def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
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 o
Check the appropriate box:
o Preliminary
proxy statement
o Confidential,
for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to § 240.14a-12
Emdeon Inc.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
x No
fee required.
o Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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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paid previously with preliminary materials.
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box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
3055 Lebanon Pike, Suite 1000
Nashville, Tennessee 37214
(615) 932-3000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2011
Dear Stockholder:
You are cordially invited to attend the 2011 annual meeting of
stockholders (the Annual Meeting) of Emdeon Inc.
(Emdeon) which will be held at
8:30 a.m. Central Time on Wednesday, May 25, 2011
at the Sheraton Music City Hotel located at 777 McGavock Pike,
Nashville, Tennessee 37214. The Annual Meeting is being held for
the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect nine directors to hold office until the
2012 annual meeting of stockholders and until their respective
successors have been duly elected and qualified
(Proposal 1);
2. To ratify the appointment of Ernst &
Young LLP as Emdeons independent registered public
accounting firm for the year ending December 31, 2011
(Proposal 2);
3. To hold an advisory vote on executive compensation
(the say on pay vote) (Proposal 3);
4. To hold an advisory vote on the frequency of
holding the say on pay vote in the future
(Proposal 4); and
5. To transact such other business as may properly
come before the Annual Meeting and any adjournment or
postponement thereof.
The board of directors recommends a vote FOR each of the
director nominees named in Proposal 1, FOR
Proposal 2 and FOR Proposal 3. The board of
directors has not made a recommendation on Proposal 4
because it has decided to consider the views of the stockholders
before making a determination.
Only stockholders that owned shares of Emdeon Class A
common stock and Class B common stock at the close of
business on March 29, 2011 are entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement
thereof.
Your vote is important. Whether or not you plan to attend the
Annual Meeting in person, to ensure the presence of a quorum,
please vote over the Internet or by telephone as instructed in
the accompanying proxy materials or complete, date and sign a
proxy card as promptly as possible. Even if you plan to attend
the Annual Meeting, please take advantage of one of the advance
voting options to ensure that your shares are represented at the
Annual Meeting. You may revoke your proxy at any time before it
is voted by following the procedures described in the
accompanying Proxy Statement.
By order of the board of directors,
Gregory T. Stevens
Executive Vice President, General Counsel and
Secretary
Nashville, Tennessee
April 12, 2011
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to Be Held On
May 25, 2011
This
Proxy Statement and the 2010 Annual Report to Stockholders
are available at www.proxyvote.com
TABLE OF
CONTENTS
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3055 Lebanon Pike, Suite 1000
Nashville, Tennessee 37214
PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2011
This Proxy Statement is furnished by Emdeon Inc., a Delaware
corporation, on behalf of our board of directors for use at the
2011 annual meeting of stockholders (the Annual
Meeting), and at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice
of Annual Meeting of Stockholders. When used in this Proxy
Statement, the terms Emdeon, the
Company, we, us or our
refer to Emdeon Inc.
INTERNET
AVAILABILITY OF PROXY MATERIALS
In accordance with the rules and regulations adopted by the
Securities and Exchange Commission (SEC), we are
primarily furnishing proxy materials to our stockholders over
the Internet instead of mailing printed copies of those
materials to each stockholder. Only stockholders of record at
the close of business on March 29, 2011 will be entitled to
notice of and to vote at the Annual Meeting. On or about
April 14, 2011, we expect to send most of our stockholders
a Notice of Internet Availability of Proxy Materials containing
instructions on how to access our proxy materials, including
this Proxy Statement, and our 2010 Annual Report to Stockholders
(Annual Report). The Notice of Internet Availability
of Proxy Materials also instructs you how to access the proxy
card and give your proxy authorization over the Internet or by
telephone. This process is designed to expedite
stockholders receipt of our proxy materials, lower the
cost of the Annual Meeting and conserve natural resources.
If you received a Notice of Internet Availability of Proxy
Materials by mail, you will not receive a printed copy of the
proxy materials. If you would like to receive a paper or
electronic copy of our proxy materials, you should follow the
instructions for requesting these materials which are included
in the Notice of Internet Availability of Proxy Materials. If
you previously elected to receive a printed or electronic copy
of our proxy materials, which we also expect to distribute on or
about April 14, 2011, you will receive these materials by
mail or electronic mail. You also will continue to receive paper
or electronic copies of our proxy materials in the future until
you elect otherwise.
INFORMATION
ABOUT THE ANNUAL MEETING
When is
the Annual Meeting?
The Annual Meeting will be held at 8:30 a.m. Central
Time on May 25, 2011.
Where
will the Annual Meeting be held?
The Annual Meeting will be held at the Sheraton Music City Hotel
located at 777 McGavock Pike, Nashville, Tennessee 37214.
What
items will be voted upon at the Annual Meeting?
