SecProbe.io

CORRESP
1
filename1.htm

corresp

WebMD Corporation

669 River Drive, Center 2

Elmwood Park, NJ 07407

August 12, 2004

VIA EDGAR TRANSMISSION

Barbara C. Jacobs

Assistant Director

Division of Corporation Finance

United States Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, DC 20549

    Re:
    WebMD Corporation

Preliminary Schedule 14A

File No. 0-24975

Filed on August 2, 2004

Dear Ms. Jacobs:

     This letter sets forth the responses of WebMD Corporation (“WebMD”) to the
comments of the staff by letter dated August 10, 2004 to WebMD’s Preliminary
Schedule 14A filed on August 2, 2004 (the “Comment Letter”). For your
convenience, we have restated each of the staff’s comments from the Comment
Letter in italics below, with the Company’s response to each comment
immediately following. We have also included as Exhibit A to this letter
copies of the pages from the Preliminary Schedule 14A that have been marked to
show the changes that WebMD will make in response to your comments.

    1.

    We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be certain that they have provided all information investors
require. Since the company and its management are in possession of
all facts relating to a company’s disclosure, they are responsible
for the accuracy and adequacy of the disclosures they have made.

    In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that:

    •

    the company is responsible for the adequacy and
accuracy of the disclosure in the filings;

Barbara C. Jacobs

August 12, 2004

Page 2

    •

    the staff comments or changes to disclosure in
response to staff comments in the filings reviewed by the
staff do not foreclose the Commission from taking any action
with respect to the filing; and

    •

    the company may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United
States.

    In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.

WebMD hereby acknowledges that:

    •

    WebMD is responsible for the adequacy and accuracy of the
disclosure in its filings;

    •

    The staff comments or changes to disclosure in response to staff
comments in WebMD’s filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and

    •

    WebMD may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.

    2.

    We note that, subject to shareholder approval, Proposal 2
provides that the Certificate of Incorporation will be amended to
modify the your Convertible Redeemable Preferred Stock.
Accordingly, please revise your proxy to include the information
required by Item 12 of Schedule 14A, including the proper financial
information required by Item 13(a) of Schedule 14A, disclosure
stating the reasons for the proposed modification and the effect of
the modification upon the rights of existing security holders. If
you believe that the information required by Item 13(a) of Schedule
14A is not material in accordance with Instruction 1 to Item 13,
supplementally provide a detailed analysis of the basis for your
belief.

WebMD has added the requested disclosures, as well as some additional
cross-references to assist in the reader in locating related disclosures, on
pages 2, 36 and 41. We have also retitled the section entitled
“Background of the Charter Amendment Proposals” beginning
on page 35 as “Background of and Reasons
for the Charter Amendment Proposals” to highlight that section as the primary
location of disclosure of the reasons for those proposals. In addition,
although WebMD reached the conclusion that the information required by Item

Barbara C. Jacobs

August 12, 2004

Page 3

13(a) of Schedule 14A is not material (as contemplated by Instruction 1 to Item
13), WebMD has no objection to incorporating that information by reference into
the proxy statement and will do so.

    3.

    Please revise to disclose your accounting treatment of the
modified Redeemable Exchangeable preferred stock, as well as any
other potential financial statement effect on your investors as a
result of this modification. Also, revise to disclose any tax
consequences to investors that may result from the modification to
your Redeemable Exchangeable Preferred Stock.

WebMD has added the requested disclosures, in appropriately captioned sections,
on page 39. Please be advised that the Convertible Redeemable Exchangeable
Preferred Stock is included in WebMD’s consolidated balance sheets as of March
31, 2004 and June 30, 2004 contained in WebMD’s Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2004 and June 30, 2004, and further disclosure
regarding the Convertible Redeemable Exchangeable Preferred Stock is included
in Note 4 to the consolidated financial statements contained in each of those
Quarterly Reports.

    4.

    You disclose that WebMD is amending its Certificate of
Incorporation to designate and authorize the issuance of one or more
new series of preferred stock with voting powers by creating a new
class of 4,990,000 shares of preferred stock. Please revise to
disclose whether you have any plans, proposals or arrangements to
issue any of the newly formed class of preferred stock for any
corporate purpose. If so, please disclose by including a materially
complete description of the corporate purpose. If not, please state
that you have no such plans, proposals, or arrangements written or
otherwise at this time to issue any of the authorized shares of
preferred stock.

