Emdeon’s Registration Statement on Form S-1 (No. 333-70553) filed February 10, 1999)
	10	.25*	Emdeon Amended and Restated 1998 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.27 to Emdeon’s Registration Statement on Form S-8 (No. 333-47250) filed October 4, 2000)
	10	.26*	Emdeon 2000 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.23 to Emdeon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005)
	10	.27*	Amended and Restated WebMD Health Corp. 2005 Long-Term Incentive Plan
	10	.28	Amended and Restated 1989 Class A Non-Qualified Stock Option Plan of Synetic, Inc. (incorporated by reference to Exhibit 10.1 to Synetic, Inc.’s Registration Statement on Form S-1 (No. 333-28654) filed May 18, 1989)
	10	.29	Amended and Restated 1989 Class B Non-Qualified Stock Option Plan of Synetic, Inc. (incorporated by reference to Exhibit 10.2 to Synetic, Inc.’s Registration Statement on Form S-1 (No. 333-28654) filed May 18, 1989)
	10	.30	1991 Director Stock Option Plan of Synetic, Inc. (incorporated by reference to Exhibit 4.2 to Synetic, Inc.’s Registration Statement on Form S-8 (No. 333-46640) filed March 24, 1992)
	10	.31	CareInsite, Inc. 1999 Officer Stock Option Plan (incorporated by reference to Exhibit 10.18 to Amendment No. 6 to CareInsite, Inc.’s Registration Statement on Form S-1 (No. 333-75071) filed June 11, 1999)
	10	.32	CareInsite, Inc. 1999 Employee Stock Option Plan (incorporated by reference to Exhibit 10.17 to Amendment No. 6 to CareInsite, Inc.’s Registration Statement on Form S-1 (No. 333-75071) filed June 11, 1999)
	10	.33	Emdeon 2001 Employee Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 10.46 to Emdeon’s Form 10-K for the year ended December 31, 2001, as amended by Amendment No. 1 on Form 10-K/A)
	10	.34	Amended and Restated 1991 Special Non-Qualified Stock Option Plan of Synetic, Inc. (incorporated by reference to Exhibit 4.3 to Synetic, Inc.’s Registration Statement on Form S-8 (No. 333-36041) filed September 19, 1997)
	10	.35	Amendment to the Company Stock Option Plans of Medical Manager Corporation and CareInsite, Inc. (incorporated by reference to Exhibit 99.28 to Emdeon’s Registration Statement on Form S-8 (No. 333-47250) filed October 4, 2000)

E-2

Exhibit No.			Description
	10	.36	Healtheon/WebMD Media Services Agreement, dated January 26, 2000, between Emdeon, Eastrise Profits Limited and Fox Entertainment Group, Inc. (incorporated by reference to Exhibit 10.5 to Emdeon’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)
	10	.37	Content License Agreement dated January 26, 2000 between The News Corporation Limited and Registrant (incorporated by reference to Exhibit 10.6 to Emdeon’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)
	10	.38	Letter Agreement dated December 29, 2000 between Registrant and The News Corporation Limited (incorporated by reference to Exhibit 10.17 to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000)
	10	.39	Amendment dated February 15, 2001 to Healtheon/WebMD Media Services Agreement, dated January 26, 2000, among Emdeon, Eastrise Profits Limited and Fox Entertainment Group, Inc. (incorporated by reference to Exhibit 10.2 to Emdeon’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
	10	.40†	Interactive Services Agreement, effective as of May 9, 2001, between America Online, Inc. and Emdeon (incorporated by reference to Exhibit 10.40 to the IPO Registration Statement)
	10	.41†	First Amendment to Interactive Services Agreement, dated as of May 15, 2001, between America Online, Inc. and Emdeon (incorporated by reference to Exhibit 10.41 to the IPO Registration Statement)
	10	.42	Second Amendment to Interactive Services Agreement, dated as of June 26, 2001, between America Online, Inc. and Emdeon (incorporated by reference to Exhibit 10.42 to the IPO Registration Statement)
	10	.43	Third Amendment to Interactive Services Agreement, dated as of March 1, 2002, between America Online, Inc. and Emdeon (incorporated by reference to Exhibit 10.43 to the IPO Registration Statement)
	10	.44	Fourth Amendment to Interactive Services Agreement, dated as of June 21, 2005, between America Online, Inc. and Emdeon (incorporated by reference to Exhibit 10.44 to the IPO Registration Statement)
	10	.45	Agreement of Lease, dated as of June 30, 2004, between III Chelsea Commerce LP and WebMD, Inc. (incorporated by reference to Exhibit 10.45 to the IPO Registration Statement)
	10	.46	First Amendment to the Lease Agreement, dated as of December 21, 2004, between III Chelsea Commerce LP and WebMD, Inc. (incorporated by reference to Exhibit 10.46 to the IPO Registration Statement)
	10	.47†	Services Agreement, dated as of February 12, 2004, between WebMD, Inc. and Fidelity Human Resources Services Company LLC (f/k/a Fidelity Employer Services Company LLC) (incorporated by reference to Exhibit 10.47 to the IPO Registration Statement)
	10	.48*	Form of Restricted Stock Agreement between the Registrant and the Employees (incorporated by reference to Exhibit 10.48 to the IPO Registration Statement)
	10	.49*	Form of Restricted Stock Agreement between the Registrant and the Non-Employee Directors (incorporated by reference to Exhibit 10.49 to the IPO Registration Statement)
	10	.50*	Form of Non-Qualified Stock Option Agreement between the Registrant and Employees (incorporated by reference to Exhibit 10.50 to the IPO Registration Statement)
	10	.51*	Form of Non-Qualified Stock Option Agreement between the Registrant and Non-Employee Directors (incorporated by reference to Exhibit 10.51 to the IPO Registration Statement)
	10	.52	Business Services Agreement, dated as of January 31, 2006, among Emdeon, Envoy Corporation, Emdeon Practice Services, Inc. and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed February 1, 2006)
	10	.53	Marketing Agreement, dated as of January 31, 2006, among the Emdeon, Envoy Corporation and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed February 1, 2006)

E-3

Exhibit No.			Description
	10	.54	Joint Development Agreement, dated as of January 31, 2006, among Envoy Corporation, Emdeon Practice Services, Inc. and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed February 1, 2006)
	10	.55*	Form of Restricted Stock Agreement between Emdeon and Employees for Grants Under the Emdeon’s 2000 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.57 to Emdeon’s Annual Report on Form 10-K for the quarter ended December 31, 2005)
	10	.56*	Form of Non-Qualified Stock Option Agreement between Emdeon and Employees for Grants Under Emdeon’s 2000 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.58 to Emdeon’s Annual Report on Form 10-K for the quarter ended December 31, 2005)
	10	.57*	Form of Non-Qualified Stock Option Agreement between Emdeon and Employees for Grants Under Emdeon’s 1996 Stock Plan (incorporated by reference to Exhibit 10.59 to Emdeon’s Annual Report on Form 10-K for the quarter ended December 31, 2005)
	10	.58*	Amendment, dated as of March 9, 2006, to the Employment Agreement between WebMD, Inc. and David Gang (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 15, 2006)
	10	.59*	Letter Agreement, dated as of February 1, 2006 between the Registrant and Martin J. Wygod (incorporated by reference to Exhibit 10.3 to Emdeon’s Current Report on Form 8-K filed on February 2, 2006)
	10	.60	Asset Purchase Agreement, dated as of October 31, 2005, among Conceptis Technologies Inc., WebMD, Inc., and Maple Leaf Medical Media, Inc.
	10	.61	Agreement and Plan of Merger, dated as of January 17, 2006, among the Registrant, ME Omaha, Inc., eMedicine.com, Inc., and Lilian Shackelford Murray, as Stockholders’ Representative (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2006)
	14	.1	Code of Business Conduct (incorporated by reference to Exhibit 14.1 to Emdeon’s Current Report on Form 8-K filed February 9, 2006)
	21		Subsidiaries of the Registrant
	23	.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
	24	.1	Power of Attorney (see page 67)
	31	.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Registrant
	31	.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Registrant
	32	.1	Section 1350 Certification of Chief Executive Officer of the Registrant
	32	.2	Section 1350 Certification of Chief Financial Officer of the Registrant
	99	.1	Audit Committee Charter (incorporated by reference to Exhibit 99.4 to the IPO Registration Statement)
	99	.2	Compensation Committee Charter (incorporated by reference to Exhibit 99.5 to the IPO Registration Statement)
	99	.3	Nominating Committee Charter (incorporated by reference to Exhibit 99.3 to the IPO Registration Statement)
	99	.4	Governance & Compliance Committee Charter (incorporated by reference to Exhibit 99.6 to the IPO Registration Statement)

*	Agreement relates to executive compensation.
†	Portions of this exhibit were redacted pursuant to confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 406 under the Securities Act of 1933, as amended.

E-4

EX-10.27

EXHIBIT 10.27

WEBMD HEALTH CORP.
2005 LONG-TERM INCENTIVE PLAN
(Amended and Restated as of January 27, 2006)

ARTICLE 1
PURPOSE

     1.1 GENERAL. The purpose of the WebMD Health Corp. 2005 Long-Term Incentive Plan (as it may be amended from time to time, the “Plan”) is to promote the success, and enhance the value, of WebMD Health Corp., a Delaware corporation (the “Corporation”), by linking the personal interests of its employees, officers, directors and consultants to those of Corporation shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Corporation in its ability to motivate, attract and retain the services of employees, officers, directors and consultants upon whose judgment, interest and special effort the successful conduct of the Corporation’s operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees and officers, directors and consultants.

ARTICLE 2
EFFECTIVE DATE

     2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon which it shall be approved by the Board and the shareholders of the Corporation (the “Effective Date”). In the discretion of the Committee, Awards may be made to Covered Employees which are intended to constitute qualified performance-based compensation under Section 162(m) of the Code. The effective date of the amendment and restatement of the Plan is January 27, 2006 (the “Amendment and Restatement Date”).

ARTICLE 3
DEFINITIONS

     3.1 DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence and is not otherwise defined in the Plan, the word or phrase shall generally be given the meaning ascribed to it in this Section. The following words and phrases shall have the following meanings:

     (a) “1933 Act” means the Securities Act of 1933, as amended from time to time.

     (b) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.

     (c) “Affiliate” means any Parent or Subsidiary and any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Corporation.

     (d) “Amendment and Restatement Date” has the meaning specified in Section 3.1.

     (e) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share Award, Dividend Equivalent Award or Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.

     (f) “Award Agreement” means any written agreement, contract or other instrument or document evidencing an Award.

     (g) “Board” means the Board of Directors of the Corporation.

     (h) “Cause” as a reason for a Participant’s termination of employment or service shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Corporation or an affiliated company, provided, however, that if there is no such employment agreement in which such term is defined, “Cause” shall mean any of the following acts by the Participant, as determined by the Board: gross neglect of duty, prolonged absence from duty without the consent of the Corporation, intentionally engaging in any activity that is in conflict with or adverse to the business or other interests of the Corporation, or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Corporation.

     (i) “Change of Control” means and includes the occurrence of any one of the following events:

     (i) individuals who, at the effective date of the Initial Public Offering, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest (as described in Rule 14a-11 under the 1934 Act (“Election Contest”)) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) and 14(d)(2) of the 1934 Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;

     (ii) any person becomes a “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Corporation representing 50% or more of the combined voting power of the Corporation’s then outstanding securities eligible to vote for the election of the Board (the “Corporation Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change of Control of the Corporation by virtue of any of the following acquisitions: (A) any acquisition by a person who is on the Effective Date the beneficial owner of 50% or more of the outstanding Corporation Voting Securities, (B) an acquisition by the Corporation which reduces the number of Corporation Voting Securities outstanding and thereby results in any person acquiring beneficial ownership of more than 50% of the outstanding Corporation Voting Securities, provided that if after such acquisition by the Corporation such person becomes the beneficial owner of additional Corporation Voting Securities that increase the percentage of outstanding Corporation Voting Securities beneficially owned by such person, a Change of Control of the Corporation shall then occur, (C) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Parent or

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Subsidiary, (D) an acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities or (E) an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)); or

     (iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation that requires the approval of the Corporation’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Reorganization”), or the sale or other disposition of all or substantially all of the Corporation’s assets to an entity that is not an affiliate of the Corporation (a “Sale”), unless immediately following such Reorganization or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Reorganization or the corporation which has acquired all or substantially all of the assets of the Corporation (in either case, the “Surviving Corporation”) or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by the Corporation Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which such Corporation Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Corporation Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (B) no person (other than (x) the Corporation, (y) any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation or (z) a person who immediately prior to the Reorganization or Sale was the beneficial owner of 25% or more of the outstanding Corporation Voting Securities) is the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale (any Reorganization or Sale which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

provided, however, that in no event shall a Change of Control be deemed to have occurred so long as Emdeon Corporation directly or indirectly beneficially owns at least 50% of the voting power represented by the securities of the Corporation entitled to vote generally in the election of the Corporation’s directors; and provided further, however, that under no circumstances shall a split-off, spin-off, stock dividend or similar transaction as a result of which the voting securities of the Corporation are distributed to shareholders of Emdeon Corporation or its successors constitute a Change of Control.

       Notwithstanding the foregoing, with respect to an Award that is subject to Section 409A of the Code, and payment or settlement of such Award is to be accelerated in connection with an event that would otherwise constitute a Change of Control, no event set forth in clause (i), (ii) or (iii) will constitute a Change of Control for purposes of the Plan and any Award Agreement unless such event also constitutes a “change in the ownership”, “change in the effective control” or “change in the ownership of a substantial portion of the assets” of the Corporation as defined under Section 409A of the Code and the Treasury guidance promulgated thereunder.

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     (j) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.

     (k) “Committee” means, subject to the last sentence of Section 4.1, the committee of the Board described in Article 4.

     (l) “Covered Employee” means a covered employee as defined in Section 162(m)(3) of the Code, provided that no employee shall be a Covered Employee until the deduction limitations of Section 162(m) of the Code are applicable to the Corporation and any reliance period under Treasury Regulation Section 1.162-27(f) has expired.

     (m) “Disability” has the meaning ascribed under the long-term disability plan applicable to the Participant. Notwithstanding the above, (i) with respect to an Incentive Stock Option, Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of the Code and (ii) to the extent an Award is subject to Section 409A of the Code, and payment or settlement of the Award is to be accelerated solely as a result of the Participant’s Disability, Disability shall have the meaning ascribed thereto under Section 409A of the Code and the Treasury guidance promulgated thereunder.

     (n) “Dividend Equivalent” means a right granted to a Participant under Article 11.

     (o) “Effective Date” has the meaning assigned such term in Section 2.1.

     (p) “Fair Market Value”, on any date, means (i) if the Stock is listed on a securities exchange or is traded over the Nasdaq National Market, the closing sales price on such exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported or (ii) if the Stock is not listed on a securities exchange or traded over the Nasdaq National Market, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable. With respect to awards granted on the effective date of the Corporation’s Initial Public Offering, Fair Market Value shall mean the price at which the Stock is initially offered in the Initial Public Offering.

     (q) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

     (r) “Initial Public Offering” means the underwritten initial public offering of equity securities of the Corporation pursuant to an effective registration statement under the 1933 Act.

     (s) “Non-Employee Director” means a member of the Board who is not an employee of the Corporation or any Parent or Affiliate.

     (t) “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.

     (u) “Option” means a right granted to a Participant under Article 7 to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

     (v) “Other Stock-Based Award” means a right, granted to a Participant under Article 12, that relates to or is valued by reference to Stock or other Awards relating to Stock.

4

     (w) “Parent” means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Corporation. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.

     (x) “Participant” means a person who, as an employee, officer, consultant or director of the Corporation or any Parent, Subsidiary or Affiliate, has been granted an Award under the Plan.

     (y) “Performance Share” means a right granted to a Participant under Article 9, to receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals established by the Committee.

     (z) “Restricted Stock Award” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.

     (aa) “Stock” means the $.01 par value Class A common stock of the Corporation and such other securities of the Corporation as may be substituted for Stock pursuant to Article 15.

     (bb) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a share of Stock as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8.

     (cc) “Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting equity securities or voting power is beneficially owned directly or indirectly by the Corporation. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.

     (dd)“Emdeon Corporation” means Emdeon Corporation, a Delaware corporation.

ARTICLE 4
ADMINISTRATION

   4.1 COMMITTEE. The Plan shall be administered by a committee (the “Committee”) appointed by the Board (which Committee shall consist of two or more directors) or, at the discretion of the Board from time to time, the Plan may be administered by the Board. It is intended that the directors appointed to serve on the Committee shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and “outside directors” (within the meaning of Section 162(m) of the Code) to the extent that Rule 16b-3 and, if necessary for relief from the limitation under Section 162(m) of the Code and such relief is sought by the Corporation, Section 162(m) of the Code, respectively, are applicable. However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board. During any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. Notwithstanding the foregoing, (i) initial Awards granted to Participants in connection with the Initial Public Offering may be determined, and (ii) to the extent determined by the Board, following the Initial Public Offering the Plan may be administered, by the compensation committee of the board of directors of Emdeon Corporation and all references to such Committee in the Plan shall be deemed to refer to such Committee for so long as it serves as the Plan administrator.

5

   4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the following rules of procedure shall govern the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved unanimously in writing by the members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Corporation or any Parent or Affiliate, the Corporation’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Corporation to assist in the administration of the Plan.

     4.3 AUTHORITY OF COMMITTEE. Except as provided below, the Committee has the exclusive power, authority and discretion to:

     (a) Designate Participants;

     (b) Determine the type or types of Awards to be granted to each Participant;

     (c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

     (d) Determine the terms and conditions of any Award granted under the Plan, including, but not limited to, the exercise price, grant price or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines;

     (e) Accelerate the vesting or lapse of restrictions of any outstanding Award, based in each case on such considerations as the Committee in its sole discretion determines;

     (f) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards or other property, or an Award may be canceled, forfeited or surrendered;

     (g) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

     (h) Decide all other matters that must be determined in connection with an Award;

     (i) Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

     (j) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; and

     (k) Amend the Plan or any Award Agreement as provided herein.

     4.4 DELEGATION OF AUTHORITY. To the extent not prohibited by applicable laws, rules and regulations, the Board or the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees thereof or to one or more directors or executive officers of the Corporation as it deems appropriate under such conditions or limitations as it may set at the time of such delegation or thereafter, except that neither the Board nor the Committee may

6

delegate its authority pursuant to Article 16 to amend the Plan. For purposes of the Plan, references to the Committee shall be deemed to refer to any subcommittee, subcommittees, directors or executive officers to whom the Board or the Committee delegates authority pursuant to this Section 4.4.

     4.5 DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding and conclusive on all parties.

ARTICLE 5
SHARES SUBJECT TO THE PLAN

     5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 15.1, the aggregate number of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Share Award) shall be 7,150,000 shares (the “Maximum Number”). Not more than the Maximum Number of shares of Stock shall be granted in the form of Incentive Stock Options.

     5.2 LAPSED AWARDS. To the fullest extent permissible under Rule 16b-3 under the 1934 Act and Section 422 of the Code and any other applicable laws, rules and regulations, (i) if an Award is canceled, terminates, expires, is forfeited or lapses for any reason without having been exercised or settled, any shares of Stock subject to the Award will be added back into the Maximum Number and will again be available for the grant of an Award under the Plan and (ii) shares of Stock subject to SARs or other Awards settled in cash and the number of shares of Stock tendered or withheld to satisfy a Participant’s tax withholding obligations shall be added back into the Maximum Number and will be available for the grant of an Award under the Plan.

     5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

     5.4 LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 15.1), the maximum number of shares of Stock with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Participant shall be 412,500 (all of which may be granted as Incentive Stock Options); provided, however, that in connection with his or her initial employment with the Corporation, a Participant may be granted Options or SARs with respect to up to an additional 412,500 shares of Stock (all of which may be granted as Incentive Stock Options), which shall not count against the foregoing annual limit. The maximum Fair Market Value (measured as of the date of grant) of any Awards other than Options and SARs that may be received by any one Participant (less any consideration paid by the Participant for such Award) during any one calendar year under the Plan shall be $5,000,000. The maximum number of shares of Stock that may be subject to one or more Performance Share Awards (or used to provide a basis of measurement for or to determine the value of Performance Share Awards) in any one calendar year to any one participant (determined on the date of payment of settlement) shall be 412,500.

ARTICLE 6
ELIGIBILITY

     6.1 GENERAL. Awards may be granted only to individuals who are employees, officers, directors or consultants of the Corporation or a Parent or an Affiliate.

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ARTICLE 7
STOCK OPTIONS

     7.1 GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:

         (a) EXERCISE PRICE. The exercise price per share of Stock under an Option shall be determined by the Committee at the time of the grant but in no event shall the exercise price be less than 100% of the Fair Market Value of a share of Stock on the date of grant.

         (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e) and 7.3. The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Committee may waive any exercise provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable at an earlier date.

         (c) PAYMENT. Unless otherwise determined by the Committee, the exercise price of an Option may be paid (i) in cash, (ii) by actual delivery or attestation to ownership of freely transferable shares of stock already owned; provided, however, that to the extent required by applicable accounting rules, such shares shall have been held by the Participant for at least six months, (iii) by a combination of cash and shares of Stock equal in value to the exercise price or (iv) by such other means as the Committee, in its discretion, may authorize. In accordance with the rules and procedures authorized by the Committee for this purpose, an Option may also be exercised through a “cashless exercise” procedure authorized by the Committee that permits Participants to exercise Options by delivering a properly executed exercise notice to the Corporation together with a copy of irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations.

         (d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Award Agreement between the Corporation and the Participant. The Award Agreement shall include such provisions not inconsistent with the Plan as may be specified by the Committee.

         (e) EXERCISE TERM. In no event may any Option be exercisable for more than ten years from the date of its grant.

     7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:

         (a) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the earliest of the following circumstances; provided, however, that the Committee may, prior to the lapse of the Incentive Stock Option under the circumstances described in paragraphs (3), (4) and (5) below, provide in writing that the Option will extend until a later date, but if an Option is exercised after the dates specified in paragraphs (3), (4) and (5) below, it will automatically become a Non-Qualified Stock Option:

     (1) The Incentive Stock Option shall lapse as of the option expiration date set forth in the Award Agreement.

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     (2) The Incentive Stock Option shall lapse ten years after it is granted, unless an earlier time is set in the Award Agreement.

     (3) If the Participant terminates employment for any reason other than as provided in paragraph (4) or (5) below, the Incentive Stock Option shall lapse, unless it is previously exercised, three months after the Participant’s termination of employment; provided, however, that if the Participant’s employment is terminated by the Corporation for Cause, the Incentive Stock Option shall (to the extent not previously exercised) lapse immediately.

     (4) If the Participant terminates employment by reason of his Disability, the Incentive Stock Option shall lapse, unless it is previously exercised, one year after the Participant’s termination of employment.

     (5) If the Participant dies while employed, or during the three-month period described in paragraph (3) or during the one-year period described in paragraph (4) and before the Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Incentive Stock Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5.

     Unless the exercisability of the Incentive Stock Option is accelerated as provided in Article 14, if a Participant exercises an Option after termination of employment, the Option may be exercised only with respect to the shares that were otherwise vested on the Participant’s termination of employment.

     (b) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00.

     (c) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or any Parent or Affiliate unless the exercise price per share of such Option is at least 110% of the Fair Market Value per share of Stock at the date of grant and the Option expires no later than five years after the date of grant.

