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 under Rule 14a-12
Per-Se Technologies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(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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(4) Date Filed:
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(Per-Se Logo)
May 12, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of Stockholders
of Per-Se Technologies, Inc. (the "Company") to be held at 8:00 a.m. on Monday,
June 7, 2004, at the offices of Alston & Bird LLP, One Atlantic Center, 1201
West Peachtree Street, Atlanta, GA 30309.
At the Annual Meeting, eight people will be elected to the Board of
Directors. The Board of Directors recommends that you vote FOR the election of
the eight 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
Chairman, 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
(Per-Se Logo)
PER-SE TECHNOLOGIES, INC.
2840 MT. WILKINSON PARKWAY
ATLANTA, GEORGIA 30339
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 2004
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Per-Se
Technologies, Inc. (the "Company") will be held at 8:00 a.m. on Monday, June 7,
2004, at the offices of Alston & Bird LLP, One Atlantic Center, 1201 West
Peachtree Street, Atlanta, GA 30309:
(1) To elect eight (8) 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
May 12, 2004, 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/ Paul J. Quiner
Paul J. Quiner
Senior Vice President,
General Counsel and Secretary
Atlanta, Georgia
May 12, 2004
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.
PER-SE TECHNOLOGIES, INC.
2840 MT. WILKINSON PARKWAY
ATLANTA, GEORGIA 30339
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 2004
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 8:00 a.m. on
Monday, June 7, 2004, at the offices of Alston & Bird LLP, One Atlantic Center,
1201 West Peachtree Street, Atlanta, GA 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 May 18,
2004.
Only stockholders of record as of the close of business on May 12, 2004
(the "Record Date"), will be entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding 31,620,591 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.
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
recommendation of the Board. The Board's recommendation is set forth in this
Proxy Statement with the description of the matter to be voted on. In summary,
the Board recommends a vote FOR each of the director nominees. 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, as amended (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"). 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 instructions 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.
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. 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)
The Board recommends the election of each of the nominees listed below for
the office of director to hold office until the next Annual Meeting and until
his successor is 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. Jeffrey W. Ubben, who was elected by
the Board on May 14, 2003.
The Board has no reason to believe that any of the director nominees 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 eight 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, stockholders may:
(i) vote "for" all of the director nominees, (ii) "withhold" authority to vote
for all of the nominees, or (iii) withhold authority to vote for any individual
nominee or nominees but vote for all other nominees. 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE EIGHT NOMINEES
NAMED IN THIS PROXY STATEMENT
BOARD OF DIRECTORS
DIRECTOR NOMINEES
The Company currently has eight directors, each of whom holds office until
the Annual Meeting of Stockholders and until his successor is elected and
qualified. All eight 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.
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STEPHEN A. GEORGE, M.D.
Age 51
Director since 2002
Dr. George is the President of Medvice, Inc., a provider of advisory
services and investment capital to healthcare and technology companies and has
held that position since October 1998. He serves as Clinical Assistant Professor
at the University of Washington in the Department of Health Services. Dr. George
also held the positions of Chairman and Chief Executive Officer of NexCura, Inc.
("NexCura") from September 2000 through May 2002. NexCura is a software
development, medical informatics and e-communications firm which serves the
treatment decision support needs of patients suffering from chronic diseases.
From June 1993 to July 1998, Dr. George held the positions of Chairman and Chief
Executive Officer of First Physician Care, Inc., a privately held physician
practice management company that he founded in 1993, which was sold to a
publicly-held physician practice management company in 1998.
DAVID R. HOLBROOKE, M.D.
Age 63
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 33-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.
CRAIG MACNAB
Age 48
Director since 2002
Mr. Macnab is the Chief Executive Officer of Commercial Net Lease Realty,
Inc. (NYSE: NNN), an equity real estate investment trust ("REIT"). From April
2000 until March 2003, Mr. Macnab was the Chief Executive Officer of JDN Realty
Corporation, an Atlanta-based REIT specializing in the development and
management of retail shopping centers. From 1997 to 1999, Mr. Macnab was the
President of Tandem Capital, a venture capital firm that provided growth
capital, primarily mezzanine debt, to small public companies. Mr. Macnab's prior
experience includes having been an investment banker for seven years at Lazard
Freres & Co. in New York and six years at J.C. Bradford & Co., where he was
co-head of the merger and acquisition department. Mr. Macnab also serves on the
Board of Directors of Developers Diversified Realty Corporation, a
self-administered and self-managed REIT operating as a fully integrated real
estate company that acquires, develops, leases and manages shopping centers.
DAVID E. MCDOWELL
Age 61
Director since 1996
Mr. McDowell is the former Chairman and Chief Executive Officer of the
Company. He served as Chairman of the Board from October 1996 to May 2003, and
as Chief Executive Officer of the Company from October 1996 to July 1998. 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 a Vice President and President of the
National Services Division.
3
PHILIP M. PEAD
Age 51
Director since 2000
Mr. Pead is the Chairman, President and Chief Executive Officer of the
Company. He has served as Chairman of the Board since May 2003, and as President
and Chief Executive Officer of the Company since November 2000. 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 hospital software business and formed the Company's
electronic transaction processing business segment in 1999. He served as the
President of the hospital software business from May 1997 until August 1999.
From May 1996 to April 1997, Mr. Pead was employed by Dun & Bradstreet Software
as a senior executive with responsibility for international operations.
JOHN C. POPE
Age 55
Director since 1997
Mr. Pope has been Chairman of PFI Group, LLC, 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. Prior to joining MotivePower Industries, Inc., Mr. Pope
served in various capacities with United Airlines and its parent, UAL
Corporation, including as a Director, Vice Chairman, President, Chief Operating
Officer, Chief Financial Officer, and Executive Vice President, Marketing and
Finance. Prior to that time, he served as Senior Vice President of Finance,
Chief Financial Officer and Treasurer for American Airlines and its parent, AMR
Corporation. He also serves on the Board of Directors of Air Canada, CNF, Inc.,
Dollar Thrifty Automotive Group Inc., Federal-Mogul Corporation, Kraft Foods,
Inc., R.R. Donnelley & Sons Company and Waste Management, Inc. Mr. Pope will
resign as a director of Air Canada and Federal-Mogul Corporation upon each such
corporation emerging from reorganization proceedings, which is anticipated to
occur for each corporation in the latter half of 2004.
