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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
PER-SE TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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(Per-Se Logo)
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Per-Se Technologies, Inc. (the "Company") to be held at 10:00 a.m. on
Thursday, May 4, 2000, at the offices of Alston & Bird LLP, One Atlantic Center,
1201 West Peachtree Street, Atlanta, Georgia 30309.
At the Annual Meeting, seven people will be elected to the Board of
Directors. The Board of Directors recommends that you vote FOR the election of
the seven nominees named in the Proxy Statement.
In addition, the Company will ask the stockholders to approve increases in
the numbers of shares authorized under two of the Company's stock option plans.
The Board has determined that the proposed increases are in the best interests
of the Company and its stockholders and has unanimously approved the increases.
The Board recommends that you vote FOR the proposed increases.
Your vote is very important. Please vote by telephone, over the Internet or
by completing and signing the proxy card and mailing it back even if you plan to
attend the Annual Meeting. If you attend the Annual Meeting, you may vote in
person if you wish, even if you have previously submitted your proxy. Your
prompt cooperation will be greatly appreciated.
Sincerely,
/s/ Allen W. Ritchie
Allen W. Ritchie
President and Chief Executive Officer
Per-Se Technologies, Inc. 770/444-5300
2840 Mt. Wilkinson Parkway 877/73 PER-SE toll free
Atlanta, Georgia 30339 www.per-se.com
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(Per-Se Logo)
PER-SE TECHNOLOGIES, INC.
2840 MT. WILKINSON PARKWAY
ATLANTA, GEORGIA 30339
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
---------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Per-Se
Technologies, Inc. (the "Company") will be held at 10:00 a.m. on Thursday, May
4, 2000, at the offices of Alston & Bird LLP, One Atlantic Center, 1201 West
Peachtree Street, Atlanta, Georgia 30309, for the following purposes:
(1) To elect seven (7) directors;
(2) To increase by 3,000,000 shares the number of shares of the
Company's common stock reserved for issuance under the Company's Second
Amended and Restated Stock Option Plan;
(3) To increase by 250,000 shares the number of shares of the
Company's common stock reserved for issuance under the Company's
Non-Employee Director Stock Option Plan; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of business on
March 20, 2000, as the record date for the determination of stockholders
entitled to receive notice of, and to vote at, the meeting and any adjournment
thereof.
Your attention is directed to the Proxy Statement submitted with this
Notice.
By Order of the Board of Directors,
/s/ Randolph L. M. Hutto
Randolph L. M. Hutto
Executive Vice President,
General Counsel and
Secretary
Atlanta, Georgia
April 10, 2000
PLEASE VOTE YOUR PROXY PROMPTLY VIA MAIL, THE INTERNET OR BY TELEPHONE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. PLEASE REFER TO YOUR
SPECIFIC VOTING INSTRUCTIONS ON THE ENCLOSED PROXY OR VOTING INSTRUCTIONS CARD.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY SUBMITTED YOUR PROXY.
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PER-SE TECHNOLOGIES, INC.
2840 MT. WILKINSON PARKWAY
ATLANTA, GEORGIA 30339
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
GENERAL INFORMATION
The enclosed form of proxy is solicited by the Board of Directors (the
"Board") of Per-Se Technologies, Inc. (the "Company" or "Per-Se"), which has its
principal executive offices at 2840 Mt. Wilkinson Parkway, Atlanta, Georgia
30339, for use at the annual meeting of stockholders to be held at 10:00 a.m. on
Thursday, May 4, 2000, at the offices of Alston & Bird LLP, One Atlantic Center,
1201 West Peachtree Street, Atlanta, Georgia 30309, and any adjournment thereof.
It is anticipated that this proxy statement ("Proxy Statement") and the
accompanying proxy will first be mailed to stockholders on or about April 10,
2000.
Only stockholders of record as of the close of business on March 20, 2000
(the "Record Date"), will be entitled to vote at the annual meeting. As of that
date, the Company had outstanding 29,868,185 shares of common stock, $.01 par
value ("Common Stock"). Each share of Common Stock is entitled to one vote. No
cumulative voting rights are authorized and appraisal rights for dissenting
stockholders are not applicable to the matters being proposed. The Company
effected a 1-for-3 reverse split of the Common Stock on November 23, 1999. The
numbers of shares, per share amounts and market prices of the Common Stock set
forth herein are presented on a post-split basis, except where specifically
indicated otherwise.
When a proxy is properly executed and returned, the shares it represents
will be voted as directed at the meeting and any adjournment thereof or, if no
direction is indicated, such shares will be voted according to the
recommendations of the Board. The Board recommends a vote FOR each of the
nominees and FOR both of the other proposals described herein and in the notice
of the annual meeting of stockholders attached hereto. Any stockholder giving a
proxy has the power to revoke it at any time before it is voted. Revocation of a
proxy is effective upon receipt by the Secretary of the Company of either (i) an
instrument revoking such proxy or (ii) a duly executed proxy bearing a later
date. Furthermore, if a stockholder attends the annual meeting and elects to
vote in person, any previously executed proxy is thereby revoked, except that
beneficial owners who hold their stock in street name cannot revoke their
proxies in person at the meeting because the stockholders of record who have the
right to cast the votes will not be present. If they wish to change their votes
after returning voting instructions, such beneficial owners should contact their
brokers or other agents before the annual meeting to determine whether they can
do so.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspector of elections appointed for the meeting who will also determine
whether a quorum is present for the transaction of business. The Company's
Restated By-laws (the "By-laws"), provide that a quorum is present if the
holders of a majority of the issued and outstanding stock of the Company
entitled to vote at the meeting are present in person or represented by proxy.
Abstentions will be counted as shares that are present and entitled to vote for
purposes of determining whether a quorum is present, and thus will have the
effect of a vote against a proposal that requires the affirmative vote of a
majority of the votes cast by the stockholders of Common Stock present in person
or by proxy and entitled to vote thereon. Shares held by nominees for beneficial
owners will also be counted for purposes of determining whether a quorum is
present if the nominee has the discretion to vote on at least one of the matters
presented and even though the nominee may not exercise discretionary voting
power with respect to other matters and voting instructions have not been
received from the beneficial owner (a "broker non-vote"). Abstentions may be
specified on all proposals other than the election of directors, and will have
no effect on the vote for election of directors. Broker non-votes will not be
counted as votes for or against matters presented for stockholder consideration.
Most stockholders have a choice of voting over the Internet, by telephone
or by using a traditional proxy card. Please check your proxy or voting
instructions card to see which specific voting methods are available to
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you. Voting instructions are included on the proxy or voting instruction card.
The Internet and telephone voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to vote and to allow
stockholders to confirm that their instructions have been properly recorded.
Beginning this year, most stockholders can elect to view future proxy
statements, annual reports and other stockholder communications over the
Internet instead of receiving paper copies in the mail. This will help reduce
the Company's printing and postage costs, and is more environmentally friendly.
Information about making that election is available by following the
instructions on your proxy card, or by following the prompts if voting over the
Internet or by telephone. Please consider making that election when voting your
proxy.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Management of the Company and the Board recommend the election of the
nominees listed below for the office of director to hold office until the next
annual meeting and until their successors are elected and qualified. All of such
nominees are members of the present Board. Each of such nominees was elected by
the stockholders at the last annual meeting.
The Board has no reason to believe that any of the nominees for the office
of director will be unavailable for election as a director. However, if at the
time of the annual meeting any of the nominees should be unable or decline to
serve, the persons named in the proxy will vote for such substitute nominees,
vote to allow the vacancy created thereby to remain open until filled by the
Board, or vote to reduce the number of directors for the ensuing year, as the
Board recommends. In no event, however, can the proxy be voted to elect more
than seven directors. The election of the nominees to the Board requires the
affirmative vote of a plurality of the votes cast by stockholders present at the
annual meeting in person or by proxy. With respect to the election of directors,
votes may be cast or withheld for each nominee. Votes that are withheld will
have no effect on the election of directors. Stockholders eligible to vote at
the annual meeting do not have cumulative voting rights with respect to the
election of directors.
MANAGEMENT OF THE COMPANY
DIRECTOR NOMINEES
The Company currently has seven directors, all of whom hold office until
the annual meeting of stockholders and until their successors are elected and
qualified. All seven of the Company's directors are standing for reelection at
the annual meeting.