There are four matters scheduled for a vote at the Annual
Meeting:
1. To elect nine directors to hold office until the
2012 annual meeting of stockholders and until their respective
successors have been duly elected and qualified;
2. To ratify the appointment of Ernst &
Young LLP as Emdeons independent registered public
accounting firm for the year ending December 31, 2011;
3. To hold an advisory vote on executive compensation
(the say on pay vote); and
4. To hold an advisory vote on the frequency of
holding the say on pay vote in the future.
As of the date of this Proxy Statement, we are not aware of any
additional matters that will be presented for consideration at
the Annual Meeting.
What are
our board of directors recommendations?
Our board of directors recommends that you vote:
FOR the election of each of the
nine nominees named herein to serve on our board of directors;
FOR the ratification of the
appointment of Ernst & Young LLP as Emdeons
independent registered public accounting firm for the year
ending December 31, 2011; and
FOR the advisory approval of the
compensation of our named executive officers.
Our board of directors has not made a recommendation on the
frequency of the say on pay vote because it has decided to
consider the views of the stockholders before making a
determination.
INFORMATION
ABOUT VOTING
Who is
entitled to vote at the Annual Meeting?
Only stockholders of record at the close of business on the
record date, March 29, 2011, are entitled to receive notice
of and to vote at the Annual Meeting and any adjournment or
postponement thereof. As of the close of business on
March 29, 2011, Emdeon had outstanding
91,127,179 shares of Class A common stock and
24,689,142 shares of Class B common stock.
Stockholder of Record: Shares Registered in Your
Name. If, on March 29, 2011, your shares were
registered directly in your name with Emdeons transfer
agent, American Stock Transfer & Trust Company,
LLC, then you are a stockholder of record. As a stockholder of
record, you may vote in person at the Annual Meeting or vote by
proxy.
Beneficial Owner: Shares Registered in the Name of a
Broker, Bank or Other Agent. If, on March 29,
2011, your shares were held in an account at a broker, bank or
other agent, then you are the beneficial owner of shares held in
street name, and the Notice of Internet Availability
of Proxy Materials was forwarded to you by that organization.
The organization holding your account is considered to be the
stockholder of record for purposes of voting at the Annual
Meeting. As a beneficial owner, you have the right to direct
your broker, bank or other agent how to vote the shares in your
account. You are also invited to attend the Annual Meeting.
Because you are not the stockholder of record, however, you may
not vote your shares in person at the Annual Meeting unless you
request and obtain a valid proxy from your broker, bank or other
agent.
How do I
vote?
For Proposal 1, you may either vote FOR
all of the nominees to our board of directors or you may
withhold your vote for all of the nominees or for any nominee
that you specify. For Proposals 2 and 3, you may vote
FOR or AGAINST or abstain
from voting. For Proposal 4, you may vote for the say on
pay
2
vote to occur every year, every two years, every three years or
you may abstain from voting. The procedures for voting are set
forth below:
Stockholder of Record: Shares Registered in Your
Name. If you are a stockholder of record, you may vote
in person at the Annual Meeting or by giving your proxy
authorization over the Internet or by telephone. In addition,
you may request a proxy card from us as instructed in the Notice
of Internet Availability of Proxy Materials and indicate your
vote by completing, signing and dating the proxy card where
indicated and mailing the proxy card in the postage paid
envelope provided. Whether or not you plan to attend the
Annual Meeting, we encourage you to vote by proxy or give your
proxy authorization to ensure your vote is counted. You may
still attend the Annual Meeting and vote in person if you have
already voted by proxy or given your proxy authorization.
To vote in person, attend the Annual Meeting,
and we will provide you with a ballot when you arrive.
To give your proxy authorization over the
Internet or by telephone, follow the instructions for accessing
the proxy materials provided in the Notice of Internet
Availability of Proxy Materials.
To vote using a proxy card, request a proxy
card from us as instructed in the Notice of Internet
Availability of Proxy Materials. You should complete, sign and
date the proxy card and return it promptly in the postage paid
envelope provided. If your signed proxy card is received by
Broadridge ICS, our proxy solicitor, by the close of business on
May 24, 2011, then we will vote your shares as you direct.
Beneficial Owner: Shares Registered in the Name of a
Broker, Bank or Other Agent. If you are a beneficial
owner of shares registered in the name of your broker, bank or
other agent, you should have received the Notice of Internet
Availability of Proxy Materials from that organization rather
than from Emdeon. You should follow the instructions provided by
your broker, bank or other agent as to how to vote your shares.
To vote in person at the Annual Meeting, you must obtain a valid
proxy from your broker, bank or other agent. To do this, follow
the instructions from your broker, bank or other agent included
with the Notice of Internet Availability of Proxy Materials or
contact your broker, bank or other agent to request a proxy card.
We provide Internet proxy authorization on-line with
procedures designed to ensure the authenticity and correctness
of your proxy authorization instructions. Please be aware,
however, that you must bear any costs associated with your
Internet access, such as usage charges from Internet access
providers and telephone companies.
How many
votes do I have?
