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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(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)
March 25, 2005
Dear Stockholder:
You are cordially invited to attend the 2005 Annual Meeting of Stockholders
of Per-Se Technologies, Inc. (the "Company") to be held at 10:00 a.m. local time
on Wednesday, May 18, 2005, at the Pan Pacific San Francisco Hotel, 500 Post
Street -- Union Square, San Francisco, California 94102.
At the Annual Meeting, seven people will be elected to the Board of
Directors. The Board of Directors recommends that you vote FOR the election of
the seven nominees named in the Proxy Statement.
In addition, the Company will ask the stockholders to ratify the
appointment of the firm of Ernst & Young LLP as independent auditors of the
Company for 2005. The Board of Directors recommends that you vote FOR
ratification of the appointment of Ernst & Young LLP as independent auditors.
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. 770/237-4300
1145 Sanctuary Parkway, Suite 200 877/73PER-SE toll free
Alpharetta, Georgia 30004 www.per-se.com
(PER-SE LOGO)
PER-SE TECHNOLOGIES, INC.
1145 SANCTUARY PARKWAY, SUITE 200
ALPHARETTA, GEORGIA 30004
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2005
---------------------
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. local time on
Wednesday, May 18, 2005, at the Pan Pacific San Francisco Hotel, 500 Post
Street -- Union Square, San Francisco, California 94102:
(1) To elect seven (7) directors;
(2) To ratify the appointment of the firm of Ernst & Young LLP as
independent auditors of the Company for 2005; and
(3) 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 21, 2005, 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
Alpharetta, Georgia
March 25, 2005
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.
1145 SANCTUARY PARKWAY, SUITE 200
ALPHARETTA, GEORGIA 30004
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2005
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 1145 Sanctuary Parkway, Suite 200, Alpharetta,
Georgia 30004, for use at the Annual Meeting of Stockholders to be held at 10:00
a.m. local time on Wednesday, May 18, 2005, at the Pan Pacific San Francisco
Hotel, 500 Post Street -- Union Square, San Francisco, California 94102, and any
adjournment thereof. It is anticipated that this proxy statement ("Proxy
Statement") and the accompanying proxy will first be mailed to stockholders on
or about April 6, 2005.
Only stockholders of record as of the close of business on March 21, 2005
(the "Record Date"), will be entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding 30,207,646 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
recommendations of the Board. The Board's recommendations are set forth in this
Proxy Statement with the descriptions of the matters to be voted on. In summary,
the Board recommends a vote FOR each of the director nominees and FOR
ratification of the appointment of Ernst & Young LLP as independent auditors.
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 shares held by the stockholders 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 have the
effect of 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 John W. Clay, Jr., who was elected by the
Board on October 28, 2004, and John W. Danaher, M.D., who was elected by the
Board on December 3, 2004.
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 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, 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 SEVEN NOMINEES
NAMED IN THIS PROXY STATEMENT
BOARD OF DIRECTORS
DIRECTOR NOMINEES
The Company currently has nine directors, each of whom holds office until
the Annual Meeting of Stockholders and until his successor is elected and
qualified. All of the Company's directors are standing for reelection at the
Annual Meeting, with the exception of Stephen A. George, M.D. and David R.
Holbrooke, M.D., both of whom have informed the Company that they do not intend
to stand 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.
JOHN W. CLAY, JR.
Age 63
Director since 2004
Mr. Clay retired in December 2004 as Vice Chairman of SunTrust Banks, Inc.,
one of the nation's largest commercial banking organizations. In his capacity as
Vice Chairman of SunTrust Banks he was responsible for SunTrust's four major
geographic banking units, the Mid-Atlantic, Central, Carolinas and Florida
regions, as well as the corporate and investment banking line of business and
corporate sales and administration. He was elected Vice Chairman in August 2000.
Previously, Mr. Clay was Executive Vice President and Managing Director of
corporate and investment banking for SunTrust. Mr. Clay continues in an advisory
and consulting role with SunTrust until his announced retirement in December
2005. Mr. Clay is a graduate of Vanderbilt University and the Stonier Graduate
School of Banking at Rutgers University.
2
JOHN W. DANAHER, M.D.
Age 46
Director since 2004
Dr. Danaher is the President and Chief Executive Officer of
QuickCompliance, Inc., a full-service e-learning company that enables healthcare
and governmental organizations to address a comprehensive range of business
imperatives. He has held that position since February 2001. From July 2000 until
February 2001, Dr. Danaher was the President and Chief Operating Officer of
HealthMarket, Inc., an on-line provider of consumer driven health plans. He
served as an Executive Vice President with WebMD Corporation (Nasdaq: HLTH) from
February 1999 to July 2000. Dr. Danaher earned undergraduate degrees from
Trinity College and Bryn Mawr College. He earned his medical degree from
Dartmouth Medical School, completed his residency and chief residency in
Internal Medicine at Stanford University Medical Center and has also earned a
M.B.A. from Stanford University.
