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This excerpt taken from the WBMD 10-K filed Mar 16, 2006. 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.
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