     (d) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive Stock Option may be made pursuant to the Plan after the day immediately prior to the tenth anniversary of the Effective Date.

     (e) RIGHT TO EXERCISE. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or legal representative.

     (f) DIRECTORS. The Committee may not grant an Incentive Stock Option to a non-employee director. The Committee may grant an Incentive Stock Option to a director who is also an employee of the Corporation or any Parent or Affiliate but only in that individual’s position as an employee and not as a director.

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     7.3 OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. Notwithstanding the foregoing, Options granted to Non-Employee Directors under this Article 7 shall be subject to the following additional terms and conditions:

     (a) LAPSE OF OPTION. An Option granted to a Non-Employee Director under this Article 7 shall lapse under the earliest of the following circumstances:

     (1) The Option shall lapse as of the option expiration date set forth in the Award Agreement.

     (2) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board for any reason other than as provided in the proviso to this paragraph (2) or in paragraph (3) below, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, on the later of (x) 6¹/2 months following the Participant’s termination as a member of the Board of Directors or (y) December 31 of the year in which such termination of service occurs; provided, however, that if the Participant is removed for cause (determined in accordance with the Corporation’s bylaws, as amended from time to time), the Option shall (to the extent not previously exercised) lapse immediately.

     (3) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board by reason of his Disability or death, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, 15¹/2 months following the Participant’s termination as a member of the Board of Directors. If the Participant dies during the post termination exercise period specified above in paragraph (2) or in paragraph (3) and before the Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5

If a Participant exercises Options after termination of his service on the Board, he may exercise the Options only with respect to the shares that were otherwise exercisable on the date of termination of his service on the Board. Such exercise otherwise shall be subject to the terms and conditions of this Article 7.

     (b) ACCELERATION UPON CHANGE OF CONTROL. Notwithstanding Section 7.1(b), in the event of a Change of Control of the Corporation, each Option granted to a Non-Employee Director under this Article 7 that is then outstanding immediately prior to such Change of Control shall become immediately vested and exercisable in full on the date of such Change of Control.

ARTICLE 8
STOCK APPRECIATION RIGHTS

     8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:

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     (a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive the excess, if any, of:

     (1) The Fair Market Value of one share of Stock on the date of exercise; over

     (2) The grant price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one share of Stock on the date of grant.

     (b) OTHER TERMS. All awards of Stock Appreciation Rights shall be evidenced by an Award Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Agreement.

ARTICLE 9
PERFORMANCE SHARES

     9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant Performance Shares to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares granted to each Participant, subject to Section 5.4. All Awards of Performance Shares shall be evidenced by an Award Agreement.

     9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares are granted, in whole or in part, as the Committee shall establish at grant or thereafter. The Committee shall set performance goals and other terms or conditions to payment of the Performance Shares in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares that will be paid to the Participant.

     9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock or other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Agreement.

ARTICLE 10
RESTRICTED STOCK AWARDS

     10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee. All Awards of Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.

     10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

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     10.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided, however, that the Committee may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

     10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock.

ARTICLE 11
DIVIDEND EQUIVALENTS

     11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to Participants subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive payments (in cash, Stock or other property) equal to dividends with respect to all or a portion of the number of shares of Stock subject to an Award, as determined by the Committee. The Committee may provide that Dividend Equivalents be paid or distributed when accrued, or be deemed to have been reinvested in additional shares of Stock or otherwise reinvested.

ARTICLE 12
OTHER STOCK-BASED AWARDS

     12.1 GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, shares of Stock awarded purely as a “bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, stock units, phantom stock and other Awards valued by reference to book value of shares of Stock or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards.

ARTICLE 13
ANNUAL AWARDS TO NON-EMPLOYEE DIRECTORS

     13.1 GRANT OF OPTIONS. Each Non-Employee Director who is serving in such capacity as of January 1 of each year that the Plan is in effect shall be granted a Non-Qualified Option to purchase 13,200 shares of Stock, subject to adjustment as provided in Section 15.1. In addition, each Non-Employee Director who is serving in such capacity as of the effective date of the Initial Public Offering shall be granted a Non-Qualified Stock Option to purchase 13,200 shares of Stock on such date. Each such date that Options are to be granted under this Article 13 is referred to hereinafter as a “Grant Date”. In addition, the Committee may, in its sole discretion, permit or require each Non-Employee Director to receive all or any portion of his or her compensation for services as a director in the form of an Award under the Plan with such term and conditions as may be determined by the Board in its sole discretion.

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     If on any Grant Date, shares of Stock are not available under the Plan to grant to Non-Employee Directors the full amount of a grant contemplated by the immediately preceding paragraph, then each Non-Employee Director shall receive an Option (a “Reduced Grant”) to purchase shares of Stock in an amount equal to the number of shares of Stock then available under the Plan divided by the number of Non-Employee Directors as of the applicable Grant Date. Fractional shares shall be ignored and not granted.

     If a Reduced Grant has been made and, thereafter, during the term of the Plan, additional shares of Stock become available for grant, then each person who was a Non-Employee Director both on the Grant Date on which the Reduced Grant was made and on the date additional shares of Stock become available (a “Continuing Non-Employee Director”) shall receive an additional Option to purchase shares of Stock. The number of newly available shares shall be divided equally among the Options granted to the Continuing Non-Employee Directors; provided, however, that the aggregate number of shares of Stock subject to a Continuing Non-Employee Director’s additional Option plus any prior Reduced Grant to the Continuing Non-Employee Director on the applicable Grant Date shall not exceed 13,200 shares (subject to adjustment pursuant to Section 15.1). If more than one Reduced Grant has been made, available Options shall be granted beginning with the earliest such Grant Date.

     13.2 OPTION PRICE. The option price for each Option granted under this Article 13 shall be the Fair Market Value on the date of grant of the Option.

     13.3 TERM. Each Option granted under this Article 13 shall, to the extent not previously exercised, terminate and expire on the date ten (10) years after the date of grant of the Option, unless earlier terminated as provided in Section 13.4.

     13.4 LAPSE OF OPTION. An Option granted under this Article 13 shall not automatically lapse by reason of the Participant ceasing to qualify as a Non-Employee Director but remaining as a member of the Board. An Option granted under this Article 13 shall lapse under the earliest of the following circumstances:

     (1) The Option shall lapse ten years after it is granted.

     (2) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board for any reason other than as provided in the proviso to this paragraph (2) or paragraph (3) below, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, on the later of (x) 6¹/2 months following the Participant’s termination as a member of the Board of Directors or (y) December 31 of the year in which such termination of service occurs; provided, however, that if the Participant is removed for cause (determined in accordance with the Corporation’s bylaws, as amended from time to time), the Option shall (to the extent not previously exercised) lapse immediately.

     (3) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board by reason of his Disability or death, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, 15¹/2 months following the Participant’s termination as a member of the Board of Directors. If the Participant dies during the post termination exercise period specified above in paragraph (2) or in paragraph (3) and before the

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Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5.

          If a Participant exercises Options after termination of his or her service on the Board, he or she may exercise the Options only with respect to the shares that were otherwise exercisable on the date of termination of his service on the Board. Such exercise otherwise shall be subject to the terms and conditions of this Article 13.

     13.5 CANCELLATION OF OPTIONS. Upon a Participant’s termination of service for any reason other than death or Disability, all Options that have not vested in accordance with the Plan shall be cancelled immediately.

     13.6 EXERCISABILITY. Subject to Section 13.7, each Option grant under this Article 13 shall be exercisable as to twenty-five percent (25%) of the Option shares on each of the first, second, third and fourth anniversaries of the Grant Date, such that the Options will be fully exercisable after four years from the Grant Date.

     13.7 ACCELERATION UPON A CHANGE OF CONTROL. Notwithstanding Section 13.6, in the event of a Change of Control of the Corporation, each Option granted under his Section 13 that is then outstanding immediately prior to such Change of Control shall become immediately vested and exercisable in full on the date of such Change in Control.

     13.8 TERMINATION OF ARTICLE 13. No Options shall be granted under this Article 13 after January 1, 2015.

     13.9 NON-EXCLUSIVITY. Nothing in this Article 13 shall prohibit the Committee from making discretionary Awards to Non-Employee Directors pursuant to the other provisions of the Plan before or after January 1, 2015. Options granted pursuant to this Article 13 shall be governed by the provisions of this Article 13 and by other provisions of the Plan to the extent not inconsistent with the provisions of this Article 13.

ARTICLE 14
PROVISIONS APPLICABLE TO AWARDS

     14.1 STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan. If an Award is granted in substitution for another Award, the Committee may require the surrender of such other Award in consideration of the grant of the new Award. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

     14.2 TERM OF AWARD. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant (or, if Section 7.2(c) applies, five years from the date of its grant).

     14.3 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or Award Agreement, payments or transfers to be made by the Corporation or a Parent or Affiliate on the grant or exercise of an Award may be made in such form as the Committee determines at

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or after the time of grant, including, without limitation, cash, Stock, other Awards or other property, or any combination thereof, and may be made in a single payment or transfer, in installments or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee.

     14.4 LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered or hypothecated to or in favor of any party other than the Corporation or a Parent or Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Corporation or a Parent or Affiliate. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation or other adverse tax consequences, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Section 422(b) of the Code, and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including, without limitation, state or federal tax or securities laws applicable to transferable Awards.

     14.5 BENEFICIARIES. Notwithstanding Section 14.4, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and such Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time, provided the change or revocation is filed with the Committee.

     14.6 STOCK CERTIFICATES. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.

     14.7 ACCELERATION UPON DEATH OR DISABILITY. Unless otherwise set forth in an Award Agreement, upon the Participant’s death or Disability during his employment or service as a director, all outstanding Options, Stock Appreciation Rights, Restricted Stock Awards and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on outstanding Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(b), the excess Options shall be deemed to be Non-Qualified Stock Options.

     14.8 ACCELERATION OF VESTING AND LAPSE OF RESTRICTIONS. Subject to Sections 7.3(b) and 13.7, the Committee may, in its sole discretion, at any time (including, without limitation, prior to, coincident with or subsequent to a Change of Control) determine that (a) all or a portion of a Participant’s Options, Stock Appreciation Rights and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, and/or (b) all or a part of the

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restrictions on all or a portion of the outstanding Awards shall lapse, in each case, as of such date as the Committee may, in its sole discretion, declare; provided, however, that, with respect to Awards that are subject to Section 409A of the Code, the Committee shall not have the authority to accelerate or postpone the timing of payment or settlement of an Award in a manner that would cause such Award to become subject to the interest and penalty provisions under Section 409A of the Code. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 14.8. All Awards made to Non-Employee Directors shall become fully vested and, in the case of Options, Stock Appreciation Rights and other Awards in the nature of rights that may be exercised, fully exercisable in the event of the occurrence of a Change of Control as of the date of such Change of Control.

     14.9 OTHER ADJUSTMENTS. If (i) an Award is accelerated under Sections 7.3(b), 13.7 and/or 14.8 or (ii) a Change of Control occurs (regardless or whether acceleration under Sections 7.3(b), 13.7 and/or 14.8 occurs), the Committee may, in its sole discretion, provide (a) that the Award will expire after a designated period of time after such acceleration or Change of Control, as applicable, to the extent not then exercised, (b) that the Award will be settled in cash rather than Stock, (c) that the Award will be assumed by another party to a transaction giving rise to the acceleration or a party to the Change of Control, (d) that the Award will otherwise be equitably converted or adjusted in connection with such transaction or Change of Control, or (e) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated; provided, however, that, with respect to Awards that are subject to Section 409A of the Code, the Committee shall not have the authority to accelerate or postpone the timing of payment or settlement of an Award in a manner that would cause such Award to become subject to the interest and penalty provisions under Section 409A of the Code.

     14.10 PERFORMANCE GOALS. In order to preserve the deductibility of an Award under Section 162(m) of the Code, the Committee may determine that any Award granted pursuant to this Plan to a Participant that is or is expected to become a Covered Employee shall be determined solely on the basis of (a) the achievement by the Corporation or Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Corporation’s stock price, (c) the Corporation’s total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or target over a specific performance period, (d) the achievement by the Corporation or a Parent or Subsidiary, or a business unit of any such entity, of a specified target, or target growth in, net income, revenues, earnings per share, earnings before income and taxes, and earnings before income, taxes, depreciation and amortization, or (e) any combination of the goals set forth in (a) through (d) above. If an Award is made on such basis, the Committee shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Section 162(m) of the Code or the regulations thereunder), and the Committee has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal. Any payment of an Award granted with performance goals shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied.

     14.11 TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A termination of employment shall not occur (i) in a circumstance in which a Participant transfers from the Corporation to one of its Parents or Subsidiaries, transfers from a Parent or Affiliate to the Corporation, or transfers from one Parent or Affiliate to another Parent or Affiliate, or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a split-off, spin-off, sale or other disposition of the Participant’s employer from the Corporation or any Parent or Affiliate. To the extent that this provision causes Incentive Stock Options to extend beyond three months from the

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date a Participant is deemed to be an employee of the Corporation, a Parent or Affiliate for purposes of Section 424(f) of the Code, the Options held by such Participant shall be deemed to be Non-Qualified Stock Options.

     14.12 LOAN PROVISIONS. Subject to applicable laws, rules and regulations, including, without limitation, Section 402 of the Sarbanes-Oxley Act of 2002, with the consent of the Committee, the Corporation may make, guarantee or arrange for a loan or loans to a Participant with respect to the exercise of any Option granted under this Plan and/or with respect to the payment of the purchase price, if any, of any Award granted hereunder and/or with respect to the payment by the Participant of any or all federal and/or state income taxes due on account of the granting or exercise of any Award hereunder. The Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms and provisions of any such loan(s), including the interest rate to be charged in respect of any such loan(s), whether the loan(s) are to be made with or without recourse against the borrower, the collateral or other security, if any, securing the repayment of the loan(s), the terms on which the loan(s) are to be repaid and the conditions, if any, under which the loan(s) may be forgiven.

ARTICLE 15
CHANGES IN CAPITAL STRUCTURE

     15.1 GENERAL. In the event of a corporate transaction involving the Corporation (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the authorization limits under Section 5.1 and 5.4 shall be adjusted proportionately, and the Committee may adjust Awards to preserve the benefits or potential benefits of the Awards. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards; (iv) adjustments to the type or form of Award, and (v) any other adjustments that the Committee determines to be equitable. Without limiting the foregoing, in the event a stock dividend or stock split is declared upon the Stock, the authorization limits under Section 5.1 and 5.4 shall be increased proportionately, and the shares of Stock then subject to each Award shall be increased proportionately without any change in the aggregate purchase price therefor.

ARTICLE 16
AMENDMENT, MODIFICATION AND TERMINATION

     16.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan; provided, however, that the Board or the Committee may condition any amendment or modification on the approval of shareholders of the Corporation if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations.

     16.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award or Award Agreement without approval of the Participant; provided, however, that, subject to the terms of the applicable Award Agreement, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination; provided further, however, that the original term of any Option may not be extended. No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant. Notwithstanding any provision herein to the contrary, the Committee shall have broad authority to amend the Plan or any outstanding Award under the Plan without approval of the

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Participant to the extent necessary or desirable (i) to comply with, or take into account changes in, applicable tax laws, securities laws, accounting rules and other applicable laws, rules and regulations or (ii) to ensure that an Award is not subject to interest and penalties under Section 409A of the Code.

ARTICLE 17
GENERAL PROVISIONS

     17.1 NO RIGHTS TO AWARDS. No Participant or any eligible participant shall have any claim to be granted any Award under the Plan, and neither the Corporation nor the Committee is obligated to treat Participants or eligible participants uniformly.

     17.2 NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the rights of a shareholder of the Corporation unless and until shares of Stock are in fact issued to such person in connection with the exercise, payment or settlement of such Award.

     17.3 WITHHOLDING. The Corporation or any Subsidiary, Parent or Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Corporation, an amount sufficient to satisfy federal, state, local and other taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by (i) withholding from the Award shares of Stock or (ii) delivering shares of Stock that are already owned, having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes. The Corporation or any Subsidiary, Parent or Affiliate, as appropriate, shall also have the right to deduct from all cash payments made to a Participant (whether or not such payment is made in connection with an Award) any applicable taxes required to be withheld with respect to such payments.

     17.4 NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Corporation or any Parent or Affiliate to terminate any Participant’s employment or status as an officer, director or consultant at any time, nor confer upon any Participant any right to continue as an employee, officer, director or consultant of the Corporation or any Parent or Affiliate. In its sole discretion, the Board or the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver shares of Stock with respect to awards hereunder.

     17.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Corporation or any Parent or Affiliate.

     17.6 INDEMNIFICATION. To the extent allowable under applicable law, each member of the Committee shall be indemnified and held harmless by the Corporation from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit or proceeding to which such member may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by such member in satisfaction of judgment in such action, suit or proceeding against him; provided such member shall give the Corporation an opportunity, at its own expense, to handle and defend the same before such member undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which

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such persons may be entitled under the Corporation’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold such persons harmless.

     17.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Corporation or any Parent or Affiliate unless provided otherwise in such other plan.

     17.8 EXPENSES; APPLICATION OF FUNDS. The expenses of administering the Plan shall be borne by the Corporation and its Parents or Subsidiaries. The proceeds received by the Corporation from the sale of shares of Stock pursuant to Awards will be used for general corporate purposes.

     17.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

     17.10 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

     17.11 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down.

     17.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules and regulations, and to such approvals by government agencies as may be required. To the extent that Awards under the Plan are awarded to individuals who are domiciled or resident outside of the United States or to persons who are domiciled or resident in the United States but who are subject to the tax laws of a jurisdiction outside of the United States, the Committee may adjust the terms of the Awards granted hereunder to such person (i) to comply with the laws of such jurisdiction and (ii) to avoid adverse tax consequences relating to an Award. The authority granted under the previous sentence shall include the discretion for the Committee to adopt, on behalf of the Corporation, one or more sub-plans applicable to separate classes of Participants who are subject to the laws of jurisdictions outside of the United States.

     17.13 SECURITIES LAW RESTRICTIONS. An Award may not be exercised or settled and no shares of Stock may be issued in connection with an Award unless the issuance of such shares of Stock has been registered under the 1933 Act and qualified under applicable state “blue sky” laws and any applicable foreign securities laws, or the Corporation has determined that an exemption from registration and from qualification under such state “blue sky” laws is available. The Corporation shall be under no obligation to register under the 1933 Act, or any state securities act, any of the shares of Stock issued in connection with the Plan. The shares issued in connection with the Plan may in certain circumstances be exempt from registration under the 1933 Act, and the Corporation may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. The Committee may require each Participant purchasing or acquiring shares of Stock pursuant to an Award under the Plan to represent to and agree with the Corporation in writing that such Participant is acquiring the shares of Stock for investment purposes and not with a view to the distribution thereof. All certificates for shares of Stock delivered under the Plan shall be subject to such

19

stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any exchange upon which the Stock is then listed, and any applicable securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

     17.14 SATISFACTION OF OBLIGATIONS. Subject to applicable law, the Corporation may apply any cash, shares of Stock, securities or other consideration received upon exercise or settlement of an Award to any obligations a Participant owes to the Corporation and its Parents, Subsidiaries or Affiliates in connection with the Plan or otherwise, including, without limitation, any tax obligations or obligations under a currency facility established in connection with the Plan.

     17.15 SECTION 409A OF THE CODE. If any provision of the Plan or an Award Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award to be subject to the interest and penalties under Section 409A of the Code, such provision of the Plan or any Award Agreement shall be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Board or the Committee may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority will contravene Section 409A of the Code or the Treasury guidance promulgated thereunder.

     17.16 GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.

     17.17 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other terms and conditions as the Board or the Committee may determine, provided that such other terms and conditions are not inconsistent with the provisions of this Plan. In the event of any conflict or inconsistency between the Plan and an Award Agreement, the Plan shall govern and the Award Agreement shall be interpreted to minimize or eliminate such conflict or inconsistency.

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EX-10.60

EXHIBIT 10.60

Conformed Copy

Asset Purchase Agreement

Dated as of October 31, 2005

Among

Conceptis Technologies Inc.,

WebMD, Inc.

and

Maple Leaf Medical Media, Inc.

Table of Contents

ARTICLE 1 DEFINITIONS AND INTERPRETATION	1
1.1 Definitions	1
1.2 Interpretation	9
ARTICLE 2 PURCHASE AND SALE; CLOSING	9
2.1 Purchase and Sale	9
2.2 Assets	10
2.3 Cash Purchase Price	10
2.4 Escrow	11
2.5 Assumption of Liabilities	11
2.6 The Closing	12
2.7 Allocation of Purchase Price among the Assets	13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE VENDOR	14
3.1 Organization and Good Standing	14
3.2 Authority; Validity; Consents	14
3.3 No Conflict	14
3.4 Subsidiary	15
3.5 Financial Statements	15
3.6 Immoveable (Real) Property	15
3.7 Sufficiency of Assets	16
3.8 Moveable (Personal) Property	16
3.9 Brokers or Finders	16
3.10 Environmental and Health and Safety Matters	16
3.11 Employee Benefit Plans	17
3.12 Compliance with Legal Requirements; Permits	18
3.13 Legal Proceedings	18
3.14 Insurance	18
3.15 Absence of Certain Changes and Events	19
3.16 Material Contracts	19
3.17 Binding Nature of Material Contracts	20
3.18 Employees and Labor Relations	20
3.19 Intellectual Property	21
3.20 Site Content	24
3.21 Page Views and Unique Visitors	24
3.22 Databases	25
3.23 Significant Customers and Suppliers	25
3.24 Related Party Transactions	25
3.25 Accounts Receivable	26
3.26 Taxes	26
3.27 GST and QST Registration	26
3.28 Residence	26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER	27
4.1 Organization and Good Standing	27
4.2 Authority; Validity; Consents	27
4.3 No Conflict	27
4.4 Legal Proceedings	27
4.5 Brokers or Finders	28
ARTICLE 5 PRE-CLOSING COVENANTS OF THE VENDOR	28
5.1 Operation of the Business	28

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5.2 Negative Covenant	28
5.3 Required Approvals	30
5.4 Shareholder Approval	30
5.5 Access to Information	30
5.6 Exclusivity	31
5.7 Best Efforts	31
5.8 Confidentiality	32
5.9 Notice of Developments	32
5.10 Purchaser GST and QST Registration	32
5.11 Termination of Plans	32
5.12 Offer letters for US Employees	32
ARTICLE 6 PRE-CLOSING COVENANTS OF PURCHASER	33
6.1 Required Approvals	33
6.2 Confidentiality Obligations	33
6.3 Best Efforts	33
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER TO CLOSE	33
7.1 Accuracy of Representations	34
7.2 Vendor’s Performance	34
7.3 Delivery of Certificates	34
7.4 No Order	34
7.5 Governmental Authorizations	34
7.6 Required Consents	34
7.7 Employment Agreements	34
7.8 Release of Encumbrances	34
7.9 Update of the Disclosure Schedule	34
7.10 Requisite Shareholder Approval	35
7.11 FIRPTA	35
7.12 Opinion	35
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE VENDOR TO CLOSE	35
8.1 Cash Purchase Price	35
8.2 Accuracy of Representations	35
8.3 Purchaser’s Performance	35
8.4 Delivery of Certificates	36
8.5 No Order	36
8.6 Governmental Authorizations	36
8.7 Required Consents	36
8.8 Requisite Shareholder Approval	36
8.9 Employment Agreements	36
ARTICLE 9 POST-CLOSING COVENANTS	36
9.1 General	36
9.2 Proprietary Information	36
9.3 Cooperation in Litigation	37
9.4 Cooperation on Tax Matters; Transfer Taxes; GST	37
9.5 Employee Matters	38
9.6 Access to Books, Records, etc.	39
9.7 Solicitation and Hiring	39
9.8 Non-Competition	39
9.9 Collection of Accounts Receivable	40
9.10 Use of Name	40

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ARTICLE 10 TERMINATION	40
10.1 Termination Events	40
10.2 Effect of Termination	41
ARTICLE 11 INDEMNIFICATION; REMEDIES	41
11.1 Survival	41
11.2 Indemnification by the Vendor	42
11.3 Indemnification by Purchaser	42
11.4 Notice of Potential Claims for Indemnification	43
11.5 Third Party Claims	45
11.6 Insurance	46
11.7 Miscellaneous	46
ARTICLE 12 GENERAL PROVISIONS	46
12.1 Expenses	46
12.2 Notices	46
12.3 Waiver	47
12.4 Entire Agreement; Amendment	47
12.5 Assignment	48
12.6 Severability	48
12.7 Governing Law; Consent to Jurisdiction and Venue	48
12.8 Counterparts	48
12.9 Time of Essence	48
12.10 No Third Party Beneficiaries	48
12.11 Public Announcements	48
12.12 Language	49

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Exhibits and Schedules

Exhibits

Exhibit 1.1.38	—	Form Escrow Agreement
Exhibit 2.1	—	Data Transfer Protocol
Exhibit 2.6.2.3(i)	—	Form of Bill of Sale
Exhibit 2.6.2.3(ii)	—	Form of Stock Transfer Power
Exhibit 2.6.2.4	—	Form of Instrument of Assumption
Exhibit 3.5	—	Financial Statements
Exhibit 7.12	—	Opinion of Counsel to Vendor
Schedules
Schedule 1.1.80	—	List of certain Permitted Encumbrances
Schedule 2.7	—	Allocation of Purchase Price
Schedule 3.18	—	Employees and Labor Relations
Schedule 4.1	—	Purchaser’s Organization and Good Standing
Schedule 4.2	—	Authority; Validity; Consents
Schedule 4.5	—	Brokers or Finders
Schedule 5.2	—	Exceptions from Vendor’s Negative Covenants
Schedule 7.8	—	Release of Encumbrances
Schedule 9.5.1	—	Eligible Employees
Disclosure Schedule

*The exhibits and schedules to the Asset Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.