CRAIG MACNAB
Age 49
Director since 2002
Mr. Macnab is a Director and the President and Chief Executive Officer of
Commercial Net Lease Realty, Inc. (NYSE: NNN), a real estate investment trust
that owns primarily single tenant net-leased retail properties. From 2000 until
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 62
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.
PHILIP M. PEAD
Age 52
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.
3
C. CHRISTOPHER TROWER
Age 56
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 43
Director since 2003
Mr. Ubben is a founder and Managing Partner of VA Partners, L.L.C., the
general partner of several investment partnerships. 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, Martha Stewart Living
Omnimedia, Inc. and Gartner, Inc.
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 John W. Clay, Jr., John W. Danaher,
M.D., Stephen A. George, M.D., David R. Holbrooke, M.D., Craig Macnab, 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 established the position of Lead Independent
Director. Mr. Trower currently serves as the 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 four standing committees: the Audit,
Compensation, Compliance, and Governance Committees. The Audit, Compensation and
Governance Committees consist entirely of independent directors as defined by
NASD Rule 4200(a)(15). The Compliance Committee consists 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
Craig Macnab, Chairman, John W. Clay, Jr., David R. Holbrooke, M.D., and C.
Christopher Trower, each of whom meet 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 Board believes that the Chairman of the Audit Committee,
Mr. Macnab, 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 Board believes that Mr.
Macnab's past experience and background results in his financial sophistication
within the meaning of NASD Rule 4350(d)(2). The Audit Committee has direct
responsibility for the appointment, determination of compensation and oversight
of the Company's independent auditors, oversight of management's fulfillment of
its financial reporting and disclosure responsibilities, oversight of the
Company's internal audit function, and maintenance of procedures for the
receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, including the confidential, anonymous
submission by
4
employees of concerns regarding questionable accounting or auditing matters. 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, and is
also attached hereto as Appendix A. 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, John W. Clay, Jr., John W. Danaher,
M.D., Stephen A. George, M.D., David R. Holbrooke, M.D., 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 2004 are described herein under the caption
"Compensation Committee Report on Executive Compensation."
The Compliance Committee of the Board (the "Compliance Committee") is
composed of John W. Danaher, M.D., Chairman, John W. Clay, Jr., Stephen A.
George, M.D., Philip M. Pead, and C. Christopher Trower. 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.
The Governance Committee of the Board (the "Governance Committee") is
composed of C. Christopher Trower, Chairman, John W. Clay, Jr., John W. Danaher,
M.D., Stephen A. George, M.D., David R. Holbrooke, M.D., Craig Macnab, 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 such recommendations are
submitted to the Board in accordance with the procedures specified in the
By-laws for direct nominations of director candidates by stockholders. 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 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 a 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.
5
MEETINGS IN 2004; ATTENDANCE
During 2004, the Board met fourteen (14) times, the Audit Committee met
twenty-seven (27) times, the Compensation Committee met eight (8) times, the
Compliance Committee met four (4) 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 then incumbent directors attended the Company's 2004
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.
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 March 21, 2005, 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. .................................... 4,858
Craig Macnab................................................ 14,220
C. Christopher Trower....................................... 34,900
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").
6
DIRECTOR AND EXECUTIVE OFFICER COMMON STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of March 21, 2005, 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
---- ------------ --------
John W. Clay, Jr. .......................................... -- *
John W. Danaher, M.D. ...................................... -- *
Stephen A. George, M.D. .................................... 34,858(2) *
David R. Holbrooke, M.D. ................................... 57,163(3) *
Craig Macnab................................................ 44,220(4) *
David E. McDowell........................................... 1,263,150(5) 4.1%
Philip M. Pead.............................................. 1,340,036(6) 4.3%
C. Christopher Trower....................................... 91,918(7) *
Jeffrey W. Ubben............................................ 5,392,472(8) 17.8%
Chris E. Perkins............................................ 470,149(9) 1.5%
Philip J. Jordan............................................ 95,500(10) *
Paul J. Quiner.............................................. 160,167(11) *
Patrick J. Leonard.......................................... 33,976(12) *
David F. Mason.............................................. 36,801(13) *
All executive officers and directors as a group (15
persons).................................................. 9,020,410(14) 27.2%
---------------
* 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 4,858 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 14,220
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
777,572 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 1,029,169 shares that are not currently
outstanding, but which may be acquired under the Executive Stock Option
Plan, 163,332 shares that are not currently outstanding, but which may be
acquired under the Per-Se Technologies, Inc. Non-Qualified Stock Option
Plan for Non-Executive
7
Employees, as amended (the "Employee Stock Option Plan"), and 17,948
deferred stock units credited under the Deferred Stock Unit Plan.