Set forth below is the name of each nominee for election to the Board. Also
set forth below as to each nominee is his age, the year in which he first became
a director, a brief description of his principal occupation and business
experience during the past five years, directorships of certain companies
presently held by him, and certain other information, which information has been
furnished by the respective nominees.
RODERICK M. HILLS
Age 69
Director since 1998
Mr. Hills is Chairman and was formerly President of Hills Enterprises, Ltd.
(formerly The Manchester Group Ltd.), a consulting firm, since 1987. He also has
been a Partner in Hills & Stern, a law firm, since 1999. Mr. Hills also served
as Vice Chairman of the Board of Directors of Oak Industries, Inc., a
manufacturing firm, from 1989 through 1999. Mr. Hills served from September to
November 1996 as Chairman of Federal-Mogul Corporation, an automotive parts
manufacturing firm. Mr. Hills served as a Partner and/or Consultant to the law
firms of Donovan, Leisure, Rogovin, Huge & Schiller; Shea & Gould; and Mudge,
Rose, Guthrie, Alexander & Ferndon from 1989 until 1995. Mr. Hills served as
Chairman of the Securities and Exchange Commission from 1975 to 1977 and as
counsel to the President of the United States in 1975. Mr. Hills is also a Board
member of Federal-Mogul Corporation and Waste Management, Inc.
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DAVID R. HOLBROOKE, M.D.
Age 59
Director since 1994
Dr. Holbrooke has been the President and Chief Executive Officer of
Advocates Rx, Inc., a medical management and healthcare venture development
company, since 1995. From 1983 to 1995, Dr. Holbrooke served as President and
Chief Executive Officer of Holbrooke & Associates. Dr. Holbrooke has a 25 year
history of entrepreneurship, management, medical practice, and new business
development experience in the healthcare services industry. He currently is
active as a board member and investor in several privately held healthcare
companies.
DAVID E. MCDOWELL
Age 57
Director since 1996
Mr. McDowell was appointed to the Board in May 1996 and has served as
Chairman of the Board from October 1996 to the present. From October 1996 to
July 1998, Mr. McDowell also served as Chief Executive Officer of the Company.
From 1992 to 1996, he was President, Chief Operating Officer and a director of
McKesson Corporation. McKesson is the world's largest distributor of
pharmaceutical and healthcare products through McKesson Drug Company in the
United States and Medis Health and Pharmaceutical Services, Inc. in Canada.
Prior to 1992, Mr. McDowell served for over 25 years as a senior executive at
IBM, including as a Vice President and President of the National Services
Division.
KEVIN E. MOLEY
Age 53
Director since 1999
From November 1998 to December 1999, Mr. Moley was the Chairman of the
Board of Patient Care Dynamics LLC, a lessor of computer hardware and software
to physicians' offices. From January 1996 to March 1998, Mr. Moley was the
President and CEO of Integrated Medical Systems, Inc., a leading provider of
electronic connectivity among healthcare providers. From February 1993 to
January 1996, Mr. Moley was Senior Vice President of PCS Health Systems, Inc.,
the largest pharmacy benefit management company in the healthcare industry. Mr.
Moley served as Deputy Secretary, U.S. Department of Health and Human Services
("HHS") from November 1991 to January 1993, and as Assistant Secretary for
Management and Budget of HHS from May 1989 to November 1991. Mr. Moley served
from 1984 to 1988 in various senior management positions with the U.S. Health
Care Financing Administration. Mr. Moley is also a member of the Board of
Directors of Cephalon, Inc., Merge Technologies, Inc., and Innovative Clinical
Solutions LLC.
JOHN C. POPE
Age 51
Director since 1997
Mr. Pope has been Chairman of PFI Group, a private investment group, since
July 1994. From December 1995 to November 1999, Mr. Pope was Chairman of the
Board of MotivePower Industries, Inc., a manufacturer of locomotives and
locomotive components. From April 1992 to July 1994, Mr. Pope was President,
Chief Operating Officer and a Director of UAL Corporation and its subsidiary,
United Airlines, Inc. Mr. Pope is also a member of the Board of Directors of Air
Canada, Dollar Thrifty Automotive Group, Inc., Federal-Mogul Corporation,
Wallace Computer Services, Inc., and Waste Management, Inc.
ALLEN W. RITCHIE
Age 42
Director since 1998
Mr. Ritchie was appointed to the Board in July 1998. Also, in July 1998,
Mr. Ritchie became the Chief Executive Officer and President of the Company. In
April 1998, he was appointed President and Chief
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Operating Officer of the Company. From January to April, 1998, he was Executive
Vice President and Chief Financial Officer of the Company. From 1991 to 1997,
Mr. Ritchie served as a senior executive of AGCO corporation, including as
President and a member of the Board of Directors. From 1979 to 1991, he was
employed with Arthur Andersen & Co., where he was a partner in the Atlanta
office.
C. CHRISTOPHER TROWER
Age 51
Director since 1997
Mr. Trower, a member of the Georgia and Kentucky bars, is engaged in the
private practice of law. Since June 1997, he has been the owner of the Atlanta
law firm of electriclaw.com. From 1988 to June 1997, Mr. Trower was a partner in
the Atlanta law firm of Sutherland, Asbill & Brennan.
OPERATION OF THE BOARD OF DIRECTORS
The Company has an Audit Committee of the Board (the "Audit Committee")
which is composed of Roderick M. Hills, Chairman, Kevin E. Moley and C.
Christopher Trower. The Audit Committee is responsible for meeting with the
Company's auditors to review the Company's financial statements and internal
accounting controls. The Audit Committee is also responsible for submitting
recommendations to the Board regarding the Company's internal accounting
controls. The Audit Committee may exercise such additional authority as may be
prescribed from time to time by resolution of the Board.
The Company has a Compensation Committee of the Board (the "Compensation
Committee") which is composed of John C. Pope, Chairman, David R. Holbrooke,
M.D., and Kevin E. Moley. The Compensation Committee makes recommendations at
least annually to the Board regarding the compensation of the officers of the
Company. The Compensation Committee may exercise such additional authority as
may be prescribed from time to time by resolution of the Board.
On October 21, 1999, the Company established a Governance Committee of the
Board (the "Governance Committee") which is composed of David R. Holbrooke,
M.D., Chairman, Roderick M. Hills, John C. Pope and C. Christopher Trower. The
Governance Committee is responsible for reviewing and assessing the composition
and performance of the Board, formulating policies with respect to corporate
governance and serving as a nominating committee. The Governance Committee may
exercise such additional authority as may be prescribed from time to time by
resolution of the Board.
During 1999, the Board met four (4) times, the Audit Committee met five (5)
times, the Compensation Committee met five (5) times and the Governance
Committee met one (1) time. All of the directors attended 75% or more of the
aggregate number of meetings of the Board and all committees on which they
served during 1999.
DIRECTORS' COMPENSATION
In July 1997, the Company adopted a non-employee director compensation
plan. The intent of this plan is to compensate non-employee members of the Board
fairly for their talents and time spent on behalf of the Company. The plan
provides both cash and equity compensation. The cash compensation consists of an
annual retainer in the amount of $16,000, and a fee in the amount of $1,000 for
each Board meeting attended. Each Board committee chairman also receives an
annual retainer in the amount of $2,000, and a fee in the amount of $750 for
each committee meeting attended, and each Board committee member other than a
committee chairman receives a fee in the amount of $650 for each committee
meeting attended. Equity compensation under the plan consists of an initial
grant of 3,333 stock options (upon first election or appointment to the Board)
and an annual grant of 666 stock options for each year of service thereafter.
The stock option plan under which these options are granted is the Company's
Non-Employee Director Stock Option Plan, as amended (the "Director Stock Option
Plan"). Non-employee directors may elect to defer receipt and taxation of their
cash fees and retainers by participating in the Company's Non-Employee Director
Deferred Stock Credit Plan (the "Deferred Stock Credit Plan"). Deferral of
taxation is accomplished under the Deferred Stock Credit Plan using a cash-based
feature similar in substance to a restricted stock program
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(i.e., the prospective economic benefit to each participant reflects the full
market price per share of the Company's Common Stock, and varies with
fluctuations in that price). The pay element is paid to the participant upon
retirement from the Board.
In addition, the Company reimburses each director for out-of-pocket
expenses associated with each Board or committee meeting attended and for each
other business meeting at which the Company has requested the director's
presence.