For each matter to be voted upon, you have one vote for each
share of Class A common stock or Class B common stock
that you own as of the close of business on March 29, 2011.
Stockholders that own shares of Class A common stock and
Class B common stock will vote together as a single class
on all matters hereby submitted to stockholders and such other
matters as may properly come before the Annual Meeting and any
adjournment or postponement thereof.
What if I
request and return a proxy card but do not make specific
choices?
If you request a proxy card and return the proxy card signed and
dated without marking any voting selections, your shares will be
voted FOR the election of all nine nominees
for director, FOR the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for the year ending
December 31, 2011, FOR the advisory vote
on executive compensation and will be treated as an abstention
from the advisory vote on the frequency of holding the say on
pay vote in the future. If any other matter is properly
presented at the Annual Meeting, your proxy (one of the
individuals named on your proxy card) will vote your shares as
recommended by our board of directors or, if no recommendation
is given, will vote your shares using his discretion.
3
Can I
change my vote after I return my proxy card?
Yes. If you are the stockholder of record of your shares, you
may revoke your proxy in any one of three ways:
You may submit another properly completed
proxy bearing a later date which is received by Broadridge ICS,
our proxy solicitor, by the close of business on May 24,
2011;
You may send a written notice which is
received by the close of business on May 24, 2011 that you
are revoking your proxy to 3055 Lebanon Pike, Suite 1000,
Nashville, Tennessee 37214, Attention:
Gregory T. Stevens, Corporate Secretary; or
You may attend the Annual Meeting and notify
the election officials that you wish to revoke your proxy and
vote in person. Your attendance at the Annual Meeting will not,
by itself, revoke your proxy.
If your shares are held by your broker, bank or other agent as
your nominee, you should follow the instructions provided by
your broker, bank or other agent.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the Annual Meeting. With respect to Proposal 1,
FOR and withheld votes will be separately
counted. With respect to Proposals 2 and 3,
FOR votes, AGAINST votes,
abstentions and broker non-votes will be separately counted.
With respect to Proposal 4, One Year,
Two Years, Three Years,
abstentions and broker non-votes will be separately counted.
Under Delaware law, abstentions are not counted as voting
FOR or AGAINST a
particular matter. Abstentions, therefore, will have no effect
on the outcome of Proposals 1 and 4 but will have the same
effect as a vote cast AGAINST
Proposals 2 and 3.
If your shares are held by your broker, bank or other agent as
your nominee, you will need to obtain a proxy card from the
organization that holds your shares and follow the instructions
included on that form regarding how to instruct your broker,
bank or other agent to vote your shares. Brokers, banks or other
agents that have not received voting instructions from their
clients do not have discretion to vote on their clients
behalf on non-routine proposals but may vote their
clients shares on routine proposals. Under
applicable rules of the New York Stock Exchange
(NYSE), Proposal 1 (election of directors) and
Proposals 3 and 4 (related to executive compensation) are
non-routine proposals whereas Proposal 2
(ratification of the appointment of Ernst & Young LLP)
is a routine proposal. Therefore, if you do not
return a proxy card to your broker, bank or other agent with
instructions on how to vote your shares with respect to
Proposals 1, 3 or 4, then your shares will be treated as
broker non-votes and will not be counted for determining the
number of votes cast on Proposals 1, 3 or 4 because a
broker non-vote is not considered entitled to vote on those
Proposals. However, your broker, bank or other agent will
retain the right to vote your shares with respect to
Proposal 2, and your shares will be counted for purposes of
determining whether a quorum is present for all proposals voted
upon at the Annual Meeting.
How many
votes are needed to approve each proposal?
For Proposal 1, the election of
directors, the affirmative vote of a plurality of all the votes
cast at the Annual Meeting at which a quorum is present is
necessary for the election of a director. Therefore, for the
nine director positions, the nominees receiving the most
FOR votes (among votes properly cast in
person or by proxy) will be elected.
For Proposal 2, the ratification of the
appointment of Ernst & Young LLP as Emdeons
independent registered public accounting firm for the year
ending December 31, 2011, to be approved, the affirmative
vote of a majority of the shares present or represented and
entitled to vote either in person or by proxy is required.
However, the audit committee of our board of directors is not
bound by a vote either for or against Proposal 2. The audit
committee will consider a vote against the firm by the
stockholders in selecting Emdeons independent registered
public accounting firm in the future.
4
For Proposal 3, the say on pay vote, to
be approved, the affirmative vote of a majority of the shares
present or represented and entitled to vote either in person or
by proxy is required. As an advisory vote, this proposal is not
binding upon the Company. Our board of directors and the
compensation committee, however, will review the voting results
in connection with their ongoing evaluation of the
Companys compensation programs and will consider the
outcome of the vote when making future compensation decisions.
For Proposal 4, the outcome will be
determined by which of the choices (One Year,
Two Years or Three Years)
receives the greatest number of votes. As an advisory vote, this
proposal is not binding upon the Company. Our board of directors
will consider the outcome of the vote when determining the
frequency of holding the say on pay vote in the future.