(7) 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 34,900 deferred stock units credited under the Deferred
Stock Unit Plan.
(8) Includes 10,000 shares that are not currently outstanding, but which may be
acquired under the Director Stock Option Plan. Also includes 5,382,472
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.
(9) Includes 345,003 shares that are not currently outstanding, but which may
be acquired under the Executive Stock Option Plan, and 100,000 shares that
are not currently outstanding, but which may be acquired under the Employee
Stock Option Plan. Also includes 24,479 deferred stock units credited under
the Deferred Stock Unit Plan.
(10) Consists of 95,500 shares that are not currently outstanding, but which may
be acquired under the Executive Stock Option Plan.
(11) Consists of 159,167 shares that are not currently outstanding, but which
may be acquired under the Executive Stock Option Plan.
(12) Consists of 33,976 shares that are not currently outstanding, but which may
be acquired under the Employee Stock Option Plan.
(13) Consists of 36,801 shares that are not currently outstanding, but which may
be acquired under the Employee Stock Option Plan.
(14) Includes 181,328 shares that are not currently outstanding, but which may
be acquired under the Director Stock Option Plan; 2,406,411 shares that are
not currently outstanding, but which may be acquired under the Executive
Stock Option Plan; 334,109 shares that are not currently outstanding, but
which may be acquired under the Employee Stock Option Plan; and 96,405
deferred stock units credited under the Deferred Stock Unit Plan.
8
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)...................... 5,382,472 17.8%
One Maritime Plaza, Suite 1400, San Francisco, CA 94111
FMR Corp.(3)................................................ 4,520,139 14.9%
82 Devonshire Street, Boston, MA 02109
Basil P. Regan(4)........................................... 2,178,132 7.2%
c/o Regan Partners, L.P., 32 East 57th Street, 20th Floor,
New York, NY 10022
Regan Partners, L.P.(5)..................................... 1,538,468 5.1%
32 East 57th Street, 20th Floor, New York, NY 10022
AMVESCAP PLC(6)............................................. 2,926,748 9.7%
11 Devonshire Square, London EC2M 4Y4R, England
Wellington Management Company, LLP(7)....................... 2,506,015 8.3%
75 State Street, Boston, MA 02109
Wachovia Corporation(8)..................................... 1,960,298 6.5%
One Wachovia Center, Charlotte, NC 28288
---------------
(1) See Note (1) under "Director and Executive Officer Common Stock Ownership."
(2) The number of shares reported was derived from a Schedule 13F-HR filed on
February 14, 2005 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 number of shares reported and the information included in this footnote
were derived from a Schedule 13G/A filed on February 14, 2005 by FMR Corp.
("FMR"). Edward C. Johnson, III, as Chairman of FMR, and Abigail Johnson, as
a Director of FMR, are deemed beneficial owners of the 4,520,139 shares of
such common stock and jointly executed the Schedule 13G/A. FMR reports that
it has sole voting power over 1,188,282 shares and sole dispositive power
over 4,520,139 shares. FMR also reports that various persons have the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, such shares of common stock. Fidelity Management
& Research Company ("Fidelity") is a wholly-owned subsidiary of FMR and a
registered investment adviser. Fidelity is the beneficial owner of 3,342,057
shares or 11.06% of such outstanding common stock as a result of acting as
investment adviser to various investment companies (the "Fidelity Funds").
The ownership of one such investment company, Fidelity Small Cap Stock Fund,
amounted to 2,611,800 shares or 8.65% of the Company's total outstanding
common stock. Mr. Johnson and FMR, through its control of Fidelity, each has
sole power to dispose of 3,342,057 shares owned by the Fidelity Funds.
Neither FMR nor Mr. Johnson has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out the voting of the shares
under written guidelines established by the Funds' Boards of Trustees.
Fidelity Management Trust Company ("FMTC"), a wholly-owned subsidiary of FMR
and a bank as defined in Section 3(a)(6) of the Exchange Act, is the
beneficial owner of 1,178,082 shares or 3.9% of the Company's outstanding
common stock as a result of serving as investment manager of institutional
account(s). Mr. Johnson and FMR, through its control of FMTC, each has sole
dispositive power over 1,178,082 shares and sole power to vote or to direct
the voting of 1,178,082 shares owned by the institutional account(s).
(4) The number of shares reported was derived from a Schedule 13G/A filed on
February 14, 2005 by Regan Partners, L.P. and Basil P. Regan. Mr. Regan
reports that he has sole voting power and sole dispositive
9
power over 83,398 shares, shared voting power over 2,094,734 shares, and
shared dispositive power over 2,178,132 shares. The number reported does not
reflect the sale of 200,000 shares by Regan Partners, L.P. to the Company on
March 11, 2005. See "Certain Relationships and Related Transactions."