The Director Stock Option Plan was recently amended to increase the size of
the initial grant (upon first election or appointment to the Board) and the size
of the annual grant (once each year following the annual meeting of
stockholders) from 3,333 stock options and 666 stock options, respectively, to
10,000 stock options in each instance, and to authorize a special grant of
10,000 stock options to each non-employee director eligible to participate in
the Director Stock Option Plan as of February 24, 2000, such stock options to
have an exercise price of $7.35625 per share, which is the average of the fair
market values of the Common Stock for the five trading days prior to February
24, 2000, determined in accordance with the terms of the plan. The effectiveness
of such increases and such special grant are, however, subject to and
conditioned upon the approval by the stockholders of an increase in the number
of shares reserved for issuance under the Director Stock Option Plan. See
"Proposal to Increase Shares Under the Director Stock Option Plan."
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MANAGEMENT COMMON STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of March 15, 2000, by (i) each of the Company's
directors, (ii) the Company's Chief Executive Officer and the four other most
highly compensated executive officers of the Company as of December 31, 1999,
and (iii) such directors and all executive officers as a group.
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
- ---- ------------ --------
Roderick M. Hills........................................... 2,333(2) *
David R. Holbrooke.......................................... 39,065(3) *
David E. McDowell........................................... 240,249(4) *
Kevin E. Moley.............................................. 3,999(5) *
John C. Pope................................................ 14,867(6) *
Allen W. Ritchie............................................ 183,334(7) *
C. Christopher Trower....................................... 4,167(8) *
Philip M. Pead.............................................. 93,889(9) *
Wayne A. Tanner............................................. 50,222(10) *
Randolph L. M. Hutto........................................ 67,556(11) *
William J. DeZonia, Jr...................................... 77,519(12) *
All executive officers and directors as a group (11
persons).................................................. 777,200 2.6%
- ---------------
* Beneficial ownership represents less than 1% of the outstanding Common
Stock.
(1) Under the rules of the Securities and Exchange Commission, a person is
deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities which that person has the
right to acquire within sixty (60) days. Under these rules, more than one
person may be deemed to be a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which he
has no economic or pecuniary interest. Except as set forth in the footnotes
below, the persons named above have sole voting and investment power with
respect to all shares of Common Stock shown as being beneficially owned by
them.
(2) All shares are owned through a limited partnership, the Hills Family Trust.
Includes 1,333 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan.
(3) Includes 500 shares held in a bank account for the benefit of Dr.
Holbrooke's son, a minor. Also includes 5,732 shares that are not currently
outstanding, but which may be acquired under the Director Stock Option
Plan.
(4) Includes 139,583 shares that are not currently outstanding, but which may
be acquired upon the exercise of stock options granted under the Company's
Second Amended and Restated Stock Option Plan, as amended (the "Restated
Stock Option Plan"); does not include 70,000 shares that may be acquired
under the Restated Stock Option Plan which are subject to an accelerated
vesting schedule based on appreciation in the market value of the Common
Stock.
(5) Includes 3,999 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan.
(6) Includes 3,201 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan.
(7) Includes 150,001 shares that are not currently outstanding, but which may
be acquired under the Restated Stock Option Plan.
(8) Includes 1,666 shares held by a family member, for which Mr. Trower
disclaims beneficial ownership. Also includes 2,267 shares that are not
currently outstanding, but which may be acquired under the Director Stock
Option Plan.
(9) Includes 3,333 shares held by a family member. Also includes 90,556 shares
that are not currently outstanding, but which may be acquired under the
Restated Stock Option Plan.
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(10) Includes 38,889 shares that are not currently outstanding, but which may be
acquired under the Restated Stock Option Plan.
(11) Includes 3,333 shares held by Mr. Hutto in a 401(k) plan. Also includes
63,890 shares that are not currently outstanding, but which may be acquired
under the Restated Stock Option Plan.
(12) Includes 60,578 shares that are not currently outstanding, but which may be
acquired under the Restated Stock Option Plan.
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information as of December 31, 1999
concerning each person known to the Board to be a "beneficial owner," as such
term is defined by the rules of the Securities and Exchange Commission, of more
than 5% of the outstanding shares of the Common Stock.
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED(1) OF CLASS
- ---------------- ------------ --------
Basil P. Regan and Regan Partners, L.P.(2).................. 3,958,930 13%
6 East 43rd St., New York, New York 10017
- ---------------
(1) See Note (1) under "Management Common Stock Ownership."
(2) Includes 1,758,333 shares beneficially owned by Regan Partners, L.P. The
information regarding Basil P. Regan and Regan Partners, L.P. is given in
reliance upon a Schedule13G/A filed by such stockholders on January 20, 2000
with the Securities and Exchange Commission.
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CERTAIN INFORMATION REGARDING EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company (as of December 31, 1999) (collectively, the "named
executive officers") for 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OTHER SECURITIES
------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
- ---------------------------- ---- -------- -------- ------------ ------------ ---------------
Allen W. Ritchie.................. 1999 $299,991 $240,000 -- 50,000 $10,862
President and 1998 271,154 150,000 -- 316,666 425
Chief Executive Officer 1997 -- -- -- -- --
Philip M. Pead.................... 1999 256,155 205,000 -- 66,666 8,704
Executive Vice President and 1998 262,324 172,308 -- 121,666 7,089
Chief Operating Officer 1997 132,500 125,000 -- 41,666* 54,299
Wayne A. Tanner................... 1999 248,000 200,000 -- 33,333 8,543
Executive Vice President and 1998 75,962 60,770(2) -- 116,666 68
Chief Financial Officer 1997 -- -- -- -- --
Randolph L. M. Hutto.............. 1999 250,000 56,828 -- -- 12,080
Executive Vice President and 1998 250,000 62,500 -- 25,000 76,296(4)
General Counsel 1997 102,612 100,000(3) -- 83,333 28,560(4)
William J. DeZonia, Jr............ 1999 213,926 100,000 -- 16,666 6,132
Senior Vice President and 1998 198,081 51,250 -- 24,999 5,927
Chief Compliance Officer 1997 181,538 130,000 -- 58,082* 5,886
- ---------------
* Reflects the repricing, exchange and reissuance (restrike) of certain stock
options outstanding as of April 25, 1997.
(1) Includes amounts paid by the Company on behalf of each named executive
officer for matching 401(k) plan contributions, matching non-qualified
deferred compensation plan contributions, and life, medical and dental
insurance premiums.
(2) Reflects incentive compensation for 1998 guaranteed under Mr. Tanner's
employment agreement.
(3) Reflects incentive compensation for 1997 guaranteed under Mr. Hutto's
employment agreement.
(4) Includes pro rata forgiveness of debt pursuant to a loan from the Company to
Mr. Hutto. In connection with his entering into a three-year employment
agreement with the Company on July 28, 1997, the Company made a loan to Mr.
Hutto in the amount of $100,000. This loan was forgiven on a pro-rata basis
during the initial twelve months of the agreement.
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STOCK OPTION GRANTS
The following table sets forth information with respect to options granted
to each of the named executive officers during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
--------------------------------------------------- ASSUMED ANNUAL
NUMBER PERCENT OF RATES OF
OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE (PER EXPIRATION ---------------------
NAME GRANTED 1999 SHARE)(1) DATE 5% 10%
- ---- ---------- ------------ ---------- ---------- --------- ---------
Allen W. Ritchie................. 50,000 8.8036% $8.71875 10/21/10 $309,664 $807,843
Philip M. Pead................... 33,333 5.8690 10.875 7/29/10 257,495 671,749
33,333 5.8690 8.71875 10/21/10 206,440 538,557
Wayne A. Tanner.................. 33,333 5.8690 8.71875 10/21/10 206,440 538,557
Randolph L. M. Hutto............. -- -- -- -- -- --
William J. DeZonia, Jr........... 16,666 2.9344 10.875 7/29/10 128,744 335,864
- ---------------
(1) All options were granted at an exercise price equal to the fair market value
of the Common Stock on the date of grant. Such options may not be exercised
later than 11 years, or earlier than six months, after the original date of
grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall market conditions. The amounts
reflected in this table may not necessarily be achieved.