How many
shares must be present to constitute a quorum for the Annual
Meeting?
A quorum of stockholders is necessary to hold a valid meeting. A
quorum will be present at the Annual Meeting if at least a
majority of votes represented by the holders of our outstanding
Class A common stock and Class B common stock, treated
as a single class, are present in person or represented by
proxy. As of the close of business on March 29, 2011, the
record date, there were 91,127,179 shares of Class A
common stock and 24,689,142 shares of Class B common
stock outstanding and entitled to vote. Thus, 57,908,161 total
shares must be represented at the Annual Meeting to have a
quorum.
Your shares will be counted towards the quorum only if you vote
in person at the Annual Meeting or if you submit a valid proxy
(or one is submitted on your behalf by your broker, bank or
other agent). Abstentions and broker non-votes will also be
counted towards the quorum requirement. If there is no quorum,
the chairman of the Annual Meeting may adjourn the meeting until
a later date.
How can I
find out the results of the voting at the Annual
Meeting?
Preliminary voting results will be announced at the Annual
Meeting. Final voting results will be announced in a Current
Report on
Form 8-K
which will be filed with the SEC within four business days after
the conclusion of the Annual Meeting.
5
PROPOSAL 1
ELECTION OF DIRECTORS
Our Amended and Restated By-laws (by-laws) provide
that our board of directors will consist of no less than 5 nor
more than 20 persons, with the exact number of members to
be determined from time to time by our board of directors. The
number of directors is currently fixed at nine directors. At the
Annual Meeting, the stockholders will elect nine directors to
serve for a term of one year and until their successors have
been duly elected and qualified.
Upon the recommendation of the nominating and corporate
governance committee, our board of directors has nominated the
individuals listed below for election as members of our board of
directors. Each of the nominees is currently serving as a
director and, if re-elected, will hold office until the next
annual meeting of stockholders and until their successors have
been duly elected and qualified, except for Philip M. Pead as
described below. If a nominee becomes unable or is unwilling to
accept nomination or election, the person or persons voting the
proxy will vote for such other person or persons as may be
designated by our board of directors, unless our board of
directors chooses to reduce the number of directors serving on
the board. Except as described below, our board of directors has
no reason to believe that any of the nominees will be unable or
unwilling to serve as a director if elected.
Because of his position as executive Chairman of the Board of
Allscripts Healthcare Solutions, Inc. (Allscripts),
Mr. Pead and our board of directors determined on
April 6, 2011, that, although he will stand for election at
the Annual Meeting and serve as a director if elected, he plans
to resign from the board of directors after a search for a
qualified successor is completed following the Annual Meeting.
The nominating and corporate governance committee has commenced
a search for a qualified candidate. Any vacancy created on our
board of directors from the resignation of Mr. Pead will be
filled in accordance with our by-laws and Corporate Governance
Guidelines, the Stockholders Agreement (as defined below) and
the requirements of the NYSE.
We are party to a written Stockholders Agreement by and
among Emdeon and the stockholders of Emdeon named therein (the
Stockholders Agreement). The
Stockholders Agreement was originally entered into in
connection with our August 2009 initial public offering
(IPO) and contains provisions related to the
composition of our board of directors and the committees
thereof. Among other things, the Stockholders Agreement
gives affiliates of General Atlantic LLC (the General
Atlantic Equityholders) and affiliates of
Hellman & Friedman LLC (the H&F
Equityholders and together with the General Atlantic
Equityholders, the Principal Equityholders) the
right to nominate a majority of the members of our board of
directors. See Corporate Governance
Information about our Board of Directors Process for
Identifying and Nominating Directors and Certain
Relationships and Related Party Transactions
Transactions Related to the IPO Stockholders
Agreement.
A biography for each of the director nominees is set forth
below. Included in each directors biography is a
description of the directors key qualifications, skills
and experiences that, in addition to the criteria and
characteristics described below under Corporate
Governance Information about our Board of
Directors Director Qualifications, are
important in light of Emdeons business and structure.
Director
Nominees
George I. Lazenby, IV. Mr. Lazenby, 42,
has been our Chief Executive Officer and a member of our board
of directors since September 2008. Mr. Lazenby has served
as the Chief Executive Officer and a director of our subsidiary
EBS Master LLC (EBS Master) since March 2007. Prior
to that, Mr. Lazenby served as Executive Vice
President Provider Services of Emdeon Business
Services from December 2003 to March 2007. Mr. Lazenby
served as the Chief Operating Officer of Medifax EDI, Inc. from
January 2003 until it was acquired by us in December 2003.
Mr. Lazenby received a B.S. in Accounting from the
University of Alabama. As a member of Emdeons senior
management team, Mr. Lazenby provides our board of
directors significant industry-specific experience and expertise
on Emdeons products and services. Our board of directors
also benefits from Mr. Lazenbys executive leadership
and management experience, gained through holding various
positions of increasing responsibility at Emdeon.
