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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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(Per-Se Logo)
March 30, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Per-Se Technologies, Inc. (the "Company") to be held at 10:00 a.m. on
Thursday, May 3, 2001, at the offices of the Company at 268 West Hospitality
Lane, San Bernardino, California 92408.
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.
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/ Philip M. Pead)
Philip M. Pead
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 3, 2001
---------------------
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
3, 2001, at the offices of the Company at 268 West Hospitality Lane, San
Bernardino, California 92408:
(1) To elect seven (7) directors; and
(2) 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 19, 2001, 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/ CHRIS E. PERKINS
Chris E. Perkins
Executive Vice President and
Chief Financial Officer
Atlanta, Georgia
March 30, 2001
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 3, 2001
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 3, 2001, at the offices of the Company at 268 West Hospitality
Lane, San Bernardino, California 92408, 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 March 30, 2001.
Only stockholders of record as of the close of business on March 19, 2001
(the "Record Date"), will be entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding 29,901,754 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 matter 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 named herein. 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 any proposal other than the election of directors, but 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 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.
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Most stockholders can elect to view 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
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, with the exception of Mr. Philip M.
Pead, who was elected to the Board on November 13, 2000, by the Board to fill
the vacancy resulting from the resignation of Allen W. Ritchie.
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. If, however, 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 70
Director since 1998
Mr. Hills is Chairman and was formerly President of Hills Enterprises, Ltd.
(formerly The Manchester Group Ltd.), an investment 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 Regional Market Makers, Inc.
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DAVID R. HOLBROOKE, M.D.
Age 60
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 58
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. Prior to 1992, Mr. McDowell served for over 25 years as a
senior executive at IBM, including as an IBM Vice President and President of the
National Services Division.
KEVIN E. MOLEY
Age 54
Director since 1999
Mr. Moley is a private investor. 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 Chief Executive Officer 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., a leading 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.
PHILIP M. PEAD
Age 48
Director since 2000
Mr. Pead was elected to the Board in November 2000. Also, in November 2000,
Mr. Pead became the President and Chief Executive Officer of the Company. From
August 1999 to November 2000, Mr. Pead served as Executive Vice President and
Chief Operating Officer of the Company. Mr. Pead joined the Company in April
1997 as a senior executive in the Application Software and e-Health segments of
the Company's business, and he served as the President of those segments from
May 1997 until August 1999. From May 1996 to April 1997, Mr. Pead was employed
by Dun & Bradstreet Application Software as a senior executive with
responsibility for international operations. From August 1994 to May 1996, he
was employed by Attachmate Corporation, a leading provider of communications
software, as a senior executive with responsibility for Asia Pacific and Latin
American operations.
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JOHN C. POPE
Age 52
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.
C. CHRISTOPHER TROWER
Age 52
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. All of the members of the Audit Committee have been
determined by the Board to be independent pursuant to Rule 4200(a)(14) of the
National Association of Securities Dealers' marketplace rules. The Audit
Committee operates under a written charter adopted by the Board, a copy of which
is attached hereto as Appendix A. The responsibilities of the Audit Committee,
which are described in detail in its charter, include responsibility for
recommending which firm to engage as the Company's principal independent
auditors, meeting with the Company's auditors to review the Company's financial
statements and internal accounting controls, oversight of management's
fulfillment of its financial reporting and disclosure responsibilities, and
oversight of the Company's internal audit function.
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.
The Company has 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 and formulating policies with respect to corporate governance. The
Governance Committee also serves as a nominating committee to select
management's nominees for election to the Board. The nominating committee will
consider nominees recommended by stockholders if submitted to the Board in
accordance with the procedures specified in the By-laws. The Governance
Committee may exercise such additional authority as may be prescribed from time
to time by resolution of the Board.
During 2000, the Board met nine (9) times, the Audit Committee met ten (10)
times, the Compensation Committee met seven (7) times and the Governance
Committee met two (2) times. 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 2000.
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DIRECTORS' COMPENSATION
The Company maintains a non-employee director compensation plan, which is
intended 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 10,000 stock options
(upon first election or appointment to the Board) and an annual grant of 10,000
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 (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. As of March
1, 2001, the non-employee directors participating in the Deferred Stock Credit
Plan and the total stock credits accumulated by each of them were as follows:
NAME STOCK CREDITS
- ---- -------------
Roderick M. Hills........................................... 8,501.06
Kevin E. Moley.............................................. 9,116.42
John C. Pope................................................ 11,260.78
C. Christopher Trower....................................... 11,196.86
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.