STOCK OPTION EXERCISES
None of the named executive officers exercised any stock options during
1999. The table below shows the number of shares of Common Stock covered by both
exercisable and unexercisable stock options held by the named executive officers
as of December 31, 1999. The table also reflects the values for in-the-money
options based on the positive spread between the exercise price of such options
and the last reported sale price of the Common Stock on December 31, 1999.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
Allen W. Ritchie................ -- -- 105,557 261,109 -- --
Philip M. Pead.................. -- -- 68,334 161,664 -- --
Wayne A. Tanner................. -- -- 38,889 111,110 -- --
Randolph L. M. Hutto............ -- -- 63,890 44,443 -- --
William J. DeZonia, Jr.......... -- -- 57,245 42,502 -- --
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EMPLOYMENT AGREEMENTS
In November 1996, the Company and David E. McDowell, then the Company's
Chairman and Chief Executive Officer, entered into a five-year employment
agreement which contains certain non-competition, non-solicitation and change in
control provisions. Pursuant to that agreement, Mr. McDowell received a signing
incentive of $500,000 and is to receive a base salary of at least $300,000 per
year. Mr. McDowell is entitled to reimbursement of certain expenses, including
housing and travel expenses, and is also entitled to receive an amount equal to
any federal and state income taxes payable by him as a result of such expense
reimbursement. Upon early termination of the agreement by the Company other than
for cause or by Mr. McDowell for "good reason" or by either party for any reason
following certain change in control events, the Company is obligated to pay Mr.
McDowell his annual salary, to provide for the continued vesting of stock option
awards described in the agreement and to provide for certain health insurance
benefits to Mr. McDowell through November 19, 2001. Upon certain change in
control events and a termination of the agreement by Mr. McDowell, the Company
will pay to Mr. McDowell (in lieu of its obligation to make the foregoing
payments of salary and to provide the foregoing benefits), a termination payment
in periodic installments or a lump sum (at Mr. McDowell's option) equal to the
salary that would have been payable to Mr. McDowell pursuant to the agreement
from the date of termination until November 18, 2001, and an additional amount
sufficient to make Mr. McDowell whole with respect to any tax which may be
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"). A "change in control event" is generally defined in the agreement as
the adoption of a plan of liquidation or approval of the dissolution of the
Company, certain mergers and consolidations of the Company, the sale or transfer
of substantially all of the Company's assets, certain changes in the composition
of the Company's Board of Directors, or the acquisition of more than 30% of the
Common Stock by any individual, entity, group or other person. Mr. McDowell also
received options to purchase up to 270,000 shares of Common Stock. Mr. McDowell
resigned as Chief Executive Officer of the Company on July 28, 1998, but still
serves as Chairman of the Board.
In October 1999, as a result of the separation of the positions of Chairman
of the Board and Chief Executive Officer, the employment agreement between the
Company and Mr. McDowell was amended to increase the term of the agreement to
six years (beginning on the date of the amendment), to delete the provisions for
payment of relocation expenses and tax gross-up amounts, to decrease the base
salary to $100,000, and to provide for the continuation of Mr. McDowell's status
as an employee of the Company under the Restated Stock Option Plan in the event
of an early termination of the agreement.
In July 1997, the Company and Randolph L. M. Hutto, the Executive Vice
President, General Counsel and Secretary of the Company, entered into a
three-year employment agreement which contains certain non-competition,
non-solicitation and change in control provisions. Pursuant to that agreement,
Mr. Hutto received a signing bonus of $100,000 (structured as a loan forgiven
ratably over the initial 12 months of the agreement), and is to receive a base
salary of $250,000 per year (subject to adjustments by any increases given in
the normal course of business). Mr. Hutto also is entitled to an incentive
compensation payment equal to 80% of his base salary, payable at the discretion
of the Board; provided, however, that the payment of such incentive compensation
for 1997 was guaranteed, and pro-rated based upon the number of months that Mr.
Hutto was employed by the Company during 1997. Upon early termination of Mr.
Hutto's employment by the Company other than for cause or by Mr. Hutto for "good
reason," Mr. Hutto is entitled to elect a severance payment equal to the greater
of two years of salary and benefit continuation, or his then current monthly
salary multiplied by the number of months remaining in the initial term of the
agreement, in each case excluding any incentive bonus payments. In the event Mr.
Hutto's employment by the Company is terminated in connection with a change in
control of the Company, he is entitled to receive a severance payment equal to
two years of salary and benefits, including incentive bonus payments. A "change
in control" is generally defined in the agreement as any consolidation, merger,
reorganization or other transaction in which the Company is not the surviving
entity or certain changes in the composition of the Company's Board of
Directors. Mr. Hutto also received options to purchase up to 83,333 shares of
Common Stock.
In January 1998, the Company and Allen W. Ritchie, then the Executive Vice
President and Chief Financial Officer of the Company, entered into a three-year
employment agreement which contains certain
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non-competition, non-solicitation and change in control provisions. Pursuant to
that agreement, Mr. Ritchie is to receive a base salary of $300,000 per year,
subject to adjustments in the normal course of business, and he is entitled to
an incentive compensation payment of up to 80% of his base salary, payable at
the discretion of the Board. Upon early termination of Mr. Ritchie's employment
by the Company other than for cause or by Mr. Ritchie for "good reason," Mr.
Ritchie is entitled to elect a severance payment equal to two years of salary
and benefit continuation, or his then current monthly salary multiplied by the
number of months remaining in the initial term of the agreement, in each case
excluding any incentive bonus payments. In the event Mr. Ritchie's employment by
the Company is terminated in connection with a change in control of the Company,
he is entitled to receive a severance payment equal to two years of salary and
benefits, including incentive bonus payments. A "change in control" is generally
defined in the agreement as any consolidation, merger, reorganization or other
transaction in which the Company is not the surviving entity or certain changes
in the composition of the Company's Board of Directors. Mr. Ritchie also
received options to purchase up to 100,000 shares of Common Stock. In April
1998, Mr. Ritchie was appointed President and Chief Operating Officer of the
Company. In July 1998, Mr. Ritchie was promoted to Chief Executive Officer and
President of the Company, and became a member of the Board.
Effective September, 1998, the Company and Wayne A. Tanner, the Executive
Vice President and Chief Financial Officer of the Company, entered into a
three-year employment agreement which contains certain non-competition,
non-solicitation and change in control provisions. Pursuant to that agreement,
Mr. Tanner is to receive a base salary of $250,000 per year, subject to
adjustments in the normal course of business, and he is entitled to an incentive
compensation payment of up to 80% of his base salary, payable at the discretion
of the Board. Mr. Tanner's incentive compensation is guaranteed for the first
twelve (12) months of his employment, pro-rated between 1998 and 1999 based on
the number of months he is employed by the Company during each such year. Upon
early termination of Mr. Tanner's employment by the Company other than for cause
or by Mr. Tanner for "good reason," Mr. Tanner is entitled to elect a severance
payment equal to two years of salary and benefit continuation, or his then
current monthly salary multiplied by the number of months remaining in the
initial term of the agreement, in each case excluding any incentive bonus
payments. In the event Mr. Tanner's employment by the Company is terminated in
connection with a change in control of the Company, he is entitled to receive a
severance payment equal to two years of salary, including incentive bonus
payments. A "change in control" is generally defined in the agreement as any
consolidation, merger, reorganization or other transaction in which the Company
is not the surviving entity or certain changes in the composition of the
Company's Board of Directors. Mr. Tanner also received options to purchase up to
66,666 shares of Common Stock.
In June 1999, PST Products, Inc., a wholly-owned subsidiary of the Company,
and Philip M. Pead, the Executive Vice President and Chief Operating Officer of
the Company, entered into a two-year employment agreement which contains certain
non-competition, non-solicitation and change in control provisions. Pursuant to
that agreement, Mr. Pead is to receive a base salary of $250,000 per year
(subject to adjustments by any increases given in the normal course of
business). Mr. Pead also is entitled to incentive compensation of up to 80% of
his base salary, payable at the discretion of the Board. Upon early termination
of Mr. Pead's employment by the Company other than for cause or by Mr. Pead for
"good reason," Mr. Pead is entitled to a severance payment equal to his then
current monthly salary multiplied by the greater of (i) the number of months
remaining in the initial term of the agreement or (ii) twelve, in each case
excluding any incentive bonus payments. In the event Mr. Pead's employment by
the Company is terminated in connection with a change in control of the Company,
he is entitled to receive a severance payment equal to two times the sum of (i)
his then current annual base salary and (ii) the most recent incentive bonus
payment received by him prior to such change in control. In addition, Mr. Pead
is entitled to receive payments for 18 months following termination for
continuation of healthcare coverage at pre-termination levels. A "change in
control" is generally defined in the agreement as any consolidation, merger,
reorganization or other transaction in which the Company is not the surviving
entity or certain changes in the composition of the Company's Board of
Directors.