6
Tracy L. Bahl. Mr. Bahl, 49, has been
our Executive Chairman since May 2009. Mr. Bahl has been
chairman of our board of directors since September 2008 and
chairman of the board of directors of EBS Master since February
2008. Mr. Bahl was Chief Executive Officer of Uniprise, a
UnitedHealth Group Company, from 2004 to 2007, and before that
served in various executive positions at CIGNA HealthCare.
Mr. Bahl received M.B.A.s from Columbia University and the
London Business School and received undergraduate degrees in
Business Administration, Health and Exercise Science from
Gustavus Adolphus College. As a member of Emdeons senior
management team, Mr. Bahl provides our board of directors
significant industry-specific experience and expertise in the
healthcare industry. Our board of directors also benefits from
Mr. Bahls executive leadership and management
experience, as well as his understanding of the challenges
associated with leading and operating a complex organization
given his service as an executive officer at public companies,
including his role as Chief Executive Officer of Uniprise.
Dinyar S. Devitre. Mr. Devitre, 63, has
been a member of our board of directors and a member of the
board of directors of EBS Master since September 2008.
Mr. Devitre is a Principal of Devitre LLC. Mr. Devitre
served as Senior Vice President and Chief Financial Officer of
Altria Group, Inc. from 2002 to March 2007. From 1998 to 2001,
Mr. Devitre served as Executive Vice President at Citigroup
Inc. and Citibank in Europe. Mr. Devitre serves as a
director of Western Union Company, Altria Group and SABMiller
plc and also served as a director of Kraft Foods Inc. from 2002
to 2007. Mr. Devitre received a B.A. degree from St.
Josephs College in Darjeeling, India and an M.B.A. from
the Indian Institute of Management in Ahmedabad. As a member of
our board of directors, Mr. Devitre has extensive
experience in the areas of finance and risk management that he
brings to his role as chairman of the audit committee, having
served as Chief Financial Officer of Altria Group.
Mr. Devitre also brings to Emdeon a thorough understanding
of the function and role of public company boards of directors,
developed through extensive board and board committee experience.
Mark F. Dzialga. Mr. Dzialga, 46, has
been a member of our board of directors since September 2008 and
a member of the board of directors of EBS Master since November
2006. Since 1998, he has been a Managing Director of General
Atlantic LLC (General Atlantic). From 1990 to 1998,
Mr. Dzialga was with Goldman, Sachs & Co., most
recently as the co-head of the High Technology Merger Group.
Mr. Dzialga also serves as a director of Genpact Limited.
Mr. Dzialga received an M.B.A. from the Columbia University
School of Business and a B.S. in Accounting from Canisius
College. As a member of our board of directors, Mr. Dzialga
has significant financial and capital markets experience,
developed through his service as an investment banking executive
with Goldman, Sachs & Co. and a Managing Director with
General Atlantic. He also contributes his experience having
served on other boards of directors, including public and
private companies.
Philip U.
Hammarskjold. Mr. Hammarskjold, 46, has been a
member of our board of directors since September 2008 and a
member of the board of directors of EBS Master since February
2008. Mr. Hammarskjold joined Hellman & Friedman
LLC (Hellman & Friedman) in 1992, became a
partner in January 1996 and has served as a Managing Director of
Hellman & Friedman since January 1998. In 2009,
Mr. Hammarskjold became the Chief Executive Officer of
Hellman & Friedman. Mr. Hammarskjold serves as a
director of various Hellman & Friedman affiliated
portfolio companies and also served as a director of Digitas,
Inc. from 1999 to 2006. Mr. Hammarskjold received a B.S.E.
from Princeton University and an M.B.A. from Harvard Business
School. As a member of our board of directors,
Mr. Hammarskjold contributes his financial and capital
markets expertise and draws on his extensive experience with
Hellman & Friedman. Mr. Hammarskjold also brings
his insight into the proper functioning and role of corporate
boards of directors, gained through his years of service on the
boards of directors of Hellman & Friedmans
portfolio companies.
Jim D. Kever. Mr. Kever, 58, has been a
member of our board of directors since September 2008 and a
member of the board of directors of EBS Master since November
2006. Mr. Kever is a founding partner of Voyent Partners,
LLC, an investment partnership founded in 2001. Mr. Kever
served as Co-Chief Executive Officer of the transaction services
division of WebMD from June 2000 to March 2001. From March 1999
through May 2000, Mr. Kever served as Chief Executive
Officer of the transaction services division of Quintiles
Transnational Corp. From 1995 through March 1999, Mr. Kever
was the President and Co-Chief Executive Officer of Envoy
Corporation. Mr. Kever joined Envoy as Treasurer and
General Counsel in October
7
1981. Mr. Kever serves as a director of 3D Systems
Corporation, Luminex Corporation and Tyson Foods, Inc. and also
served as a director of ACI Worldwide, Inc. from 1996 to 2007.