C. CHRISTOPHER TROWER
Age 55
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.
JEFFREY W. UBBEN
Age 42
Director since 2003
Mr. Ubben is a founder and Managing Partner of VA Partners, L.L.C., an
investment partnership. From 1995 to 2000, Mr. Ubben was a Managing Partner of
Blum Capital. Prior to that, he was a portfolio manager for Fidelity Investments
from 1987 to 1995. Mr. Ubben is also a member of the Board of Directors of
Mentor Corporation and Martha Stewart Living Omnimedia, Inc., where he is
currently Chairman of the Board.
INDEPENDENT DIRECTORS
The Board consists of a substantial majority of independent directors, as
independence is defined in National Association of Securities Dealers, Inc.
("NASD") Rule 4200(a)(15), the standard applicable to the Company as a
Nasdaq-listed issuer. The directors that the Board has determined to be
independent under NASD Rule 4200(a)(15) are Stephen A. George, M.D., David R.
Holbrooke, M.D., Craig Macnab, John C.
4
Pope, C. Christopher Trower, and Jeffrey W. Ubben. The independent directors
meet regularly in executive sessions at which only independent directors are
present, in accordance with NASD Rule 4350(c)(2).
In May 2003, in connection with Philip M. Pead's election as the Company's
Chairman of the Board, the Board elected Mr. Pope as the Company's Lead
Independent Director. The primary duties of the Lead Independent Director are to
chair meetings of the independent directors, to consult with the Chairman of the
Board regarding Board meeting agendas, schedules and information flow, to
facilitate communications between the independent directors, the Chairman and
management, and to be of counsel to the Chairman and Chief Executive Officer.
COMMITTEES OF THE BOARD
The Board has established five standing committees: the Audit,
Compensation, Compliance, Finance, and Governance Committees. The Audit,
Compensation and Governance Committees consist entirely of independent directors
as defined by NASD Rule 4200(a)(15). The Compliance and Finance Committees
consist of a majority of independent directors. The members and the Chairman of
each committee are nominated by the Governance Committee (which also serves as a
nominating committee) and are elected by the Board. All of the committees report
on their activities to the Board.
The Audit Committee of the Board (the "Audit Committee") is composed of
John C. Pope, Chairman, David R. Holbrooke, M.D., Craig Macnab and C.
Christopher Trower, each of whom meets the requirements for audit committee
membership set forth in NASD Rule 4350(d)(2), including the criteria for
independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of
1934, as amended. The Company believes that the Chairman of the Audit Committee,
Mr. Pope, qualifies as an "audit committee financial expert" within the meaning
of rules adopted by the Securities and Exchange Commission under Section 407 of
the Sarbanes-Oxley Act of 2002. In addition, the Company believes that Mr.
Pope's past experience and background, including his experience as a chief
financial officer, results in his financial sophistication within the meaning of
NASD Rule 4350(d)(2). The Audit Committee has direct responsibility for the
appointment and discharge, determination of compensation and oversight of the
Company's independent auditors, oversight of management's fulfillment of its
financial reporting and disclosure responsibilities, and oversight of the
Company's internal audit function. A copy of the Charter of the Audit Committee,
which specifies the items enumerated in NASD Rule 4350(d)(1), is posted in the
corporate governance area of the investors section of the Company's Internet
website at www.per-se.com. The Audit Committee reviews and reassesses the
adequacy of its Charter on an annual basis, in accordance with NASD Rule
4350(d)(1).
The Compensation Committee of the Board (the "Compensation Committee") is
composed of Jeffrey W. Ubben, Chairman, Stephen A. George, M.D., David R.
Holbrooke, M.D., John C. Pope and C. Christopher Trower, each of whom is
independent as defined by NASD Rule 4200(a)(15). The duties of the Compensation
Committee include determining all compensation, allowances and benefits for
officers of the Company. The Committee makes such determination with respect to
the Chief Executive Officer of the Company at a meeting in executive session, at
which only members of the Compensation Committee are present. A copy of the
Charter of the Compensation Committee, which addresses such determinations, is
posted in the corporate governance area of the investors section of the
Company's Internet website at www.per-se.com. The Compensation Committee's
policies applicable to compensation of the Company's executive officers during
2003 are described herein under the caption "Compensation Committee Report on
Executive Compensation."
The Compliance Committee of the Board (the "Compliance Committee") is
composed of C. Christopher Trower, Chairman, Stephen A. George, M.D., and Philip
M. Pead. The Compliance Committee has oversight responsibility for the Company's
compliance with laws, rules and regulations applicable to the conduct of its
medical billing and collection activities, electronic claims processing
activities, and other aspects of its business operations, including compliance
with regulations issued under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). The Compliance Committee may exercise such
additional authority as may be prescribed from time to time by resolution of the
Board.
5
The Finance Committee of the Board (the "Finance Committee") is composed of
Craig Macnab, Chairman, David E. McDowell, John C. Pope and C. Christopher
Trower. The Finance Committee is responsible for providing advice, support and
assistance to management with respect to the Company's strategic plans and
financial objectives. The Finance Committee may exercise such additional
authority as may be prescribed from time to time by resolution of the Board.