(5) The number of shares reported was derived from a Schedule 13G/A filed on
February 14, 2005 by Regan Partners, L.P. and Basil P. Regan. Regan
Partners, L.P. reports that it has shared voting power and shared
dispositive power over the 1,538,468 shares. The number reported does not
reflect the sale of 200,000 shares by Regan Partners, L.P. to the Company on
March 11, 2005. See "Certain Relationships and Related Transactions."
(6) The number of shares reported was derived from a Schedule 13G filed on
February 15, 2005 by AMVESCAP PLC ("AMVESCAP"). AMVESCAP reports that it has
sole voting power over 2,926,748 shares and sole dispositive power over
2,926,748 shares, and that such shares are held by the following
subsidiaries in the following respective amounts: Atlantic Trust Company,
N.A., 9,000 shares, INVESCO Institutional (N.A.), 45,300 shares, and Stein
Roe Investment Counsel, Inc., 2,872,448 shares.
(7) The number of shares reported was derived from a Schedule 13G/A filed on
February 14, 2005 by Wellington Management Company, LLP ("WMC"). WMC reports
that it has shared voting power over 2,047,255 shares and shared dispositive
power over 2,451,915 shares.
(8) The number of shares reported was derived from a Schedule 13G filed on
February 14, 2005 by Wachovia Corporation ("Wachovia"). Wachovia reports
that it has sole voting power over 1,960,057 shares and sole dispositive
power over 1,397,698 shares. Wachovia reports that these shares are held by
certain of its subsidiaries: Wachovia Securities, LLC and Evergreen
Investment Management Company, as investment advisors for mutual funds
and/or other clients, and Wachovia Bank, N.A., in a fiduciary capacity for
its respective customers.
10
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 other most highly compensated executive officers
of the Company as of December 31, 2004 (collectively, the "named executive
officers") for 2004, 2003 and 2002.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- -----------------------------
OTHER SECURITIES
ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS COMPENSATION(3)
---------------------------- ---- -------- ----------- --------------- ---------------- ---------- ---------------
Philip M. Pead............... 2004 $439,423 $ -- -- -- 250,000 $13,798
Chairman, President and 2003 365,385 108,000 -- -- -- 13,896
Chief Executive Officer 2002 353,077 176,539 -- $109,663 -- 12,870
Chris E. Perkins............. 2004 309,615 120,000 -- 9,000 100,000 16,207
Executive Vice President 2003 250,000 222,000(4) -- 14,375 -- 15,749
and Chief Financial Officer 2002 250,000 115,000 $ 37,599 70,097 -- 14,592
Philip J. Jordan............. 2004 232,922 60,000 -- -- 150,000 10,183
President of the Company's 2003 102,981(5) 82,385(6) 119,014 -- 290,000 1,620
Hospital Services Division 2002 -- -- -- -- -- --
Paul J. Quiner............... 2004 232,885 90,000 -- -- 150,000 12,051
Senior Vice President 2003 205,000 65,600 -- -- -- 5,415
and General Counsel 2002 194,038 58,093 -- -- 25,000 5,797
Patrick J. Leonard........... 2004 221,060 60,000 -- -- 70,000 11,182
President, Physician 2003 184,851 25,568 -- -- -- 9,033
Services Specialty 2002 184,974 55,410 -- -- -- 7,152
Operations
David F. Mason............... 2004 193,769 196,000(7) -- -- 50,000 14,031
President, Physician 2003 162,154 3,648 -- -- -- 13,595
Services, Academic and 2002 149,615 50,000 -- -- -- 12,236
Multi-Specialty Operations
---------------
(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 for 2003 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, 2004, the aggregate
unvested deferred stock units held by each of the named executive officers
was as follows: 5,384 units valued at $85,235 for Mr. Pead; and 5,685 units
valued at $89,992 for Mr. Perkins. No units were held by Messrs. Jordan,
Quiner, Leonard or Mason.
(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 2004 fiscal year were $6,000 for
each of Messrs. Pead, Perkins, Quiner and Leonard, and $3,900 for Mr. Mason.
No such contributions were made to Mr. Jordan. The amount of life, dental,
medical, vision and/or short-term disability insurance premiums paid for
each of the named executive officers for the 2004 fiscal year was as
follows: $7,798 for
11
Mr. Pead, $10,207 for Mr. Perkins, $10,183 for Mr. Jordan, $6,051 for Mr.
Quiner, $5,182 for Mr. Leonard, and $10,131 for Mr. Mason.
(4) Includes a $150,000 payment made in satisfaction of an outstanding signing
compensation obligation under Mr. Perkins' employment agreement.
(5) Reflects salary payments commencing as of the date of Mr. Jordan's
employment by the Company in July 2003.
(6) Reflects non-discretionary 2003 incentive compensation paid to Mr. Jordan
pursuant to the terms of his employment agreement.
(7) Includes a $146,000 sales commission paid in 2004.