Mr. Kever received a B.S. in Business and Administration
from the University of Arkansas and a J.D. from the Vanderbilt
University School of Law. As a member of our board of directors,
Mr. Kevers experience, particularly his prior
experience as an executive at Envoy and our predecessor
companies, provides industry-specific experience and expertise
on Emdeons products and services. Mr. Kever also
brings to Emdeon leadership experiences from his roles as an
executive officer of public companies, including his role as
President and Co-Chief Executive Officer of Envoy, as well as
insights on board leadership developed through an extensive
history of service on boards and board committees of public and
private companies.
Jonathan C. Korngold. Mr. Korngold, 37,
has been a member of our board of directors since September 2008
and a member of the board of directors of EBS Master since
November 2006. Mr. Korngold joined General Atlantic in
2001, has been a Managing Director since 2006 and is responsible
for leading General Atlantics healthcare group. Prior to
joining General Atlantic, Mr. Korngold was a member of
Goldman, Sachs & Co.s Principal Investment Area
and Mergers & Acquisitions groups in London and New
York, respectively. Mr. Korngold received an M.B.A. from
Harvard Business School and graduated with an A.B. in Economics
from Harvard College. As a member of our board of directors,
Mr. Korngold has significant financial, capital markets and
mergers and acquisitions expertise, given his positions at
Goldman, Sachs & Co. and General Atlantic.
Mr. Korngold also provides knowledge of the healthcare
industry as a result of the positions he has held at General
Atlantic.
Philip M. Pead. Mr. Pead, 58, has been a
member of our board of directors and the board of directors of
EBS Master since February 2009. Mr. Pead has served as
executive Chairman of the Board of Allscripts since August 2010
following Allscriptss acquisition of Eclipsys Corporation
where he had served as President and Chief Executive Officer
since May 2009. Mr. Pead also served as a director of
Eclipsys since February 2009. Mr. Pead served as the
managing partner of Beacon Point Partners LLC from March 2007 to
May 2009. Prior to that, he served as President and Chief
Executive Officer of Per-Se Technologies, Inc. from November
2000 until January 2007. Mr. Pead served as the Chairman of
Per-Se beginning in May 2003, having joined the company in 1997.
While at Per-Se, Mr. Pead also served as Executive Vice
President and Chief Operating Officer from August 1999 to
November 2000. Mr. Pead received a B.S. in Economics from
the University of London and a Business Administration Diploma
from Harrow College of Technology. As the Chairman of the Board
and an executive officer of a publicly-traded healthcare
technology company, Mr. Pead brings to Emdeon and our board
of directors his leadership skills and intimate knowledge of the
industry. Mr. Pead also has significant and varied
management expertise, developed in roles of increasing
responsibility throughout his career. In particular, while at
Per-Se, Mr. Pead was instrumental in a corporate strategy
that included improving the integration of acquired companies,
improving operating efficiencies and margins, managing complex
regulatory compliance matters and growing the business, all of
relevance to Emdeon.
Allen R. Thorpe. Mr. Thorpe, 40, has
been a member of our board of directors since September 2008 and
a member of the board of directors of EBS Master since February
2008. Mr. Thorpe joined Hellman & Friedman in
1999 and has served as a Managing Director of
Hellman & Friedman since 2004. At Hellman &
Friedman, his primary areas of focus are financial services and
healthcare. Prior to joining Hellman & Friedman in
1999, Mr. Thorpe was a Vice President with Pacific Equity
Partners and a Manager at Bain & Company.
Mr. Thorpe serves as a director of various
Hellman & Friedman affiliated portfolio companies,
including Sheridan Healthcare and LPL Investment Holdings Inc.
Mr. Thorpe received an A.B. from Stanford University and an
M.B.A. from Harvard Business School. As a member of our board of
directors, Mr. Thorpe contributes his strategic, financial,
healthcare and capital markets expertise through his career with
equity investment firms. Mr. Thorpe also contributes
insights on board leadership developed through his service on
several boards of Hellman & Friedmans portfolio
companies.
THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR EACH OF THE DIRECTOR
NOMINEES.
8
CORPORATE
GOVERNANCE
We believe that effective corporate governance is critical to
our ability to create long-term value for our stockholders. We
have adopted and implemented charters, policies, procedures and
controls that we believe promote and enhance corporate
governance, accountability and responsibility, and create a
culture of honesty and integrity. Our Corporate Governance
Guidelines, Code of Business Conduct and Ethics, various other
governance-related information and board committee charters are
available on the Investors page of our corporate website at
http://investors.emdeon.com
under the category Corporate Governance.
Controlled
Company
For purposes of NYSE rules, our board of directors has
determined that we are a controlled company.
Controlled companies under those rules are companies
of which more than 50% of the voting power is held by an
individual, a group or another company. Together, the Principal
Equityholders control more than 50% of the combined voting power
of our Class A common stock and Class B common stock
and are able to elect our entire board of directors.