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MANAGEMENT COMMON STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of February 28, 2001, by (i) each of the Company's
directors, (ii) the Company's named executive officers (as defined herein under
the caption "Certain Information Regarding Executive Officers -- Executive
Compensation"), and (iii) such directors and all executive officers as a group.
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
- ---- ------------ --------
Roderick M. Hills........................................... 13,000(2) *
David R. Holbrooke.......................................... 116,365(3) *
David E. McDowell........................................... 581,349(4) *
Kevin E. Moley.............................................. 13,999(5) *
Philip M. Pead.............................................. 287,226(6) *
John C. Pope................................................ 25,666(7) *
C. Christopher Trower....................................... 16,716(8) *
Allen W. Ritchie............................................ -- *
Chris E. Perkins............................................ 34,000(9) *
Karen B. Andrews............................................ 42,500(10) *
William N. Dagher........................................... 53,330(11) *
Frank B. Murphy............................................. 37,016(12) *
All executive officers and directors as a group (11
persons).................................................. 1,221,167 4.1%
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* 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) Includes 1,000 shares owned through a limited partnership, the Hills Family
Trust. Also includes 12,000 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. Also includes 15,865 shares that are not currently
outstanding, but which may be acquired under the Director Stock Option
Plan.
(4) Includes 7,100 shares held in a trust for Mr. McDowell's son. Also includes
179,583 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 13,999 shares that are not currently outstanding, but which may
be acquired under the Director Stock Option Plan.
(6) Includes 2,116 shares held by family members, for which Mr. Pead disclaims
beneficial ownership. Also includes 189,444 shares that are not currently
outstanding, but which may be acquired under the Restated Stock Option
Plan.
(7) Includes 14,000 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan.
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(8) Includes 1,883 shares held by family members, for which Mr. Trower
disclaims beneficial ownership. Also includes 12,934 shares that are not
currently outstanding, but which may be acquired under the Director Stock
Option Plan.
(9) Includes 33,334 shares that are not currently outstanding, but which may be
acquired under the Restated Stock Option Plan.
(10) Includes 2,500 shares held by Ms. Andrews' husband. Also includes 40,000
shares that are not currently outstanding, but which may be acquired under
the Restated Stock Option Plan.
(11) Includes 51,111 shares that are not currently outstanding, but which may be
acquired under the Restated Stock Option Plan.
(12) Includes 3,681 shares purchased under an employee stock purchase plan. Also
includes 23,334 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, 2000
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).................. 4,112,134 13.8%
6 East 43rd St., 28th Floor, New York, NY 10017
ValueAct Capital Partners, L.P., and affiliates(3).......... 1,906,600 6.4%
One Maritime Plaza, Suite 1400, San Francisco, CA 94111
Whitehall Asset Management, Inc.(4)......................... 1,761,335 5.9%
320 Park Avenue, 10th Floor, New York, NY 10022
Gruber & McBaine Capital Management, LLC(5)................. 1,745,967 5.8%
50 Osgood Place, San Francisco, CA 94133
- ---------------
(1) See Note (1) under "Management Common Stock Ownership."
(2) The information shown is derived from a Form 13F Holdings Report filed on
February 17, 2001, by Basil P. Regan and Regan Partners, L.P.
(3) The information shown is derived from a Schedule 13D filed on December 18,
2000, by (a) ValueAct Capital Partners, L.P. ("ValueAct Partners"), (b)
ValueAct Capital Partners II, L.P. ("ValueAct Partners II"), (c) VA
Partners, L.L.C. ("VA Partners"), (d) Jeffrey W. Ubben, (e) George F. Hamel,
Jr., and (f) Peter H. Kamin, indicating that ValueAct Partners is the
beneficial owner of 1,762,510 shares of the Common Stock, ValueAct Partners
II is the beneficial owner of 144,090 shares of the Common Stock, and that
VA Partners and each of Messrs. Ubben, Hamel and Kamin may be deemed the
beneficial owner of an aggregate of 1,906,600 shares of the Common Stock.
(4) The information shown is derived from a Schedule 13G filed on February 26,
2001, by Whitehall Asset Management, Inc.