STOCK OPTION GRANTS
The following table sets forth information with respect to the stock
options granted to each of the named executive officers during 2004.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE (PER EXPIRATION ---------------------------
GRANTED 2004 SHARE)(1) DATE 5% 10%
---------- ------------ ---------- ---------- ----------- -------------
Philip M. Pead................. 83,334 5.44% $12.70 5/18/15 $751,782 $1,961,231
83,333 5.44% $13.97 5/18/15 645,940 1,855,374
83,333 5.44% $15.37 5/18/15 529,274 1,738,708
Chris E. Perkins............... 33,334 2.18% $12.70 5/18/15 300,716 784,502
33,333 2.18% $13.97 5/18/15 258,374 742,145
33,333 2.18% $15.37 5/18/15 211,708 695,479
Philip J. Jordan............... 50,000 3.26% $12.70 5/18/15 451,065 1,176,729
50,000 3.26% $13.97 5/18/15 387,565 1,113,229
50,000 3.26% $15.37 5/18/15 317,565 1,043,229
Paul J. Quiner................. 50,000 3.26% $12.70 5/18/15 451,065 1,176,729
50,000 3.26% $13.97 5/18/15 387,565 1,113,229
50,000 3.26% $15.37 5/18/15 317,565 1,043,229
Patrick J. Leonard............. 50,000 3.26% $14.02 3/09/15 497,983 1,299,127
6,667 0.44% $12.70 5/18/15 60,145 156,905
6,667 0.44% $13.97 5/18/15 51,678 148,438
6,666 0.44% $15.37 5/18/15 42,338 139,083
David F. Mason................. 30,000 1.96% $14.02 3/09/15 298,790 779,476
6,667 0.44% $12.70 5/18/15 60,145 156,905
6,667 0.44% $13.97 5/18/15 51,678 148,438
6,666 0.44% $15.37 5/18/15 42,338 139,083
---------------
(1) All options were granted at an exercise price equal to or in excess of the
fair market value of the Common Stock on the date of grant. Such options
expire eleven years after the date of grant, and generally vest over a
three-to-five year period.
(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.
12
STOCK OPTION EXERCISES
None of the named executive officers exercised any stock options during
2004, with the exception of Mr. Leonard. 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, 2004. 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, 2004.
AGGREGATED OPTION EXERCISES IN 2004 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
NUMBER OF OPTIONS AT DECEMBER 31, MONEY OPTIONS AT
COMMON SHARES 2004 DECEMBER 31, 2004
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------- ----------- ------------- ------------ --------------
Philip M. Pead....... -- -- 955,000 599,998 $7,695,911 $3,632,150
Chris E. Perkins..... -- -- 365,002 209,998 3,476,719 1,180,450
Philip J. Jordan..... -- -- 58,000 382,000 134,560 810,740
Paul J. Quiner....... -- -- 116,667 158,333 1,087,802 316,398
Patrick J. Leonard... 8,143 $56,515 5,132 84,352 2,478 257,101
David F. Mason....... -- -- 16,850 59,899 158,998 180,488
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. As a result of subsequent evaluations by the Board of Mr.
Pead's performance and reviews by the Compensation Committee of his
compensation, Mr. Pead's base salary was increased to $425,000 effective as of
January 1, 2004, and to $500,000 effective as of January 14, 2005.
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
13
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,
2006. 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 14, 2005, is $325,000.
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.
His base salary beginning effective January 14, 2005, is $275,000.
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, 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, 2006. 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 14, 2005, is $245,000.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is certain information as of March 21, 2005, 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 2004 OF 3/21/05 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.
On March 9, 2005, the Company announced that the Board has authorized the
repurchase of up to 1 million shares of the outstanding Common Stock. Under the
share repurchase program, the Company may repurchase shares from time to time at
management's discretion in the open market, by block purchase, in privately
negotiated transactions or as otherwise allowed by securities laws and
regulations. Any shares repurchased will be placed into treasury to be used for
general corporate purposes. The actual number and timing of shares to be
repurchased will depend on market conditions and certain SEC rules. Repurchases
may be discontinued at any time. On March 11, 2005, the Company purchased
200,000 shares of the outstanding Common Stock from Regan Partners, L.P., in a
privately negotiated transaction at a price of $15.39 per share, in cash. Regan
Partners, L.P. is a holder of more than five percent of the Common Stock. The
purchase price for those shares was the opening price for shares of the Common
Stock on that date on the Nasdaq National Market. The transaction was negotiated
by Philip M. Pead, the Company's Chairman, President and Chief Executive
Officer, and Basil P. Regan, the General Partner of Regan Partners, L.P.
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 a Form 4 reporting a transaction by Dr. Holbrooke on December 1,
2004, 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, John W.