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Asset Purchase Agreement

          This Asset Purchase Agreement (this “Agreement”) is made as of October 31, 2005 (the “Effective Date”) by and among Conceptis Technologies Inc., a Canadian Corporation (the “Vendor”), WebMD, Inc., a Georgia corporation (“WebMD”) and Maple Leaf Medical Media, Inc., a Delaware corporation (the “Purchaser”).

Recitals

          Whereas, the Vendor provides medical and health care information, media services and education to Persons, including physicians in certain key medical specialties, including by means of different web-based services, Internet web portals and CD-ROMs;

          Whereas, the Purchaser wants to acquire the Business by acquisition of all of Vendor’s Assets and the Assumed Liabilities,

          Whereas, the respective Boards of Directors of the Vendor, the Purchaser and WebMD have approved the acquisition of the Business pursuant to the terms hereof;

          Whereas, the Purchaser has, as of the date hereof, entered into employment agreements with certain employees (the “Employment Agreements”) which will become effective as of the Closing, provided that the respective party thereto accepts employment with the Purchaser; and

          Whereas, certain shareholders of the Vendor have entered into certain letter agreements with Purchaser as of the date hereof, whereby each such party has agreed to certain covenants with the Purchaser (collectively, the “Voting Agreements”);

          Now, Therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Parties agree as follows:

ARTICLE 1
Definitions and Interpretation

1.1	Definitions.
	For purposes of this Agreement, the following terms have the meanings specified or referenced below:
		1.1.1	“Accounts Receivable” means all of the Vendor’s trade and other accounts receivable, and notes and loans receivable, that are payable to the Vendor and all rights to unbilled amounts for products delivered or services provided, together with any security held by the Vendor for the payment thereof.
		1.1.2	“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, “control,” when used in connection with any specified Person, means the power to direct the management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, in fact or otherwise, and the terms “controls”, “controlling” and “controlled” have correlative meanings.
		1.1.3	“Agreed Amount” shall mean part, but not all, of the Claimed Amount.
		1.1.4	“Agreement” has the meaning set forth in the appearance hereto.
		1.1.5	“Arbitration Rules” shall mean the provisions relating to arbitration contained in Book VII of the Code of Civil Procedure (Quebec) in effect from time to time.

1.1.6	“Arbitrator” has the meaning set forth in Section 11.4.4.
1.1.7	“Assets” has the meaning set forth in Section 2.2.
1.1.8	“Assumed Liabilities” has the meaning set forth in Section 2.5.1.
1.1.9	“Audited Financial Statements” has the meaning set forth in Section 3.5.
1.1.10	“Business” means the business of the Vendor and the Subsidiary on the Effective Date, being (i) the provision of medical and health care information, media services and education, including by means of meetings, presentations, web-based services, Internet web portals or CD-ROMS, or (ii) the operation or sponsorship of one or more web sites which web site or sites has as its principal business focus providing medical and health-related information to consumers or health care professionals, selling advertising or educational programs to the pharmaceutical or medical device industries, editing medical reference materials and/or producing original content related to these activities.
1.1.11	“Business Day” means any day the banks are open for business in Montréal and New York.
1.1.12	“Cash Purchase Price” has the meaning set forth in Section 2.3.
1.1.13	“Claimed Amount” shall mean the amount of any Losses incurred or reasonably expected to be incurred by the Indemnitee and claimed by the Indemnitee in an Indemnification Notice.
1.1.14	“Closing” has the meaning set forth in Section 2.6.1.
1.1.15	“Closing Date” means the date and time as of which the Closing occurs as set forth in Section 2.6.1.
1.1.16	“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.
1.1.17	“Commitments” has the meaning set forth in Section 3.19.12.
1.1.18	“Confidentiality Agreement” means the confidentiality agreement executed by WebMD, Inc. and Berkery, Noyes & Co., LLC dated May 23, 2005 concerning the non-disclosure of the Vendor’s confidential information and trade secrets.
1.1.19	“Contract” means any agreement, contract, obligation, promise, instrument, indenture or undertaking (whether written or oral) that is legally binding.
1.1.20	“Controlling Party” shall mean the party controlling the defense of any Third Party Claim.
1.1.21	“Copyrights” has the meaning set forth in Section 1.1.55.
1.1.22	“Designated Sites” means www.theheart.org; www.thekidney.org; and www.jointandbone.org
1.1.23	“Disclosure Schedule” means the disclosure schedule delivered to Purchaser by the Vendor on the Effective Date and annexed to this Agreement.
1.1.24	“Disclosure Statement” shall mean a written proxy or information statement or circular which includes a summary of the contents of this Agreement that are material to the matters to be brought before the shareholders of the Vendor for the Requisite Shareholder Approval, and contains such other information as may be required by law.

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1.1.25	“Dispute” shall mean the dispute resulting if the Indemnitor in a Response disputes its liability for all or part of the Claimed Amount.
1.1.26	“Documents” means all books, records, accounts, ledgers, files, documents, correspondence, lists (including customer and prospect lists), manufacturing and procedural manuals, Intellectual Property Rights records, sales and promotional materials, studies, reports and other printed or written materials of the Vendor or the Subsidiary, in each case relating to the Business or the Assumed Liabilities, but excluding any minute books of Vendor.
1.1.27	“Domain Names” has the meaning set forth in Section 1.1.55.
1.1.28	“Effective Date” means the date as of which this Agreement was executed as set forth in the appearance hereto.
1.1.29	“Eligible Employees” has the meaning set forth in Section 9.5.1.
1.1.30	“Employment Agreements” has the meaning set forth in the Recitals hereto.
1.1.31	“Encumbrance” means any charge, lien, mortgage, hypothec, deed of trust, pledge, security interest, option, right of first refusal, easement, servitude, restrictive covenant, encroachment, encumbrance, or other similar restriction, whether arising by contract or by operation of law.
1.1.32	“Environmental and Health and Safety Laws” has the meaning set forth in Section 3.10.
1.1.33	“Environmental and Health and Safety Permits” means any Governmental Authorization required under any Environmental and Health and Safety Laws.
1.1.34	“Equity Interest” means (a) any capital stock, share, partnership or membership interest, unit of participation or other similar equity interest (however designated) in any Person, and (b) any option, warrant, purchase right, conversion right, exchange right or other similar right which would entitle any other Person to acquire any such equity interest in such Person or otherwise entitle any other Person to share in the equity, profits, earning, losses or gains of such Person (including stock appreciation, phantom stock, profit participation or other similar right).
1.1.35	“ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended and any regulations and rules issued thereunder.
1.1.36	“ERISA Affiliate” shall mean any entity which is, or at any applicable time was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Vendor.
1.1.37	“Escrow Agent” shall mean Wilmington Trust Company, a Delaware banking corporation.
1.1.38	“Escrow Agreement” shall mean an escrow agreement in substantially the form attached hereto as Exhibit 1.1.38.
1.1.39	“Escrow Amount” has the meaning set forth in Section 2.4.
1.1.40	“Escrow Fund” shall mean the fund established pursuant to the Escrow Agreement and including the Escrow Amount.
1.1.41	“Excise Tax Act” means the Excise Tax Act (Canada), together with the regulations promulgated thereunder, as amended or supplemented from time to time.

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1.1.42	“Excluded Assets” has the meaning set forth in Section 2.2.
1.1.43	“Excluded Liabilities” has the meaning set forth in Section 2.5.2.
1.1.44	“Financial Statements” has the meaning set forth in Section 3.5.
1.1.45	“GAAP” means Canadian generally accepted accounting principles, applied on a consistent basis, approved by the Canadian Institute of Chartered Accountants or any successor institute, applicable as at the date on which any calculation or determination is required to be made.
1.1.46	“Governmental Authority” means any Canadian or U.S. federal, state, provincial or local, or any foreign government, governmental authority, regulatory or administrative authority or any court, tribunal or judicial body having competent jurisdiction, including any commission, board or arbitrator.
1.1.47	“Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted or otherwise made available by or under the authority of any Governmental Authority.
1.1.48	“GST” means the Goods and Services Tax levied under Part IX of the Excise Tax Act.
1.1.49	“Hazardous Substance” means any “pollutant”, “contaminant”, “solid waste”, “hazardous waste”, “hazardous material” or “hazardous substance” under any Environmental and Health and Safety Laws.
1.1.50	“Indebtedness” means (i) any indebtedness of the Vendor or the Subsidiary for borrowed money, whether short term or long term, (ii) any indebtedness arising under capitalized leases, conditional sales contracts and other similar title retention instruments, (iii) all Liabilities secured by any Encumbrance on any property owned by the Vendor, and (iv) all Liabilities under any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement or other similar agreement designed to protect the Vendor against fluctuations in interest rates.
1.1.51	“Indemnification Claim” has the meaning set forth in Section 11.4.1.
1.1.52	“Indemnification Notice” has the meaning set forth in Section 11.4.1.
1.1.53	“Indemnitee” has the meaning set forth in Section 11.4.1.
1.1.54	“Indemnitor” has the meaning set forth in Section 11.4.1.
1.1.55	“Intellectual Property Rights” means (i) all registered and unregistered trademarks, trademark registrations, trademark rights and renewals thereof, trade names, trade name rights, corporate names, servicemarks, servicemark registrations and renewals thereof, servicemark rights, and all applications to register the same (“Trademarks”); (ii) all issued foreign and domestic patents, patent rights, patent applications (“Patents”); (iii) all registered and unregistered copyrights, copyright registrations, renewals thereof, and applications to register the same (“Copyrights”); (iv) all software, computer programs, computer systems, modules and related data (incl. all source and object codes) and databases and materials other than shrink-wrap or other licenses for off-the-shelf software (“Software”); (v) all Internet domain names (“Domain Names"), URLs, and Internet web-sites and the content thereof (“Internet Sites”); (vi) all licenses, sublicenses and agreements pursuant to which the Vendor or the Subsidiary has acquired rights in or to any

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	Trademarks, Patents, Copyrights, Software, Domain Names, Internet Sites or Proprietary Rights other than shrink-wrap or other licenses for off-the-shelf software (“Licenses-In”); (vii) all licenses, sublicenses and agreements pursuant to which the Vendor or the Subsidiary has licensed or transferred any rights to any Trademarks, Patents, Copyrights, Software, Domain Names or Proprietary Rights (“Licenses-Out”); (viii) all Proprietary Rights (including in each case of (i) through (vii) above, all copies and embodiments thereof, in electronic, written or other media). As used herein, the term “Proprietary Rights” means all categories of goodwill, trade secrets, trade dress, know-how, inventions, invention disclosures (whether or not patentable and whether or not reduced to practice), inventor rights, reports, discoveries, developments, research and test data, blueprints, technology, ideas, compositions, quality records, engineering notebooks, models, processes, procedures, prototypes, patent records, manufacturing and product procedures and techniques, troubleshooting procedures, failure/defect analysis data, drawings, specifications, designs, ingredient or component lists, formulae, plans, proposals, technical data, copyrightable works, financial, marketing, customer and business data, pricing and cost information, business and marketing plans, selling information, marketing information, customer and supplier lists and information, Site Content and all other confidential and proprietary information.
1.1.56	“Internet Sites” has the meaning set forth in Section 1.1.55.
1.1.57	“ITA” means the Income Tax Act (Canada), together with the regulations promulgated thereunder, as amended or supplemented from time to time.
1.1.58	“Knowledge” means with respect to any matter in question, the actual knowledge of such matter by the relevant Party’s Specified Officers without inquiry. For purposes of this definition, the term “Specified Officers” means (i) with respect to the Vendor, Roger Simard, Greg Ogrodnick, Kathleen Wickman, Éric Beaudoin, Marc-André Nadon, Linda Giering, Ian Temple and Réjean Rochette, and (ii) with respect to the Purchaser, David Schlanger, Doug Wamsley, Wayne Gattinella, Anthony Vuolo, Judy Blackwell, Steve Zatz and Floss O’Sullivan.
1.1.59	“Leased Real Property” has the meaning set forth in Section 3.6.
1.1.60	“Leases” means all leases, subleases, licenses, concessions and other agreements, whether oral or written, including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, to which the Vendor or the Subsidiary is a party and pursuant to which the Vendor or the Subsidiary uses or occupies or has the right to use or occupy any Real Property.
1.1.61	“Legal Requirement” means any applicable federal, provincial, state, local, municipal, foreign, international, multinational, or other administrative Order, constitution, law, ordinance, rules, codes, requirements, principle of common law, regulation, statute or treaty, including any applicable laws governing privacy and the protection of personally identifiable information.
1.1.62	“Liability” shall mean all liabilities and obligations (whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).
1.1.63	“Licenses-In” has the meaning set forth in Section 1.1.55.
1.1.64	“Licenses-Out” has the meaning set forth in Section 1.1.55.
1.1.65	“Listed Intellectual Property” has the meaning set forth in Section 3.19.1.
1.1.66	“Losses” of a Person means any claims, liabilities, losses, damages, deficiencies, assessments, judgments and costs or expenses (including out-of-pocket expenses for reasonable attorneys fees) actually incurred or sustained by the indemnified party, but specifically excluding any special, indirect, incidental or consequential damages (including economic loss and loss of profits) unless awarded by a Governmental Authority to a person bringing a Third Party Claim.

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1.1.67	“Material Adverse Effect” means any change, event, effect or condition that, individually or together with any other change, event, effect or condition, could reasonably be expected to be materially adverse to the Business, Assets, Liabilities, results of operations or condition (financial or other) of the Vendor and the Subsidiary, taken as a whole and in light of the circumstances on the Effective Date; provided, however, that none of the following shall constitute a Material Adverse Effect: (a) any adverse change, event, effect or condition that is caused by conditions affecting the Canadian, U.S. or world economy or markets generally, or (b) any adverse change, event, effect or condition that is caused by conditions generally affecting the industries and markets in which the Business operates.
1.1.68	“Material Contracts” has the meaning set forth in Section 3.16.
1.1.69	“Most Recent Balance Sheet” has the meaning set forth in Section 3.5.
1.1.70	“Most Recent Balance Sheet Date” has the meaning set forth in Section 3.5.
1.1.71	“Net Working Capital” has the meaning set forth in Section 2.2.10.
1.1.72	“Non-controlling Party” shall mean the party not controlling the defense of any Third Party Claim.
1.1.73	“Open Source Materials” has the meaning set forth in Section 3.19.10.
1.1.74	“Order” means any award, writ, injunction, judgment, order, or decree entered, issued, made, or rendered by any Governmental Authority.
1.1.75	“Ordinary Course of Business” shall mean the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount).
1.1.76	“Organizational Documents” means, with respect to any Person, such Person’s certificate and/or articles of incorporation and general bylaws, or other similar constituent or organizational documents such as a partnership agreement, unlimited or limited liability company agreement, shareholders’ agreement and/or other similar documents, in each case as amended to date.
1.1.77	“Page View” means a page (file) sent to a browser as a result of a single request by an individual user (i.e., human person) received by a server. Page Views do not include pages viewed by internal staff at the Vendor, and do not include pages on the Sites viewed by spiders, crawlers, search engine robots or other automated/machine programs, and do not include page views acquired through the payment of any fee. In addition, Page Views do not include associated graphics images, javascript includes, audio files, etc, that are sent with an HTML file or additional HTML files sent to build a “frame-set” and all the associated image files associated with them.
1.1.78	“Party” or “Parties” means, individually or collectively, Purchaser and the Vendor.
1.1.79	“Patents” has the meaning set forth in Section 1.1.55.
1.1.80	“Permitted Encumbrances” means such of the following as to which no enforcement collection, execution, levy or foreclosure proceedings shall have been commenced (i) Encumbrances for Taxes not yet due or payable (ii) Encumbrances in favor of vendors, carriers, warehousemen, repairmen, mechanics, workers, material-men, construction or other Encumbrances arising by operation of law in respect of obligations that are not yet due, (iii) Encumbrances arising pursuant to discharged indebtedness which are to be released at or prior to the Closing, (iv) easements, servitudes, reservations, rights of way, restrictions, covenants, conditions and other similar

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	encumbrances whether of record or apparent, including road, highway, pipeline, railroad and utility easements and servitudes, and municipal, zoning and building by-laws not incurred in connection with any indebtedness which do not, individually or in the aggregate, materially interfere with the use, occupancy or operation of the Leased Real Property as currently used, occupied and operated or as intended to be used, occupied and operated; (v) statutory Encumbrances incurred or deposits made in the Ordinary Course of Business in connection with workers’ compensation, employment insurance and other social security legislation and (vi) the Encumbrances listed on Schedule 1.1.80.
1.1.81	“Person” means any individual, corporation (including any non-profit corporation), partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Authority.
1.1.82	“Personal Property” has the meaning set forth in Section 3.8.
1.1.83	“Post-Closing Obligations” has the meaning set forth in Section 11.1.
1.1.84	“Proceeding” means any action, arbitration, appeal, audit, claim, complaint, hearing, investigation, litigation, or suit (whether civil, criminal, administrative or investigative) filed, commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority.
1.1.85	“Proprietary Rights” has the meaning set forth in Section 1.1.55.
1.1.86	“Purchaser” has the meaning set forth in the appearance hereto.
1.1.87	“Purchaser Threshold Amount” has the meaning set forth in Section 11.3.3.
1.1.88	“Purchase Price” means the aggregate of the Cash Purchase Price and the assumption by the Purchaser of the Assumed Liabilities.
1.1.89	“QST” means the Québec Sales Tax levied under Title I of the Québec Sales Tax Act.
1.1.90	“Québec Sales Tax Act” means An Act respecting the Québec Sales Tax (Québec) together with the regulations promulgated thereunder, as amended or supplemented from time to time.
1.1.91	“QTA” means the Taxation Act (Québec) together with the regulations promulgated thereunder, as amended or supplemented from time to time.
1.1.92	“Real Property” means any and all real/immovable property.
1.1.93	“Related Party” means any partner, shareholder, director, officer or Affiliate (including a wife, husband, or other Person controlled by, controlling or under common control with another Person) of the Vendor.
1.1.94	“Related Party Debt” means any indebtedness owed by the Vendor or the Subsidiary to a Related Party.
1.1.95	“Related Party Transactions” has the meaning set forth in Section 3.24.
1.1.96	“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.
1.1.97	“Requisite Shareholder Approval” shall mean the approval of the sale of the Assets by the Vendor

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	to the Purchaser as contemplated by this Agreement by two-thirds (2/3) of the votes represented by the outstanding shares of each class or series of outstanding shares of the capital stock of the Vendor entitled to vote thereon and voting in person or by proxy at a meeting called for that purpose, as required by the Canada Business Corporations Act and other Legal Requirements.
1.1.98	“Response” shall mean a written response containing the information provided for in Section 11.4.2.
1.1.99	“Restricted Employee” shall mean any person who either (i) was an employee of the Purchaser on either the date of this Agreement or the Closing Date or (ii) was an employee of the Vendor or the Subsidiary on either the date of this Agreement or the Closing Date and received an employment offer from the Purchaser within five business days following the Closing Date.
1.1.100	“Session” means the accessing of a Site by a Unique Visitor during any calendar period.
1.1.101	“Site Content” means all of the health, medical and pharmaceutical information and other Intellectual Property Rights (other than Intellectual Property Rights belonging to third parties and identified as such on the respective Designated Site) displayed or available on the Designated Sites.
1.1.102	“Sites” has the meaning set forth in Section 3.19.11.
1.1.103	“Software” has the meaning set forth in Section 1.1.55.
1.1.104	“Subsidiary” means Conceptis Technologies USA Inc., a Delaware corporation.
1.1.105	“Tax” or “Taxes” means any tax, assessment, charge, duty or levy imposed by any federal, provincial, municipal, local or foreign governmental authority, including income, sales, payroll, property, import, customs, excise, gross receipts, profits, goods and services, capital, severance, stamp, occupation, franchise, withholding, employment or unemployment, use, transfer, registration, Canada Pension Plan and Québec Pension Plan contributions and provincial worker’s compensation payments, and like taxes and other governmental charges of any kind, and including any interest, penalty, or addition thereto.
1.1.106	“Tax Return” means a report, return, amended return, declaration, claim for refund or other information required or permitted to be filed or supplied to a Governmental Authority with respect to Taxes, including any amendment thereto.
1.1.107	“Third Party Claim” means any Proceeding that is instituted against an Indemnitee by a Person other than an Indemnitor or another Indemnitee.
1.1.108	“Trademarks” has the meaning set forth in Section 1.1.55.
1.1.109	“Transaction Documents” means this Agreement and all any other agreements, instruments, or documents entered into pursuant to this Agreement, including the Escrow Agreement, the Employment Agreements, the Voting Agreements and the instruments of conveyance and assumption referred to in Sections 2.6.2.3 and 2.6.2.4.
1.1.110	“Transaction Expenses” means all costs and expenses incurred by or on behalf of the Purchaser or the Vendor, as the case may be, in connection with the preparation, execution and performance of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, including all fees of all Representatives including attorneys, accountants, and financial advisors.