(5) The information shown is derived from a Form 13F Holdings Report filed on
February 2, 2001, by Gruber & McBaine Capital Management, LLC.
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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 during 2000, 1999 and 1998 to or on
behalf of each of the individuals serving as the Company's Chief Executive
Officer during 2000, and the four other most highly compensated executive
officers of the Company (collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OTHER SECURITIES
------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
- ---------------------------- ---- -------- -------- --------------- ------------ ---------------
Philip M. Pead................... 2000 $279,040 $111,616 -- 200,000 $ 9,783
President and Chief Executive 1999 256,155 205,000 -- 66,666 8,704
Officer (11/00 -- Present) 1998 262,324 172,308 -- 121,666 7,089
Allen W. Ritchie................. 2000 299,989 -- -- 120,000 11,361
President and Chief Executive 1999 299,991 240,000 -- 50,000 10,862
Officer (through 10/00) 1998 271,154 150,000 -- 316,666 425
Chris E. Perkins................. 2000 163,654 65,461 -- 100,000 --
Executive Vice President and 1999 -- -- -- -- --
Chief Financial Officer 1998 -- -- -- -- --
Karen B. Andrews................. 2000 197,883 59,365 -- 140,000 9,694
President of the Company's 1999 179,230 90,000 -- -- 9,369
Application Software segment 1998 140,962 17,385 -- 36,666 7,053
William N. Dagher................ 2000 201,731 80,692 -- 90,000 10,981
President of the Company's 1999 200,000 165,000 -- -- 10,680
e-Health Solutions segment 1998 154,327 77,163 -- 61,666 4,982
Frank B. Murphy.................. 2000 204,577 81,830 -- 155,000 5,316
President of the Company's 1999 180,691 123,414 -- -- 2,929
Physician Services segment 1998 92,769 48,192 -- 24,999 121
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(1) Did not exceed, for each named officer, the lesser of $50,000 or 10% of such
officer's total annual salary and bonus for such year.
(2) 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. Company contributions under the 401(k) plan for the 2000
fiscal year were as follows: $5,100 for Mr. Pead; $5,100 for Mr. Ritchie; $0
for Mr. Perkins; $5,100 for Ms. Andrews; $5,100 for Mr. Dagher; and $5,100
for Mr. Murphy. No contributions were made for the 2000 fiscal year to any
of the named executive officers under the non-qualified deferred
compensation plan. The amount of insurance premiums paid for each of the
named executive officers for the 2000 fiscal year was: $4,683 for Mr. Pead;
$6,261 for Mr. Ritchie; $0 for Mr. Perkins; $4,594 for Ms. Andrews: $5,881
for Mr. Dagher; and $216 for Mr. Murphy.
8
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STOCK OPTION GRANTS
The following table sets forth information with respect to stock options
granted to each of the named executive officers during 2000.
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 2000 SHARE)(1) DATE 5% 10%
- ---- ---------- ------------ ---------- ---------- -------- ----------
Philip M. Pead............. 100,000 3.76% $7.6250 1/20/11 $541,634 $1,413,001
100,000 3.76 3.7500 11/13/11 266,377 694,919
Allen W. Ritchie........... 120,000 4.51 7.6250 11/13/00 --(3) --(3)
Chris E. Perkins........... 100,000 3.76 5.6250 4/03/11 399,566 1,042,378
Karen B. Andrews........... 30,000 1.13 7.6250 1/20/11 162,490 423,900
50,000 1.88 6.9063 5/04/11 245,289 639,904
60,000 2.26 3.7500 11/13/11 159,826 416,951
William N. Dagher.......... 30,000 1.13 7.6250 1/20/11 162,490 423,900
60,000 2.26 3.7500 11/13/11 159,827 416,951
Frank B. Murphy............ 20,000 0.75 7.6250 1/20/11 108,327 282,600
75,000 2.82 6.9063 5/04/11 367,934 959,857
60,000 2.26 3.7500 11/13/11 159,826 416,951
- ---------------
(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.
(3) These options were forfeited upon the termination of Mr. Ritchie's
employment with the Company.