WebMD does not have any plans, proposals or arrangements to issue any of the
newly formed class of preferred stock and has added additional disclosure so
stating on pages 2, 37 and 39. This supplements the disclosure we had
included on pages 38 and 39 under “Effects of the Charter Amendment
Proposals” and also presents this disclosure earlier in the proxy statement.

If you would like to discuss these matters further, please feel free to contact
the undersigned at (858) 759-6008 or Catherine Meeker of
Alston & Bird LLP at (704) 444-1077.

Sincerely,

/s/  Lewis H. Leicher

Lewis H. Leicher

Senior Vice President and Assistant General Counsel

WebMD Corporation

EXHIBIT A

    4,990,000 shares of preferred stock
    describing such authority with specificity, as set forth in
    Annex E to this Proxy Statement.

Proposals 2, 3 and 4 are sometimes referred
to in this Proxy Statement as the Charter Amendment Proposals.

Our Board of Directors recommends a vote
“FOR” the election of each the nominees for director
listed in Proposal 1 and for each of Proposals 2, 3
and 4.

As more fully described in
“Proposals 2, 3 and 4 — The Charter
Amendment Proposals — Background of and Reasons for
the Charter Amendment Proposals” below, we are seeking the
approval of our stockholders of the amendments to the WebMD
Charter contemplated by Proposal 2 because we agreed, in
the purchase agreement between WebMD and the purchaser of the
Convertible Redeemable Exchangeable Preferred Stock, to use our
reasonable best efforts to amend the WebMD Charter to provide
the voting powers contemplated by Proposal 2. The effects
of the amendments in Proposal 2, which are described more
fully in “Proposals 2, 3 and 4 — The Charter
Amendment Proposals — Effects of the Charter Amendment
Proposals,” are that holders of the 10,000 shares of
Convertible Redeemable Exchangeable Preferred Stock will have
the right to cast an aggregate of 10,638,297 votes on matters
that are put to a vote of holders of WebMD common stock and have
the class voting rights described above. Also as described more
fully in “Proposals 2, 3 and 4 — The Charter
Amendment Proposals,” the intent of the changes to the
language of the WebMD Charter contemplated by Proposals 3
and 4 is to make explicit the authority that our Board of
Directors was intended to have, under the existing language of
the WebMD Charter, with respect to the issuance of preferred
stock. However, our Board of Directors has determined not to
exercise such authority except: (1) if Proposals 3 and
4 are approved or (2) based on an opinion of counsel that,
with respect to any particular authorization of preferred stock,
the Board may validly take such action. If approved,
Proposals 3 and 4:

    •

    would not result in any change in the
    total number of authorized shares of capital stock of WebMD from
    what is currently authorized,

    •

    would not result in any change in the
    number of outstanding shares of the Convertible Redeemable
    Exchangeable Preferred Stock, and

    •

    would not result in any change in the
    total number of authorized shares of all classes of preferred
    stock from what is currently authorized.

We have no plans, proposals or arrangements,
written or otherwise, at this time to issue for any corporate
purpose any of the shares of preferred stock that will be
available for issuance if Proposals 3 and 4 are approved by
our stockholders.

The Charter Amendment Proposals are separated
into Proposal 2, Proposal 3 and Proposal 4 to
allow our stockholders to focus on each proposed change to the
language of the WebMD Charter. However, adoption of the
amendments to the WebMD Charter proposed by each of
Proposals 3 and 4 is conditioned on approval of both of
those Proposals and upon approval of Proposal 2.
Proposal 2 is not, however, conditioned upon approval of
any other Proposal. This means that:

    •

    if our stockholders fail to approve any one of
    Proposals 2, 3 and 4, then none of the amendments to
    the WebMD Charter contemplated by Proposals 3 and 4 will
    become effective, even if our stockholders approve the other
    Proposals; and

    •

    the amendments to the WebMD Charter contemplated
    by Proposal 2 will, if Proposal 2 is approved, become
    effective even if one or both of Proposals 3 and 4 are not
    approved.