The Governance Committee of the Board (the "Governance Committee") is
composed of David R. Holbrooke, M.D., Chairman, Stephen A. George, M.D., Craig
Macnab, John C. Pope, C. Christopher Trower and Jeffrey W. Ubben, each of whom
is independent as defined by NASD Rule 4200(a)(15). 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 nominees
for election to the Board, and will consider nominees recommended by
stockholders if submitted to the Board in accordance with the procedures
specified in the By-laws. A description of those procedures is included herein
under the caption "Stockholder Nominees."
Nominees for Board membership must have appropriate business background and
industry, technical and/or functional expertise related to the Company's
products and services, and must meet the requirements of applicable Securities
and Exchange Commission and Nasdaq rules regarding director and committee member
qualification. The Governance Committee has, however, refrained from
establishing more specific standing requirements for Board membership because
the specific skills and expertise required of Board members may vary from time
to time, depending on the composition of the Board and an assessment of the
needs of the Board and the Company at such time. The Governance Committee
periodically examines the composition of the Board of Directors to determine
whether the Board would better serve its purposes with the addition of one or
more directors. If the Governance Committee determines that adding a new
director is advisable, the Committee will initiate an appropriate search,
working with other directors and management to identify qualified candidates.
The Governance Committee identifies and evaluates all potential nominees for
director, including any nominees that may be recommended by stockholders, on a
case-by-case basis and it has not established any differences in the manner in
which it evaluates nominees based on whether the nominee is recommended by a
stockholder. Copies of the Charter of the Governance Committee and the Company's
Corporate Governance Guidelines, which address the Governance Committee's
director nominations function and related matters, are posted in the corporate
governance area of the investors section of the Company's Internet website at
www.per-se.com.
MEETINGS IN 2003; ATTENDANCE
During 2003, the Board met ten (10) times, the Audit Committee met twelve
(12) times, the Compensation Committee met six (6) times, the Compliance
Committee met six (6) times, the Finance Committee met five (5) times and the
Governance Committee met five (5) times. Each of the incumbent directors
attended 75% or more of the aggregate number of meetings of the Board and all
committees on which he served. Each Board member is expected to attend the
Annual Meetings of Stockholders of the Company, and all of the incumbent
directors attended the Company's 2003 Annual Meeting of Stockholders.
NON-EMPLOYEE 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 for
Board membership in the amount of $16,000, and a fee in the amount of $1,000 for
each Board meeting attended. In addition, the Lead Independent Director and the
Board committee chairmen receive annual retainers, and the members of the
committees including the committee chairmen receive fees for each committee
meeting attended. The annual retainer for the Lead Independent Director is
$32,000, the annual retainer for the Audit Committee chair is $4,000, the annual
retainer for the Compensation Committee chair is $3,000, and the annual retainer
for the other committee chairs is $2,000. The Audit Committee meeting fee is
$2,000 per meeting attended, and the meeting fee for the other committees is
$1,000 per meeting attended.
6
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.
Non-employee directors may elect to defer receipt and taxation of their
cash fees and retainers by participating in the Company's Deferred Stock Unit
Plan (the "Deferred Stock Unit Plan"), under which each non-employee director of
the Company and certain selected key employees are permitted to defer cash
compensation in the form of deferred "stock units," each of which is deemed to
be equivalent to one share of Common Stock. At a designated future distribution
date selected by the participant, the stock units accumulated in the
participant's account under the Deferred Stock Unit Plan will be distributed in
the form of Common Stock, and will be taxable to the participant at that time
based on the fair market value of the Common Stock.
As of May 12, 2004, the non-employee directors participating in the
Deferred Stock Unit Plan and the total deferred stock units accumulated by each
of them were as follows:
DEFERRED
NAME STOCK UNITS
---- -----------
Stephen A. George, M.D. .................................... 2,333
Craig Macnab................................................ 9,886
John C. Pope................................................ 31,110
C. Christopher Trower....................................... 29,347
The equity compensation under the non-employee director compensation 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. Such options are granted under the Amended and
Restated Per-Se Technologies, Inc. Non-Employee Director Stock Option Plan (the
"Director Stock Option Plan").
7
DIRECTOR AND EXECUTIVE OFFICER COMMON STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of May 12, 2004, 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
---- ------------ --------
Stephen A. George, M.D. .................................... 32,333(2) *
David R. Holbrooke, M.D. ................................... 157,163(3) *
Craig Macnab................................................ 39,886(4) *
David E. McDowell........................................... 1,193,151(5) 3.8%
Philip M. Pead.............................................. 1,082,535(6) 3.4%
John C. Pope................................................ 98,107(7) *
C. Christopher Trower....................................... 86,365(8) *
Jeffrey W. Ubben............................................ 5,382,240(9) 17.0%
Chris E. Perkins............................................ 390,148(10) 1.2%
Frank B. Murphy............................................. 368,402(11) 1.2%
Philip J. Jordan............................................ --(12) *
Paul J. Quiner.............................................. 113,334(13) *
All executive officers and directors as a group (12
persons).................................................. 8,943,664 28.3%
---------------
* 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 30,000 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan. Also includes 2,333 deferred
stock units credited under the Deferred Stock Unit Plan
(3) Includes 500 shares held in a bank account for the benefit of Dr.
Holbrooke's son. Also includes 56,663 shares that are not currently
outstanding, but which may be acquired under the Director Stock Option
Plan.
(4) Includes 30,000 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan. Also includes 9,886 deferred
stock units credited under the Deferred Stock Unit Plan.
(5) Includes 7,100 shares held in a trust for Mr. McDowell's son. Also includes
725,041 shares that are not currently outstanding, but which may be
acquired under the Second Amended and Restated Per-Se Technologies, Inc.
Stock Option Plan, as amended (the "Executive Stock Option Plan").
(6) Includes 2,716 shares held by family members, for which Mr. Pead disclaims
beneficial ownership. Also includes 955,000 shares that are not currently
outstanding, but which may be acquired under the Executive Stock Option
Plan, and 18,970 deferred stock units credited under the Deferred Stock
Unit Plan.