STOCK OPTION EXERCISES
None of the named executive officers exercised any stock options during
2000, with the exception of Mr. Dagher. 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, 2000. 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, 2000.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
Philip M. Pead.................. -- -- 144,999 284,999 -- --
Allen W. Ritchie................ -- -- 227,779 -- -- --
Chris E. Perkins................ -- -- -- 100,000 -- --
Karen B. Andrews................ -- -- 27,778 152,221 -- --
William N. Dagher............... 8,334 $19,272 32,778 110,554 -- --
Frank B. Murphy................. -- -- 16,667 163,332 -- --
9
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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, the Company paid Mr. McDowell a
signing incentive of $500,000, and agreed to pay him a base salary of at least
$300,000 per year. The Company also agreed to reimburse Mr. McDowell for certain
expenses, including housing and travel expenses, and to pay him 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 November 2000, in connection with his promotion from Executive Vice
President and Chief Operating Officer to President and Chief Executive Officer
of the Company, the Company and Philip M. Pead entered into a three-year
employment agreement which contains certain non-competition, non-solicitation
and change in control provisions. Pursuant to that agreement, which replaced a
two-year employment agreement entered into in June 1999 between Mr. Pead and one
of the Company's subsidiaries, Mr. Pead's base salary was increased from
$250,000 to $310,000 per year (subject to adjustments by any increases given in
the normal course of business), and the annual incentive compensation payment
that he is eligible to receive, which is payable at the discretion of the Board,
was increased from a maximum of 80% of his base salary to a maximum of 100% of
his base salary. 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
severance consideration equal to two years of salary continuation at his then
current salary level, but without the right to receive any incentive bonus
payments, and two years of health and welfare benefits continuation. 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 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. In all such events of termination, Mr. Pead is entitled to a tax
equalization payment with respect to any tax which may be imposed by Section
4999 of the Code. The Company also agreed to loan Mr. Pead the amount of
$250,000 for the purchase of shares of Common Stock, and Mr. Pead used that
amount in November 2000 to purchase an aggregate of 74,000 shares of Common
10
14
Stock. The loan, which is evidenced by a promissory note executed by Mr. Pead
and secured by those shares, is payable in full upon the earlier to occur of the
termination of Mr. Pead's employment by the Company or the sale of all or any
part of the shares. The terms of the promissory note provide that any overdue
payment shall bear interest at a rate equal to the rate of interest then imputed
by the Internal Revenue Service plus 4% per annum, or the maximum rate permitted
by law, whichever is lower, but such terms do not otherwise require the payment
of interest.
In April 2000, the Company and Chris E. Perkins, then the Senior Vice
President, Corporate Development of the Company, entered into a three-year
employment agreement which contains certain non-competition, non-solicitation
and change in control provisions. That agreement provides that Mr. Perkins will
be paid a base salary of $230,000 per year, subject to adjustments in the normal
course of business, and that he is eligible for an annual incentive compensation
payment of up to 80% of his base salary, payable at the discretion of the Board.
Upon early termination of Mr. Perkins' employment by the Company other than for
cause or by Mr. Perkins for "good reason," Mr. Perkins is entitled to elect
severance consideration equal to the greater of two years of salary 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, plus benefit continuation for the lesser of eighteen months and the
number of months remaining in the initial term of the agreement. In the event
Mr. Perkins' 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. Perkins also received options to purchase up to 100,000 shares of
Common Stock.
In February 2001, in connection with his promotion from Senior Vice
President, Corporate Development to Executive Vice President and Chief Financial
Officer of the Company, the employment agreement between the Company and Mr.
Perkins was amended to increase his base salary to $250,000 per year, and to
provide for Mr. Perkins to receive options to purchase an additional 100,000
shares of Common Stock.
In March 2001, the Company and Karen B. Andrews, a Senior Vice President of
the Company and President of the Company's Application Software segment, entered
into a two-year employment agreement which contains certain non-competition,
non-solicitation and change in control provisions. That agreement provides that
Ms. Andrews will be paid a base salary of $225,000 per year (subject to
adjustments by any increases given in the normal course of business), and that
she is eligible for an annual incentive compensation payment of up to 80% of her
base salary, payable at the discretion of the Board. Upon early termination of
Ms. Andrews's employment by the Company other than for cause or for "good
reason," Ms. Andrews is entitled to receive a severance payment equal to her
then current monthly salary multiplied by the greater of the number of months
remaining in the term of the agreement or twelve, and she is also entitled to
continuation of certain health and welfare benefits. In the event Ms. Andrews's
employment by the Company is terminated in connection with a change in control
of the Company, she is entitled to receive a severance payment equal to one year
of salary continuation at her then current base salary, or the payments due and
owing to her under the remaining term of the agreement, whichever is greater. 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.