Accordingly, we are eligible to take advantage of certain
exemptions from the NYSE rules. Specifically, as a
controlled company under NYSE rules, we are not
required to have (i) a majority of independent directors,
(ii) a nominating and corporate governance committee
composed entirely of independent directors or (iii) a
compensation committee composed entirely of independent
directors. We avail ourselves of the exemption from having a
fully independent nominating and corporate governance committee.
Notwithstanding the available exemptions, our board of directors
is comprised of a majority of independent directors and the
compensation committee is composed exclusively of independent
directors. Additionally, as discussed in more detail below, the
audit committee also is composed exclusively of independent
directors.
Information
about our Board of Directors
Director
Independence
Our board of directors consults with Emdeons legal counsel
to ensure that our board member independence determinations are
consistent with all relevant securities and other laws and
regulations regarding director independence. To assist in our
board member independence determinations, each director
completes materials designed to identify any relationships that
could affect the directors independence. In addition,
through discussions among our directors, a subjective analysis
of independence is undertaken by the nominating and corporate
governance committee. Our board of directors has determined that
Messrs. Devitre, Dzialga, Hammarskjold, Kever, Korngold,
Pead and Thorpe are independent as such term is defined by the
applicable rules and regulations of the NYSE. Additionally, each
of these directors meets the categorical standards for
independence established by our board of directors, as set forth
in our Corporate Governance Guidelines.
Director
Qualifications
Our board of directors has delegated to the nominating and
corporate governance committee the responsibility of reviewing
and recommending nominees for membership on our board of
directors. Though Emdeon has no formal policy addressing
diversity, the nominating and corporate governance committee and
board of directors believe that diversity is an important
attribute of the members who comprise our board of directors and
that the members should represent an array of backgrounds and
experiences and should be capable of articulating a variety of
viewpoints. Accordingly, in its review, the nominating and
corporate governance committee evaluates director nominees
against the criteria in our Corporate Governance Guidelines,
which include character, judgment, business experience and
specific areas of expertise, all in the context of an assessment
of the perceived needs of our board of directors at that point
in time. Other characteristics, including, but not limited to,
the director nominees material relationships with Emdeon,
time availability, service on other boards of directors and
their committees, diversity or any other characteristics which
may prove relevant at any given time are also reviewed by the
nominating and corporate governance committee for purposes of
determining a director nominees qualification.
9
In the case of incumbent directors whose terms of office are set
to expire, the nominating and corporate governance committee
reviews such directors overall service to Emdeon during
their respective term, including the number of meetings
attended, level of participation, quality of performance and any
relationships and transactions that might impair such
directors independence. With respect to new director
nominees, in addition to the criteria discussed above, the
nominating and corporate governance committee also determines
whether the nominee is independent, which determination is based
upon applicable NYSE rules, applicable SEC rules and
regulations, our Corporate Governance Guidelines and the advice
of legal counsel, if necessary. To date, the nominating and
corporate governance committee has not paid a fee to any third
party to assist in the process of identifying or evaluating
director candidates.
Process
for Identifying and Nominating Directors
A majority of our directors are nominated annually by our
Principal Equityholders pursuant to the Stockholders
Agreement. Under the Stockholders Agreement, (i) the
General Atlantic Equityholders are entitled to nominate three
directors so long as they beneficially own, in the aggregate,
more than 40% of the Class A common stock outstanding
immediately prior to consummation of the IPO, two directors so
long as they beneficially own, in the aggregate, more than 20%
but not more than 40% of the Class A common stock
outstanding immediately prior to consummation of the IPO and one
director so long as they beneficially own, in the aggregate,
more than 5% but not more than 20% of the Class A common
stock outstanding immediately prior to consummation of the IPO;
and (ii) the H&F Equityholders are entitled to
nominate two directors so long as they beneficially own, in the
aggregate, more than 20% of the Class A common stock
outstanding immediately prior to consummation of the IPO and one
director so long as they beneficially own, in the aggregate,
more than 5% but not more than 20% of the Class A common
stock outstanding immediately prior to consummation of the IPO.
In each case, computation of the applicable percentage ownership
of Class A common stock held by either the General Atlantic
Equityholders or the H&F Equityholders (i) includes
the number of shares of Class B common stock held by the
H&F Equityholders and (ii) excludes stock held by
persons or entities other than the Principal Equityholders that
are a party to the Stockholders Agreement (such persons or
entities are referred to herein as our Management
Equityholders, and include, among others, members of our
senior management team and board of directors (including
Messrs. Devitre, Kever, Pead, Lazenby, Bahl, Stevens, Bob
A. Newport, Jr., our Chief Financial Officer, J. Philip
Hardin, our Executive Vice President Provider
Services, Gary D. Stuart, our Executive Vice
President Payer Services, and an affiliate entity of
Mark Lyle, our Senior Vice President Pharmacy
Services)).
In addition, for as long as each group of Principal
Equityholders is entitled to nominate at least one director
under the Stockholders Agreement, our Principal
Equityholders are permitted to jointly nominate one independent
member to our board of directors, provided, that, if one of the
Principal Equityholders is no longer eligible to nominate any
directors, then the other Principal Equityholder shall have the
right to nominate the independent director.