(7) Includes 55,331 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan. Also includes 31,110
deferred stock units credited under the Deferred Stock Unit Plan.
8
(8) Includes 1,883 shares held by family members, for which Mr. Trower
disclaims beneficial ownership. Also includes 54,665 shares that are not
currently outstanding, but which may be acquired under the Director Stock
Option Plan, and 29,347 deferred stock units credited under the Deferred
Stock Unit Plan.
(9) Includes 10,000 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan. Also includes 5,372,240
shares beneficially owned by VA Partners, L.L.C. as general partner of
ValueAct Capital Partners, L.P. and ValueAct Capital Partners II, L.P., and
as investment advisor of ValueAct Capital International, Ltd. Mr. Ubben is
attributed beneficial ownership of these shares as a managing partner of VA
Partners, L.L.C., but disclaims beneficial ownership except to the extent
of his pecuniary interest in each fund.
(10) Includes 365,002 shares that are not currently outstanding, but which may
be acquired under the Executive Stock Option Plan. Also includes 24,479
deferred stock units credited under the Deferred Stock Unit Plan.
(11) Includes 3,681 shares purchased under an employee stock purchase plan. Also
includes 345,001 shares that are not currently outstanding, but which may
be acquired under the Executive Stock Option Plan, and 8,719 deferred stock
units credited under the Deferred Stock Unit Plan. Effective April 8, 2004,
Mr. Murphy's employment agreement with the Company was amended and restated
to provide that he will no longer serve as an officer of the Company but
will continue as an employee of the Company on a part-time basis. See
"Employment Agreements."
(12) Mr. Jordan holds options to acquire 290,000 shares under the Executive
Stock Option Plan; however, he is not yet deemed to be the beneficial owner
of those shares, because he does not have the right to acquire any of those
shares within sixty (60) days, since none of those options are scheduled to
become vested and exercisable until August 2004. These stock options vest
and become exercisable at the rate of twenty percent (20%) per year over a
five-year period beginning on the date of grant, and are subject in all
respects to the terms and conditions of the Executive Stock Option Plan,
except that the provisions of Section 4(c) thereof, pursuant to which the
unexercised portion of outstanding options become fully vested and
immediately exercisable upon the occurrence of certain "Change of Control"
events (as defined in the Executive Stock Option Plan), will not apply
until Mr. Jordan's completion of two (2) years of service with the Company.
(13) Consists of 113,334 shares that are not currently outstanding, but which
may be acquired under the Executive Stock Option Plan.
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information 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
---------------- ------------ --------
VA Partners, L.L.C., and affiliates(2)...................... 5,372,240 17.0%
One Maritime Plaza, Suite 1400, San Francisco, CA 94111
Basil P. Regan and Regan Partners, L.P.(3).................. 2,814,634 8.9%
32 East 57th Street, 20th Floor, New York, NY 10022
---------------
(1) See Note (1) under "Director and Executive Officer Common Stock Ownership."
(2) The information shown is derived from a Schedule 13F-HR filed on February
12, 2004, by VA Partners, L.L.C. ("VA Partners"). Shares reported as being
beneficially owned by VA Partners are also beneficially owned in whole or in
part by its affiliates ValueAct Capital Partners, L.P., ValueAct Capital
Partners II, L.P., ValueAct Capital International, Ltd., Jeffrey W. Ubben,
George F. Hamel, Jr., and Peter H. Kamin.
(3) The information shown is derived from a Schedule 13D filed on April 8, 2004,
by Basil P. Regan.
9
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, 2003 (collectively, the "named
executive officers") for 2003, 2002 and 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- -----------------------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
POSITIONS YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS COMPENSATION(3)
------------------ ---- -------- ----------- --------------- ---------------- ---------- ---------------
Philip M. Pead.......... 2003 $365,385 $108,000 -- -- -- $13,896
Chairman, President and 2002 353,077 176,539 -- $109,663 -- 12,870
Chief Executive Officer 2001 310,000 219,325 -- -- 875,000 12,065
Chris E. Perkins........ 2003 250,000 222,000(4) 14,375 -- 15,749
Executive Vice President 2002 250,000 115,000 37,599 70,097 -- 14,592
and Chief Financial
Officer 2001 243,846 140,194 -- -- 375,000 10,639
Frank B. Murphy(5)...... 2003 250,000 13,500 -- -- -- 6,514
President of the
Company's 2002 250,000 106,600 -- 21,308 -- 5,770
Physician Services
Division 2001 225,962 170,465 -- -- 275,000 5,370
Philip J. Jordan........ 2003 102,981(6) 82,385(7) 119,014 -- 290,000 1,620
President of the
Company's 2002 -- -- -- -- -- --
Hospital Services
Division 2001 -- -- -- -- -- --
Paul J. Quiner.......... 2003 205,000 65,600 -- -- -- 5,415
Senior Vice President 2002 194,038 58,093 -- -- 25,000 5,797
and General Counsel 2001 103,729 44,033 -- -- 100,000 5,264
---------------
(1) In accordance with rules of the Securities and Exchange Commission, amounts
of perquisites and other personal benefits that did not exceed the lesser of
$50,000 or 10% of the named executive officer's total annual salary and
bonus have been omitted. The amount shown for Mr. Perkins for 2002 includes
reimbursement of $12,610 for an apartment maintained until October 2002 near
the Company's headquarters, and $13,086 for automobile expenses. The amount
shown for Mr. Jordan reflects a payment made to assist Mr. Jordan in
relocating himself and his family from London, England to Atlanta, Georgia.
(2) Represents enhancement bonuses paid in the form of unvested deferred stock
units (restricted stock equivalents) granted under the Deferred Stock Unit
Plan, which vest at the rate of 20% each year over a period of five years.