Clay, Jr., John W. Danaher, M.D., Stephen A. George, M.D., David R. Holbrooke,
M.D., and C. Christopher Trower. None of the members of the Compensation
Committee were officers or employees of the Company or any of its subsidiaries
during the last fiscal year, or at any other time, and none of the members of
the Compensation Committee had any relationship with the Company during the last
fiscal year requiring disclosure under Item 404 of Regulation S-K. During the
last fiscal year, none of our executive officers served on the compensation
committee (or equivalent), or the board of directors, of another entity whose
executive officer(s) served on our Board of Directors or our Compensation
Committee.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As of the date hereof, the Compensation Committee consists of the six
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 2004 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 2004 that was subject to the Section 162(m) limitation.
16
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 2004 base salary (which
reflects adjustments for increases given in the normal course of business) was
$425,000. As a result of the Board's evaluation of Mr. Pead's performance during
2004 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
$500,000, effective as of January 14, 2005.
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
John W. Clay, Jr.
John W. Danaher, M.D.
Stephen A. George, M.D.
David R. Holbrooke, M.D.
C. Christopher Trower
March 25, 2005
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.
17
STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative total 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 a peer group index selected by the Company (the "Peer
Group Index") for the periods indicated. The graph reflects the investment of
$100 on December 31, 1999 in the Common Stock, the Nasdaq Composite and the Peer
Group Index. The Peer Group Index consists of the following companies: MedQuist,
Inc., NCO Group, Inc., NDCHealth Corporation, ProxyMed, Inc. and WebMD
Corporation.
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------------
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
--------------------------------------------------------------------------------------
Per-Se
Technologies,
Inc. 100 41.45 127.88 106.70 182.02 188.32
Peer Group Index 100 56.32 63.96 55.00 59.29 52.38
NASDAQ Composite 100 72.62 50.23 29.12 44.24 47.16
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.
18
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, including
the assessment of, and reporting on, the effectiveness of internal control over
financial reporting. 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, as well as for expressing an opinion on management's
assessment of the effectiveness of internal control over financial reporting and
on the effectiveness of the Company's internal control over financial reporting.
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. The Audit Committee has reviewed and
discussed, with management and the independent auditors, the Company's
consolidated financial statements and reports on the effectiveness of the
Company's internal control over financial reporting. 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, 2004, filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Craig Macnab, Chairman
John W. Clay, Jr.
David R. Holbrooke, M.D.
C. Christopher Trower
March 25, 2005
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.
19
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
The Audit Committee has appointed the firm of Ernst & Young LLP ("Ernst &
Young"), an independent registered public accounting firm, to serve as the
Company's principal independent auditors for 2005, and the Board has directed
management to submit Ernst & Young's appointment for ratification by the
stockholders at the Annual Meeting.
Ernst & Young has served as the Company's principal independent auditors
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.
Stockholder ratification of the appointment of Ernst & Young as the
Company's independent auditors is not required by our By-laws or otherwise,
since the Audit Committee has the responsibility for appointing auditors;
however, the appointment is being submitted for ratification at the Annual
Meeting as a matter of good corporate governance. The affirmative vote of
holders of a majority of the shares present or represented by proxy and entitled
to vote at the meeting is needed to ratify the appointment of Ernst & Young as
the Company's independent auditors. No determination has been made as to what
action the Board would take if stockholders do not ratify the appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2005
20
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, 2003 and 2004:
% OF % OF
FEE CATEGORY 2003 TOTAL 2004 TOTAL
------------ ---------- ----- ---------- -----
Audit Fees..................................... $1,199,132 69.2% $2,316,073 88.1%
Audit-Related Fees............................. 24,370 1.4% 39,300 1.5%
Tax Fees....................................... 463,188 26.8% 220,000 8.3%
All Other Fees................................. 45,664 2.6% 54,500 2.1%
---------- ---- ---------- ----
Total Fees..................................... 1,732,354 100% 2,629,873 100%
========== ==========
"Audit Fees" for the fiscal years ended December 31, 2003 and 2004 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 $568,132 for additional
procedures performed in connection with allegations of improprieties made in
2003. "Audit Fees" for the fiscal year ended December 31, 2004 included
$1,072,000 for the audit of internal control over financial reporting pursuant
to Section 404(a) of the Sarbanes-Oxley Act of 2002.
"Audit-Related Fees" as of the fiscal years ended December 31, 2003 and
2004 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 year ended December 31, 2004 were for
traditional tax compliance services, and, as of the fiscal year ended December
31, 2003, for tax services related to the sale of the Company's Patient1(R)
clinical software product line and an examination of state and local tax
apportionment. Fees for traditional tax compliance services as of the fiscal
year ended December 31, 2003, were $430,188, or 93% of the total Tax Fees as of
that year. Fees for traditional tax compliance services as of the fiscal year
ended December 31, 2004, were 100% 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. Fees for
services rendered as an independent review organization as of the fiscal year
ended December 31, 2004, were $53,000, or 97% of All Other Fees as of that year.