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		1.1.111	“Transferred Employees” has the meaning set forth in Section 9.5.1.
		1.1.111	“Transferred Employees” has the meaning set forth in Section 9.5.1.
		1.1.112	“Unaudited Financial Statements” has the meaning set forth in Section 3.5.
		1.1.113	“Unique Visitor” means one individual machine/browser that has accessed a Site (i.e., a Unique Visitor represents a single machine with a single cookie accessing the particular Site, not the number of different persons accessing the Site). A Unique Visitor does not include internal staff at the Vendor and does not include spiders, crawlers, search engine robots or other automated/machine programs viewing pages on the Sites and does not include visitors associated with page views acquired by the payment of any fee.
		1.1.114	“Vendor” has the meaning set forth in the appearance hereto.
		1.1.115	“Vendor Benefit Plans” has the meaning set forth in Section 3.11.1.
		1.1.116	“Vendor Intellectual Property” has the meaning set forth in Section 3.19.3.
		1.1.117	“Vendor Threshold Amount” has the meaning set forth in Section 11.2.3.
		1.1.118	“Voting Agreements” has the meaning set forth in the Recitals to this Agreement.
1.2	Interpretation.
		1.2.1	Currency. Unless otherwise expressly provided herein, all dollar amounts and amounts referred to with “$” in this Agreement and the other Transaction Documents are in United States funds; dollar amounts referred to with “C$” are in Canadian Funds.
		1.2.2	Construction. All words used in this Agreement shall be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms and means “including without limitation”.
		1.2.3	Section Headings. The headings of Sections in this Agreement are provided for convenience only and shall not affect its construction or interpretation. Unless otherwise expressly provided, all references to “Article,” “Section” or “Sections” refer to the corresponding Article, Section or Sections of this Agreement.
		1.2.4	Exhibits and Schedules. All Exhibits and Schedules referred to herein and annexed hereto are hereby incorporated herein and made a part hereof as if fully set forth herein.
		1.2.5	Ambiguity. It is expressly acknowledged that the Parties have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

ARTICLE 2
Purchase and Sale; Closing

2.1

Purchase and Sale.

On and subject to the terms and conditions of this Agreement, the Vendor agrees to sell, transfer, assign, convey and deliver to Purchaser, and the Purchaser agrees to purchase, acquire and accept from the Vendor, at the Closing, all right, title and interest in and to the Assets. Notwithstanding the foregoing, the transfer of the Data (as defined in the Data Transfer Protocol attached as Exhibit 2.1 hereto) shall be transferred in the manner set forth in said Data Transfer Protocol.

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2.2	Assets.
	The term “Assets” shall include all of the property, rights, and assets, immovable (real), movable (personal) or mixed, tangible and intangible (including goodwill), of every kind and description, wherever located, whether accrued, contingent or otherwise, belonging to the Vendor at the Closing Date (other than the Excluded Assets), and including all of the following property and assets of the Vendor:
		2.2.1	all Accounts Receivable;
		2.2.2	all fixed assets;
		2.2.3	all Personal Property;
		2.2.4	all Contracts related to the Business;
		2.2.5	all Vendor Intellectual Property;
		2.2.6	all Leases;
		2.2.7	all Equity Interests in the Subsidiary;
		2.2.8	all Documents;
		2.2.9	all Vendor Benefit Plans; and
		2.2.10	cash equal to the amount by which the Net Working Capital of the Vendor is less than $450,000. For purposes hereof, “Net Working Capital” means the current assets that are included in the Assets less the current liabilities that are included in the Assumed Liabilities (all as calculated in accordance with GAAP as if the Closing occurred on October 31, 2005).
		The term “Assets” shall not include any of the following (collectively, the “Excluded Assets”):
		2.2.11	the Purchase Price delivered to the Vendor pursuant to this Agreement and the Vendor’s rights under this Agreement and the other Transaction Documents;
		2.2.12	cash and cash equivalents of the Vendor on the Closing Date (other than as required to achieve the Net Working Capital);
		2.2.13	all insurance policies of Vendor except the insurance policies relating to the Vendor Benefit Plans;
		2.2.14	prepaid Income Tax of the Vendor, the right of the Vendor to receive Tax refunds and Tax credits receivable by Vendor;
		2.2.15	any Equity Interests not in the Subsidiary; and
		2.2.16	the assets listed at Section 2.2.16 of the Disclosure Schedule.
2.3	Cash Purchase Price.
	For, and in consideration of, the sale by the Vendor to the Purchaser of the Assets, the Purchaser agrees to pay to the Vendor an aggregate purchase price (the “Cash Purchase Price”) in the amount of nineteen million dollars ($19,000,000). The Cash Purchase Price, less the Escrow Amount, shall be paid by the Purchaser to the Vendor at Closing, by certified check or wire-transfer.

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2.4	Escrow.
	The Vendor agrees that at the Closing, an amount equal to 10% of the Cash Purchase Price payable by the Purchaser to the Vendor at Closing shall be delivered by the Purchaser, on behalf of the Vendor, to the Escrow Agent for the purpose of securing the indemnification obligations of the Vendor set forth in this Agreement (the “Escrow Amount”). The Escrow Fund shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms thereof. The Escrow Fund shall be held as a bare trust and shall not be subject to any lien, attachment or any other judicial process of any creditor of any party, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Escrow Agreement.
2.5	Assumption of Liabilities.
		2.5.1	Subject to the terms and conditions of this Agreement, and as additional consideration for the sale of the Assets by the Vendor to the Purchaser, the Purchaser agrees to assume and perform, pay or discharge, when due, to the extent not theretofore finally performed, paid or discharged the following Liabilities of the Vendor and the Subsidiary (without duplication) existing as of the Closing Date (collectively, the “Assumed Liabilities”):
				2.5.1.1	Liabilities shown or reserved for in the Most Recent Balance Sheet;
				2.5.1.2	Liabilities incurred since the Most Recent Balance Sheet Date and incurred in the Ordinary Course of Business (other than Liabilities resulting from a breach of contract, breach of warranty, tort, infringement or violation of law prior to the Closing or which arose out of any charge, complaint, action, suit, proceeding, hearing, investigation claim or demand made prior to the Closing);
				2.5.1.3	Liabilities arising after the Closing incurred in connection with or that relate to any of the Assets (other than Liabilities resulting from a breach of contract, breach of warranty, tort, infringement or violation of law prior to the Closing or which arose out of any charge, complaint, action, suit, proceeding, hearing, investigation claim or demand made prior to the Closing); and
				2.5.1.4	to the extent not otherwise covered by the foregoing, Liabilities set forth in Section 2.5.1.4 of the Disclosure Schedule.
			It is not the intention of either the Purchaser or the Vendor that the assumption by Purchaser of the Assumed Liabilities shall in any way enlarge the rights of any third parties relating thereto.
		2.5.2	Notwithstanding anything to the contrary in this Agreement, the Purchaser shall not assume or have any liability or responsibility for any Liabilities which are not Assumed Liabilities, including any Liabilities arising out of or relating to any of the following matters, whether arising before or after the Closing (collectively, the “Excluded Liabilities”):
				2.5.2.1	any Liabilities in connection with or arising from or related to any Excluded Asset or the possession, use or disposition of any Excluded Asset;
				2.5.2.2	any Liabilities of the Vendor for indemnification of, or advancement of expenses or payment of insurance proceeds to, any present or former director or officer of (or other person serving in a fiduciary capacity at the request of) the Vendor based upon an actual or alleged breach of fiduciary duty of such person;
				2.5.2.3	any Liabilities of the Vendor under or arising out of this Agreement;

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				2.5.2.4	any Liabilities of the Vendor to its shareholders or optionholders and any Liabilities of the Vendor under its stock option plans;
				2.5.2.5	any Liabilities of the Vendor arising out of any matters occurring, or obligations incurred, after the Closing;
				2.5.2.6	any Liabilities of the Vendor with respect to Related Party Debt;
				2.5.2.7	any Liabilities of the Subsidiary which, if they were Liabilities of the Vendor, would not have constituted Assumed Liabilities;
				2.5.2.8	except as expressly set forth in Section 9.4.1 below, any Liabilities of the Vendor or the Subsidiary for Taxes arising in connection with the consummation of the transactions contemplated by this Agreement (including any income Taxes arising as a result of the transfer by the Vendor to the Purchaser of the Assets);
				2.5.2.9	except as expressly set forth in Section 9.4.1 below, any Liabilities of the Vendor for any Taxes (including deferred taxes or taxes measured by income of the Vendor, withholding taxes, payroll taxes, sales, use or excise Taxes, and customs or duties);
				2.5.2.10	any Liabilities of the Subsidiary for any Taxes relating to a Pre-Closing Tax Period, as determined under Section 2.5.3;
				2.5.2.11	any Liabilities for any Taxes of the Vendor (or of the Purchaser or its Affiliates with respect thereto under successor or transferee liability) required to be paid due to a failure by the Vendor or Subsidiary to comply with, and obtain for the Purchaser, the Vendor or the Subsidiary, the benefits afforded by compliance with any state, provincial or local Tax laws relating to asset transfers that would, absent compliance therewith, subject the Purchaser to liability for any Tax of the Vendor (or any Tax of the Subsidiary that relates to a Pre-closing Tax Period) and/or impose liens on the Assets or on the Subsidiary’s assets; and
				2.5.2.12	any Liabilities of the Vendor relating to any Eligible Employee of the Vendor or the Subsidiary who declines an offer of employment by the Purchaser (provided that the Purchaser has complied with the provisions of Section 9.5).
			The Vendor shall remain liable for, and agrees to pay and satisfy the Excluded Liabilities in accordance with their terms.
		2.5.3	In the case of any Tax of the Subsidiary that is payable for a taxable period that begins before and ends after the Closing Date, the portion of the Tax which relates to the period in the taxation year ending on the Closing Date (the “Pre-Closing Tax Period” ) shall:
				2.5.3.1	in the case of any real property, personal property or other ad valorem Taxes be deemed to be the amount of such Tax for the entire taxation year multiplied by a fraction the numerator of which is the number of days in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire taxation year; and
				2.5.3.2	in the case of any other Tax applicable for a taxation year that includes but does not end on the Closing Date, be deemed to be the amount which would be payable if the relevant taxation year ended on the Closing Date based on a closing of the books as of the close of business on the Closing Date.
2.6	The Closing.

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		2.6.1	The consummation of the transactions herein contemplated (the “Closing”) shall take place at the offices of Davies Ward Phillips & Vineberg LLP, 1501 McGill College Avenue, 26th Floor, Montreal, Canada H3A 3N9 at 10:00 a.m., Montreal time, on the date that is five (5) Business Days following the date all conditions to Closing which must be satisfied prior to Closing have been met, or at such other time and place as to which the Parties may agree, effective at 12:01 a.m. (Montreal Time) on such date (the applicable time and date on which the Closing shall occur is referred to herein as, the “Closing Date”).
		2.6.2	At the Closing:
				2.6.2.1	the Vendor shall deliver to the Purchaser the various certificates, instruments and documents referred to in Article 7;
				2.6.2.2	the Purchaser shall deliver to the Vendor the various certificates, instruments and documents referred to in Article 8;
				2.6.2.3	the Vendor shall execute and deliver to the Purchaser a bill of sale in substantially the form attached hereto as Exhibit 2.6.2.3(i), a stock transfer power in the form attached hereto as Exhibit 2.6.2.3(ii) and such other instruments of conveyance (such as trademark assignments, assigned certificates or documents of title, and assigned negotiable instruments) as the Purchaser may reasonably require in order to effect the sale, transfer, conveyance and assignment to the Purchaser of valid ownership of the Assets;
				2.6.2.4	the Purchaser shall execute and deliver to the Vendor an instrument of assumption in substantially the form attached hereto as Exhibit 2.6.2.4 and such other instruments as the Vendor may reasonably require in order to effect the assumption by the Purchaser of the Assumed Liabilities;
				2.6.2.5	the Purchaser shall pay to the Vendor the Cash Purchase Price as set forth in Section 2.3, less the Escrow Amount;
				2.6.2.6	the Purchaser, the Vendor and the Escrow Agent shall execute and deliver the Escrow Agreement and the Purchaser shall deposit the Escrow Amount with the Escrow Agent in accordance with Section 2.4;
				2.6.2.7	the Vendor shall deliver to the Purchaser, or otherwise put the Purchaser in possession and control of, all of the Assets of a tangible nature;
				2.6.2.8	the Vendor shall deliver to the Purchaser an employee list as of the Closing Date in accordance with Section 3.18;
				2.6.2.9	the Vendor shall deliver to the Purchaser all estoppel certifications or subordinations, non-disturbance and adornment agreements related to all Leases to which the Vendor is a party, as may reasonably be requested by the Purchaser; and
				2.6.2.10	the Purchaser and the Vendor shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above.
2.7	Allocation of Purchase Price among the Assets.
	The Purchase Price and all other capitalizable costs shall be allocated among the Assets and the non-solicitation and non-competition covenants set forth in Section 9.7 and 9.8.1 in the manner set forth in Schedule 2.7 (the “Allocation”), which allocation shall comply with the requirements of Section 1060 of the Code. The Allocation shall be final and binding upon the Parties for all purposes, including the filing of all Tax or other returns and the preparation of all financial statements and other documents and records.

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ARTICLE 3
Representations and Warranties of The Vendor

The Vendor represents and warrants to the Purchaser that, except as set forth in the Disclosure Schedule, the statements contained in this Article 3 are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article 3.

3.1	Organization and Good Standing.
	The Vendor is a corporation organized, validly existing and in good standing under the laws of Canada. The Subsidiary is a corporation organized, validly existing and in good standing under the laws of Delaware. Each of the Vendor and the Subsidiary has the full corporate power and authority to own, lease and operate its respective property and to carry on the Business in the places and in the manner as now conducted and presently planned to be conducted. Each of the Vendor and the Subsidiary is duly qualified or licensed to do business and is in good standing, respectively, in each jurisdiction where the character of its business or the nature of its properties makes such qualification or licensing necessary, except where the failure to so qualify or be licensed would not have a Material Adverse Effect, all of which jurisdictions are set forth in Section 3.1 of the Disclosure Schedule.
3.2	Authority; Validity; Consents
	The Vendor has the requisite corporate power and authority necessary to enter into, and to perform its obligations under, this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution, delivery of and performance with, this Agreement and the other Transaction Documents by the Vendor and the consummation of the transactions contemplated herein and therein have been duly and validly authorized by the board of directors of the Vendor, and will, subject to, and upon receipt of, the Requisite Shareholder Approval, have been duly and validly approved by the shareholders of the Vendor. This Agreement and the other Transaction Documents constitute the legal, valid and binding obligations of the Vendor 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 equity. Except as set forth in Section 3.2 of the Disclosure Schedule, neither the Vendor nor the Subsidiary is required to give any notice to or obtain any consent from any Person (including any Governmental Authority) in connection with the execution and delivery of this Agreement and the other Transaction Documents or the consummation or performance of any of the transactions contemplated hereby and thereby, except for notices or consents which if not given or obtained would not result in a Material Adverse Effect.
3.3	No Conflict.
	After all consents set forth in Section 3.2 of the Disclosure Schedule have been obtained and taken, the execution and delivery of this Agreement and the other Transaction Documents by the Vendor and the consummation by the Vendor of the transactions provided for herein and therein will not, with or without notice or the lapse of time or both, (1) result in the breach of any of the terms and provisions of, or conflict with, or constitute a default under, or result in a termination of, or give any Person a valid right of termination, cancellation, acceleration, suspension or revocation under, or infringe, or cause any acceleration of any obligation of the Vendor or the Subsidiary under (a) any Material Contract or Commitment, (b) the Organizational Documents of the Vendor or the Subsidiary, as amended to the Effective Date, (c) any Order naming the Vendor, (d) any Legal Requirement applicable to the Vendor or the Subsidiary, or (e) any Intellectual Property Rights of any third party, or (2) result in the creation or imposition of any Encumbrance on the Business or any Asset, or (3) except as set forth in Section 3.3 of the Disclosure Schedule, result in a breach or violation of, default under, or the triggering of any payment or other obligations pursuant to, any Vendor Benefit Plan, or any grant or award under any of the same.

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3.4	Subsidiary.
		3.4.1	The authorized capital stock of the Subsidiary and the number of shares of capital stock of the Subsidiary outstanding (the “Subsidiary Equity Securities”) are as set forth on Schedule 3.4.1. All of the Subsidiary Equity Securities are validly issued, fully paid and nonassessable and are owned beneficially and of record by Vendor free and clear of any Encumbrances (other than Permitted Encumbrances), and there are no proxies outstanding or restrictions on voting with respect to any such shares. There are no contracts, agreements, commitments or arrangements of Vendor or the Subsidiary obligating Vendor or the Subsidiary to sell or issue or to offer to sell or issue any Subsidiary Equity Securities or to redeem, purchase or otherwise acquire, or create or impose any Encumbrance on, any Subsidiary Equity Securities.
		3.4.2	Except for the Subsidiary, the Vendor does not, directly or indirectly, hold any Equity Interest in any other Person.
3.5	Financial Statements.
	Attached as Exhibit 3.5 are (i) the consolidated audited balance sheet of the Vendor as of December 31, 2004 and the related statements of income, equity and cash flows for the year then ended (collectively, the “Audited Financial Statements”), and (ii) the consolidated unaudited balance sheets of the Vendor as of September 30, 2005 (such date, the “Most Recent Balance Sheet Date” and such balance sheet, the “Most Recent Balance Sheet”) and the related statements of income, equity and cash flows for the ten-month period then ended (collectively, the “Unaudited Financial Statements”). The Audited Financial Statements and the Unaudited Financial Statements are sometimes herein collectively referred to as the “Financial Statements.” The Financial Statements were prepared in accordance with GAAP (with only such deviations from GAAP as are referred to in the notes thereto or on Section 3.5 of the Disclosure Schedule or, in the case of the Unaudited Financial Statements, subject to normal year-end adjustments which will not be material and except for the omission of certain footnotes and other presentation items required by GAAP with respect to audited financial statements), and fairly present in all material respects the consolidated financial position, results of operations and cash flows of the Vendor as of the date thereof and for the periods covered thereby. The Net Working Capital is equal to or greater than $450,000. The Subsidiary has no Liabilities which are not set forth at Section 3.5 of the Disclosure Schedule.
3.6	Immoveable (Real) Property.
	The Vendor and its Subsidiary are not the owners of any Real Property. Section 3.6 of the Disclosure Schedule sets forth a list of all Real Property that is subject to a Lease or otherwise occupied by the Vendor or the Subsidiary (the “Leased Real Property”). The Vendor has delivered to the Purchaser complete and accurate copies of the Leases. Except as set forth in Section 3.6 of the Disclosure Schedule, with respect to the Leased Real Property:
		3.6.1	there are no leases, subleases, licenses or other agreements granting to any Person other than the Vendor or the Subsidiary any rights to the possession, use, occupancy or enjoyment of the Leased Real Property or any portion thereof;
		3.6.2	each Lease is legal, valid, binding, enforceable and in full force and effect against the Vendor or the Subsidiary, as the case may be;
		3.6.3	each Lease is assignable by the Vendor or the Subsidiary to the Purchaser without the consent or approval of any party (except as set forth in Section 3.6 of the Disclosure Schedule) and such Lease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

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		3.6.4	to the Vendor’s Knowledge all Leased Real Property is in a condition suitable for return to the lessor under the terms of such Lease without payment of any penalty, restoration costs, or forfeiture of a security deposit or any portion thereof; and
		3.6.5	all rent and other sums and charges payable by the Vendor and the Subsidiary, as the case may be, as tenant under each Lease are current, no notice of default or termination under any such Lease is outstanding, no termination event or condition or uncured default on the part of the Vendor or the Subsidiary, or to the Vendor’s Knowledge, the landlord, exists under any Lease, and no event has occurred and no condition exists, or to the Vendor’s knowledge is threatened, which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition, in each case except as would not have a Material Adverse Effect.
3.7	Sufficiency of Assets.
	The Assets constitute all of the assets used by the Vendor and the Subsidiary in the operation of the Business and are sufficient to permit Purchaser to operate the Business from and after the Closing Date in substantially the same manner and to the extent as the Business is currently conducted by the Vendor and the Subsidiary, except to the extent that any such Asset is not material to the operation of the Business.
3.8	Moveable (Personal) Property.
		3.8.1	Each of the Vendor and/or the Subsidiary, as the case may be, has good and marketable title to, or a valid leasehold interest in, all leasehold improvements, furniture, fixtures, equipment, computers, vehicles and other tangible moveable (personal) property used or held for use by the Vendor and the Subsidiary, as the case may be, in and material to the operation of the Business (the “Personal Property”), free and clear of all Encumbrances, except for Permitted Encumbrances. Except as set forth in Section 3.8 of the Disclosure Schedule, all Personal Property is free from material defects, has been maintained in accordance with normal industry practice, and is in good operating condition and repair, subject to normal wear and tear.
		3.8.2	Vendor has good and marketable title to the Subsidiary Equity Securities free and clear of any Encumbrances (other than Permitted Encumbrances). Upon consummation of the transactions contemplated hereby, Purchaser will acquire good and marketable title to the Subsidiary Equity Securities, free and clear of any Encumbrances.
3.9	Brokers or Finders.
	Except as set forth in Section 3.9 of the Disclosure Schedule, neither the Vendor, the Subsidiary nor any of their respective officers and agents has incurred any Liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby.
3.10	Environmental and Health and Safety Matters.
	Except as set forth on Section 3.10 of the Disclosure Schedule or as would not have a Material Adverse Effect, neither Vendor nor the Subsidiary has received any written notice regarding, and has no Knowledge of, (i) any actual or alleged material violation of applicable Legal Requirements relating to environmental, or health and safety matters (“Environmental and Health and Safety Laws”), or (ii) any material liabilities or potential material liabilities arising under Environmental and Health and Safety Laws or their respective Environmental and Health and Safety Permits, in each case which has not been addressed to the satisfaction of the applicable Governmental Authorities. The Vendor and the Subsidiary have not, and to the Vendor’s Knowledge, the landlord of any Leased Real Property has not, used the Leased Real Property, except in compliance in all material respects with all Environmental and Health and Safety Laws, to treat, store, dispose of, generate, manufacture, process or handle any Hazardous Substance.