In January 1998, the Company and William N. Dagher, then the Senior Vice
President and Chief Information Officer of the Company, entered into a two-year
employment agreement which contains certain non-competition, non-solicitation
and change in control provisions. That agreement provides that Mr. Dagher will
be paid a base salary of $175,000 per year (subject to adjustments by any
increases given in the normal course of business), and that he is eligible for
an annual incentive compensation payment of up to 50% of his base salary,
payable at the discretion of the Board. Upon early termination of Mr. Dagher's
employment by the Company other than for cause, Mr. Dagher is entitled to
receive salary continuation and health benefit continuation for the balance of
the term of the agreement, or nine months of salary in a lump sum, whichever is
greater. In the event Mr. Dagher'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 nine months of salary
11
15
continuation at his then current base salary, or the payments due and owing to
him under the remaining term of the agreement, whichever is greater. 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. Mr. Dagher also received options to purchase up to 25,000 shares of
Common Stock. As provided in the agreement, the term thereof has continued in
effect beyond the initial two-year term for successive one-year terms. The
current term of the agreement extends to January 31, 2002. Mr. Dagher currently
serves as Senior Vice President of the Company and President of the Company's
e-Health Solutions segment.
In June 1998, the Company and Frank B. Murphy, then the Senior Vice
President -- Physician Management of the Company, entered into a two-year
employment agreement which contains certain non-competition, non-solicitation
and change in control provisions. That agreement provides that Mr. Murphy will
be paid a base salary of $180,000 per year (subject to adjustments by any
increases given in the normal course of business), and that he is eligible for
an annual incentive compensation payment of up to 80% of his base salary,
payable at the discretion of the Board. Upon early termination of Mr. Murphy's
employment by the Company other than for cause or for "good reason," Mr. Murphy
is entitled to receive a severance payment equal to his then current monthly
salary multiplied by the greater of the number of months remaining in the term
of the agreement or twelve, and he is also entitled to continuation of certain
health and welfare benefits. In the event Mr. Murphy'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 one year of salary continuation
at his then current base salary, or the payments due and owing to him under the
remaining term of the agreement, whichever is greater. 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. Mr.
Murphy also received options to purchase up to 24,999 shares of Common Stock. As
provided in the agreement, the term thereof has continued in effect beyond the
initial two-year term for successive one-year terms. The current term of the
agreement extends to June 15, 2001. Mr. Murphy currently serves as Senior Vice
President of the Company and President of the Company's Physician Services
segment.
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 contained certain non-competition, non-solicitation
and change in control provisions. That agreement provides that Mr. Ritchie will
be paid a base salary of $300,000 per year, subject to adjustments in the normal
course of business, and that he is eligible for an annual incentive compensation
payment of up to 80% of his base salary, payable at the discretion of the Board.
The Company agreed that upon early termination of Mr. Ritchie's employment by
the Company other than for cause or by Mr. Ritchie for "good reason," Mr.
Ritchie would be 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 April 1998, Mr. Ritchie was
appointed President and Chief Operating Officer of the Company, and in July
1998, Mr. Ritchie was promoted to President and Chief Executive Officer of the
Company, and became a member of the Board.
In November 2000, Mr. Ritchie resigned his position as President and Chief
Executive Officer of the Company, and from the Board. In connection with his
resignation, the Company entered into an agreement with Mr. Ritchie which
acknowledges the termination of the foregoing employment agreement and contains
a general release of the Company and certain confidentiality, non-competition
and non-solicitation provisions. Pursuant to that agreement, Mr. Ritchie is
entitled to receive two years of salary continuation, payment by the Company of
his premium for COBRA benefits for eighteen months, and payment by the Company
of his premium for existing disability insurance for two years.
12
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SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (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 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is certain information as of December 31, 2000, regarding
an outstanding loan made pursuant to the employment agreement between the
Company and Philip M. Pead, the Company's President and Chief Executive Officer
and a member of the Board.