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.
21
OTHER MATTERS
The minutes of the Annual Meeting of Stockholders held on June 7, 2004,
will be presented at 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.
STOCKHOLDER NOMINEES
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 2006 Annual Meeting. Stockholders interested
in nominating a candidate for election to the Board at the 2006 Annual Meeting
of Stockholders may do so by following the procedures described above. To be
timely, the required notice of such nomination must be received at the principal
executive offices of the Company no later than December 7, 2005.
STOCKHOLDER PROPOSALS
No stockholder proposals were received for inclusion in this Proxy
Statement.
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 previous year's meeting, then notice by the
stockholder must be received not later than (i) the close of
22
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 2006 Annual Meeting. Stockholders interested
in bringing a proposal before the stockholders at the 2006 Annual Meeting of
Stockholders may do so by following the procedures described above. To be
timely, the required notice of such proposals must be received at the Company's
principal executive offices no later than December 7, 2005. In addition, any
stockholder proposal submitted pursuant to Rule 14a-8 under the Exchange Act
must be received at the Company's principal executive offices no later than
December 7, 2005, to be considered for inclusion in the Company's proxy
statement for the 2006 Annual Meeting of Stockholders.
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, C. Christopher Trower, at the principal executive offices
of the Company at 1145 Sanctuary Parkway, Suite 200, Alpharetta, Georgia 30004.
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,
2004, 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., 1145 Sanctuary Parkway, Suite 200, Alpharetta,
Georgia 30004, 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
March 25, 2005
23
APPENDIX A
PER-SE TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
(as amended effective 5/18/04; revised 2/17/05)
I. AUDIT COMMITTEE MISSION
The Audit Committee has oversight responsibility for the Company's
financial reporting, internal controls, business ethics and the annual audit of
the Company's financial statements. It serves as the interface with the
Company's external and internal auditors. The key to successful performance of
its functions is independence from Company management combined with an
understanding of the Company's business and material financial reporting and
internal control policies and procedures. The Audit Committee recognizes that
Company management is responsible for the completeness and accuracy of the
Company's financial statements and disclosures and for maintaining internal
controls and that the independent auditors are responsible for auditing the
Company's financial statements. It is not the duty of the Audit Committee to
plan or conduct audits, to determine that the financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles, to conduct investigations, or to assure compliance with laws and
regulations or the Company's internal policies, procedures and controls.
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. Each member of the Audit Committee shall meet the
criteria for independence set forth in Section 301 of the Sarbanes-Oxley
Act of 2002 (the "Act") and Securities and Exchange Commission ("SEC")
rules implementing the Act, and shall otherwise be an "independent
director" within the meaning of applicable Nasdaq rules. In addition, an
Audit Committee member cannot have participated in the preparation of the
Company's or any current subsidiary's financial statements at any time
during the past three years.
2. Experience. Each member must be able to read and understand
fundamental financial statements, including the Company's balance sheet,
income statement and cash flow statement, and 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 be an "audit committee financial expert" within the
meaning of SEC rules implementing Section 407 of the Act and applicable
Nasdaq rules.
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 and annual 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 generally
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.
A-1
F. Delegation. The Audit Committee may form and delegate authority to
subcommittees of its members when appropriate.
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. The Audit Committee shall have the authority to engage at the
Company's expense and determine funding for independent counsel and other
advisers, as it determines necessary to carry out its duties. The Audit
Committee shall likewise have direct and unrestricted access to all relevant
internal Company information.
V. AUDIT COMMITTEE RESPONSIBILITIES
The Audit Committee, in its capacity as a committee of the Board of
Directors, shall have sole authority for the appointment, determination of
compensation, and oversight of the work of any registered public accounting firm
engaged by the Company (including resolution of any disagreements between
management and the auditors regarding financial reporting) for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services , and each such registered public accounting firm shall report directly
to the Audit Committee. 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 Independent Auditors.
1. Determining which firm to engage as the Company's principal
independent auditors and whether to terminate that relationship.
2. Reviewing and approving 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.
3. Taking or recommending that the Board take appropriate action to
oversee the independence of the independent auditors. Actions taken to
ensure the independence of the Company's independent auditors shall
include, without limitation, prohibiting the engagement of the independent
auditors to perform prohibited activities as set forth in Section 201 of
the Act and the rules promulgated by the SEC thereunder. In addition, the
Audit Committee shall review and pre-approve all audit services and non-
audit services provided by the independent auditors, subject to the de
minimus exception under the Act.(1) All services provided by the
independent auditors shall be monitored to ensure that such work does not
compromise the independent auditors' independence in performing their audit
services.
4. Serving as a channel of communication between the independent
auditors and the Board of Directors.