VOTING RIGHTS AND RELATED MATTERS

Please complete, date and sign the accompanying
proxy and promptly return it in the enclosed envelope or
otherwise mail it to us. All properly signed proxies that we
receive prior to the vote at the Annual Meeting and that are not
revoked will be voted (or withheld from voting, as the case may
be) at

2

PROPOSALS 2, 3 AND 4:

THE CHARTER AMENDMENT PROPOSALS

Background of and Reasons for the Charter
Amendment Proposals

Pursuant to our Eleventh Amended and Restated
Certificate of Incorporation, our Board of Directors is
permitted to establish preferred stock and determine the rights,
preferences and privileges of such preferred stock. On
March 19, 2004, we sold 10,000 shares of the
Convertible Redeemable Exchangeable Preferred Stock for
$100 million in a private transaction to CalPERS/ PCG
Corporate Partners, LLC, a private equity fund managed by the
Pacific Corporate Group and principally backed by California
Public Employees’ Retirement System. In connection with our
issuance of the Convertible Redeemable Exchangeable Preferred
Stock, we filed a Certificate of Designations with the Delaware
Secretary of State, designating 5,000,000 shares of
preferred stock as the Convertible Redeemable Exchangeable
Preferred Stock and setting forth its terms and provisions.

During our negotiation of the terms of the
Convertible Redeemable Exchangeable Preferred Stock, WebMD and
CalPERS/ PCG Corporate Partners preliminarily came to an
understanding that holders of this Preferred Stock would have
the right to vote, together with holders of WebMD common stock,
on matters that are put to a vote of holders of WebMD common
stock, with holders of the Preferred Stock having the right to
cast the number of votes that could be cast by a holder of the
WebMD common stock into which the Preferred Stock would be
convertible immediately prior to the record date for the vote.
We also agreed that we would not, without the prior approval of
holders of 75% of the shares of the Convertible Redeemable
Exchangeable Preferred Stock then outstanding, voting as a
separate class, issue any additional shares of the Convertible
Redeemable Exchangeable Preferred Stock, create any other class
or series of capital stock that ranks senior to the Convertible
Redeemable Exchangeable Preferred Stock or create any class or
series of WebMD capital stock that ranks on a parity with the
Convertible Redeemable Exchangeable Preferred Stock.

Subsequent to reaching this understanding with
CalPERS/ PCG Corporate Partners, we were advised by counsel that
an amendment should be made to Article IV of our Eleventh
Amended and Restated Certificate of Incorporation before these
voting powers were granted. Specifically, counsel advised that,
although the existing language of the Eleventh Amended and
Restated Certificate of Incorporation permitting our Board of
Directors to determine the rights, preferences and privileges of
any new series of preferred stock seemed to be intended to
permit the Board to provide such preferred stock with voting
powers, an amendment, consisting of adding the word
“powers” to the list of items that the Board can
determine, should be effected prior to granting such voting
powers. Consistent with this advice, we did not provide voting
powers for the Convertible Redeemable Exchangeable Preferred
Stock in the Certificate of Designations, and agreed with
CalPERS/ PCG Corporate Partners to use our reasonable best
efforts to amend the WebMD Charter to provide these voting
powers and to provide that we would not take the actions
described above without the prior consent of the holders of 75%
of the shares of the Convertible Redeemable Preferred Stock.
Proposal 2 seeks stockholder approval of an amendment to
the WebMD Charter that would provide these voting powers and
require us to obtain the approval of the holders of 75% of the
shares of the Convertible Redeemable Preferred Stock with
respect to the matters described above. Although we are
obligated pursuant to the terms of our purchase agreement with
CalPERS/ PCG Corporate Partners to obtain the consent of the
holders of 75% of the Convertible Redeemable Exchangeable
Preferred Stock to take the actions described above, we agreed
with CalPERS/ PCG Corporate Partners to use our reasonable best
efforts to amend the WebMD Charter to include these powers as a
way of affording additional protection to CalPERS/ PCG Corporate
Partners. In addition, although WebMD did not plan to issue
additional shares of the Convertible Redeemable Exchangeable
Preferred Stock above the original 10,000 shares, WebMD
agreed with CalPERS/ PCG Corporate Partners to designate all the
shares of preferred stock available for issuance under the WebMD
Charter as the Convertible Redeemable Exchange Preferred Stock
because WebMD had been advised by counsel that the authority of
the Board to issue any other series, after the Convertible
Redeemable Exchangeable Preferred Stock, was unclear under the
existing language of the WebMD Charter.

35

Proposal 2

Our Board of Directors has determined that it is
advisable and in the best interests of WebMD to amend the WebMD
Charter to provide that holders of the Convertible Redeemable
Exchangeable Preferred Stock will have the right to vote,
together with the holders of our common stock on an as-converted
to common stock basis, on matters that are put to a vote of the
holders of the common stock and to provide that WebMD will not,
without the prior approval of holders of 75% of the shares of
the Convertible Redeemable Exchangeable Preferred Stock then
outstanding, voting as a separate cl