In June 1999, PST Services, Inc., a wholly-owned subsidiary of the Company,
and William J. DeZonia, Jr., the Senior Vice President and Chief Compliance
Officer of the Company, entered into a two-year
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15
employment agreement which contains certain non-competition, non-solicitation
and change in control provisions. Pursuant to that agreement, Mr. DeZonia is to
receive a base salary of $215,000 per year (subject to adjustments by any
increases given in the normal course of business). Mr. DeZonia also is entitled
to incentive compensation of up to 75% of his base salary, payable at the
discretion of the Board. Mr. DeZonia also received options to purchase up to
16,666 shares of Common Stock. Upon early termination of Mr. DeZonia's
employment by the Company other than for cause or by Mr. DeZonia for "good
reason," Mr. DeZonia is entitled to a severance payment equal to his then
current monthly salary multiplied by the greater of (i) the number of months
remaining in the initial term of the agreement or (ii) twelve, in each case
excluding any incentive bonus payments. In the event Mr. DeZonia's employment by
the Company is terminated in connection with a change in control of the Company,
he is entitled to receive a severance payment equal to two times the sum of (i)
his then current annual base salary and (ii) the most recent incentive bonus
payment received by him prior to such change in control. In addition, Mr.
DeZonia is entitled to receive payments for 18 months following termination for
continuation of healthcare coverage at pre-termination levels. A "change in
control" is generally defined in the agreement as any consolidation, merger,
reorganization or other transaction in which the Company is not the surviving
entity or certain changes in the composition of the Company's Board of
Directors.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who own more than 10% percent of the Common Stock to file
certain reports with respect to each such person's beneficial ownership of the
Common Stock, including statements of changes in beneficial ownership on Form 4.
In addition, Item 405 of Regulation S-K requires the Company to identify in its
Proxy Statement each reporting person that failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year or prior fiscal years. Based solely upon a review of Forms 3, 4 and
5 and amendments thereto, for such persons there were no late reports, no
transactions that were not reported on a timely basis, and no known failures to
file a required form.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described earlier in this Proxy Statement, the Company has a
Compensation Committee of the Board which, is composed of John C. Pope,
Chairman, David R. Holbrooke, M.D., and Kevin E. Moley. Each member of the
Compensation Committee is a "non-employee director" as defined in Rule 16b-3 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is an
"outside director" as provided for in Section 162(m) of the Code. There are no
"interlocks," as defined by the Securities and Exchange Commission, with respect
to any member of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Each executive officer's compensation is determined annually by the
disinterested members of the Board based upon the recommendations of the
Compensation Committee. As of the date hereof, the Compensation Committee
consists of the three Board members whose names appear below. The Compensation
Committee also receives input from the Chief Executive Officer regarding
compensation of all executive officers other than the Chief Executive Officer,
who considers the same criteria as those considered by the Compensation
Committee, as described below.
Compensation Components and Philosophy. The components of the Company's
executive compensation program consist of base salaries, benefits and
perquisites, cash bonuses, stock options and other long-term incentives. The
Company's compensation program is structured and administered to support the
Company's business mission, which is to develop an organization that efficiently
and effectively delivers technology-enabled business management services,
financial and clinical software solutions and Internet-enabled connectivity and
e-health solutions to healthcare providers, and generates favorable returns for
its stockholders in the
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process. The program is designed to provide base salaries that represent
competitive compensation for the Company's executive officers, and incentive
compensation and long-term incentives that motivate the Company's executive
officers to achieve strategic business objectives over the long-term.
Base Salary. Each executive officer's base salary, including the base
salary of the Chief Executive Officer, is based primarily upon the competitive
market for the executive officer's services. In addition to competitive
compensation information, the Compensation Committee evaluates certain
qualitative factors, such as the Chief Executive Officer's and the Compensation
Committee's perceptions of each executive officer's performance (i.e.,
experience, responsibilities assumed, demonstrated leadership ability and
overall effectiveness) during the preceding year. Other factors considered by
the Compensation Committee in formulating base salary recommendations include
the level of an executive's compensation in relation to other executives in the
Company with the same, more and less responsibilities than the particular
executive, inflation, the performance of the executive's division or group in
relation to established operating budgets, and the Company's guidelines for
salary increases to non-executive employees which are determined as a part of
the Company's annual budgeting and planning process. Additionally, for executive
officers, compensation arrangements are often set forth in employment contracts
with specified terms.
Cash Bonus Awards. Each executive officer is eligible to receive an annual
cash bonus award. These cash bonuses generally are paid pursuant to an incentive
compensation plan established at the beginning of each fiscal year in connection
with the Company's preparation of its annual operating budget for such year.
Consistent with the Company's compensation philosophy, under the incentive
compensation plan, the Chief Executive Officer and each Executive Vice President
of the Company may receive a bonus for a given year amounting to a maximum of
80% of such executive's base salary.
Stock Option Awards. The Company maintains stock option plans which are
designed to align executives' and stockholders' interests in the enhancement of
stockholder value. Stock options are granted under these plans by the
Compensation Committee. Executive officers, including the Chief Executive
Officer, are eligible to receive options under these plans. To encourage
long-term performance, executive options typically vest over a three-year period
and remain outstanding for eleven years.
In making its decisions to approve stock option awards to executives, the
Compensation Committee evaluates the Company's consolidated profitability for
the year, the Company's growth plans, the desirability of long-term service from
an executive, the number of options held by other executives in the Company with
similar responsibilities as the executive at issue, and the amount and terms of
options already held by the executive.
Deductibility of Certain Compensation. Section 162(m) of the Code
generally disallows a tax deduction to publicly held corporations for
compensation in excess of $1 million in any taxable year that is paid to the
corporation's chief executive officer or to the four other most highly
compensated executive officers. The Compensation Committee has considered the
provisions of Section 162(m) and the Restated Stock Option Plan was amended in
1996 to make certain sections of the plan compatible with that provision of the
Code, while maintaining the Compensation Committee's flexibility to exercise
business judgment in determining awards to take account of business conditions
or the performance of individual executives. No named executive received
compensation in 1999 that will be subject to the Section 162(m) limitation on
deductibility.
Chairman of the Board Compensation. Effective October 31, 1996, David E.
McDowell was appointed Chairman and Chief Executive Officer of the Company. In
connection with that appointment, the Compensation Committee determined that the
best interests of the Company's stockholders would be served by the procurement
from Mr. McDowell of an employment agreement, the terms of which are described
elsewhere in this Proxy Statement. Mr. McDowell resigned from his position as
Chief Executive Officer of the Company on July 28, 1998, but remains Chairman of
the Board. In October 1999, as a result of the separation of the positions of
Chairman of the Board and Chief Executive Officer, the employment agreement
between the Company and Mr. McDowell was amended to increase the term of the
agreement to six years (beginning on the date of the amendment), to delete the
provisions for payment of relocation expenses and tax gross-up amounts, to
decrease the base salary to $100,000, and to provide for the continuation of Mr.
McDowell's status
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as an employee of the Company under the Restated Stock Option Plan in the event
of an early termination of the agreement.
Chief Executive Officer Compensation. Effective July 28, 1998, Allen W.
Ritchie was appointed Chief Executive Officer and President of the Company. Mr.
Ritchie served as President and Chief Operating Officer of the Company from
April to July 1998, and as Executive Vice President and Chief Financial Officer
from January to April 1998. In connection with his initial position as Executive
Vice President and Chief Financial Officer, the Compensation Committee
determined that the best interests of the Company's stockholders would be served
by the procurement from Mr. Ritchie of an employment agreement, the terms of
which are described elsewhere in this Proxy Statement. In 1999, the Compensation
Committee granted Mr. Ritchie options to acquire 50,000 shares of Common Stock,
and Mr. Ritchie was awarded an annual cash bonus for 1999 in the amount of
$240,000, in each case to recognize his continued contributions toward achieving
the Company's strategic and financial objectives.
COMPENSATION COMMITTEE
John C. Pope, Chairman
David R. Holbrooke, M.D.