---------------
(1) Under Rule 2-01(c)(7)(i)(C) of SEC Regulation S-X, the preapproval
requirement is waived with respect to the provision of services other than
audit, review or attest services for an issuer, if (i) the aggregate amount of
all such non-audit services provided to the issuer constitutes not more than 5
percent of the total amount of revenues paid by the issuer to its auditor during
the fiscal year in which such services are provided; (ii) such services were not
recognized by the issuer at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of the audit
committee of the issuer and approved prior to the completion of the audit by the
audit committee or by 1 or more members of the audit committee who are members
of the board of directors to whom authority to grant such approvals has been
delegated by the audit committee.
A-2
5. 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 100 of the Company's quarterly financial statements and
reviewing the results of such review with the independent auditors and
management prior to public announcement of financial results for the
quarter.
6. Reviewing with the independent auditors and management 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.
7. Reviewing the Statements of Adjustments Passed, if any, prepared by
the independent auditors in connection with their review of the Company's
financial statements.
8. Periodic meetings with the independent auditors, including
sufficient opportunity for the independent auditors to meet with the Audit
Committee without members of management present, 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. Generally accepted auditing standards.
i. The independent auditors' responsibility under generally
accepted auditing standards.
ii. Significant accounting policies.
iii. Management judgments and accounting estimates.
iv. Audit adjustments.
v. The independent auditors' judgments about the quality of the
Company's accounting principles.
vi. Other information in documents containing audited financial
statements.
vii. Disagreements with management.
viii. Management's consultation with other accountants.
ix. Major issues discussed with management prior to initial or
recurring retention.
x. Difficulties encountered in performing the audit.
xi. Accounting for significant unusual transactions.
xii. Significant accounting policies in controversial or
emerging areas.
b. Pursuant to Section 404 of the Act, the independent auditors'
evaluation of management's assessment of the effectiveness of the
Company's internal control structure and procedures for financial
reporting.
9. Receive and review the reports to the Audit Committee from the
independent auditors regarding (a) the critical accounting policies and
practices to be used by the Company, (b) all alternative treatments of
financial information within generally accepted accounting principles
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the independent
auditors, and (c) other material written communications between the
independent auditors and management, such as any management letter or
schedule of unadjusted differences.
10. Review with the independent auditors and management all
significant accounting changes proposed by the Company.
11. Confirm that the independent auditors have established a procedure
for the rotation of audit partners as required by the Act and the rules
promulgated by the SEC thereunder.
A-3
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 compliance with internal codes of ethics and other
internal procedures with respect to financial reporting, accounting,
internal accounting controls or auditing matters.
b. Effectiveness of the Company's disclosure controls and
procedures (as defined in Securities Exchange Act Rules 13a-14 and
15d-14), including consideration of the performance of the Company's
Disclosure Controls and Procedures Committee and review of the reports
thereof to the Chief Executive Officer and the Chief Financial Officer.
4. Establishing procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and for the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
5. Receive and review reports from the Chief Executive Officer and
Chief Financial Officer on any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and on any
fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal controls.
6. Conduct an appropriate review of all related party transactions for
potential conflict of interest situations on an ongoing basis and approve
such transactions.
C. Responsibility Regarding Internal Auditors.
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. Approving 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 aspects of the Company's internal financial controls have
been the subject of internal audits.
b. What efforts have been taken to uncover errors or
irregularities, and what has been the result of those efforts.
c. What significant findings and recommendations have resulted from
the internal audits and what have been management's responses to such
recommendations.
A-4
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.
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.
VI. GENERAL
This Charter is intended to be flexible so that the Audit Committee is able
to meet changing conditions. The Audit Committee is authorized to take such
further actions as are consistent with the responsibilities and to perform such
other actions as applicable law, Nasdaq and the Company's By-laws or the Board
of Directors may require.
A-5
PROXY
PER-SE TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 2005
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 Wednesday, May 18, 2005, at the Pan Pacific San Francisco Hotel, 500
Post Street - Union Square, San Francisco, California 94102, 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 seven (7)
nominees:
01 -- John W. Clay, Jr. [ ] FOR ALL NOMINEES
02 -- John W. Danaher, M.D.
03 -- Craig Macnab [ ] WITHHOLD ALL NOMINEES
04 -- David E. McDowell
05 -- Philip M. Pead [ ] WITHHOLD AUTHORITY TO VOTE
06 -- C. Christopher Trower FOR AN INDIVIDUAL NOMINEE. WRITE
07 -- Jeffrey W. Ubben NUMBER(S) OF NOMINEE(S) BELOW:
--------------------------------
Use Number(s) Only
(Continued, and to be signed, on the other side)
(Continued from other side)
VOTE ON PROPOSALS -- Directors recommend a vote FOR Proposal 2.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 2005
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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; FOR PROPOSAL 2; 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: , 2005
------------------
-------------------------------
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 18, 2005. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED YOUR PROXY.