LARGEST AGGREGATE AMOUNT BALANCE AS
NAME AND POSITION NATURE OF INDEBTEDNESS OUTSTANDING IN 2000 OF 12/31/00 INTEREST RATE
- ----------------- ------------------------ ------------------------ ----------- -------------
Philip M. Pead,
President and CEO..... Common Stock purchase(1) $250,000 $250,000 (2)
- ---------------
(1) The loan is secured by an aggregate of 74,000 shares of Common Stock, and is
payable in full upon the earlier to occur of the termination of Mr. Pead's
employment or the sale of all or any part of those shares.
(2) The terms of the loan provide that any overdue payment shall bear interest
at a rate equal to the rate of interest then imputed by the Internal Revenue
Service plus 4% per annum, or the maximum rate permitted by law, whichever
is lower, but such terms do not otherwise require the payment of interest.
13
17
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 outsourcing
services, financial and clinical software solutions and Internet-enabled
e-health solutions to healthcare providers and payers, and generates favorable
returns for its stockholders in the process. The program is designed to provide
total compensation that represents competitive compensation for the Company's
executive officers, including incentive compensation and other 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. The
amounts of such awards are based on the performance of the Company, the
performance of the business units reporting to the executive, and the
performance of the executive, measured in each case in terms of attainment of
established objectives.
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 to five
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
14
18
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 2000 that was 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 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 November 13, 2000, Philip
M. Pead was promoted from the office of Executive Vice President and Chief
Operating Officer of the Company to the office of President and Chief Executive
Officer of the Company. Mr. Pead replaced Allen W. Ritchie, who resigned as the
Company's President and Chief Executive Officer effective concurrent with Mr.
Pead's promotion. In connection with his promotion, the Compensation Committee
determined that the best interests of the Company's stockholders would be served
by the procurement from Mr. Pead of a new employment agreement, the terms of
which are described elsewhere in this Proxy Statement. In 2000, also in
connection with his promotion, the Compensation Committee granted Mr. Pead
options to acquire 100,000 shares of Common Stock. Mr. Pead has also been
awarded an annual cash bonus for 2000 in the amount of $111,616, in recognition
of his continuing contributions toward attainment of the Company's financial and
strategic objectives.
COMPENSATION COMMITTEE
John C. Pope, Chairman
David R. Holbrooke, M.D.
Kevin E. Moley
March 30, 2001
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 Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
15
19
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three independent directors and operates
under a written charter adopted by the Board. A copy of the Audit Committee's
charter is attached hereto as Appendix A.
Management of the Company is responsible for the Company's internal
controls and the financial reporting process. The Company's independent
accountants are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and for issuing a report thereon. The Audit Committee's responsibility
is to monitor and oversee those processes.
In this context, the Audit Committee has met and held discussions with
management and the Company's independent accountants. Management has represented
to the Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated financial statements
with management and the independent accountants. The Audit Committee also
discussed with the independent accountants matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Audit Committee
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants that firm's independence.
Based on the Audit Committee's discussions with management and the
independent accountants and the Audit Committee's review of the representations
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, filed with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Roderick M. Hills, Chairman
Kevin E. Moley
C. Christopher Trower
March 30, 2001
The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
16
20
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" (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, 1995 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: Cerner Corporation, IDX Systems Corporation, InfoCure Corporation,
National Data Corporation, and QuadraMed Corporation (the "2000 Peer Group").
The Company's current peer group index consists of the following companies:
Cerner Corporation, IDX Systems Corporation, Eclipsys Corporation, National Data
Corporation, and WebMD Corporation (the "2001 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
outsourcing services, financial and clinical software solutions and
Internet-enabled e-health solutions to healthcare providers and payers).
PER-SE NASDAQ COMPOSITE 2000 PEER GROUP 2001 PEER GROUP
------ ---------------- --------------- ---------------
Dec 1995 $100.00 $100.00 $100.00 $100.00
Dec 1996 $ 30.24 $123.03 $109.43 $109.43
Dec 1997 $ 17.57 $150.69 $125.64 $118.78
Dec 1998 $ 8.87 $212.45 $156.93 $154.15
Dec 1999 $ 7.57 $394.73 $121.81 $102.37
Dec 2000 $ 3.14 $237.55 $112.83 $ 49.96
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 or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
17
21
SELECTION OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") serves as
independent accountants of the Company. 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.