Kevin E. Moley
April 10, 2000
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Acts, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
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STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative stockholder return (assuming the
reinvestment of dividends) on the Common Stock compared to the return of the
Center for Research in Security Prices Total Return Index for the Nasdaq Stock
Market(R) (U.S. Companies) (the "Nasdaq Composite") and the Company's peer group
indices for the periods indicated. The graph reflects the investment of $100 on
December 31, 1994 in the Common Stock, the Nasdaq Composite and the Company's
peer group indices. The Company's former peer group consisted of the following
companies: ADAC Laboratories, Cerner Corporation, IDX Systems Corporation,
McKesson HBOC, Inc., National Data Corporation, and Shared Medical Systems
Corporation (the "1999 Peer Group"). The Company's current peer group index
consists of the following companies: Cerner Corporation, IDX Systems
Corporation, InfoCure Corporation, National Data Corporation, and QuadraMed
Corporation (the "2000 Peer Group"). In revising the Company's former peer group
index, management of the Company took into consideration a number of factors,
including a reevaluation of the business activities of companies in the former
peer group, and an evaluation of the mix of business activities of other
companies that provide solutions to healthcare providers, and selected a group
of companies that management believes best reflects the Company's business
(technology-enabled business management services, financial and clinical
software solutions and Internet-enabled connectivity and e-health solutions for
healthcare providers).
PER-SE NASDAQ COMPOSITE 1999 PEER GROUP 2000 PEER GROUP
------ ---------------- --------------- ---------------
December 1994 100.00 100.00 100.00 100.00
December 1995 159.14 141.35 145.28 137.45
December 1996 48.12 173.90 159.08 168.93
December 1997 27.96 213.08 231.02 225.21
December 1998 14.11 300.19 293.68 289.43
December 1999 12.05 545.75 110.70 350.26
Source: Hewitt Associates L.L.C.
The stock price performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended (together, the "Acts"), except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
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PROPOSAL TO INCREASE SHARES UNDER THE RESTATED STOCK OPTION PLAN
(PROPOSAL 2)
The Board has approved and recommends to the stockholders that they approve
a proposal to increase the number of shares of Common Stock reserved for
issuance under the Company's Second Amended and Restated Stock Option Plan, as
amended (the "Restated Stock Option Plan"), from 2,652,152 shares to 5,652,152
shares, which is an increase of 3,000,000 shares. (The 2,652,152 shares
currently reserved include 860,628 options which have been granted, exercised
and converted into Common Stock. As of March 15, 2000, pursuant to the Restated
Stock Option Plan, the Company had outstanding 1,767,386 options to purchase
shares of Common Stock, and 24,138 options remaining available for grant.
Therefore, in the event that the proposed increase is approved, 3,024,138
options would be available for grant under the Restated Stock Option Plan.)
The proposed increase in shares under the Restated Stock Option Plan will
be adopted upon receiving the affirmative vote of holders of a majority of the
shares present or represented by proxy and entitled to vote at the meeting.
Proxies will be voted in accordance with the specifications marked thereon, and
if no specification is made, will be voted "FOR" adoption of the proposed
increase.
The Board has determined that the proposed increase in shares under the
Restated Stock Option Plan is in the best interests of the Company and its
stockholders. The proposed increase would provide additional shares for grant to
employees of the Company. The Board believes that grants of stock options are an
effective method to attract and retain employees and that the availability of
shares for future grants under the Restated Stock Option Plan is important to
the Company's business prospects and operations.
The following is a summary of the provisions of the Restated Stock Option
Plan. This summary is qualified in its entirety by reference to such plan.
Summary Description of the Restated Stock Option Plan. The purpose of the
Restated Stock Option Plan is to serve as an incentive to encourage stock
ownership by employees of the Company and its subsidiaries, so that they may
acquire or increase their proprietary interest in the Company and share in the
success of the Company, and to encourage them to remain in the employ of the
Company. All options granted under the Restated Stock Option Plan are
non-qualified (nonstatutory) stock options. The only persons eligible to receive
grants of stock options under the Restated Stock Option Plan are the key
employees of the Company and its subsidiaries, as determined by the Compensation
Committee. As of March 15, 2000, approximately 113 employees of the Company held
options under the Restated Stock Option Plan, with exercise prices per share
ranging from $6.00 to $75.00. In 1999, an aggregate of 216,664 of such options
were granted to seven key employees of the Company, including four of the named
executive officers. The Restated Stock Option Plan was first approved by the
stockholders of the Company in 1991. Since its inception, the number of shares
reserved for issuance under the Restated Stock Option Plan has been increased
five times, in each instance with the approval of the Company's stockholders.
The last such increase, approved in 1996, raised the number of reserved shares
to its present level.
The Restated Stock Option Plan is administered by the Compensation
Committee, all of the members of which are disinterested persons within the
meaning of Rule 16b-3 of the Exchange Act. The Compensation Committee has the
power to select option recipients and their allotments and to determine the
price, terms and vesting schedule for the options granted. The exercise price of
the options granted pursuant to the Restated Stock Option Plan is not less than
the fair market value of the Common Stock on the date that the option is
granted. The options typically vest one third per year over a three-year period
and remain outstanding for eleven years. Options granted pursuant to the
Restated Stock Option Plan may not be exercised more than eleven years, or
earlier than six months, after the date of grant.
If an optionee ceases to be an employee of the Company or any parent or
subsidiary of the Company (other than as a result of death or disability or a
change of control event, as described below) before the option is fully vested,
then any unvested portion of the option is forfeited as of such employment
termination date. If an optionee's employment with the Company is terminated by
reason of death or disability during the term of an option, the unexercised
portion of all outstanding options held by the optionee will become fully vested
and
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20
immediately exercisable, and such optionee or his estate will have the right to
exercise the options granted to him at any time within six months after the
termination. Otherwise, an optionee will have the right to exercise his options
at any time within three months after termination of such optionee's employment
with the Company. An option granted under the Restated Stock Option Plan is
exercisable only by the optionee or a permitted transferee, and is not
transferable other than to immediate family members, family trusts or
partnerships, 501(c)(3) entities, certain split interest trusts or pooled income
funds, or by will, by the laws of descent and distribution or pursuant to a
qualified domestic relations order.
The Restated Stock Option Plan provides that, upon the adoption of a plan
of merger or consolidation of the Company with another corporation pursuant to
which the Company's stockholders receive less than 50% of the voting stock of
the surviving or resulting corporation, the adoption of a plan of liquidation or
the approval of the dissolution of the Company, or the sale or transfer of
substantially all of the assets of the Company, the unexercised portion of all
outstanding options under the Restated Stock Option Plan will become fully
vested and immediately exercisable, and will remain exercisable until the
occurrence of such event, after which time all options not exercised will
immediately terminate. In the event of any such occurrence, each optionee
electing to exercise his outstanding options will have a right to sell to the
Company, or the surviving or resulting corporation, the shares which the
optionee received upon exercise of such options at a cash price equal to the
fair market value of such shares or to receive such securities or other property
delivered to stockholders in connection with such transaction by tendering the
shares of Common Stock received upon exercise of such options in the
transaction.
The Restated Stock Option Plan further provides that, upon the sale or
transfer of substantially all of the assets or stock of an operating subsidiary
of the Company or the sale or transfer of substantially all of the assets of an
operating division of the Company or its subsidiaries, the unexercised portion
of all outstanding options held by optionees employed by the affected operating
subsidiary or division who are being terminated from their employment will
become fully vested and immediately exercisable until the earlier of the
expiration of the respective terms of those options or six months following such
termination of employment. In the event of any such occurrence, each affected
optionee electing to exercise outstanding options will have the right to sell to
the Company the shares which the optionee received upon exercise of such options
at a price equal to the fair market value of such shares.
The number of shares of Common Stock covered by the Restated Stock Option
Plan, as well as the number of shares of Common Stock covered by outstanding
options (and the per share purchase price thereof), are subject to adjustment by
the Compensation Committee, without further action by stockholders, in the event
of a stock dividend, stock split or certain other recapitalizations with respect
to the Common Stock. The Compensation Committee may amend the Restated Stock
Option Plan without further stockholder approval, except with respect to a
material increase in the benefits accruing to participants, a material increase
in the number of shares which may be issued or a material modification of the
requirements for eligibility. No amendment may adversely affect any then
outstanding option. Neither the Board nor the Compensation Committee has the
authority to reprice any outstanding stock option.