Any dividend equivalents paid on such units would be converted to additional
deferred stock units that vest on the same schedule as the units with
respect to which they were granted. As of December 31, 2003, the aggregate
unvested deferred stock units held by each of the named executive officers
was as follows: 7,179 units valued at $109,842 for Mr. Pead; 6,380 units
valued at $97,608 for Mr. Perkins; and 1,395 units valued at $21,343 for Mr.
Murphy. No units were held by Mr. Jordan or Mr. Quiner.
(3) Includes amounts paid by the Company on behalf of each named executive
officer for matching 401(k) plan contributions, and life, dental, medical,
vision and/or short-term disability insurance premiums. Company
contributions under the 401(k) plan for the 2003 fiscal year were $6,000 for
each of Messrs. Pead, Perkins and Murphy. No such contributions were made to
Mr. Jordan or Mr. Quiner. The amount of life, dental, medical, vision and/or
short-term disability insurance premiums paid for each of the named
executive officers for the 2003 fiscal year was as follows: $7,896 for Mr.
Pead, $9,749 for Mr. Perkins, $514 for Mr. Murphy, $1,620 for Mr. Jordan and
$5,415 for Mr. Quiner.
(4) Includes a $150,000 payment made in satisfaction of an outstanding signing
compensation obligation under Mr. Perkins' employment agreement.
10
(5) Effective April 8, 2004, Mr. Murphy's employment agreement with the Company
was amended and restated to provide that he will no longer serve as an
officer of the Company but will continue as an employee of the Company on a
part-time basis. See "Employment Agreements."
(6) Reflects salary payments commencing as of the date of Mr. Jordan's
employment by the Company in July 2003. Mr. Jordan's base salary is $225,000
per year.
(7) Reflects non-discretionary 2003 incentive compensation paid to Mr. Jordan
pursuant to the terms of his employment agreement.
STOCK OPTION GRANTS
None of the named executive officers were granted any stock options during
2003, except Philip J. Jordan, in connection with his employment as the
President of the Company's Hospital Services Division. The following table sets
forth information with respect to the stock options granted to Mr. Jordan during
2003.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE (PER EXPIRATION -----------------------------
NAME GRANTED 2003 SHARE)(1) DATE 5% 10%
---- ---------- ------------ ---------- ---------- ------------- -------------
Philip J. Jordan.............. 290,000 42.3% $13.51 8/07/14 $2,783,039 $7,260,325
---------------
(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
2003. 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, 2003. 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, 2003.
AGGREGATED OPTION EXERCISES IN 2003 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS
COMMON SHARES DECEMBER 31, 2003 AT DECEMBER 31, 2003
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------- ----------- ------------- ----------- -------------
Philip M. Pead.......... -- -- 780,001 524,997 $5,741,027 $4,489,249
Chris E. Perkins........ -- -- 276,670 198,330 2,511,639 1,712,586
Frank B. Murphy......... -- -- 290,002 164,997 2,467,766 1,410,889
Philip J. Jordan........ -- -- -- 290,000 -- 519,390
Paul J. Quiner.......... -- -- 75,001 49,999 670,899 394,676
11
EMPLOYMENT AGREEMENTS
In November 2000, in connection with his promotion 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. That agreement provides that
Mr. Pead will be paid a base salary of $310,000 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 100% of his base salary, payable at the
discretion of the Board. Upon early termination of Mr. Pead's employment 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 is terminated in connection with a change in
control, 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 Board. In all such events of
termination, Mr. Pead is entitled to a tax equalization payment with respect to
any tax that may be imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"). The Company also agreed to loan Mr. Pead the
amount of $250,000 to purchase shares of Common Stock, and Mr. Pead used that
amount in November 2000 to purchase an aggregate of 74,000 shares of Common
Stock. The loan is evidenced by a promissory note executed by Mr. Pead and
secured by those shares. Its terms are described herein under the caption
"Certain Relationships and Related Transactions." In May 2003, in connection
with Mr. Pead's election as Chairman of the Board, the employment agreement was
amended to extend its term for three years, to increase his base salary to
$375,000, and to provide that he is eligible for a bonus payment of up to 130%
of his base salary. In December 2003, as a result of the Board's evaluation of
Mr. Pead's performance during 2003 and a review by the Compensation Committee of
his compensation, Mr. Pead's base salary was increased to $425,000, effective as
of January 1, 2004.
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 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 is terminated in connection with a change in control, 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
Board. Mr. Perkins also received options to purchase up to 100,000 shares of
Common Stock, and a commitment from the Company to provide $150,000 to Mr.
Perkins as signing compensation to be earned upon the completion of two years of
service with the Company. In February 2001, in connection with his promotion to
Executive Vice President and Chief Financial Officer of the Company, the
employment agreement was amended to increase Mr. Perkins' base salary to
$250,000, and to provide for Mr. Perkins to receive options to purchase an
additional 100,000 shares of Common Stock. As provided in the agreement, the
term thereof has continued in effect beyond the initial three-year term for
successive one-year terms. The current term of the agreement extends to April 2,
2005. Beginning with the Company's 2003 incentive compensation plan, Mr. Perkins
is eligible for a bonus payment of up to 100% of his base salary. His base
salary beginning effective January 1, 2004, is $300,000 per year.
In June 1998, the Company and Frank B. Murphy, then the Senior Vice
President -- Physician Management of the Company and more recently the President
of the Company's Physician Services Division,
12
entered into a two-year employment agreement, which has continued in effect
beyond the initial two-year term for successive one-year terms, and was amended
and restated effective April 8, 2004, as described below. The original agreement
provided that Mr. Murphy would 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 would be eligible for an annual incentive compensation
payment of up to 80% of his base salary, payable at the discretion of the Board.
Under the terms of the original agreement, upon early termination of his
employment other than for cause or for "good reason," Mr. Murphy would have been
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 months, and he would have also been entitled to continuation
of certain health and welfare benefits. In the event Mr. Murphy's employment had
terminated in connection with a change in control of the Company, he would have
been 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 was greater.