PRICEWATERHOUSECOOPERS FEES FOR 2000
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2000 and for the reviews of the financial
statements included in the Company's Forms 10-Q filed during 2000 was $477,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed by PricewaterhouseCoopers for services rendered to the
Company during the fiscal year ending December 31, 2000, in connection with
operating, or supervising the operation of, the Company's information system or
managing the Company's local area network, or designing or implementing a
hardware or software system that aggregates source data underlying the Company's
financial statements or generates information that is significant to the
Company's financial statements.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers for services rendered
to the Company during the fiscal year ending December 31, 2000, other than those
services described above, was $481,355.
AUDIT COMMITTEE REVIEW
The Company's Audit Committee has reviewed the services rendered and the
fees billed by PricewaterhouseCoopers for the fiscal year ending December 31,
2000. The Audit Committee has determined that the services rendered and the fees
billed last year that were not related to the audit of the Company's financial
statements are compatible with the independence of PricewaterhouseCoopers as the
Company's independent accountants.
OTHER MATTERS
The minutes of the Annual Meeting of Stockholders held on May 4, 2000, 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
2002 Annual Meeting of Stockholders in May of 2002, 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 2002 Annual Meeting of Stockholders must be
received by the Secretary of the Company on or before February 1, 2002. 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
2002 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 1, 2002, 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,
2000, 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
consolidated 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: Michele L. Howard
Vice President -- Investor Relations
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. 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.
CHRIS E. PERKINS
Executive Vice President and
Chief Financial Officer
March 30, 2001
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APPENDIX A
PER-SE TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE MISSION
The Audit Committee has primary oversight responsibility for the Company's
financial reporting, internal controls, and business ethics. It serves as the
primary interface with the Company's external and internal auditors. The key to
successful performance of its functions is strict independence from Company
management combined with a thorough understanding of the Company's business and
material financial reporting and internal control policies and procedures.
II. MEMBERSHIP AND QUALIFICATIONS OF AUDIT COMMITTEE MEMBERS
A. Number of Members. The Audit Committee shall at all times contain a
minimum of three members.
B. Qualifications.
1. Independence. All Audit Committee members shall be non-management
directors of the Company. Each must be free from any relationship that
would interfere with the exercise of his or her independent judgment.
Employees, advisors, or consultants to the Company shall not be eligible
for membership on the Audit Committee.
2. Experience. Each member shall have or gain sufficient
understanding of the Company's financial reporting and internal control
policies and procedures to enable them to give consideration to material
financial reporting and control issues as they arise. At least one member
of the Committee shall have accounting or related financial management
expertise as determined by the Board of Directors.
III. AUDIT COMMITTEE MEETINGS
A. Frequency. The Audit Committee shall meet at least four times annually.
B. Time of Meetings. Meetings shall occur at the following times, among
others: Prior to commencement of the annual audit, prior to completion of the
annual audit, and prior to the release of each quarterly financial report.
C. Executive Session. Each Audit Committee meeting shall include an
opportunity for an executive session held without management present.
D. Written Agendas and Minutes. Each Audit Committee meeting shall have a
written agenda, and written minutes of the meeting shall be prepared and
maintained.
E. Reporting to Board of Directors. The Audit Committee shall keep the
Board of Directors apprised of its activities and shall advise the Board in
detail of its material findings on a regular basis.
IV. DIRECT ACCESS TO ADVISORS AND INTERNAL INFORMATION
The Audit Committee shall at all times have direct access to the Company's
financial and legal advisors, including the Company's independent auditors and
outside counsel. In fulfilling its functions, the Audit Committee shall have the
right to hire counsel, public accountants, and other advisors, although such
retention would normally occur only when special circumstances arise. The Audit
Committee shall likewise have direct and unrestricted access to all relevant
internal Company information.
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V. AUDIT COMMITTEE RESPONSIBILITIES
The independent auditors are ultimately accountable to the Board of
Directors and to the Audit Committee, as representatives of the stockholders,
and the Board of Directors and the Committee have the ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace the
independent auditors. The following list of Audit Committee responsibilities is
illustrative only. The Audit Committee shall discharge responsibilities in
addition to those enumerated below as it deems prudent in light of the state of
the Company's financial reporting and internal control structure and other
relevant circumstances.
A. Responsibilities Regarding Outside Auditors.
1. Recommending which firm to engage as the Company's principal
independent auditors and whether to terminate that relationship.