Estimate of Benefits. The benefits or amounts that will be received by or
allocated to the named executive officers, all current executive officers and
all other key employees under the Restated Stock Option Plan will not change as
a result of the proposed increase, except that additional shares will be
available for issuance under the Restated Stock Option Plan. Such benefits or
amounts are not determinable because all awards are made at the discretion of
the Compensation Committee. Information regarding awards to the Chief Executive
Officer and the other named executive officers in 1999 is provided elsewhere in
this Proxy Statement. See "Certain Information Regarding Executive
Officers -- Stock Option Grants."
Federal Income Tax Consequences. An employee of the Company is not subject
to any federal income tax upon the grant of an option pursuant to the Restated
Stock Option Plan nor will the grant of an option result in an immediate income
tax deduction for the Company.
As a result of the exercise of an option, the employee generally will
recognize ordinary income in an amount equal to the excess, if any, of the fair
market value of the shares transferred to the employee upon
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exercise over the option price. Such fair market value generally will be
determined on the date the stock is transferred pursuant to the exercise.
The Company generally will be entitled to a federal income tax deduction
equal to the amount of ordinary income recognized by the employee when such
ordinary income is recognized by the employee, provided the Company satisfies
applicable federal income tax withholding requirements. The Company's deduction,
however may be subject to disallowance under Section 162(m) of the Code if the
employee's total compensation in the year of exercise of the option exceeds
$1,000,000. The Compensation Committee has considered the provisions of Section
162(m) and the Restated Stock Option Plan was amended in 1996 to make certain
sections of the plan compatible with that provision of the Code, while
maintaining the Compensation Committee's flexibility to exercise business
judgment in determining awards to take account of business conditions or the
performance of individual executives.
Upon the sale or other taxable disposition of shares of Common Stock upon
exercise of an option under the Restated Stock Option Plan, the optionee
recognizes either a short-term or long-term capital gain or loss, depending on
how long such stock was held.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO
INCREASE SHARES UNDER THE RESTATED STOCK OPTION PLAN
PROPOSAL TO INCREASE SHARES UNDER THE DIRECTOR STOCK OPTION PLAN
(PROPOSAL 3)
The Board has approved and recommends to the stockholders that they approve
a proposal to increase the number of shares of Common Stock reserved for
issuance under the Company's Non-Employee Director Stock Option Plan, as amended
(the "Director Stock Option Plan"), from 33,333 shares to 283,333 shares, which
is an increase of 250,000 shares. (The 33,333 shares currently reserved include
1,465 options which have been granted, exercised and converted into Common
Stock. As of March 15, 2000, pursuant to the Director Stock Option Plan, the
Company had outstanding 24,657 options to purchase shares of Common Stock, and
7,211 options remaining available for grant. Therefore, in the event that the
proposed increase is approved, 257,211 options would be available for grant
under the Director Stock Option Plan.)
The proposed increase in shares under the Director Stock Option Plan will
be adopted upon receiving the affirmative vote of holders of a majority of the
shares present or represented by proxy and entitled to vote at the meeting.
Proxies will be voted in accordance with the specifications marked thereon, and
if no specification is made, will be voted "FOR" adoption of the proposed
increase.
The Board has determined that the proposed increase in shares under the
Director Stock Option Plan is in the best interests of the Company and its
stockholders. The proposed increase would provide additional shares for grant to
eligible directors of the Company, and allow awards in amounts which the Board
believes are closer to market level compensation. The Board believes that grants
of stock options are an effective method to attract and retain on the Board
qualified individuals who are not employees of the Company and to align the
interests of those directors with the interests of the Company's stockholders,
and that the proposed increase in shares under the Director Stock Option Plan is
important to the Company's business prospects and operations.
The following is a summary of the provisions of the Director Stock Option
Plan. This summary is qualified in its entirety by reference to such plan.
Summary Description of the Director Stock Option Plan. The purpose of the
Director Stock Option Plan is to attract and retain individuals who are not
employees of the Company to serve as directors of the Company, and to encourage
such directors to acquire an increased proprietary interest in the Company. All
options granted under the Director Stock Option Plan are non-qualified
(nonstatutory) stock options. The only persons eligible to receive grants of
stock options under the Director Stock Option Plan are members of the Board who
are not and have not previously been employees of the Company or its affiliated
group (as defined in Section 1504 of the Internal Revenue Code) ("Non-Employee
Directors"). As of March 15, 2000,
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there were five Non-Employee Directors, holding an aggregate of 24,657 options
under the Director Stock Option Plan with exercise prices ranging from $8.14 to
$135 per share. The Director Stock Option Plan was first approved by the
stockholders of the Company in 1995. The number of shares reserved for issuance
under the Director Stock Option Plan has not previously been increased.
The Director Stock Option Plan provides for initial grants (upon first
election or appointment to the Board), annual grants (once each year following
the annual meeting of stockholders) and special grants of stock options to
Non-Employee Directors. In 1999, an aggregate of 6,663 stock options were
granted to the Non-Employee Directors under the Director Stock Option Plan, at
exercise prices per share ranging from $8.14 (in the case of the initial grant
of 3,333 options to Mr. Moley) to $10.88 (in the case of the annual grants of
666 options to each of Messrs. Hills, Holbrooke, Moley, Pope and Trower). The
Director Stock Option Plan was amended subsequent to those grants to increase
the size of the initial grants and the size of the annual grants from 3,333
stock options and 666 stock options, respectively, to 10,000 stock options in
each instance, and to authorize a special grant of 10,000 stock options to each
Non-Employee Director eligible to participate in the Director Stock Option Plan
as of February 24, 2000. If the recent increases in award amounts and the
proposed increases in shares under the Director Stock Option Plan had been in
effect in 1999, an aggregate of 110,000 stock options would have been granted to
the Non-Employee Directors in 1999 (10,000 options to Mr. Moley as an initial
grant, 50,000 options as annual grants, and an additional 50,000 options as the
special grant). However, the exercise prices of all such options would be the
same as for the 6,663 stock options actually granted to the Non-Employee
Directors in 1999, for which, as of March 15, 2000, there was no positive spread
between the exercise price and the last reported sale price of the Common Stock
on Nasdaq.
The Director Stock Option Plan is administered by the Board. The Board has
no authority, discretion or power to select the Non-Employee Directors who
receive options under the Director Stock Option Plan, or to set or re-set the
exercise price of such options or the period within which such options may be
exercised, except in the sense of administering the plan pursuant to its express
terms. The Board has the authority to set the number of shares of Common Stock
covered by options granted under the Director Stock Option Plan, to set the
timing of such grants and to make special grants from time to time in addition
to the initial and annual grants provided for pursuant to the express terms of
the Director Stock Option Plan. Subject to the foregoing and the provisions of
Section 16(b) of the Exchange Act and Rule 16b-3 thereunder, the Board has the
authority to interpret and construe the provisions of the Director Stock Option
Plan and any agreements issued thereunder and make determinations pursuant to
any Director Stock Option Plan provision or agreement.
The exercise price of the options granted pursuant to the Director Stock
Option Plan is the average of the fair market values of the Common Stock for the
five trading days prior to the date of grant, and such price may be paid in
cash, in Common Stock or a combination thereof. The options vest immediately
upon grant, but are not exercisable until one year after the date of grant,
except in the event of the termination of the optionee's service as a director
by reason of retirement, total and permanent disability, or death, in which
event all of the outstanding options held by such optionee become immediately
exercisable. Options granted pursuant to the Director Stock Option Plan may not
be exercised more than eleven years after the date of grant. An option granted
under the Director Stock Option Plan is exercisable only by the optionee or a
permitted transferee, and is not transferable other than to immediate family
members, family trusts or partnerships, 501(c)(3) entities, certain split
interest trusts or pooled income funds, or by will, by the laws of descent and
distribution or pursuant to a qualified domestic relations order.
The Director Stock Option Plan provides that if the Company agrees to sell
all or substantially all of its assets for cash or property or for a combination
of cash and property or agrees to any merger, consolidation, reorganization or
other corporate transaction in which the Common Stock is converted into another
security or into the right to receive securities or property, or in the event of
the acquisition, directly or indirectly, of the power to vote fifty percent
(50%) or more of the outstanding shares of Common Stock by a person (not
previously possessing such power), acting alone or in conjunction with others,
or a tender or exchange offer is made for Common Stock other than by the
Company, then the unexercised portion of all the outstanding options under the
Director Stock Option Plan will become fully vested and immediately exercisable,
and each optionee will have the right, upon exercise of the option and payment
of the applicable exercise price, to
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receive, at the optionee's election, either the number of shares subject to the
option or, except in limited circumstances, a cash payment equal to the fair
market value of the remaining shares.