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3.11	Employee Benefit Plans.
	Except as disclosed in Section 3.11 of the Disclosure Schedule:
		3.11.1	the Vendor and the Subsidiary do not maintain, contribute to, or have any obligation to maintain or contribute to, or have any Liability with respect to, any plan, program, arrangement or agreement that is a pension, profit-sharing, savings, retirement, employment, consulting, severance pay, termination, executive compensation, incentive compensation, deferred compensation, bonus, stock purchase, stock option, phantom stock or other equity-based compensation, change-in-control or ownership, retention, salary continuation, vacation, sick leave, disability, salary continuation, death benefit, group insurance, hospitalization, medical, dental, life or fringe benefit plan, whether written or oral, under which any employee or former employee, director or former director, agent or independent contractor of the Vendor or the Subsidiary has any present or future right to benefits (collectively, “Vendor Benefit Plans”);
		3.11.2	each Vendor Benefit Plan has been maintained in material compliance with its terms and Legal Requirements;
		3.11.3	as of the Most Recent Balance Sheet Date, all contributions (including all employer contributions and employee salary reduction contributions) or premium payments required to have been made under the terms of any Vendor Benefit Plan, or in accordance with applicable Legal Requirements, have been timely made or reflected on the Financial Statements and all contributions or premium payments for any period ending on or prior to the Closing which are not yet due will, on or prior to the Closing, have been paid or accrued as a current liability as of October 31, 2005 in accordance with GAAP;
		3.11.4	neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will entitle any employee to any job security or similar benefit or to any enhanced employment benefits;
		3.11.5	the Vendor has made available to Purchaser with respect to each Vendor Benefit Plan, a copy (or, to the extent no such copy exists, a written description) thereof and, to the extent applicable: (i) the most recent documents constituting the Vendor Benefit Plan and all amendments thereto, (ii) any related trust agreement or other funding instrument; (iii) the most recent summary plan description, summary of material modifications and any other written communication by the Vendor and/or the Subsidiary to their employees concerning the extent of the benefits provided under a Vendor Benefit Plan; and (iv) the most recent annual report filed on Form 5500 with respect to each Vendor Benefit Plan;
		3.11.6	there is no pending, or to the Vendor’s Knowledge, threatened, Proceeding, other than routine claims for benefits, concerning any Vendor Benefit Plan;
		3.11.7	neither the Vendor nor any ERISA Affiliate has maintained a Vendor Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA at any time during the six (6) years prior to the date hereof;
		3.11.8	neither the Vendor nor any ERISA Affiliate has been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) at any time during the six (6) years prior to the date hereof;
		3.11.9	the consummation of the transactions contemplated by this Agreement will not materially increase any benefits or result in the acceleration or creation of any rights of any Person to benefits under any Vendor Benefit Plan. No payment or benefit to be provided to any employee of the Vendor or the Subsidiary in connection with the transaction contemplated by the Agreement is reasonably expected to constitute an “excess parachute payment” within the meaning of Section 280G of the Code;

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		3.11.10	no Vendor Benefit Plan contains any provision that (A) requires severance or termination payments; or (B) triggers any obligation to provide a tax gross-up. No stockholder, employee, officer, or director of the Vendor or any Subsidiary has been promised or paid any bonus or incentive compensation related to the transactions contemplated pursuant to this Agreement. No current or former employee or director (or beneficiary of any of the foregoing) of the Vendor or Subsidiary is now, or after completing additional service or applying at a future date will be, entitled to, receive any post-employment benefits from the Vendor or Subsidiary, including death or medical benefits (whether or not insured) beyond retirement or other termination of employment, other than as applicable Legal Requirements require, and there have been no written or oral commitments inconsistent with the foregoing;
		3.11.11	all group health plans of the Vendor and Subsidiary and their ERISA Affiliates materially comply with the requirements of Part 6 of Title I of ERISA (“COBRA”), Code Section 5000, the Health Insurance Portability and Accountability Act, and any other comparable domestic or foreign Legal Requirements; neither Vendor nor its Subsidiary has any Liability under or with respect to COBRA for its own actions or omissions or those of any predecessor or ERISA Affiliate; and
		3.11.12	no Vendor Benefit Plan is a pension plan or a registered pension plan subject to Canadian pension legislation or the ITA.
3.12	Compliance with Legal Requirements; Permits.
	Except as set forth in Section 3.12 of the Disclosure Schedule, since inception neither the Vendor nor the Subsidiary has been in violation of any Legal Requirement applicable to the operation of the Business, except for violations that would not have a Material Adverse Effect. Neither the Vendor nor the Subsidiary has received any written notification from any Governmental Authority asserting that it is not in compliance with any Legal Requirement. Except as set forth in Section 3.12 or Section 3.13 of the Disclosure Schedule, (a) the Vendor and the Subsidiary hold all permits, licenses, certificates, accreditation and other authorizations of all Government Authorities required for the operation of the Business as presently operated, except where the failure to hold such permits would not have a Material Adverse Effect; (b) neither the Vendor nor the Subsidiary has received any notices alleging the failure to hold any permit, license, certificate, accreditation or other authorization of any Government Authority; and (c) each of the Vendor and the Subsidiary is in compliance with all material terms and conditions of all permits, licenses, accreditations and authorizations which it holds.
3.13	Legal Proceedings.
	Section 3.13 of the Disclosure Schedule lists all Proceedings to which any of the Vendor or the Subsidiary is a party and all Proceedings which, to the Vendor’s Knowledge, have been threatened against the Vendor or the Subsidiary. To the Vendor’s Knowledge, there is no outstanding Order of any Governmental Authority affecting the Assets or the Business. There is no pending Proceeding that has been commenced or that, to the Vendor’s Knowledge, has been threatened, against or otherwise naming or involving the Vendor, the Subsidiary or any of the Assets, at law or in equity, that challenges, or may have the effect of preventing, delaying, or making illegal any of the transactions contemplated hereby.
3.14	Insurance.
	Section 3.14 of the Disclosure Schedule sets forth a list, as of the Effective Date, of all insurance policies with respect to which the Vendor and/or the Subsidiary is a named insured and, except as otherwise specified therein, all such coverage is in full force and effect on the date hereof, shall be maintained in full force and effect through the Closing and all premiums due have been paid. Except as set forth in Section 3.14 of the Disclosure Schedule, there are no pending claims in excess of $25,000 against such insurance policies as to which insurers have denied liability and there exist no claims in excess of $25,000 that have not been timely submitted by the Vendor to the related insurers.

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3.15	Absence of Certain Changes and Events.
	Except as disclosed in the Most Recent Balance Sheet or in Section 3.15 of the Disclosure Schedule, since December 31, 2004 each of the Vendor and the Subsidiary has conducted the Business in all material respects in the Ordinary Course of Business. Without limiting the foregoing, except as disclosed in Section 3.15 of the Disclosure Schedule, since December 31, 2004:
		3.15.1	neither the Vendor nor the Subsidiary has made any acquisition (by merger, consolidation, or acquisition of stock or assets) of any corporation, partnership or other business organization or division thereof;
		3.15.2	neither the Vendor nor the Subsidiary has sold, assigned, transferred, licensed or sublicensed any of its assets except in the Ordinary Course of Business and except for any such assets having an aggregate value of less than $25,000;
		3.15.3	neither the Vendor nor the Subsidiary has made any material change in any method of accounting, other than any such changes required by GAAP, or made or changed any material elections with respect to Taxes;
		3.15.4	neither the Vendor nor the Subsidiary has canceled or compromised any material Indebtedness or claim, or waived or released any material right of value or collected or compromised any Accounts Receivable other than in the Ordinary Course of Business;
		3.15.5	there has been (i) no damage, destruction or loss to any of the Assets that by itself or together with other damages, destructions or losses to any Assets, and (ii) no change, occurrence or omission to any assets that by itself or together with other changes, occurrences and omissions, has had or is reasonably likely to have a Material Adverse Effect;
		3.15.6	neither the Vendor nor the Subsidiary purchased or acquired, or entered into any Contract to purchase or acquire, any properties, rights or assets with an aggregate fair market value in excess of $25,000, in each case outside the Ordinary Course of Business;
		3.15.7	there has been no material breach, and except in the Ordinary Course of Business no amendment or termination, of any Contract (other than termination of any such Contract upon expiration of its stated term), or other right to which the Vendor or the Subsidiary is a party;
		3.15.8	there has been no commencement or notice of, or threat of commencement of, any lawsuit or proceeding against, or investigation of, the Vendor or the Subsidiary;
		3.15.9	except in the Ordinary Course of Business, as required by law or according to the existing terms of an employment agreement and/or a Vendor Benefit Plan, neither the Vendor nor the Subsidiary has made any change or changes with respect to a Vendor Benefit Plan or in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, whether as bonus, extra compensation, pension or severance or vacation pay or otherwise, to any director, officer, employee, salesman, distributor or agent; and
		3.15.10	neither the Vendor nor the Subsidiary has entered into any agreement or made any commitment to take any of the types of actions described in any of Subsections 3.15.1 through 3.15.9 above.
3.16	Material Contracts.
	Section 3.16 of the Disclosure Schedule contains a list of each of the following written, and a description of

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			each of the following oral, Contracts in effect as of the Effective Date to which the Vendor and/or the Subsidiary is a party (the “Material Contracts”):
		3.16.1	all Contracts (other than the Leases) listed on Section 3.16.1 of the Disclosure Schedule that the Vendor reasonably anticipates will, in accordance with their terms, involve aggregate payments (a) to the Vendor and/or the Subsidiary of more than $25,000 during the term of such Contract, or (b) by the Vendor and/or the Subsidiary of more than $50,000 during the term of such Contract;
		3.16.2	all Contracts for the lease of movable (personal) property by the Vendor and/or the Subsidiary, anticipated to involve annual payments in excess of $15,000 by the Vendor and/or the Subsidiary;
		3.16.3	all employment or consulting agreements for persons and individuals involved in the Business, and excluding support staff;
		3.16.4	all Contracts that limit or purport to limit the ability of the Vendor or the Subsidiary to compete in any line of business or with any Person or in any geographic area or during any period of time, including any Contract under which the Vendor or the Subsidiary is an exclusive or preferred provider or the Vendor or the Subsidiary grants exclusivity or preferential rights to a third party;
		3.16.5	all Licenses-In and Licenses-Out;
		3.16.6	all Contracts under which the Vendor and/or the Subsidiary has directly or indirectly guaranteed indebtedness, Liabilities or obligations of any Person;
		3.16.7	all Contracts under which the Vendor and/or the Subsidiary has directly or indirectly made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person in excess of $25,000;
		3.16.8	all Contracts relating to the sale or purchase by the Vendor and/or the Subsidiary of any properties, assets or business operations of any Person for a price in excess of $25,000, other than the purchase and sale of inventory in the Ordinary Course of the Business; and
		3.16.9	all Contracts between, on the one hand, the Vendor and/or the Subsidiary, and, on the other hand, (i) any current officer, director, shareholder or employee of the Vendor, (ii) to the Vendor’s Knowledge, any Affiliate of any Person identified in the preceding Subsection 3.16.9(i); and (iii) any Affiliate of the Vendor;
		3.16.10	all joint ventures, partnerships or similar Contracts to which the Vendor and/or the Subsidiary is a party or by which any of the Assets are bound;
		3.16.11	all Contracts not otherwise listed in this Section 3.16, under which the consequences of a default or termination could have a Material Adverse Effect.
3.17	Binding Nature of Material Contracts.
	Each Material Contract is valid and binding on the Vendor and/or the Subsidiary (as the case may be) and, to the Vendor’s Knowledge, on the other parties thereto, and is in full force and effect. Neither the Vendor nor the Subsidiary is in material breach of, or material default under, any Material Contract and, to the Vendor’s Knowledge, no other party to any Material Contract is in material breach thereof or material default thereunder.
3.18	Employees and Labor Relations.
		3.18.1	Schedule 3.18 contains a true, complete and correct list as of the Effective Date of (i) all

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			employees of the Vendor and/or the Subsidiary identified by their respective title and date of hire, and (ii) the rate of current base compensation payable by Vendor and/or the Subsidiary to each such employee and the potential bonus for 2005 for each such employee. There are no collective bargaining agreements and there is no pending, or to the Vendor’s Knowledge, threatened strike, slowdown, picketing, work stoppage, or to the Vendor’s Knowledge any pending application for certification of a collective bargaining agent involving the Vendor or the Subsidiary.
		3.18.2	The Vendor and the Subsidiary have complied in all material respects with all applicable domestic and foreign Legal Requirements respecting employment and employment practices, terms and conditions of employment and wages and hours, including any such Legal Requirements respecting employment discrimination, employee classification, workers’ compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have complied in all material respects with all employment agreements, and no claims, controversies, investigations or suits are pending or, to the Knowledge of the Vendor, threatened, with respect to such Legal Requirements or agreements, either by private individuals or by Governmental Authorities.
		3.18.3	Neither the Vendor nor the Subsidiary is obligated by, or subject to, any order of the Labor Relations Commission or other labor board or administration, or any unfair labor practice decision. Neither the Vendor nor the Subsidiary is a party or subject to any pending or threatened labor or civil rights dispute, controversy or grievance or any unfair labor practice proceeding with respect to claims of, or obligations of, any employee or group of employees. No labor union represents or has ever represented the Vendor or the Subsidiary.
		3.18.4	Neither the Vendor nor the Subsidiary have been required to make any compensation adjustments pursuant to the Pay Equity Act (Québec) nor have they any commitments to make such compensation adjustments with respect to any of their employees.
		3.18.5	The Vendor and the Subsidiary have fully and accurately reported the compensation of all Persons who have performed services for the Vendor and the Subsidiary and have been classified as independent contractors, on all applicable tax forms when required to do so. Except as set forth on Schedule 3.18.5, the Vendor and the Subsidiary have classified all individuals who perform services for them correctly under the Vendor Benefit Plans and all applicable laws as common law employees and independent contractors or freelancers.
		3.18.6	There has been no charge of discrimination against or relating to the Vendor or the Subsidiary filed with the Commission des droits de la personne et des droits de la jeunesse or similar Governmental Authority during the last five (5) years and no employee has made or, to the Vendor’s Knowledge, intends to make allegations of discrimination.
		3.18.7	No Governmental Authorities or present or former employee of the Vendor or the Subsidiary has any claim against the Vendor or Subsidiary (whether under applicable law, pursuant to any employment agreement, or otherwise) on account of, or for: (i) overtime pay, other than for the current payroll period; (ii) wages or salary (excluding bonuses and amounts accruing under any pension or profit-sharing plan for a period other than the current payroll period); (iii) vacation, time off or pay in lieu of vacation or time off, other than vacation or time off (or pay in lieu thereof) earned in respect of the current or past fiscal year and accrued on the Most Recent Balance Sheet; (iv) payment under any applicable workers’ compensation law; (v) termination without a just cause or serious reason; (vi) payment of a statutory termination pay; or (vii) pay in lieu of a reasonable notice of termination.
3.19	Intellectual Property.
		3.19.1	Section 3.19.1 of the Disclosure Schedule sets forth a complete and accurate list of each and all domestic and foreign Trademarks, registered Copyrights, Patents, Software (other than off-the

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	shelf, shrink wrapped Software except where such Software is used for the development or operation of Vendor’s or the Subsidiary’s web site), Domain Names, Internet Sites (other than the Site Content) and Licenses-In (including: (i) for each Patent, the number, normal expiration date and subject matter for each country in which such patent has issued, or, if applicable, the application number, date of filing and subject matter for each country; (ii) for each registered Trademark, the application serial number or registration number, the class of goods covered and the expiration date for each country in which a trademark has been registered; and (iii) for each registered Copyright, the number and date of filing for each country in which a copyright has been filed) which are licensed or sublicensed by, created by or for, applied for, used by or on behalf of, owned by, controlled by, or registered in the name of, the Vendor and/or the Subsidiary, or in which the Vendor and/or the Subsidiary has any rights or interests, (excluding software and databases licensed to the Vendor and/or the Subsidiary under standard, non-exclusive software licenses granted to end-user customers by third parties in such third parties’ Ordinary Course Business) and all Licenses-Out pursuant to which third parties have the right to Vendor Intellectual Property (collectively, the “Listed Intellectual Property”).
3.19.2	To the Vendor’s Knowledge, each item of Listed Intellectual Property is valid and subsisting, all necessary registration, maintenance and renewal fees currently due in connection with such Listed Intellectual Property (where registered) have been paid and all appropriate applications, documents, recordations, and certificates in connection with such registered Listed Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in Canada, the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining or prosecuting such registered Listed Intellectual Property. To the Vendor’s Knowledge, none of the (i) registered Listed Intellectual Property has been canceled, adjudicated invalid, lapsed, or (ii) Listed Intellectual Property is subject to any outstanding judgment, order, decree, ruling, injunction, writ, or consent restricting its use or adversely affecting the Vendor’s rights thereto. To the Vendor’s Knowledge, there are no pending or threatened interferences, re-examinations, oppositions, cancellation proceedings, or the foreign equivalent thereof, involving any Patents or Trademarks included in the Listed Intellectual Property.
3.19.3	The Vendor and/or the Subsidiary owns and has good, marketable, and valid title to, or possesses legally enforceable and transferable rights to use under valid and subsisting written license agreements, free and clear of all Encumbrances other than Permitted Encumbrances (i) each item of Listed Intellectual Property, and (ii) all other Intellectual Property Rights currently owned or used by the Vendor and/or the Subsidiary in connection with the Business (collectively with the Listed Intellectual Property, the “Vendor Intellectual Property”). The Vendor Intellectual Property is sufficient to conduct the Business as currently conducted by the Vendor and the Subsidiary. With respect to each item of Listed Intellectual Property not owned by the Vendor and/or the Subsidiary: (i) the license, sublicense or other agreement covering such item is legal, valid, binding, enforceable, and in full force and effect with respect to the Vendor and/or the Subsidiary; (ii) neither the Vendor nor the Subsidiary is in material breach or default thereunder, and, to the Vendor’s Knowledge, no event has occurred which with notice or lapse of time would constitute a material breach or default thereunder or permit termination, modification or acceleration thereunder by any other party thereto; (iii) such item is not subject to any Encumbrance that materially interferes with the rights granted to the Vendor with respect to such item; and (iv) there are no royalty, commission or other executory payment agreements, arrangements or understanding relating to such item.
3.19.4	No Listed Intellectual Property or product or service of the Vendor and/or the Subsidiary is subject to any litigation, proceeding, or order restricting in any manner the use, transfer, or licensing thereof by the Vendor and/or the Subsidiary, or which may affect the validity, use, or enforceability of such Vendor Intellectual Property.
3.19.5	Neither the Vendor nor the Subsidiary has transferred ownership of or granted any license, option, or other rights with respect to, any Intellectual Property Right that is or was Vendor Intellectual

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	Property, to any third party, or knowingly permitted the rights of the Vendor and/or the Subsidiary in such Intellectual Property Rights to lapse or enter the public domain. No claim is pending or, to the Vendor’s Knowledge, threatened, and no notice or invitation to license has been received, which questions the Vendor’s and/or the Subsidiary’s title to, claims any ownership of, or any rights to, any Vendor Intellectual Property.
3.19.6	To the Vendor’s Knowledge, the operations of the Vendor and the Subsidiary in conducting the Business (including the performance of any Contract as conducted in the past and as now conducted) have not and do not (i) infringe on any Intellectual Property Rights of any third party, (ii) constitute a misuse or misappropriation of any Intellectual Property Rights of any third party, (iii) entitle any third party to any interest therein, or right to compensation from the Vendor, the Subsidiary or any of its successors or assigns, by reason thereof, or (iv) violate any applicable Legal Requirement. Neither the Vendor nor the Subsidiary has received any written complaint, assertion, threat, allegation, invitation to license, or, to the Vendor’s Knowledge, otherwise has received any notice of any claim, litigation, or proceeding that at all indicates that the present or past operations of the Vendor, the Subsidiary, or their Business infringe upon or conflict with the rights of any third party Intellectual Property Rights. To the Vendor’s Knowledge, there are no facts or circumstances that exist which could reasonably be expected to give rise to any such claim, litigation, or proceeding. Neither the Vendor nor the Subsidiary agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other violation with respect to any Vendor Intellectual Property.
3.19.7	To the Vendor’s Knowledge, no third party has infringed or misappropriated or is infringing or misappropriating any Vendor Intellectual Property. No claim, litigation, or proceeding brought by the Vendor with respect to any Vendor Intellectual Property is pending against any third party.
3.19.8	The Vendor has taken commercially reasonable steps to protect, maintain, and safeguard the Vendor’s and the Subsidiary’s rights in the Vendor Intellectual Property, and has executed and required appropriate nondisclosure agreements. In this regard, except as set forth in Section 3.19.8 of the Disclosure Schedule, all directors, officers, employees, and consultants having access to confidential information have executed appropriate nondisclosure agreements, copies of which have been provided to the Purchaser. To the Vendor’s Knowledge, there has been no unauthorized disclosure or use of Proprietary Rights of the Vendor and the Subsidiary. Except as set forth in Section 3.19.8 of the Disclosure Schedule, all employees of, and contractors to, the Vendor and the Subsidiary who have contributed to any portion of any Vendor Intellectual Property, were and are under an obligation to assign such contribution or rights to the Vendor or the Subsidiary, and all such assignments have been properly made.
3.19.9	To the Vendor’s Knowledge, no Contract between or among the Vendor or the Subsidiary and any third party exists which would impede or prevent the continued use by the Vendor of the entire right, title, and interest in and to the Vendor Intellectual Property. Neither the Vendor nor the Subsidiary has any obligation to compensate any third party for any Vendor Intellectual Property.
3.19.10	Except as set forth in Section 3.19.10 of the Disclosure Schedule, neither the Vendor nor the Subsidiary has (i) incorporated Open Source Materials into, or combined Open Source Materials with, software developed or distributed by the Vendor; or (ii) distributed Open Source Materials in conjunction with any other software developed or distributed by the Vendor or the Subsidiary. None of the licenses under which such Open Source Materials were received by the Vendor (i) grants or purports to grant, to any third party any rights to or immunities under any Vendor Intellectual Property or (ii) requires that any software owned by the Vendor or the Subsidiary be (a) disclosed or distributed in source code form, (b) licensed for the purpose of making derivative works, or (c) redistributed at no charge.
	For the purposes of this Agreement, “Open Source Materials” shall mean all software or other material that is distributed as “free software” or “open source software” pursuant to no license or

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		under a licensing or distribution model, including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), the Netscape Public License, the Sun Community Source License (SCSL), and the Sun Industry Standards License (SISL). Open Source Materials also includes all software or other material that is made generally available to the public in source code format as “open source software,” which for purposes of this Agreement means under a license that allows use and redistribution in source code form but that does not require re-distribution in source code form, including, but not limited to, the BSD license, the Apache License, and the Artistic License. However, “Open Source Materials” excludes software or other materials that are written in non-compiled languages, such as HTML or PERL.
	3.19.11	Section 3.19.11 of the Disclosure Schedule sets forth a complete and accurate list of each and all Internet Sites which are registered in the name of, and, as of the Closing Date, operated by, the Vendor and/or the Subsidiary (the “Sites”).
	3.19.12	With respect to privacy and security commitments for personally identifiable information (including terms and conditions and privacy policies applicable to such personally identifiable information) (the “Commitments”), (i) the Vendor and the Subsidiary are in material compliance with its Commitments; (ii) neither the Vendor nor the Subsidiary has received inquiries from the Federal Trade Commission, the Privacy Commissioner of Canada, provincial privacy commissions, or any other federal, state or provincial governmental agencies regarding the Commitments; (iii) neither the Vendor nor the Subsidiary has received any written (including electronic mail) complaints from any website user regarding Commitments, or compliance with the Commitments; and (iv) the Commitments have not been rejected by any applicable certification organization which has reviewed such Commitment or to which any such Commitment has been submitted.
3.20	Site Content.
	3.20.1	The Vendor and/or the Subsidiary owns, or possesses legally enforceable and transferable rights to use under valid and subsisting written license agreements set forth in Section 3.20.1 of the Disclosure Schedule, free and clear of all Encumbrances, all of the Site Content. The unsigned freelance agreements set forth on Section 3.20.1 of the Disclosure Schedule are not material to the Business.
	3.20.2	To the Vendor’s Knowledge, no author or editor of any of the Site Content has been paid any amount by any pharmaceutical manufacturer or any other Person (other than the Vendor and the Subsidiary) in connection with or related to the subject matter of that portion of the Site Content authored or edited, as applicable, by such author or editor.
	3.20.3	Neither the Vendor nor the Subsidiary has received any written (including electronic mail) notice or claim of inaccuracy regarding any of the Site Content or any notice that it does not possess the right to display the Site Content.
3.21	Page Views and Unique Visitors
	3.21.1	For each month from January 1, 2005 through September 30, 2005, Section 3.21.1 of the Disclosure Schedule contains a true, correct and complete list of the number of
		3.21.1.1   Unique Visitors to each of the Designated Sites;
		3.21.1.2   Page Views of each of the Designated Sites;
		3.21.1.3   Sessions on each of the Designated Sites;