Effective April 8, 2004 Mr. Murphy's employment agreement with the Company
was amended and restated to provide that he will no longer serve as an officer
of the Company but will continue as an employee of the Company on a part-time
basis, providing advice and counsel with respect to pending and potential
litigation that relates to matters that were within the scope of his former
position as President of the Company's Physician Services Division. The
agreement, as amended and restated, provides for an annual salary of $12,000,
and is terminable at will by either party at any time, upon ten days' prior
notice to the other party. Under the terms of the amended agreement, Mr. Murphy
is not entitled to incentive compensation, nor is he entitled to severance
benefits or any continuation of health and welfare benefits upon termination of
his employment for any reason.
In July 2003, the Company and Philip J. Jordan, a Senior Vice President of
the Company and President of the Company's Hospital Services Division, entered
into a one-year employment agreement, which contains certain non-competition,
non-solicitation and change in control provisions. That agreement provides that
Mr. Jordan 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
he is eligible for an annual incentive compensation payment of up to 80% of his
base salary, payable at the discretion of the Board; provided, however, that his
incentive compensation for 2003 is not discretionary but is instead payable
pro-rated based on the number of months he is employed by the Company during
2003. Upon early termination of Mr. Jordan's employment other than for cause or
by Mr. Jordan for "good reason," Mr. Jordan 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, in each
case excluding any incentive bonus payments, and he is also entitled to
continuation of certain health and welfare benefits. In the event Mr. Jordan's
employment is terminated in connection with a change in control, 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.
Jordan also received options to purchase up to 290,000 shares of Common Stock.
In May 2001, the Company and Paul J. Quiner, the Senior Vice President and
General Counsel 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. Quiner will be paid a base salary
of $190,000 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 60% of his base salary, payable at the discretion
of the Board. Upon early termination of Mr. Quiner's employment other than for
cause or by Mr. Quiner for "good reason," Mr. Quiner 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, in each case excluding any incentive bonus payments, and he is also
entitled to continuation of certain health and welfare benefits. In the event
Mr. Quiner's employment is terminated in connection with a change in control, 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,
13
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. Quiner also received options
to purchase up to 100,000 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 May 31,
2005. Beginning with the Company's 2003 incentive compensation plan, Mr. Quiner
is eligible for a bonus payment of up to 80% of his base salary. His base salary
beginning effective January 1, 2004, is $225,000 per year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is certain information as of December 31, 2003, regarding
an outstanding loan made in November 2000 pursuant to the employment agreement
between the Company and Philip M. Pead.
LARGEST AGGREGATE AMOUNT BALANCE AS
NAME AND POSITION NATURE OF INDEBTEDNESS OUTSTANDING IN 2003 OF 12/31/03 INTEREST
----------------- ------------------------ ------------------------ ----------- --------
Philip M. Pead,
Chairman, President
and Chief Executive
Officer............... 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.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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,
except that the report on Form 3 relating to Philip J. Jordan's appointment as
President of the Company's Hospital Services Division was inadvertently filed
late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described earlier in this Proxy Statement, the Company has a
Compensation Committee, which is composed of Jeffrey W. Ubben, Chairman, Stephen
A. George, M.D., David R. Holbrooke, M.D., John C. Pope, and C. Christopher
Trower. Each member of the Compensation Committee is an independent director, as
independence is defined in NASD Rule 4200(a)(15), 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.
14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As of the date hereof, the Compensation Committee consists of the five
independent directors whose names appear below. The Compensation Committee's
policies applicable to compensation of the Company's executive officers
(including the named executive officers) during 2003 are 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 enable physicians and hospitals to
achieve their income potential by creating an environment that streamlines and
simplifies the complex administrative burden of providing healthcare, and in so
doing to generate favorable returns for its stockholders. 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 evaluating base salary 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 for
non-executive employees determined during 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 against attainment of
established objectives.
Stock Option Awards. The Company maintains stock option plans that 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 ten to 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, the amount and terms of
options already held by the executive, and the compensation practices of the
Company's competitors.
Deductibility of Certain Compensation. Section 162(m) of the Internal
Revenue 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 Company's compensation plans permit the
grant of stock options and other awards that are fully deductible under Section
162(m). It is the Compensation Committee's intent to maximize the deductibility
of executive compensation while retaining the discretion necessary to compensate
executive officers in a manner commensurate with performance and the competitive
market for executive talent. No executive of the Company received compensation
in 2003 that was subject to the Section 162(m) limitation.
15
Chief Executive Officer Compensation. Mr. Pead's compensation is paid in
accordance with the terms of his employment agreement, the terms of which are
described elsewhere in this Proxy Statement. Mr. Pead's 2003 base salary (which
reflects adjustments for increases given in the normal course of business) was
$375,000. In December 2003, as a result of the Board's evaluation of Mr. Pead's
performance during 2003 and a review by the Compensation Committee of Mr. Pead's
compensation, the Compensation Committee approved an increase of Mr. Pead's base
salary to $425,000, effective as of January 1, 2004. The Compensation Committee
has also awarded Mr. Pead an annual cash bonus for 2003 in the amount of
$108,000, in recognition of his continuing contributions toward attainment of
the Company's financial and strategic objectives.