The number of shares of Common Stock covered by the Director Stock Option
Plan, as well as the number of shares of Common Stock covered by outstanding
options (and the per share purchase price thereof), are subject to adjustment by
the Board, without further action by stockholders, in the event of a stock
dividend, stock split or certain other recapitalizations with respect to the
Common Stock. The Board may amend the Director Stock Option Plan from time to
time to the extent that the Board deems necessary or appropriate, except that
the Board does not have the authority unilaterally to modify, amend or cancel
any previously granted option without the consent of the optionee.
Estimate of Benefits. The Director Stock Option Plan was recently amended
to increase the size of the initial grants and the size of the annual grants
from 3,333 stock options and 666 stock options, respectively, to 10,000 stock
options in each instance, and to authorize a special grant of 10,000 stock
options to each Non-Employee Director eligible to participate in the Director
Stock Option Plan as of February 24, 2000. If the proposed increase is approved
by the Company's stockholders, additional shares will be available for issuance
under the Director Stock Option Plan to support such awards, and future awards
under the Director Stock Option Plan will be made consistent with such
provisions. The number of options that will be awarded to the Non-Employee
Directors at future dates is not otherwise currently determinable, because the
Board has the authority to set the number of shares of Common Stock covered by
options granted under the Director Stock Option Plan, and to make special grants
thereunder from time to time in addition to the initial and annual grants.
Federal Income Tax Consequences. A Non-Employee Director is not subject to
any federal income tax upon the grant of an option pursuant to the Director
Stock Option Plan, nor will the grant of an option result in an immediate income
tax deduction for the Company. As a result of the exercise of an option under
the Director Stock Option Plan, the Non-Employee Director generally will
recognize ordinary income in an amount equal to the excess, if any, of the fair
market value of the shares transferred to the Non-Employee Director upon
exercise over the option price. Such fair market value generally will be
determined on the date the stock is transferred pursuant to the exercise. The
Company generally will be entitled to a federal income tax deduction equal to
the amount of ordinary income recognized by the Non-Employee Director when such
ordinary income is recognized by the Non-Employee Director, provided the Company
satisfies applicable federal income tax withholding requirements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO
INCREASE SHARES UNDER THE DIRECTOR STOCK OPTION PLAN
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected the firm of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") to serve as independent accountants of the Company
for 2000. PricewaterhouseCoopers has served as independent accountants of the
Company since July 9, 1997. One or more representatives of
PricewaterhouseCoopers will be present at the annual meeting, will have the
opportunity to make a statement if he or she so desires and will be available to
respond to appropriate questions.
OTHER MATTERS
The minutes of the annual meeting of stockholders held on May 6, 1999, and
the minutes of the special meeting of stockholders held November 23, 1999, will
be presented to the meeting, but it is not intended that action taken under the
proxy will constitute approval of the matters referred to in such minutes. The
Board knows of no other matters to be brought before the meeting. However, if
any other matters should come before the meeting, the persons named in the proxy
will vote such proxy in accordance with their judgment.
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STOCKHOLDER PROPOSALS
No stockholder proposals were received for inclusion in this Proxy
Statement. If a stockholder wishes to present a proposal to be included in the
proxy statement for the next annual meeting of stockholders, such proposal must
be submitted in writing in accordance with the following requirements and
procedures.
Nominations for the Board of Directors. The Company expects to hold its
2001 annual meeting of stockholders in May of 2001, although the Company retains
the right to change this date, as it may determine. The By-laws provide, subject
to certain exceptions, that written notice of proposed stockholder nominations
for the election of directors at the 2001 annual meeting of stockholders must be
received by the Secretary of the Company on or before February 5, 2001. Notice
to the Company from a stockholder who proposes to nominate a person for election
as a director must satisfy the requirements of the Securities and Exchange
Commission and the By-laws. Stockholders wishing to nominate persons should
contact the Company's Secretary at 2840 Mt. Wilkinson Parkway, Atlanta, Georgia
30339.
Proposals. Any stockholder who intends to present a proposal to be
included in the Company's proxy materials to be considered for action at the
2001 annual meeting of stockholders must satisfy the requirements of the
Securities and Exchange Commission and the By-laws and, subject to certain
exceptions, the proposal must be received by the Secretary of the Company on or
before February 5, 2001, for review and consideration for inclusion in the
Company's proxy statement and proxy card relating to that meeting.
ANNUAL REPORTS
The Company's annual report to stockholders for the year ended December 31,
1999, which includes the Company's Annual Report on Form 10-K, accompanies this
Proxy Statement. The Company's Annual Report on Form 10-K includes audited
financial statements and a financial statement schedule, as filed with the
Securities and Exchange Commission, except various exhibits thereto. The Company
will provide copies of the exhibits, should they be requested by eligible
stockholders, and the Company may impose a reasonable fee for providing such
exhibits. Requests for copies of those materials should be mailed to:
PER-SE TECHNOLOGIES, INC.
2840 Mt. Wilkinson Parkway
Atlanta, Georgia 30339
Attention: Joanne L. Voorhees
Vice President -- Corporate
Communications
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, facsimile or mail by one or more employees of the Company. Also, the
Company has retained Corporate Investor Communications, Inc. ("CIC") to aid in
soliciting proxies. The Company will pay an estimated fee of $6,000, plus
out-of-pocket expenses, to CIC. The Company also may reimburse brokers, banks,
nominees and other fiduciaries for postage and reasonable clerical expenses of
forwarding the proxy material to their principals who are beneficial owners of
the Company's Common Stock.
RANDOLPH L. M. HUTTO
Executive Vice President,
General Counsel and Secretary
April 10, 2000
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PROXY PER-SE TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 4, 2000
The undersigned hereby appoints ALLEN W. RITCHIE and WAYNE A. TANNER, and each
of them, proxies, with full power of substitution and resubstitution, for and in
the name of the undersigned, to vote all shares of stock of Per-Se Technologies,
Inc. which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders to be held at 10:00 a.m. on Thursday, May 4,
2000, at the offices of Alston & Bird LLP, One Atlantic Center, 1201 West
Peachtree Street, Atlanta, Georgia 30309, and at any adjournment thereof, upon
the matters described in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement, receipt of which is hereby acknowledged, and
upon any other business that may properly come before the meeting or any
adjournment thereof. Said proxies are directed to vote on the matters described
in the Notice of Annual Meeting and Proxy Statement as follows, and otherwise in
their discretion upon such other business as may properly come before the
meeting or any adjournment thereof.
DIRECTORS
1. Directors recommend a vote for election of the following seven (7) nominees:
01 -- Roderick M. Hills [ ] FOR ALL NOMINEES
02 -- David R. Holbrooke, M.D.
03 -- David E. McDowell [ ] WITHHOLD ALL NOMINEES
04 -- Kevin E. Moley
05 -- John C. Pope [ ] WITHHOLD AUTHORITY TO VOTE
06 -- Allen W. Ritchie FOR AN INDIVIDUAL NOMINEE. WRITE
07 -- C. Christopher Trower NUMBER(S) OF NOMINEE(S) BELOW:
------------------------------------
Use Number(s) Only
(Continued, and to be signed, on the other side)
(Continued from other side)
PROPOSALS Directors recommend a vote for each proposal
2. To approve an increase of 3,000,000 shares in the number of shares of the
Company's common stock reserved for issuance under the Company's Second
Amended and Restated Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve an increase of 250,000 shares in the number of shares of the
Company's common stock reserved for issuance under the Company's Non-Employee
Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSALS.
Date: _________________, 2000
______________________________
Please sign exactly as your
name or names appear hereon.
For more than one owner as
shown above, each should sign.
When signing in a fiduciary or
representative capacity,
please give full title. If
this proxy is submitted by a
corporation, it should be
executed in the full corporate
name by a duly authorized
officer; if a partnership,
please sign in partnership
name by authorized person.
PLEASE VOTE YOUR PROXY PROMPTLY VIA MAIL, THE INTERNET OR BY TELEPHONE, WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ON MAY 4, 2000. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED YOUR PROXY.