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		3.21.1.4	Unique Visitors who are US physicians, including, for each Designated Site (i) Page Views, and (ii) sessions, attributable to them; and
		3.21.1.5	CME credit hours granted.
	3.21.2	Section 3.21.2 of the Disclosure Schedule sets forth, as of September 30, 2005, for each Designated Site, the number of
		3.21.2.1	registrants;
		3.21.2.2	registrants who are US physicians, broken down by their area of specialty.
	3.21.3	Except as set forth in the footnotes to the Financial Statements and/or as set forth in Section 3.21.3 of the Disclosure Schedule, neither the Vendor nor the Subsidiary is paying any Person any amount that represents an incentive for directing visitors to the Designated Sites or any page thereunder. The Unique Visitors to the Designated Sites for the nine months from January 1, 2005 through September 30, 2005 were derived from the sources set forth on Section 3.21.3 of the Disclosure Schedule.
3.22	Databases
	The Vendor and the Subsidiary have always kept all personal data on the registered users of the Sites strictly confidential and have never sold (other than in connection with the transaction contemplated hereby), rented or disclosed any such personal data to any Person and have at all times complied with all applicable Legal Requirements concerning data protection and privacy.
3.23	Significant Customers and Suppliers.
	3.23.1	Section 3.23.1 of the Disclosure Schedule sets forth (i) a true and correct customer list showing each customer, and the gross revenues associated therewith, of the Vendor and/or the Subsidiary during the year ended December 31, 2004 and during 2005 through August 31, 2005 that generated gross revenues in excess of C$10,000 during either such period, and (ii) a true and correct supplier list showing each supplier, and the gross sales associated therewith, to the Vendor and the Subsidiary during the year ended December 31, 2004 and during 2005 through August 31, 2005 that generated gross sales in excess of C$10,000 during either such period.
	3.23.2	Since August 31, 2005, no material customer or supplier has (whether as a result of the transactions contemplated hereby or otherwise) (i) stopped trading with or supplying the Vendor or the Subsidiary, (ii) reduced its trading with or provision of goods or services to the Vendor or the Subsidiary, or (iii) changed materially the terms and conditions on which it is to trade with or supply the Vendor or the Subsidiary. Since August 31, 2005, neither the Vendor nor the Subsidiary has entered into any Contract with customers or suppliers, except in the Ordinary Course of Business.
3.24	Related Party Transactions.
	Except as set forth on Section 3.24 of the Disclosure Schedule, no Related Party (i) has borrowed money from or loaned money to the Vendor or the Subsidiary that is currently outstanding, (ii) has any ownership interest in any of the Assets, (iii) is a party to any agreement or is engaged in any ongoing transaction with the Vendor or the Subsidiary, or (iv) owns, directly or indirectly, any interest in (excepting less than 5% stock holdings for investment purposes in securities of publicly held and traded company), or is an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent, customer or client of the Business (collectively, “Related Party Transactions”).

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3.25	Accounts Receivable.
	The Accounts Receivable are valid receivables arising from products sold or services rendered in the Ordinary Course of Business, are not subject to any setoffs or counterclaims, and are current and collectible (within 90 days after the date on which the it first became due and payable), subject to any reserves for bad debts or otherwise reflected in the Financial Statements or in the Vendor’s accounting records.
3.26	Taxes.
	Except as set forth in Section 3.26 of the Disclosure Schedule, the Vendor and the Subsidiary have timely filed or will have timely filed all Tax Returns for the periods or portions thereof ending on or prior to the Closing Date that are required to be filed on or prior to the Closing Date with any Governmental Authority (taking timely requested extensions into account), and all such Tax Returns are true, accurate and complete in all material respects. Except as set forth in Section 3.26 of the Disclosure Schedule, the Vendor and the Subsidiary have timely paid, or made adequate provision for the payment of, all Taxes shown to be due on such Tax Returns, all Tax assessments received, and all Taxes which have or may become due under applicable law with respect to all periods or portions thereof ending on or prior to the Closing Date, and, with respect to all periods through the Most Recent Balance Sheet Date, such adequate provision is reflected in the Financial Statements. There are no liens for Taxes (other than current Taxes not yet due and payable) on any of the Assets. Except as set forth in Section 3.13 of the Disclosure Schedule, neither the Vendor nor the Subsidiary has received written notice of any claim by any Governmental Authority in any jurisdiction where it does not file Tax Returns or pay Taxes that it is or may be subject to Tax by that jurisdiction. Except as set in Section 3.26 of the Disclosure Schedule, the Vendor and the Subsidiary have timely withheld or collected and timely remitted all Taxes which are required to have been withheld or collected and paid by it in connection with amounts paid or owing to or received from any employee, independent contractor, creditor or any other Person. The Vendor and the Subsidiary have made available to the Purchaser complete and accurate copies of all income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Vendor and the Subsidiary. To Vendor’s Knowledge neither it nor the Subsidiary have been subject to any assessments, reassessments, levies, penalties or interest with respect to Taxes which will result in any liabilities on their part in respect of any period ending on or prior to the Closing Date. Neither the Vendor nor the Subsidiary has expressly waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency which waiver or extension is still in effect. Neither the Vendor nor the Subsidiary has any actual or, to the Vendor’s Knowledge, potential liability for any Taxes of any person (other than the Vendor or the Subsidiary) under U.S. Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local or foreign law), or as a transferee or successor, by contract or otherwise. None of the Assets is a “United States real property interest” within the meaning of Section 897 of the U.S. Internal Revenue Code of 1986, as amended.
3.27	GST and QST Registration.
	The Vendor is a Registrant within the meaning of the Excise Tax Act and the Quebec Sales Tax Act and its registration numbers are as follows: GST: RT899355747; QST: 1018750852.
3.28	Residence.
	The Vendor is not a non-resident of Canada for the purposes of the ITA.

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ARTICLE 4
Representations and Warranties of Purchaser

	The Purchaser represents and warrants to the Vendor that the statements contained in this Article 4 are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date).
4.1	Organization and Good Standing.
	Each of the Purchaser and WebMD is a corporation organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Purchaser has the full corporate power and authority to own, lease and operate its property and carry on its business as now being conducted and presently planned to be conducted. Purchaser is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of its business or the nature of its properties makes such qualification or licensing necessary, except where the failure to so qualify or be licensed would not have a material adverse effect, all of which jurisdictions are set forth in Schedule 4.1.
4.2	Authority; Validity; Consents.
	Each of the Purchaser and WebMD has the requisite corporate power and authority necessary to enter into and perform its obligations under this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the other Transaction Documents to which each is a party by the Purchaser and WebMD and the consummation of the transactions contemplated herein and therein have been duly and validly authorized by the respective boards of directors of the Purchaser and WebMD and all other required corporate action of the Purchaser and WebMD. This Agreement and the other Transaction Documents to which each is a party constitute the legal, valid and binding obligations of the Purchaser and WebMD enforceable against them 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 equity. Neither the Purchaser nor WebMD is required to give any notice to or obtain any consent from any Person (including any Governmental Authority) in connection with the execution and delivery of this Agreement and the other Transaction Documents or the consummation or performance of any of the transactions contemplated hereby and thereby, except for notices or consents which if not given or obtained would not result in a material adverse effect.
4.3	No Conflict.
	The execution and delivery of this Agreement and the other Transaction Documents to which it is a party by the Purchaser and WebMD and the consummation by the Purchaser and WebMD of the transactions provided for herein and therein will not, with or without notice or the lapse of time or both result in the breach of any of the terms and provisions of, or conflict with, or constitute a default under, or result in a termination of, or give any Person a valid right of termination, cancellation, acceleration, suspension or revocation under, or infringe, or cause any acceleration of any obligation of the Purchaser or WebMD under (a) any material agreement, contract, obligation, promise, or undertaking (whether written or oral) to which the Purchaser or WebMD is bound, (b) the Organizational Documents of the Purchaser and WebMD, as amended to the Effective Date, (c) any Order naming the Purchaser, or (d) any Legal Requirement applicable to the Purchaser or WebMD.
4.4	Legal Proceedings.
	There is no pending Proceeding that has been commenced or that, to the Purchaser’s Knowledge has been threatened, against or otherwise naming to or involving Purchaser or WebMD or any of their respective assets, at law or in equity, that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated hereby.

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4.5	Brokers or Finders.
	Neither the Purchaser nor WebMD nor any of their respective Affiliates, nor any of their respective officers and agents, has incurred any Liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby.

ARTICLE 5
Pre-Closing Covenants of the Vendor

5.1	Operation of the Business.
	Except as otherwise expressly authorized by this Agreement or with the prior consent of Purchaser (such consent not to be unreasonably withheld or delayed), between the Effective Date and the Closing Date, the Vendor shall (and shall cause the Subsidiary to) operate the Business in the Ordinary Course of Business and comply in all material respects with all material Legal Requirements applicable to the Vendor and Subsidiary. The Vendor shall have sole responsibility for the Business and its operations (and that of the Subsidiary), and during the period between the Effective Date and the Closing Date the Vendor shall:
		5.1.1	use its commercially reasonable efforts to preserve intact the goodwill and staff of the Vendor and the Subsidiary, and the relationships of the Vendor and the Subsidiary with advertisers, customers, suppliers, employees, officers, consultants, freelancers, contracting parties, Governmental Authorities and others having business relations with the Vendor or the Subsidiary;
		5.1.2	maintain in full force and effect all material permits which are presently held and are required for the operation of Business as presently conducted;
		5.1.3	maintain all of the material Assets in a manner consistent with past practices, reasonable wear and tear excepted, and maintain the types and levels of insurance currently in effect in respect of the Assets; and
		5.1.4	manage the working capital of the Vendor and the Subsidiary consistent with past practices.
5.2	Negative Covenant
	Except as provided on Schedule 5.2, between the Effective Date and the Closing Date, the Vendor shall not (and shall cause the Subsidiary not to), without the prior consent of Purchaser (which shall not be unreasonably withheld or delayed):
		5.2.1	declare, set aside or pay any dividend in any property other than cash in respect of any interest of the Vendor;
		5.2.2	terminate or amend any Contract or cancel, modify or waive any material Indebtedness or claims held in respect of the Vendor or the Subsidiary or waive any material rights of value, except in the Ordinary Course of the Business;
		5.2.3	do any act or fail to do any act which will cause a breach or default under, or waive any rights under, any of the Material Contracts;
		5.2.4	mortgage, pledge or subject to any Encumbrance (other than a Permitted Encumbrance) any portion of the Assets, other than pursuant to the Material Contracts;

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5.2.5	sell, lease, license, transfer or otherwise dispose of any of the Assets except in the Ordinary Course of Business;
5.2.6	adopt or amend any Vendor Benefit Plan (or any plan that would be a Vendor Benefit Plan if adopted), except for the renewal of Vendor Benefit Plans in the Ordinary Course of Business, or enter into or adopt any collective bargaining agreement or other contract with any labor organization, union or association, except in each case as required by applicable Legal Requirements;
5.2.7	grant to any executive officer, director, or employee of the Vendor or the Subsidiary any increase in compensation or benefits, except for employees (other than officers) in the Ordinary Course of Business or as may be required under Vendor Benefit Plans;
5.2.8	create, incur or assume any Indebtedness or guarantee any Indebtedness, other than pursuant to the Material Contracts, assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, or make any loans, advances or capital contributions to, or investments in, any other Person;
5.2.9	pay, loan or advance any amount to, or sell, transfer or lease any of the Assets to, or enter into any agreement or arrangement with any Related Party;
5.2.10	make any change in any method of accounting or accounting practice or policy other than those required by GAAP, or make or change any material elections with respect to Taxes;
5.2.11	acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any Person or otherwise acquire any assets that are valued, individually or in the aggregate, in excess of $25,000;
5.2.12	make or incur any capital expenditure that, individually or in the aggregate, is in excess of $25,000, or assume any obligation outside the Ordinary Course of Business;
5.2.13	remove any director, officer or auditor of the Vendor or the Subsidiary from office;
5.2.14	institute or settle any Proceedings;
5.2.15	take any action prohibited or fail to take any action required by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Vendor set forth in this Agreement becoming untrue, as of the Closing Date, with respect to the period from the Effective Date to the Closing Date, or (ii) any of the conditions to the Closing set forth in Article 7 not being satisfied;
5.2.16	modify or change its relation with its suppliers and customer, or change its pricing, credit or payment policies other than in the Ordinary Course of Business; or
5.2.17	issue or sell any Equity Interest of the Vendor or the Subsidiary (except pursuant to the conversion or exercise of options, warrants or other convertible securities of Vendor outstanding on the date hereof);
5.2.18	amend the charter, by-laws or other organizational documents of the Subsidiary;
5.2.19	authorize any of the foregoing, or commit or agree to take actions, whether in writing or otherwise, to do any of the foregoing.

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5.3	Required Approvals.
	As promptly as practicable after the Effective Date, the Vendor shall, and shall cause the Subsidiary to, make all filings required by any Legal Requirement to be made by it in order to consummate the transactions contemplated hereby, including the submission to the Vendor’s shareholders of the transactions contemplated hereby for the Requisite Shareholder Approval. Between the Effective Date and the Closing Date, the Vendor shall, and shall cause the Subsidiary to, reasonably cooperate with the Purchaser: (a) with respect to all filings that Purchaser is required by any Legal Requirement to make in connection with the transactions contemplated hereby, and (b) in obtaining all consents identified in Schedule 4.2. The costs of the filing fees in connection with any filing required under the Competition Act (Canada) shall be paid by the Purchaser. The Vendor shall promptly deliver to the Purchaser copies of all filings, correspondence and Orders to and from any Governmental Authority in connection with the transactions contemplated hereby.
5.4	Shareholder Approval.
		5.4.1	The Vendor shall use its reasonable best efforts to obtain, as promptly as practicable, the Requisite Shareholder Approval at a special meeting of shareholders, all in accordance with the Canada Business Corporations Act and other applicable Legal Requirements. In connection with such special meeting of shareholders, the Vendor shall provide the Disclosure Statement to its shareholders as promptly as practicable (and shall use its reasonable efforts to do so within ten days) following the Effective Date. The Purchaser agrees to cooperate with the Vendor in the preparation of the Disclosure Statement. The Vendor agrees not to distribute the Disclosure Statement until the Purchaser has had a reasonable opportunity to review and comment on the Disclosure Statement and the Disclosure Statement has been approved by the Purchaser (which approval may not be unreasonably withheld, conditioned or delayed).
		5.4.2	The Vendor, acting through its Board of Directors, shall include in the Disclosure Statement the unanimous recommendation of its Board of Directors that the shareholders of the Vendor vote in favor of the adoption of this Agreement and the approval of the transactions contemplated by this Agreement.
		5.4.3	The Vendor shall ensure that the Disclosure Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading (provided that the Vendor shall not be responsible for the accuracy or completeness of any information concerning the Purchaser furnished by the Purchaser in writing for inclusion in the Disclosure Statement).
		5.4.4	The Purchaser shall ensure that any information furnished by the Purchaser to the Vendor in writing for inclusion in the Disclosure Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
5.5	Access to Information.
		5.5.1	Subject to Section 6.2, the Vendor shall (and shall cause the Subsidiary to) permit representatives of the Purchaser to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Vendor and the Subsidiary) to all premises, properties, financial, tax and accounting records (including the work papers of the Vendor’s independent accountants), contracts, other records and documents, and personnel, of or pertaining to the Vendor and the Subsidiary for the purpose of performing such inspections and tests as the Purchaser deems necessary or appropriate.
		5.5.2	Within 15 days after the end of each month ending prior to the Closing, beginning with the end of the first calendar month following the date hereof, the Vendor shall furnish to the Purchaser an

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			unaudited income statement for such month and a balance sheet as of the end of such month, prepared on a basis consistent with the Financial Statements. Such financial statements shall present fairly the financial condition and results of operations of the Vendor and the Subsidiary on a consolidated basis as of the dates thereof and for the periods covered thereby, and shall be consistent with the books and records of the Vendor and the Subsidiary.
5.6	Exclusivity.
		5.6.1	The Vendor shall not, and shall cause its Representatives (as defined below) not to, enter into an agreement with respect to any Alternative Transaction (as defined below) or consummate an Alternative Transaction; solicit, initiate, encourage or accept any inquiries, proposals or offers from any Person with respect to an Alternative Transaction; participate in any discussions, conversations, negotiations or other communications with any Person with respect to an Alternative Transaction; furnish any information to any Person in connection with an Alternative Transaction; or otherwise assist, facilitate or encourage the making of, or cooperate in any way regarding, any proposal or offer by any Person with respect to an Alternative Transaction.
		5.6.2	For purposes of this Section 5.6: (a) “Alternative Transaction” means any of the following transactions between or among the Vendor or the Subsidiary and any Person other than the Purchaser, WebMD or their respective Affiliates: (i) the acquisition or purchase of any capital stock of the Vendor or the Subsidiary, (ii) the sale, transfer, license or other disposition of any material assets or rights of the Vendor or the Subsidiary, which is outside the Ordinary Course of Business, (iii) a business combination involving the Vendor or the Subsidiary, (iv) any other extraordinary business transaction involving or otherwise relating to the Vendor or the Subsidiary, or (v) any other transaction that would reasonably be expected to interfere with the Transaction; and (b) “Representative” means the Vendor’s or Subsidiary’s Affiliates and their respective directors, officers, employees, agents, and advisors (including financial advisors, counsel and accountants).
		5.6.3	The Vendor shall immediately notify any party with which discussions or negotiations of an Alternative Transaction were pending that the Vendor is terminating such discussions or negotiations. If the Vendor receives any inquiry, proposal or offer with respect to an Alternative Transaction, the Vendor shall, within one Business Day after such receipt, notify the Purchaser of the existence of such inquiry, proposal or offer and provide a general description of the terms thereof.
5.7	Best Efforts.
	Subject to the terms and conditions of this Agreement:
		5.7.1	Between the Effective Date and the Closing Date, the Vendor shall: (a) use its reasonable best efforts to cause the conditions in Article 7 to be satisfied, and (b) not take any action that will have the effect of unreasonably delaying, impairing or impeding the receipt of any authorizations, consents, orders or approvals to be sought pursuant to this Agreement.
		5.7.2	From and after the Closing, the Vendor shall use its 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 make effective the transactions contemplated hereby and to carry out the provisions hereof.
		5.7.3	Other than with respect to matters falling within the ambit of the Data Transfer Protocol (set forth as Exhibit 2.1 hereof) which matters shall be dealt with thereunder, if (i) any of the Contracts to which the Vendor or the Subsidiary is a party or other assets or rights constituting Assets may not be assigned and transferred by the Vendor to the Purchaser (as a result of either the provisions thereof or any Legal Requirement) without the consent or approval of a third party, (ii) the

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		Vendor, after using its reasonable best efforts, is unable to obtain such consent or approval prior to the Closing and (iii) the Closing occurs nevertheless, then (A) such Contracts and/or other assets or rights shall not be assigned and transferred by the Vendor to the Purchaser at the Closing and the Purchaser shall not assume the Vendor’s or the Subsidiary’s Liabilities with respect thereto at the Closing, (B) the Vendor shall continue to use its reasonable best efforts to obtain the necessary consent or approval as soon as practicable after the Closing, (C) upon the obtaining of such consent or approval, the Purchaser and the Vendor or the Subsidiary, as the case may be, shall execute such further instruments of conveyance (in substantially the form executed at the Closing) as may be necessary to assign and transfer such Contracts and/or other assets or rights (and the associated Liabilities of the Vendor) to the Purchaser, and (D) from and after the Closing until the assignment of each such Contract pursuant to clause (C) above, the Purchaser shall perform and fulfill, on a subcontractor basis, the obligations of the Vendor or the Subsidiary, as the case may be, to be performed under such Contract, and the Vendor or the Subsidiary shall promptly remit to the Purchaser all payments received by it under such Contract for services performed during such period.
5.8	Confidentiality.
	From and after the Closing: (a) the Vendor shall hold in confidence all confidential information (including trade secrets, customer lists, marketing plans and pricing information) of the Vendor and the Subsidiary in connection with the Business, (b) in the event that the Vendor shall be legally compelled to disclose any such information, it shall provide Purchaser with prompt written notice of such requirement so that Purchaser may seek a protective order or other remedy, and (c) in the event that such protective order or other remedy is not obtained, the Vendor shall furnish only such information as is legally required to be provided.
5.9	Notice of Developments.
	The Vendor shall promptly notify the Purchaser in writing of any change or development which would cause any of the representations and warranties in Article 3 not to be true and correct.
5.10	Purchaser GST and QST Registration.
	The Purchaser shall apply to become a Registrant within the meaning of the Excise Tax Act and the Quebec Sales Tax Act, effective as of the Effective Date.
5.11	Termination of Plans.
	At the request of the Purchaser, the board of directors of the Vendor or the Subsidiary will, at or prior to Closing, adopt a resolution to authorize the termination of the Retirement Plan for U.S. Employees with the Principal Financial Group and shall send notices of termination with respect thereto and with respect to any other Vendor Benefit Plans as may be requested by Purchaser.
5.12	Offer letters for US Employees
	The Vendor shall use reasonable best efforts to obtain from each U.S. employee of the Vendor or the Subsidiary who is not party to an Employment Agreement an offer letter consistent with the form of offer letter executed by similarly situated employees of Purchaser or its Affiliates in the United States, which such offer letter shall supercede any offer letter in effect between the Vendor or the Subsidiary.