2. Reviewing the independent auditors' compensation, proposed terms of
engagement and independence. This evaluation shall include review of a
formal written statement delineating all relationships between the
independent auditors and the Company consistent with Independence Standards
Board Standard 1, discussion with the independent auditors with respect to
any disclosed relationships, and consideration of any effect that
relationships or non-audit services provided by the independent auditors to
the Company may have on the auditors' objectivity and independence. Taking
or recommending that the Board take appropriate action to ensure the
independence of the independent auditors.
3. Serving as a channel of communication between the independent
auditors and the Board of Directors.
4. Reviewing the results of each independent audit, including any
qualifications in the independent auditors' opinion, and any related
management letter, and requiring a review by the independent auditors
pursuant to SAS 71 of the Company's quarterly financial statements and
reviewing the results of such review with the independent auditors prior to
public announcement of financial results for the quarter.
5. Reviewing the Company's annual financial statements and any
material disputes which have arisen between management and the independent
auditors in connection with the preparation of those financial statements.
6. Reviewing the Statements of Adjustments Passed prepared by the
independent auditors in connection with their review of the Company's
financial statements.
7. Periodic meetings with the independent auditors, in which the
following subject areas, along with such other subject areas as the Audit
Committee deems appropriate, should be discussed at least once each year.
a. What are the Company's primary internal control risks and areas
of financial reporting weaknesses, and how they can be improved.
b. Whether the independent auditors have noticed any end of the
year or unusually large transactions, which require further
investigation.
c. Whether the independent auditors have had any material
disagreement with management regarding financial reporting or internal
control matters.
d. Whether the independent auditors have had the full cooperation
of management in connection with the audit.
e. The quality of the Company's accounting principles as applied in
its financial reporting.
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B. Responsibilities Regarding Company Management.
1. Ascertaining from senior management the Company's primary business
and financial exposure risks.
2. Reviewing senior management's responses to the recommendations of
the independent and internal auditors.
3. Periodic meetings with senior management in which the following
matters should be discussed at least annually.
a. Company budgets and forecasts.
b. Company compliance with internal codes of ethics and other
internal procedures.
c. Regulatory compliance.
C. Responsibility Regarding Internal Auditor.
1. To oversee the establishment of an internal audit function either
at the Company or through some independent third party and the retention of
qualified personnel to staff and manage such department or the retention of
a qualified third party to provide internal audit services.
2. Ascertaining the nature of and reviewing the internal audit plan.
3. Ascertaining appropriate staffing levels or service levels for the
internal audit function.
4. Reviewing the appointment and replacement of the senior auditing
executive or the provider of internal audit services, as appropriate.
5. Serving as a channel of communication between the internal auditors
and the Board.
6. Regular meetings with the internal auditing staff, in which the
following subject areas, along with such other subject areas, as the Audit
Committee deems appropriate, should be discussed.
a. What are the strengths and weaknesses of the Company's internal
financial controls.
b. What efforts have been taken to uncover errors or
irregularities, and what has been the result of those efforts.
D. Responsibilities Regarding Disclosure.
1. To prepare a report from the Committee, such report to include all
information required by federal securities laws and regulations, as in
effect from time to time, for inclusion in the Company's proxy statements,
commencing no later than the first proxy statement with respect to a
stockholder vote occurring after December 31, 2000.
2. To review at least annually the Charter of the Committee, making
such amendments and modifications as it deems appropriate from time to
time, and to file a copy of the then-current Committee Charter as an
appendix to the Company's proxy statement at least once every three years.
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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 3, 2001
The undersigned hereby appoints PHILIP M. PEAD and CHRIS E. PERKINS 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 3,
2001, at the offices of the Company at 268 West Hospitality Lane, San
Bernardino, California 92408, 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:
[ ] FOR ALL NOMINEES
01 -- Roderick M. Hills
02 -- David R. Holbrooke, M.D.
[ ] WITHHOLD ALL NOMINEES
03 -- David E. McDowell
04 -- Kevin E. Moley
[ ] WITHHOLD AUTHORITY TO VOTE
05 -- Philip M. Pead
FOR AN INDIVIDUAL NOMINEE. WRITE
06 -- John C. Pope
NUMBER(S) OF NOMINEE(S) BELOW:
07 -- C. Christopher Trower
-----------------------------------
Use Number(s) Only
(Continued, and to be signed, on the other side)
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSAL.
Date: -----------------, 2001
------------------------------
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 3, 2001. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED YOUR PROXY.