Stock Ownership Guidelines. In 2001, the Board adopted stock ownership
guidelines for directors and certain key executive officers. The stock ownership
guidelines reflect the Company's view that the best way to reinforce the link
between the interests of the directors and executive officers, on the one hand,
and the interests of the stockholders, on the other, is for the directors and
executives to own significant amounts of the Company's Common Stock. It is
expected that the Company's directors and executives will demonstrate their
confidence in the Company's future by increasing ownership of the Common Stock
in accordance with these guidelines. The target ownership levels are as follows:
Directors: 5x annual retainer
Chief Executive Officer: 5x base salary
CFO and Division Presidents: 2x base salary
For example, if an executive has a base salary of $200,000, and the target
ownership level is 2x base salary, then the value of the Common Stock owned by
that executive should be $400,000. The target ownership levels are generally
intended to be achieved by 2006. (Mr. Jordan has until July 2008, i.e., five
years from the date he was hired, to achieve such ownership levels.) The shares
owned at that time will be valued for compliance purposes at their then-fair
market value (rather than historical cost or investment). The then-applicable
target stock ownership levels will, likewise, be based on compensation in effect
in 2006 (therefore, if compensation increases, the target ownership levels will
also increase). Shares that count toward reaching target ownership levels
include stock owned outright, vested shares in qualified benefit plans (e.g., a
401(k) or employee stock purchase plan), and vested stock units in the Deferred
Stock Unit Plan. Unexercised stock options will not be counted toward target
stock ownership. Progress toward compliance with the target stock ownership
levels will be monitored quarterly by the Compensation Committee.
COMPENSATION COMMITTEE
Jeffrey W. Ubben, Chairman
Stephen A. George, M.D.
David R. Holbrooke, M.D.
John C. Pope
C. Christopher Trower
May 12, 2004
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.
16
STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative stockholder return 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, 1998 in the Common Stock,
the Nasdaq Composite and the Company's peer group indices. The Company's current
peer group index consists of the following companies: MedQuist Inc., NCO Group,
Inc., NDCHealth Corporation, ProxyMed, Inc. and WebMD Corporation (the "2004
Peer Group"). The Company's former peer group index consists of the following
companies: Cerner Corporation, IDX Systems Corporation, Eclipsys Corporation,
NDCHealth Corporation, and WebMD Corporation (the "2003 Peer Group"). In
revising the Company's former peer group index, management of the Company took
into consideration a number of factors, including the divestitures of the
Company's Patient1(R) clinical software product line and Business1(R) patient
financial management software product line, 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 physicians
and hospitals, and selected a group of companies that management believes best
reflects the Company's business.
(Performance Graph)
--------------------------------------------------------------------------------------------------
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/29/2002 12/31/2003
--------------------------------------------------------------------------------------------------
Per-Se
Technologies, Inc. 100 85 35 109 91 155
2004 Peer Group
Index 100 92 29 32 28 31
2003 Peer Group
Index 100 91 41 34 30 36
NASDAQ Composite 100 185 112 89 61 92
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
AUDIT COMMITTEE REPORT
As of the date hereof, the Audit Committee consists of the four independent
directors whose names appear below. Management of the Company is responsible for
the Company's internal controls and the financial reporting process. The
Company's independent auditors 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.
It is not the Audit Committee's duty or responsibility to conduct auditing
or accounting reviews or procedures. The members of the Audit Committee do not
represent themselves to be accountants or auditors by profession or experts in
the fields of accounting or auditing.
As part of its oversight of the Company's financial statements, the Audit
Committee has met and held discussions with management and the Company's
independent auditors. 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 auditors. The Audit Committee also discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees).
The Company's independent auditors 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 auditors that firm's independence.
Based on the Audit Committee's discussions with management and the
independent auditors and the Audit Committee's review of the representations of
management and the report of the independent auditors to the Audit Committee,
and without any independent verification, the Audit Committee has 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, 2003, filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
John C. Pope, Chairman
David R. Holbrooke, M.D.
Craig Macnab
C. Christopher Trower
May 12, 2004
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.
SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has selected the firm of Ernst & Young LLP ("Ernst &
Young") to serve as the Company's principal independent auditors. Ernst & Young
has served in that capacity since June 14, 2001. One or more representatives of
Ernst & Young 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.
18
AUDITORS' FEES
The following table sets forth the aggregate fees billed by Ernst & Young
to the Company for professional services rendered as of or for the fiscal years
ended December 31, 2002 and 2003:
% OF % OF
FEE CATEGORY 2002 TOTAL 2003 TOTAL
------------ -------- ----- ---------- -----
Audit Fees....................................... $567,800 61.1% $1,199,132 69.6%
Audit-Related Fees............................... 76,682 8.3% 24,370 1.4%
Tax Fees......................................... 285,000 30.6% 453,000 26.3%
All Other Fees................................... -- -- 45,664 2.7%
Total Fees....................................... 929,482 100% 1,722,166 100%
======== ==========
"Audit Fees" for the fiscal years ended December 31, 2002 and 2003 were for
professional services rendered for the audits of the Company's consolidated
financial statements, review of the financial statements included in the
Company's Quarterly Reports on Form 10-Q, consents required in connection with
registration statements and other assistance normally provided by auditors in
connection with statutory and regulatory filings or engagements. "Audit Fees"
for the fiscal year ended December 31, 2003 included $560,000 for additional
procedures performed in connection with allegations of improprieties made in
2003.
"Audit-Related Fees" as of the fiscal years ended December 31, 2002 and
2003 were for assurance and related services that were reasonably related to the
performance of the audit or review of the Company's consolidated financial
statements, including contract reviews and consultation on compliance with new
accounting standards.
"Tax Fees" as of the fiscal years ended December 31, 2002 and 2003 were for
traditional tax compliance services and an examination of state and local tax
apportionment, and, as of the fiscal year ended December 31, 2003, for tax
services related to the sale of the Company's Patient(R) clinical software
product line. Fees for traditional tax compliance services as of the fiscal year
ended December 31, 2002, were $245,000, or 86% of the total Tax Fees as of that
year. Fees for traditional tax compliance services as of the fiscal year ended
December 31, 2003, were $420,000, or 93% of the total Tax Fees as of that year.
"All Other Fees" as of the fiscal year ended December 31, 2003 were for
services rendered as an independent review organization to assist in assessing
the adequacy of the Company's billing and compliance practices.
None of the services described above were approved by the Audit Committee
under the de minimus exception provided by Rule 2-01(c)(7)(i)(C) under the
Securities and Exchange Commission's Regulation S-X.
PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
The Audit Committee pre-approves all audit and non-audit services provided
by the independent auditors prior to the engagement of the independent auditors
with respect to such services, in order to assure that such services do not
impair the auditors' independence. The Audit Committee has established
pre-approval policies and procedures that are detailed as to the particular
services that may be performed and under which the Audit Committee is informed
of each service, and such policies and procedures do not allow delegation of any
Audit Committee responsibilities to the Company's management.
OTHER MATTERS
The minutes of the Annual Meeting of Stockholders held on May 8, 2003, 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,
19
if any other matters should come before the meeting, the persons named in the
proxy will vote such proxy in accordance with their judgment.
STOCKHOLDER NOMINEES
No candidates were recommended by stockholders for election to the Board at
the 2004 Annual Meeting of Stockholders. If a stockholder wishes to recommend a
candidate for election to the Board at the next Annual Meeting of Stockholders,
such recommendation must be submitted in writing in accordance with the
following requirements and procedures.
Advance Notice Procedures. Under the By-laws, nominations of persons for
election to the Board may be made at a meeting of stockholders by any
stockholder of the Company entitled to vote for the election of directors at the
meeting who complies with the notice procedures described herein. Such
nominations must be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a stockholder's notice must be received at the
principal executive offices of the Company, in the case of an annual meeting of
stockholders, not later than the 120th calendar day before the anniversary date
of the Company's proxy statement released to stockholders in connection with the
previous year's annual meeting; provided, however, that in the event that the
date of the annual meeting has been changed by more than 30 days from the date
of the previous year's meeting, then notice by the stockholder must be received
not later than (i) the close of business on the 15th day following the day on
which the Company's notice of the date of the annual meeting was mailed or the
Company's public disclosure of the date of the annual meeting was made,
whichever first occurs; and in the case of a special meeting of stockholders
called for the purpose of electing directors, not later than the close of
business on the 15th day following the day on which the Company's notice of the
date of the special meeting was mailed or the Company's public disclosure of the
date of the special meeting was made, whichever first occurs; or (ii) such other
reasonable time before the Company begins to print and mail its proxy materials
for the meeting as the Company may publicly disclose. Such stockholder's notice
to the Secretary shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a Director, (i) the name,
age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Company which are beneficially owned by the person and (iv)
any other information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Exchange Act and (b) as to the stockholder giving the notice (i) the
name and record address of such stockholder and (ii) the class and number of
shares of capital stock of the Company which are beneficially owned by such
stockholder. The Company may require any proposed nominee to furnish such other
information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as a director of the Company.
Stockholder Nominees for the 2005 Annual Meeting. Stockholders interested
in recommending a candidate for election to the Board at the 2005 Annual Meeting
of Stockholders may do so by following the procedures described above. To be
timely, notice of such recommendation must be received by the Company's
Secretary no later than January 12, 2005.
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.
Advance Notice Procedures. Under the By-laws, for business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Company. To be
timely, a stockholder's notice must be received at the principal executive
offices of the Company not later than the 120th calendar day before the
anniversary date of the Company's proxy statement released to stockholders in
connection with the previous year's annual meeting; provided, however, that in
the event that the date of the annual meeting has been changed by more than 30
days from the date of the
20
previous year's meeting, then notice by the stockholder must be received not
later than (i) the close of business on the 15th day following the day on which
the Company's notice of the date of the annual meeting was mailed or the
Company's public disclosure of the date of the annual meeting was made,
whichever first occurs; or (ii) such other reasonable time before the Company
begins to print and mail its proxy materials for the meeting as the Company may
publicly disclose. A stockholder's notice to the Secretary shall set forth with
respect to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Company which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
Stockholder Proposals for the 2005 Annual Meeting. Stockholders interested
in submitting a proposal for inclusion in the proxy materials for the 2005
Annual Meeting of Stockholders may do so by following the procedures described
above, and those prescribed by the Securities and Exchange Commission in Rule
14a-8 under the Exchange Act. To be eligible for inclusion, such stockholder
proposals must be received by the Company's Secretary no later than January 12,
2005.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
Stockholders interested in sending communications to the Board should send
such communications to the Board c/o the Chairman, Philip M. Pead, and the Lead
Independent Director, John C. Pope, at the principal executive offices of the
Company at 2840 Mt. Wilkinson Parkway, Atlanta, Georgia 30339. Upon receipt, the
Chairman and the Lead Independent Director, in consultation with the Company's
General Counsel, will determine which of such communications should
appropriately be relayed to Board members, and to what Board members/Committees
such relayed communications will be directed.
ANNUAL REPORTS
The Company's annual report to stockholders for the year ended December 31,
2003, 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 and 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. 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.
/s/ Paul J. Quiner
PAUL J. QUINER
Senior Vice President,
General Counsel and
Secretary
May 12, 2004
21
PROXY
PER-SE TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 7, 2004
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 8:00 a.m. on Monday,
June 7, 2004, at the offices of Alston & Bird LLP, One Atlantic Center, 1201
West Peachtree Street, Atlanta, GA 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.
ELECTION OF DIRECTORS
1. Directors recommend a vote FOR election of the following eight (8) nominees:
01 -- Stephen A. George, M.D. [ ] FOR ALL NOMINEES
02 -- David R. Holbrooke, M.D.
03 -- Craig Macnab [ ] WITHHOLD ALL NOMINEES
04 -- David E. McDowell
05 -- Philip M. Pead [ ] WITHHOLD AUTHORITY TO VOTE
06 -- John C. Pope FOR AN INDIVIDUAL NOMINEE. WRITE
07 -- C. Christopher Trower NUMBER(S) OF NOMINEE(S) BELOW:
08 - Jeffrey W. Ubben
-------------------------------------------------
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 ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED ON THE
REVERSE SIDE; AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date: , 2004
------------------------------
------------------------------------------
------------------------------------------
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 JUNE 7, 2004. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED YOUR PROXY.