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ARTICLE 6
Pre-Closing Covenants of Purchaser

6.1	Required Approvals.
	As promptly as practicable after the Effective Date, the Purchaser and WebMD shall, and shall cause each of their respective Affiliates to, make all filings required by any Legal Requirement to be made by it or them to consummate the transactions contemplated hereby. Between the Effective Date and the Closing Date, the Purchaser and WebMD shall, and shall cause each Affiliate to, reasonably cooperate with the Vendor with respect to all filings that they are required by any Legal Requirement to make in connection with the transactions contemplated hereby, in obtaining all consents identified in Section 3.2 of the Disclosure Schedule. The Purchaser and WebMD shall promptly deliver to the Vendor copies of all filings, correspondence and Orders to and from any Governmental Authority in connection with the transactions contemplated hereby.
6.2	Confidentiality Obligations.
	The Parties acknowledge that the Vendor is the “Seller” referred to but not identified in the Confidentiality Agreement and agree that, as among the Parties hereto, the Confidentiality Agreement shall be construed as if the Vendor has all the rights and obligations of Berkery, Noyes & Co., LLC thereunder and the Purchaser and WebMD have all the rights and obligations of WebMD, Inc. thereunder. The terms of the Confidentiality Agreement (as so construed) are hereby incorporated by reference and shall continue in full force and effect until the Closing, at which time such Confidentiality Agreement and the obligations of the Purchaser under this Section 6.2 shall terminate except with respect to confidential information concerning the Vendor or the Subsidiary (in each case to the extent not related to the Business or the Assets), which shall remain in full force and effect. If, for any reason, the Closing does not occur, the Confidentiality Agreement shall remain in full force and effect in accordance with its terms but construed as set forth in the first sentence of this Section 6.2. Notwithstanding anything to the contrary contained in this Agreement or the Confidentiality Agreement, under no circumstances shall the Purchaser or any of its Affiliates directly or indirectly contact, prior to the Closing, any employee of the Vendor or any customer, supplier or advertiser of the Vendor with respect to any matter relating to the transactions contemplated hereby without the prior consent of the Vendor.
6.3	Best Efforts
	Subject to the terms and conditions of this Agreement:
		6.3.1	between the Effective Date and the Closing Date, Purchaser and WebMD shall:
			(a) use their reasonable best efforts to cause the conditions in Article 8 to be satisfied (other than Section 8.8 thereof), and (b) not take any action that will have the effect of unreasonably delaying, impairing or impeding the receipt of any authorizations, consents, orders or approvals to be sought pursuant to this Agreement; and
		6.3.2	from and after the Closing, Purchaser shall use its 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 make effective the transactions contemplated hereby and carry out the provisions hereof.

ARTICLE 7
Conditions Precedent to Obligations of the Purchaser to Close

The obligation of the Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by the Purchaser, in whole or in part):

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7.1	Accuracy of Representations.
	The representations and warranties of the Vendor set forth in this Agreement shall be 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 other than changes arising following the Effective Date in the Ordinary Course of Business that do not have Material Adverse Effect (provided that representations and warranties which are confined to a specified date shall speak only as of such date) and Purchaser shall have received a certificate of the Vendor to such effect signed by a duly authorized officer thereof.
7.2	Vendor’s Performance.
	Each covenant and obligation that the Vendor is required to perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been duly performed and complied with in all material respects, and Purchaser shall have received a certificate of the Vendor to such effect signed by a duly authorized officer thereof.
7.3	Delivery of Certificates.
	The Vendor shall have delivered to the Purchaser: (a) a certificate dated within seven (7) days before the Closing Date from the appropriate office of the jurisdictions of organization of the Vendor and the Subsidiary, certifying that such entity is validly existing and in good standing under the laws of such jurisdiction; and (b) copies, certified by an officer of the Vendor and the Subsidiary (acting in such capacity), of the: (i) Organizational Documents of the Vendor and the Subsidiary; and (ii) resolutions of the board of directors and shareholders, as applicable, of the Vendor authorizing the execution of the present Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby.
7.4	No Order
	No Governmental Authority shall 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.
7.5	Governmental Authorizations.
	All requisite Governmental Authorizations or waiting periods following governmental filings shall have been obtained or expired.
7.6	Required Consents.
	The notices and consents described in Section 3.2 of the Disclosure Schedule shall have been given and obtained, as the case may be.
7.7	Employment Agreements.
	Each of the Employment Agreements shall have been executed and become effective (pending the Closing) and each of the employees party thereto shall have accepted employment with the Purchaser on the terms thereunder.
7.8	Release of Encumbrances.
	The Purchaser shall have received evidence reasonably satisfactory to it of the release and discharge of the Encumbrances set forth on Schedule 7.8
7.9	Update of the Disclosure Schedule

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	The Vendor shall have delivered to the Purchaser an update, as of the day prior to the Closing Date, of the Disclosure Schedule. To the extent that such updated Disclosure Schedule reflects changes in the Ordinary Course of Business between the date hereof and the Closing Date, such changes shall be deemed not to be a breach of the relevant representations and warranties and the Disclosure Schedule shall be deemed to be amended as of the Closing Date to include such changes.
7.10	Requisite Shareholder Approval
	The Requisite Shareholder Approval shall have been obtained.
7.11	FIRPTA.
	On or prior to the Closing, the Subsidiary shall deliver to the Purchaser a certificate that the shares of the Subsidiary are not “U.S. real property interests” in accordance with Treasury Regulations under Sections 897 and 1445 of the Code, together with evidence reasonably satisfactory to the Purchaser that the Subsidiary has provided notice to the Internal Revenue Service in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2). If the Purchaser does not receive the certificate and evidence described above on or before the Closing Date, the Purchaser shall be permitted to withhold from the payments to be made pursuant to the Agreement any required withholding tax under Section 1445 of the Code.
7.12	Opinion.
	The Purchaser shall have received an opinion of Davies Ward Phillips & Vineberg LLP covering the matters set forth in Exhibit 7.12 hereto.

ARTICLE 8
Conditions Precedent to the Obligation of the Vendor to Close

The Vendor’s obligation to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by the Vendor, in whole or in part):

8.1	Cash Purchase Price.
	The Cash Purchase Price less the Escrow Amount shall be paid to the Vendor and the Escrow Amount shall be delivered to the Escrow Agent concurrently with Closing, the whole in accordance with the terms of this Agreement and the Escrow Agreement.
8.2	Accuracy of Representations.
	The representations and warranties of Purchaser set forth in this Agreement shall be 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 other than changes arising following the Effective Date in the Ordinary Course of Business that do not have a material adverse effect on the Purchaser (provided that representations and warranties which are confined to a specified date shall speak only as of such date), and the Vendor shall have received a certificate of Purchaser to such effect signed by a duly authorized officer thereof.
8.3	Purchaser’s Performance.
	The covenants and obligations that the Purchaser is required to perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been performed and complied with in all material respects, and the Vendor shall have received a certificate from the Purchaser to such effect signed by a duly authorized officer thereof.

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8.4	Delivery of Certificates.
	The Purchaser shall have delivered to the Vendor: (a) a certificate dated within seven (7) days before the Closing Date from the appropriate office of the jurisdictions of organization of the Purchaser and WebMD, certifying that such entity is validly existing and in good standing under the laws of such jurisdiction; and (b) copies, certified by an officer of the Purchaser or WebMD, as the case may be, (acting in such capacity), of the: (i) Organizational Documents of the Purchaser and WebMD; and (ii) resolutions of the respective boards of directors of the Purchaser and WebMD authorizing the execution of the present Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby.
8.5	No Order.
	No Governmental Authority shall have enacted, issued, promulgated or entered any Order which is in effect and which has the effect of making illegal or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.
8.6	Governmental Authorizations.
	All requisite Governmental Authorizations or waiting periods following governmental filings shall have been obtained or expired.
8.7	Required Consents.
	The notices and consents described on Schedule 4.2 shall have been given and obtained, as the case may be.
8.8	Requisite Shareholder Approval.
	The Requisite Shareholder Approval shall have been obtained.
8.9	Employment Agreements.
	Purchaser shall have entered into the Employment Agreements.

ARTICLE 9
Post-Closing Covenants

The Parties agree as follows with respect to the period existing from and after the Closing (provided that nothing in this Article 9 shall be deemed to prevent the Vendor from dissolving or winding up or otherwise ceasing its activities following the termination of the Escrow Agreement):

9.1	General.
	In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, without cost or expense to the requesting Party.
9.2	Proprietary Information.
	From and after the Closing, the Vendor shall not disclose or make use of (except to pursue its rights under this Agreement or any other Transaction Document), and shall use its best efforts to cause all of its

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	Affiliates not to disclose or make use of, any knowledge, information or documents of a confidential nature or not generally known to the public with respect to Assets, the Business or the Purchaser or its business (including the financial information, technical information or data relating to the Vendor’s products and names of customers of the Vendor), except to the extent that such knowledge, information or documents shall have become public knowledge other than through improper disclosure by the Vendor or an Affiliate. The Vendor shall use its best efforts to enforce, for the benefit of the Purchaser, all confidentiality, invention assignments and similar agreements between the Vendor and any other party relating to the Assets or the Business which are not sold and transferred to the Purchaser as part of the Assets.
9.3	Cooperation in Litigation.
	From and after the Closing Date, each Party shall cooperate reasonably with the other in the defense or prosecution of any litigation or proceeding already instituted or which may be instituted hereafter against or by such other Party relating to or arising out of the conduct of the business of the Vendor or the Purchaser prior to or after the Closing Date involving the Vendor (other than litigation among the Parties and/or their Affiliates arising out the transactions contemplated by this Agreement). The Party requesting such cooperation shall pay the reasonable out-of-pocket expenses incurred in providing such cooperation (including legal fees and disbursements) by the Party providing such cooperation and by its officers, directors, employees and agents, but shall not be responsible for reimbursing such Party or its officers, directors, employees and agents, for their time spent in such cooperation.
9.4	Cooperation on Tax Matters; Transfer Taxes; GST.
		9.4.1	Except to the extent provided in Section 2.5.2.11 above, the Purchaser shall be liable for, and shall pay, any transfer, sales, use, value-added, conveyance, deeds, registration, recording or any other similar fees or Taxes (including title recording or filing fees, mutation taxes and other amounts payable in respect of transfer filings, but specifically excluding any income or gross receipts taxes), and all documentary or other stamp taxes, arising out of or related to the transactions contemplated by this Agreement and payable to any Governmental Authority. The Purchaser shall be liable for, and subject to Section 9.4.2 shall pay, any and all QST and GST arising out of the Purchaser’s purchase of the Assets hereunder.
		9.4.2	The Vendor and the Purchaser shall cooperate with each other and make any and all elections required in order that the minimum possible GST and QST, if any, be payable in connection with the transactions contemplated hereby. At the Closing, the Vendor and the Purchaser shall jointly elect in prescribed form and manner under subsection 167(1) of the Excise Tax Act (and under any corresponding provisions of the Québec Sales Tax Act) that no tax be payable pursuant to (a) Part IX of the Excise Tax Act or (b) Part I of the Québec Sales Tax Act, with respect to the sales contemplated hereby of the Assets disposed of by the Vendor. The Vendor and the Purchaser shall make such election in prescribed form containing the prescribed information pursuant to the said legislation. Prior to making such election, the Vendor and the Purchaser shall be duly registered under subdivision (d) of Division V of Part IX of the Excise Tax Act with respect to the GST and under Division I of Chapter VIII of Title I of the Québec Sales Tax Act with respect to the QST. The Parties agree and acknowledge that the Purchase Price does not include any GST or QST payable by the Purchaser in respect of the purchase of the Assets.
		9.4.3	The Purchaser and the Vendor shall each jointly elect, in the prescribed manner and form to have section 22 of the ITA (and the corresponding provision under the QTA) apply to the transfer of the Accounts Receivable transferred hereunder by the Vendor. Such election shall set out the Purchase Price allocated to the Accounts Receivables as determined pursuant to Section 2.7 hereof and shall be filed by the Vendor and the Purchaser along with and within the time prescribed for the filing of their respective income Tax Returns for the taxation year in which the Closing occurs or at such earlier time as may be prescribed for the purposes of section 22 of the ITA (and the corresponding provisions under the QTA).

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		9.4.4	The Purchaser and the Vendor shall jointly elect pursuant to subsections 20(24) and 20(25) of the ITA (and the corresponding provisions under the QTA) in respect of amounts for future obligations and will file such election with their respective income Tax Returns for the taxation year in which the Closing occurs. The Vendor and the Purchaser acknowledge that part of the Assets were transferred to the Purchaser as a payment by the Vendor to the Purchaser for the assumption by the Purchaser of such future obligations of the Vendor.
		9.4.5	To the extent relevant to the Assets, each Party to this Agreement shall (i) provide the other such assistance as may be reasonably requested in connection with the preparation of any Tax Return or the conduct of any audit or examination or other proceeding relating to Taxes and (ii) for a period of six (6) years following the Closing retain and provide the other with information that may be relevant to the preparation of a Tax Return, or the conduct of an audit, examination or other proceeding relating to Taxes.
		9.4.6	In respect of the covenants in Sections 9.7 and 9.8.1, the Vendor and the Purchaser agree to elect, in prescribed form or, if no form has been so prescribed, in a manner acceptable to the relevant Tax authorities, and to furnish the relevant Tax authorities with any documentation necessary or desirable for this purpose, to have proposed paragraph 56.4(3)(b) of the ITA (as formulated by the Department of Finance as at July 18, 2005), or any substantially similar provision of the ITA, and any corresponding provision of a provincial tax legislation, apply to the amounts allocated to the covenants pursuant to Section 2.7 and to any other amount determined by the relevant Tax authority to be part of the consideration received or receivable by the Vendor pursuant to this Agreement and which is attributable to a “restrictive covenant”, within the meaning of proposed subsection 56.4(1) of the ITA (as formulated by the Department of Finance as at July 18, 2005), or any substantially similar provision, under this Agreement.
9.5	Employee Matters.
		9.5.1	The Parties intend that there will be continuity of employment with respect to all Eligible Employees who become Transferred Employees. Accordingly, all of the employees of the Vendor and the Subsidiary employed in the Business as of the Closing Date (all of whom, if employed on the Effective Date are listed by numbers on Schedule 9.5.1) (collectively, “Eligible Employees”), shall either be automatically transferred to and continued by Purchaser (where applicable law provides for an automatic transfer of employees upon the transfer of assets or of a business as a going concern), or Purchaser shall offer employment to commence as of the Closing Date to all of the Eligible Employees. Such employment shall be at the same salaries and wages, at least substantially equivalent benefits in the aggregate (including benefits under Vendor Benefit Plans and vacation benefits), same location (except as otherwise agreed by the Eligible Employee), and otherwise on substantially the same terms and conditions (other than with respect to bonus and other incentive programs) as those in effect immediately prior to the Closing Date (provided, however, that the new terms of employment may include provisions against non-competition). Those Eligible Employees who either transfer and continue employment or accept Purchaser’s offer of employment and commence working with Purchaser on or after the Closing Date shall hereafter be referred to as “Transferred Employees”. Without limiting the Purchaser’s obligations under the Employment Agreements, and subject to Section 9.5.2, nothing in this Agreement shall obligate Purchaser to provide continued employment to any employee of the Vendor for any specified period of time following the Closing Date or to maintain the same terms of employment for any specified period of time following the Closing Date. All bonus and incentive payments payable to Eligible Employees for the year ending December 31, 2005 shall, on or prior to the Closing, have been paid or accrued by the Purchaser on the Most Recent Balance Sheet in accordance with GAAP.
		9.5.2	Without limiting the generality of any other provision of this Agreement, Purchaser shall defend, indemnify and hold the Vendor harmless from and against any and all Losses the Vendor may incur in connection with any constructive or wrongful termination or dismissal claim asserted by

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			any Eligible Employee of the Vendor or the Subsidiary relating to or arising in connection with (i) Purchaser not offering any such Eligible Employee employment on substantially the same terms and conditions as such Eligible Employee’s employment terms and conditions with the Vendor and/or the Subsidiary, or (ii) Purchaser otherwise not complying with the provisions of this Section 9.5. Vendor shall defend, indemnify and hold the Purchaser harmless from and against any and all Losses asserted by any Eligible Employee of the Vendor or the Subsidiary who declines an offer of employment by the Purchaser (provided that the Purchaser has complied with the provisions of this Section 9.5).
		9.5.3	Purchaser shall have the responsibility for providing health care continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act to any of the U.S. employees of the Vendor or the Subsidiary terminated on or before the Closing Date (to the extent eligible for coverage thereunder), any of the U.S. employees of the Vendor or the Subsidiary who decline offers of employment by the Purchaser on or after the Closing Date, and to former U.S. employees of the Vendor and the Subsidiary receiving such continuation coverage as of the Closing Date.
9.6	Access to Books, Records, etc.
	Each Party agrees that it will cooperate with and make available to the respective other Party, during normal business hours and upon reasonable notice, all books and records, information and employees (without substantial disruption of employment) retained and remaining in existence after the Closing Date that are necessary or useful in connection with any inquiry, audit, investigation, dispute, litigation or other proceeding or similar matter. Each Party agrees that it shall preserve and keep all books and records of the Vendor in its possession or otherwise available to the other party after Closing for a period of at least five (5) years from the Closing Date. After such five (5) year period, before a Party shall dispose of any such books and records, the respective other Party shall be given an opportunity, at their cost and expense, to remove and retain all or any part of such books and records as they may select.
9.7	Solicitation and Hiring.
	For a period of two years after the Closing Date, the Vendor shall not, either directly or indirectly (including through an Affiliate), (a) solicit or attempt to induce any Restricted Employee to terminate his employment with the Purchaser or any subsidiary of the Purchaser or (b) hire or attempt to hire any Restricted Employee; provided, that this clause (b) shall not apply to any individual whose employment with the Purchaser or a subsidiary of the Purchaser has been terminated for a period of six months or longer.
9.8	Non-Competition.
		9.8.1	For a period of three years after the Closing Date, the Vendor shall not, either directly or indirectly (including through an Affiliate), as a shareholder, investor, partner, consultant or otherwise, (i) design, develop, manufacture market, sell or license any product or provide any service anywhere in the world which is competitive with any product designed, developed (or under development), manufactured, sold or licensed or any service provided by the Vendor within the three-year period prior to the Closing Date or (ii) engage anywhere in the world in any business competitive with the Business as conducted as of the Closing Date or during the three-year period prior to the Closing Date.
		9.8.2	The Vendor agrees that the duration and geographic scope of the non-competition provision set forth in this Section 9.8 are reasonable. To the extent permitted by applicable law, in the event that any court determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the Parties agree that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it

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			unenforceable. The Parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for (i) each and every province of Canada, and (ii) each and every county of each and every state of the United States of America and each and every political subdivision of each and every country outside the United States of America where this provision is intended to be effective.
		9.8.3	The Vendor shall, and shall use its best efforts to cause its Affiliates to, refer all inquiries regarding the business, products and services of the Vendor to the Purchaser.
9.9	Collection of Accounts Receivable.
	The Vendor agrees that it shall forward promptly to the Purchaser any monies, checks or instruments received by the Vendor after the Closing Date with respect to the Accounts Receivable purchased by the Purchaser from the Vendor pursuant to this Agreement. The Vendor shall provide to the Purchaser such reasonable assistance as the Purchaser may request with respect to the collection of any such Accounts Receivable, provided the Purchaser pays the reasonable out of pocket expenses of the Vendor and its officers, directors and employees incurred in providing such assistance. The Vendor hereby grants to the Purchaser a power of attorney to endorse and cash any checks or instruments payable or endorsed to the Vendor or its order which are received by the Purchaser and which relate to Accounts Receivable purchased by the Purchaser from the Vendor.
9.10	Use of Name.
	The Vendor shall not use, and shall not permit any Affiliate to use, the names (i) Conceptis Technologies Inc., or (ii) Conceptis Technologies USA Inc., or (iii) any name reasonably similar thereto after the Closing Date. At Closing, the Vendor shall sign, and promptly thereafter file, articles of amendment to change its name to a name not including the word “Conceptis” or any other word similar to, or which may cause confusion with, the word “Conceptis”.

ARTICLE 10
Termination

10.1	Termination Events
	This Agreement may be terminated, by written notice given prior to the Closing:
		10.1.1	by mutual written consent of the Vendor and Purchaser;
		10.1.2	either Party may terminate this Agreement by giving written notice to the other Party at any time after the shareholders of the Vendor have voted on whether to approve the sale of the Assets contemplated by this Agreement in the event such matter failed to receive the Requisite Shareholder Approval;
		10.1.3	the Purchaser may terminate this Agreement by giving written notice to the Vendor if the Closing shall not have occurred on or before January 31, 2006 by reason of the failure of any condition precedent under Article 7 (unless the failure results primarily from a breach by the Purchaser of any representation, warranty or covenant contained in this Agreement); or
		10.1.4	the Vendor may terminate this Agreement by giving written notice to the Purchaser if the Closing shall not have occurred on or before January 31, 2006 by reason of the failure of any condition precedent under Article 8 (unless the failure results primarily from a breach by the Vendor of any representation, warranty or covenant contained in this Agreement).
		10.1.5	by written notice from Purchaser, if Purchaser is not then in material default or breach of this

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			Agreement, following a breach of any covenant or agreement of the Vendor contained in this Agreement, or if any representation or warranty of the Vendor contained in this Agreement shall be or shall have become inaccurate, in either case such that any of the conditions set forth in Sections 7.1 and 7.2 would not be satisfied as of the time of such breach or as of the time such representation or warranty was or shall have become inaccurate; provided, however, that: (i) if such breach or inaccuracy is curable by the Vendor, then Purchaser may not terminate this Agreement under this Section 10.1.5 with respect to the particular breach or inaccuracy provided the Vendor cures such breach or inaccuracy within thirty (30) days after written notice of such breach from Purchaser is received by the Vendor; and (ii) the right to terminate this Agreement under this Section 10.1.5 shall not be available to Purchaser if the breach is the result of any willful act on the part of Purchaser designed to impede the consummation of any transaction contemplated hereby; or
		10.1.6	by written notice from the Vendor, if the Vendor is not then in material default or breach of this Agreement, following a material breach of any covenant or agreement of Purchaser contained in this Agreement, or if any representation or warranty of Purchaser contained in this Agreement shall be or shall have become inaccurate, in either case such that any of the conditions set forth in Sections 8.1, 8.2 and 8.3 would not be satisfied as of the time of such breach or as of the time such representation or warranty was or shall have become inaccurate; provided, however, that: (i) if such breach or inaccuracy is curable by Purchaser, then the Vendor may not terminate this Agreement under this Section 10.1.6 with respect to the particular breach or inaccuracy provided Purchaser cures such breach or inaccuracy within thirty (30) days after written notice of such breach from the Vendor is received by Purchaser; and (ii) the right to terminate this Agreement under this Section 10.1.6 shall not be available to the Vendor if the breach is the result of any willful act on the part of the Vendor designed to impede the consummation of any transaction contemplated hereby.
10.2	Effect of Termination.
	If this Agreement is validly terminated pursuant to Section 10.1, this Agreement shall become null and void and all further obligations of the Parties under this Agreement shall terminate and there shall be no liability on the part of any Party hereto, except as set forth in Section 6.2, provided that any termination of this Agreement pursuant to Section 10.1 shall be without prejudice to any of the rights of the Parties with respect to any willful breach of this Agreement occurring prior to the date of such termination.

ARTICLE 11
Indemnification; Remedies

11.1	Survival
	The representations and warranties of the Parties contained in this Agreement shall survive the Closing, regardless of any investigation made by or on behalf of the Vendor or Purchaser, until January 15, 2007, except that (i) the representations and warranties set forth in Sections 3.1, 3.2 and 3.4 shall survive the Closing without limitation and (ii) the representations and warranties set forth in Sections 3.11 and 3.26 shall survive until 30 days following expiration of all statutes of limitation applicable to the matters referred to therein, and provided, however, that any representation or warranty that constitutes fraud shall survive the Closing and remain in full force and effect indefinitely. All covenants and agreements of the Parties set forth in this Agreement to be performed after the Closing Date (collectively, the “Post-Closing Obligations”) shall survive the Closing and remain in full force and effect indefinitely until fully performed.
	The rights to indemnification set forth in this Article 11 shall not be affected by (i) any investigation conducted by or on behalf of an Indemnitee or any knowledge acquired (or capable of being acquired) by an Indemnitee, whether before or after the date of this Agreement or the Closing Date, with respect to the

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	inaccuracy or noncompliance with any representation, warranty, covenant or obligation which is the subject of indemnification hereunder or (ii) any waiver by an Indemnitee of any closing condition relating to the accuracy of representations and warranties or, any waiver by an Indemnitee with the consent of the other party of any closing condition relating to the performance of or compliance with agreements and covenants.
11.2	Indemnification by the Vendor
		11.2.1	The Vendor agrees, subject to the other terms and conditions of this Article 11, to indemnify, defend and hold harmless Purchaser from all Losses incurred by the Purchaser as a result of (a) the inaccuracy of any representation or warranty of the Vendor contained in this Agreement, or fraud; (b) any breach by the Vendor of any covenants or agreement to be performed by it pursuant to this Agreement; and (c) any breach by the Vendor, after the Closing, of any of the Post-Closing Obligations, including the obligation to satisfy Excluded Liabilities.
		11.2.2	Notwithstanding anything to the contrary contained in this Agreement, (a) the rights of Purchaser to indemnification under this Article 11 shall constitute the sole and exclusive remedy of Purchaser for any breach by the Vendor of any provision of this Agreement, and (b) no claim may be asserted nor any action commenced against the Vendor for indemnification under Section 11.2.1 unless written notice describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action is received by the Vendor on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or action is based ceases to survive as set forth in Section 11.1, regardless of whether the subject matter of such claim or action shall have occurred before such date.
		11.2.3	The indemnification obligations of the Vendor pursuant to Section 11.2.1(a) shall not be effective until the aggregate dollar amount of all Losses that would otherwise be indemnifiable pursuant thereto exceeds two hundred and fifty thousand dollars ($250,000) (the “Vendor Threshold Amount”), and then only to the extent such aggregate amount exceeds the Vendor Threshold Amount; provided, however, that the Vendor Threshold Amount shall not apply in the case of fraud, and in the case of a claim pursuant to Section 11.2.1(a) relating to a breach of the representations and warranties set forth in Sections 3.1 (Organization and Good Standing), 3.2 (Authority; Validity; Consents), 3.4 (Subsidiary), the last three (3) sentences of Section 3.5 (Financial Statements) and Section 3.26 (Taxes).
		11.2.4	The indemnification obligations of the Vendor pursuant to Section 11.2.1(a) shall be limited to an amount equal to ten percent (10%) of the Cash Purchase Price, and no indemnification pursuant to such provisions shall be payable thereafter; provided, however, that in the case of fraud, and in the case of a claim pursuant to Section 11.2.1(a) relating to a breach of the representations and warranties set forth in Sections 3.1 (Organization and Good Standing), 3.2 (Authority; Validity; Consents), 3.4 (Subsidiary), the last three (3) sentences of Section 3.5 (Financial Statements), 3.10 (Environmental and Health and Safety Matters), and 3.26 (Taxes), such indemnification limitation shall be an amount equal to the Cash Purchase Price.
		11.2.5	For the purposes solely of determining amounts payable pursuant to this Article 11 (and not for determining whether there is a breach or inaccuracy pursuant to Section 11.2.1(a)), all representations and warranties of the Vendor in Article 3 shall be construed as if the term “material” and any reference to “Material Adverse Effect” (and variations thereof) were omitted from such representations and warranties.
11.3	Indemnification by Purchaser.
		11.3.1	Each of the Purchaser and WebMD agrees, from and after the Closing Date, subject to the other terms and conditions of this Article 11, to solidarily (jointly and severally) indemnify, defend and hold harmless the Vendor from all Losses incurred by the Vendor as a result of (a) the inaccuracy of any representation or warranty of Purchaser contained in this Agreement; (b) any breach by

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			Purchaser of the covenants and agreements to be performed by Purchaser pursuant to this Agreement; and (c) any breach by Purchaser, after the Closing, of any of the Post-Closing Obligations, including the obligation to satisfy Assumed Liabilities.
		11.3.2	Notwithstanding anything to the contrary contained in this Agreement, (a) the rights of the Vendor to indemnification under this Article 11 shall constitute the sole and exclusive remedy of the Vendor for any breach by Purchaser of any provision of this Agreement, and (b) no claim may be asserted nor any action commenced against Purchaser for indemnification under Section 11.3.1 unless written notice describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action is received by Purchaser on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or action is based ceases to survive as set forth in Section 11.1, regardless of whether the subject matter of such claim or action shall have occurred before or after such date.
		11.3.3	The indemnification obligations of the Purchaser pursuant to this Article 11 shall not be effective until the aggregate dollar amount of all Losses that would otherwise be indemnifiable pursuant thereto exceeds two hundred and fifty thousand dollars ($250,000) (the “Purchaser Threshold Amount”), and then only to the extent such aggregate amount exceeds the Purchaser Threshold Amount; provided, however, that the Purchaser Threshold Amount shall not apply in the case of fraud and in the case of a claim pursuant to Section 11.3.1(a) relating to a breach of the representations and warranties set forth in Sections 4.1 (Organization and Good Standing) and 4.2 (Authority, Validity, Consents).
		11.3.4	The indemnification obligations of the Purchaser pursuant to this Article 11 shall be limited to an amount equal to the Cash Purchase Price, and no indemnification pursuant to such provisions shall be payable thereafter.
		11.3.5	For the purposes solely of determining amounts payable pursuant to this Article 11 (and not for determining whether there is a breach or inaccuracy pursuant to Section 11.3.1(a)), all representations and warranties of the Purchaser in Article 4 shall be construed as if the term “material” and any reference to “material adverse effect” (and variations thereof) were omitted from such representations and warranties.
11.4	Notice of Potential Claims for Indemnification
		11.4.1	An indemnified Party (the “Indemnitee”) shall give the indemnifying Party (the “Indemnitor”) prompt written notice (an “Indemnification Notice”) of any matter or event that could give rise to a claim for indemnification by the Indemnitor under this Article 11, including any Third Party Claim (an “Indemnification Claim”). Each Indemnification Notice shall specify the basis on which indemnification is sought and the Indemnitee’s good faith estimate of the amount of its Losses and, in the case of a Third Party Claim, contain (by attachment or otherwise) such other information as such Indemnitee may have concerning such Third Party Claim. If the Indemnitee is the Purchaser and is seeking to enforce an Indemnification Claim pursuant to the Escrow Agreement, the Indemnitor shall deliver a copy of the Indemnification Notice to the Escrow Agent. After the delivery of an Indemnification Notice, the Indemnitee shall provide prompt written notice to the Indemnitor of all developments known to it relating to the related Indemnification Claim, and any material changes in Indemnitee’s good faith estimate of the amount of its Losses. The Indemnitee shall provide the Indemnitor with access, upon reasonable notice and during normal business hours, to its books and records, properties and personnel relating to the Indemnification Claim. For the avoidance of doubt, no delay or failure on the part of the Indemnitee in so notifying the Indemnitor shall relieve the Indemnitor of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure.
		11.4.2	Within 20 days after delivery of an Indemnification Notice, the Indemnitor shall deliver to the

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	Indemnitee a Response, in which the Indemnitor shall: (i) agree that the Indemnitee is entitled to receive all of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnitor to the Indemnitee of the Claimed Amount, by check or by wire transfer; provided that if the Indemnitee is the Purchaser and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnitor and the Indemnitee shall deliver to the Escrow Agent, within three days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to disburse the Claimed Amount to the Purchaser), or (ii) agree that the Indemnitee is entitled to receive the Agreed Amount (in which case the Response shall be accompanied by a payment by the Indemnitor to the Indemnitee of the Agreed Amount, by check or by wire transfer; provided that if the Indemnitee is the Purchaser and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnitor and the Indemnitee shall deliver to the Escrow Agent, within three days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to disburse the Agreed Amount to the Purchaser) or (iii) dispute that the Indemnitee is entitled to receive any or part of the Claimed Amount.
11.4.3	During the 30-day period following the delivery of a Response that reflects a Dispute, the Indemnitor and the Indemnitee shall use good faith efforts to resolve the Dispute. If the Dispute is not resolved within such 30-day period, the Indemnitor and the Indemnitee shall submit the Dispute to binding arbitration, whereupon the provisions of Section 11.4.4 shall become effective with respect to such Dispute. If the Indemnitee is the Purchaser and is seeking to enforce the claim that is the subject of the Dispute pursuant to the Escrow Agreement, the Indemnitor and the Indemnitee shall deliver to the Escrow Agent, promptly following the resolution of the Dispute (whether by mutual agreement, arbitration, judicial decision or otherwise), a written notice executed by both parties instructing the Escrow Agent as to what (if any) portion of the Escrow Fund shall be disbursed to the Purchaser and/or the Vendor (which notice shall be consistent with the terms of the resolution of the Dispute).
11.4.4	Upon the submission of any Dispute to binding arbitration, the arbitration shall be conducted by a single arbitrator (the “Arbitrator”) in English in Montreal, Quebec and in accordance with the Arbitration Rules and the following provisions:
		11.4.4.1	In the event of any conflict between the Arbitration Rules and the provisions of this Agreement, the provisions of this Agreement shall prevail and be controlling.
		11.4.4.2	The Parties shall use their best efforts to ensure that not later than 30 days after the conclusion of the arbitration hearing, the Arbitrator shall prepare and distribute to the parties a writing setting forth the arbitral award and the Arbitrator’s reasons therefor. Any award rendered by the Arbitrator shall be final, conclusive and binding upon the Parties, and judgment thereon may be entered and enforced in any court of competent jurisdiction, provided that the Arbitrator shall have no power or authority to grant injunctive relief, specific performance or other equitable relief.
		11.4.4.3	The Arbitrator shall have no power or authority, under the Arbitration Rules or otherwise, to (a) modify or disregard any provision of this Agreement, including the provisions of this Section 11.4.4, or (b) address or resolve any issue not submitted by the parties.
		11.4.4.4	In connection with any arbitration proceeding pursuant to this Agreement, each Party shall bear its own costs and expenses except such costs and expenses as the Arbitrator may determine to be directly related to the conduct of the arbitration and appropriately borne jointly by the Parties (which shall not include any party’s attorneys’ fees or costs, witness fees (if any), costs of investigation and similar expenses) shall be shared equally by the Indemnitee and the Indemnitor.
11.4.5	If the Indemnification Claim involves a Third Party Claim, the provisions set forth in Section 11.5 shall be applicable.

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11.5	Third Party Claims
	The obligations and liabilities of the Parties hereunder with respect to a Third Party Claim for which an Indemnitee is entitled to indemnification pursuant to this Article 11 shall be subject to the following terms and conditions:
		11.5.1	An Indemnitee shall give written notification to the Indemnitor of the commencement of any Third Party Claim. Such notification shall be given within 10 days after receipt by the Indemnitee of notice of such Third Party Claim, and shall describe in reasonable detail (to the extent known by the Indemnitee) the facts constituting the basis for such Third Party Claim and the amount of the claimed damages; provided, however, that no delay or failure on the part of the Indemnitee in so notifying the Indemnitor shall relieve the Indemnitor of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure Within 20 days after delivery of such notification, the Indemnitor may, upon written notice thereof to the Indemnitee, assume control of the defense of such Third Party Claim with counsel reasonably satisfactory to the Indemnitee; provided that (i) the Indemnitor may only assume control of such defense if (A) it acknowledges in writing to the Indemnitee that any damages, fines, costs or other liabilities that may be assessed against the Indemnitee in connection with such Third Party Claim constitute Losses for which the Indemnitee shall be indemnified pursuant to this Article 11 and (B) the ad damnum is less than or equal to the amount of Losses for which the Indemnitor is liable under this Article 11 and (ii) the Indemnitor may not assume control of the defense of a Third Party Claim involving criminal liability or in which equitable relief is sought against the Indemnitee. If the Indemnitor does not, or is not permitted under the terms hereof to, so assume control of the defense of a Third Party Claim, the Indemnitee shall control such defense. The Non-controlling Party may participate in such defense at its own expense. The Controlling Party shall keep the Non-controlling Party advised of the status of such Third Party Claim and the defense thereof and shall consider in good faith recommendations made by the Non-controlling Party with respect thereto. The Non-controlling Party shall furnish the Controlling Party with such information as it may have with respect to such Third Party Claim (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such Third Party Claim. The reasonable fees and expenses of counsel to the Indemnitee with respect to a Third Party Claim shall be considered Losses for purposes of this Agreement if (i) the Indemnitee controls the defense of such Third Party Claim pursuant to the terms of this Section 11.5.1 or (ii) the Indemnitor assumes control of such defense and the Indemnitee reasonably concludes that the Indemnitor and the Indemnitee have conflicting interests or different defenses available with respect to such Third Party Claim. The Indemnitor shall not agree to any settlement of, or the entry of any judgment arising from, any Third Party Claim without the prior written consent of the Indemnitee, which shall not be unreasonably withheld, conditioned or delayed. The Indemnitee shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnitor, which shall not be unreasonably withheld, conditioned or delayed.
		11.5.2	Notwithstanding the other provisions of this Section 11.5, if a third party asserts (other than by means of a lawsuit) that an Indemnitee is liable to such third party for a monetary or other obligation which may constitute or result in Losses for which such Indemnitee may be entitled to indemnification pursuant to this Article 11, and such Indemnitee reasonably determines that it has a valid business reason to fulfill such obligation, then (i) such Indemnitee shall be entitled to satisfy such obligation, without prior notice to or consent from the Indemnitor, (ii) such Indemnitee may subsequently make a claim for indemnification in accordance with the provisions of this Article 11, and (iii) such Indemnitee shall be reimbursed, in accordance with the provisions of this Article 11, for any such Losses for which it is entitled to indemnification pursuant to this

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			Article 11 (subject to the right of the Indemnitor to dispute the Indemnitee’s entitlement to indemnification, or the amount for which it is entitled to indemnification, under the terms of this Article 11).
11.6	Insurance
	All indemnification payments payable hereunder shall be reduced by the amount of insurance proceeds received by the Indemnitee as a result of the Loss for which the Indemnitee is seeking indemnification.
11.7	Miscellaneous
		11.7.1	Each Party hereby acknowledges that, except as specifically set forth in this Agreement, neither Party is making any representation, warranty, covenant or agreement with respect to the subject matter of this Agreement and each Party hereby disclaims, and agrees that the other Party may disclaim, any and all liability and responsibility for any other statement or information made or communicated (whether orally or in writing) by it or its Representatives to the other Party or such other Party’s Representatives. In furtherance of, but without limiting the foregoing, the Purchaser acknowledges and agrees that no representation or warranty is being made by the Vendor with respect to the future prospects or operating or financial performance of the Vendor. In connection with its investigation of the Vendor, Purchaser has received certain estimates, projections, forecasts, plans, budgets and similar materials and information regarding or relating to the future operating and financial performance of the Vendor. The Purchaser hereby acknowledges and agrees that there are uncertainties inherent in attempting to make estimates, projections, forecasts, plans, budgets and similar materials and information, that it is familiar with such uncertainties, and that it is not relying on any such information but rather on its own estimates, projections, forecasts, plans, or budgets.
		11.7.2	No breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of either Party hereto, after the consummation of the transactions contemplated hereby, to rescind this Agreement or any of the transactions contemplated hereby.

ARTICLE 12
General Provisions

12.1	Expenses.
	Whether or not the Closing occurs, (a) each Party shall pay all Transaction Expenses incurred by it, and (b) each Party shall pay all advisory fees due and payable by it to any investment banker or other broker or agent retained by it in connection with the preparation, execution and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby.
12.2	Notices.
	All notices, consents, waivers and other communications under this Agreement must be in writing and shall be deemed to have been duly given when: (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), or (c) when received by the addressee, if sent by a delivery service (prepaid, receipt requested) or (d) when received by the addressee, if sent by registered or certified mail (postage prepaid, return receipt requested), in each case to the appropriate addresses, representative (if applicable) and telecopier numbers set forth below (or to such other addresses, representative and telecopier numbers as a Party may designate by notice to the other Parties):

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12.2.1	If to the Vendor, to:
		Conceptis Technologies Inc.
		390 Guy Street, Suite 109
		Montreal, Quebec
		H3J 1S6
		Attention: Roger Simard, director
		Telecopier: 514.931.5362
		with a copy (which shall not constitute notice) to:
		Davies Ward Phillips & Vineberg LLP
		1501 McGill College Ave, 26th Floor
		Montreal, Quebec
		Attention: Janet Ferrier
		Telecopier: 514.841.6499
12.2.2	If to the Purchaser, to:
		WebMD Health Corp.
		111 Eighth Avenue
		New York, NY 10011
		Attention Douglas W. Wamsley
		Telecopier: 201.703.3443
		with a copy (which shall not constitute notice) to:
		Wilmer Cutler Pickering Hale and Dorr LLP
		60 State Street
		Boston, MA 02109
		Attention: Jeff Stein
		Telecopier: 617.526.5000
12.3	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 shall operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power, or privilege shall 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, (a) no waiver that may be given by a Party shall be applicable except in the specific instance for which it is given; and (b) no notice to or demand on one Party shall 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.
12.4	Entire Agreement; Amendment.
	This Agreement (including the Disclosure Schedules and the Exhibits hereto) and the other Transaction

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	Documents supersede all prior agreements between the Parties with respect to its subject matter and constitute (along with the Confidentiality Agreement) a complete and exclusive statement of the terms of the agreements between the Parties with respect to their subject matter. This Agreement may not be amended except by a written agreement executed by the Parties hereto.
12.5	Assignment.
	This Agreement, and the rights, interests and obligations hereunder, shall not be assigned by either Party hereto by operation of Law or otherwise without the express written consent of the other Party (which consent may be granted or withheld in the sole discretion of such other Party), provided, that the Purchaser may assign all of its rights, interests and obligations hereunder to any of its Affiliates without Vendor’s consent, but upon reasonable prior notice and so long as such transferee executes such documentation as may be reasonably required by Vendor in order to ensure that all of Purchaser’s obligations hereunder are assumed by such assignee which assignee must be a subsidiary of WebMD Health Corp.
12.6	Severability.
	If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Legal Requirement or public policy, all other conditions and provisions of this Agreement shall 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 hereto shall 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.
12.7	Governing Law; Consent to Jurisdiction and Venue.
		12.7.1	This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Quebec and the federal laws of Canada applicable therein.
		12.7.2	All actions and proceedings arising out of or relating to this Agreement shall be submitted to binding arbitration conducted in accordance with the provisions of Section 11.4.3 above.
12.8	Counterparts.
	This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.
12.9	Time of Essence.
	Time is of the essence in this Agreement.
12.10	No Third Party Beneficiaries.
	This Agreement is for the sole benefit of the Parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable benefit, claim, cause of action, remedy or right of any kind.
12.11	Public Announcements.
	The Parties agree that they will not make any public announcement with respect to the transactions

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	contemplated hereby prior to the Closing, except to the Vendor’s shareholders (subject to a notice requesting confidentiality) and/or unless otherwise required by applicable Legal Requirement or by obligations of the Parties or their Affiliates pursuant to any listing agreement with or rules of any securities exchange or securities commission. In any event, the Parties hereto shall consult with each other before issuing any press release or otherwise making any public statement with respect to this Agreement or the transactions contemplated hereby. The Vendor acknowledges that (a) subject to the prior sentence, the Purchaser will be filing a Current Report on Form 8-K with the United States Securities and Exchange Commission and issuing a press release, copies of which have been provided to the Vendor, in each case containing information relating to this Agreement and the transactions contemplated hereby; and (b) the Purchaser shall have the right to make additional public disclosures consistent with the disclosure in the Form 8-K and press release described in the foregoing clause (a), without prior consultation with the Vendor.
12.12	Language.
	The Parties hereby acknowledge that they have expressly required this Agreement and any documents ancillary hereto be drafted in the English language only. Les parties reconnaissent par les présentes avoir expressément exigé que cette entente et tout document y afférent soit rédigée en langue anglaise seulement.

[Signatures Appear on next page]

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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.

The Purchaser:

Maple Leaf Medical Media, Inc.
 

Per: /s/ David Schlanger  

David Schlanger 

Senior Vice President 

The Vendor:

Conceptis Technologies Inc.
 

Per: /s/ Roger Simard  

Roger Simard 

WebMD, Inc.
 

Per: /s/ David Schlanger  

David Schlanger 

Senior Vice President 

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EX-21

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

     This exhibit lists the subsidiaries of WebMD Health Corp. and their respective jurisdictions of incorporation or formation:

Name	Jurisdiction
WebMD Health Corp.	Delaware
WebMD, Inc.	Georgia
Boca Subsidiary Corp.	Delaware
Conceptis, Inc.	Delaware
Crescendo Medical Education LLC	Delaware
eMedicine.Com, Inc.	Delaware
Endeavor Technologies, Inc.	Georgia
Healtheon/WebMD Cable Corporation	Delaware
Healtheon/WebMD Internet Corporation	Delaware
HealthShare Technology, Inc.	Delaware
HW Japan, Inc.	Delaware
MDhub, LLC	Connecticut
MedicineNet, Inc.	California
MMM Acquisition Company	Delaware
Medscape Portals, Inc.	Delaware
Medscape LLC	Delaware
National Physicians DataSource, LLC	Connecticut
OnHealth Network Company	Washington
BabyData.com, Inc.	Delaware
Demand Management, Inc.	Colorado
Health Decisions, Inc.	Colorado
Health Decisions International, LLC	Colorado
The Ornish Health Program, Inc.	California
OW Corp.	Delaware
Physicians Telephone Directory, Inc.	Connecticut
RxList, Inc.	Delaware
RxList LLC	California
Telemedics, Inc.	Georgia
WebMD Domain Corp.	Delaware
WellMed, Inc.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-128898), pertaining to the WebMD Health Corp. 2005 Long-Term Incentive Plan, of our report dated March 16, 2006 with respect to the consolidated financial statements and schedule of WebMD Health Corp. included in the Annual Report on Form 10-K for the year ended December 31, 2005.

/s/ Ernst & Young LLP

MetroPark, New Jersey
March 16, 2006

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Wayne T. Gattinella, certify that:

     1. I have reviewed this annual report on Form 10-K of WebMD Health Corp.;

     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: March 16, 2006

/s/ Wayne T. Gattinella

Wayne T. Gattinella
Chief Executive Officer

(Principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Anthony Vuolo, certify that:

     1. I have reviewed this annual report on Form 10-K of WebMD Health Corp.;

     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: March 16, 2006

/s/ Anthony Vuolo  

Anthony Vuolo 

Executive Vice President and
    Chief Financial Officer
(Principal financial and accounting officer) 

EX-32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER OF
WEBMD HEALTH CORP.
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 Annual Report of WebMD Health Corp. (“WebMD”) on Form 10-K for the fiscal year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wayne T. Gattinella, 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: March 16, 2006	/s/ Wayne T. Gattinella
	Wayne T. Gattinella
	Chief Executive Officer

The foregoing certification is being furnished to accompany WebMD’s Annual Report on Form 10-K for the year ended December 31, 2005 (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 that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to WebMD and will be retained by WebMD and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER OF
WEBMD HEALTH CORP.
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 Annual Report of WebMD Health Corp. (“WebMD”) on Form 10-K for the fiscal year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony Vuolo, Executive Vice President and 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: March 16, 2006	/s/ Anthony Vuolo
	Anthony Vuolo
	Executive Vice President and        Chief Financial Officer

The foregoing certification is being furnished to accompany WebMD’s Annual Report on Form 10-K for the year ended December 31, 2005 (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 that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to WebMD and will be retained by WebMD and furnished to the Securities and Exchange Commission or its staff upon request.