Each group of our Principal Equityholders has agreed to vote its
shares in favor of the directors nominated by the other in
accordance with the terms of the Stockholders Agreement.
To the extent that either group of our Principal Equityholders
is no longer entitled to nominate a board member, our board of
directors (upon the recommendation of the nominating and
corporate governance committee, if then existing) will nominate
a director in its place.
Under the Stockholders Agreement, for so long as either
group of Principal Equityholders is entitled to nominate
directors, they must give notice to us of their nominee(s) at
least 30 days before the first anniversary of the date of
the prior years annual meeting of stockholders. However,
if either group of the Principal Equityholders fails to deliver
such notice, such group of Principal Equityholders will be
deemed to have nominated the director or directors it previously
nominated that then serves or serve on our board of directors.
The remaining nominees for our board of directors are
recommended by the nominating and corporate governance
committee, which may utilize a variety of methods for
identifying nominees for director. Candidates may come to the
attention of the nominating and corporate governance committee
through current board members, professional search firms,
stockholders or other persons.
10
The nominating and corporate governance committee will consider
nominees proposed by our stockholders in accordance with the
provisions contained in our by-laws. Each nomination submitted
in this manner must contain the information specified in our
by-laws including, but not limited to, information with respect
to the beneficial ownership of our common stock and any
derivative securities that have a value associated with our
common stock held by the proposing stockholder and its
associates and any voting or similar agreement the proposing
stockholder has entered into with respect to our common stock.
To be timely, the notice must be received at our corporate
headquarters not less than 90 days nor more than
120 days prior to the first anniversary of the date of the
prior years annual meeting of stockholders. If the annual
meeting of stockholders is advanced by more than 30 days,
or delayed by more than 60 days, from the anniversary of
the preceding years annual meeting of stockholders, or if
no annual meeting of stockholders was held in the preceding
year, notice by the stockholder, to be timely, must be received
not earlier than the 120th day prior to the annual meeting
of stockholders and not later than the later of the
90th day prior to the annual meeting of stockholders or the
10th day following the day on which we notify stockholders
of the date of the annual meeting of stockholders, either by
mail or other public disclosure.
Notwithstanding the foregoing, in the event that the number of
directors to be elected to our board of directors at an annual
meeting of stockholders is increased and we do not make any
public announcement naming the nominees for the additional
directorships at least 100 days before the first
anniversary of the preceding years annual meeting of
stockholders, a stockholder nomination also shall be considered
timely, but only with respect to nominees for the additional
directorships, if it is delivered not later than the close of
business on the 10th day following the day on which such
public announcement is first made.
The foregoing description of the Stockholders Agreement
and the advance notice provisions of our by-laws is a summary
and is qualified in its entirety by reference to the full text
of the Stockholders Agreement and by-laws. Accordingly, we
advise you to review the Stockholders Agreement and
by-laws for additional stipulations relating to the process for
identifying and nominating directors, including advance notice
of director nominations and stockholder proposals. See also
Additional Information Stockholder Proposals
for Emdeons 2012 Annual Meeting.
Structure
and Operations of our Board of Directors
Composition
of our Board of Directors
Our board of directors currently consists of nine directors. Our
by-laws provide that our board of directors will consist of no
less than 5 nor more than 20 persons. The exact number of
members on our board of directors will be determined from time
to time by resolution of a majority of our board of directors,
subject to restrictions in the Stockholders Agreement that
fix the current size of our board of directors at nine
directors. Each of our directors will be elected to serve for a
term of one year. Directors hold office until the next annual
meeting of stockholders and until their successors have been
duly elected and qualified.
Pursuant to the Stockholders Agreement, our board of
directors currently includes three directors nominated by the
General Atlantic Equityholders, two directors nominated by the
H&F Equityholders and one independent director jointly
nominated by the Principal Equityholders. These directors
include Mark F. Dzialga, Jonathan C. Korngold and Tracy L. Bahl,
each nominated by the General Atlantic Equityholders; Philip U.
Hammarskjold and Allen R. Thorpe, each nominated by H&F
Equityholders; and Jim D. Kever, the independent director
jointly nominated by the Principal Equityholders. For
re-election to our board of directors, (i) the General
Atlantic Equityholders have nominated Messrs. Dzialga,
Korngold and Bahl; (ii) the H&F Equityholders have
nominated Messrs. Hammarskjold and Thorpe; and
(iii) the Principal Equityholders have jointly nominated
Mr. Kever.
In addition to the directors nominated by our Principal
Equityholders, our board of directors currently also includes
George I. Lazenby, IV, who also serves as our Chief Executive
Officer, Dinyar S. Devitre and Philip M. Pead.
Each of the aforementioned director nominees has been nominated
for re-election by our board of directors in accordance with our
director nominating policies described above.
11
Corporate
Leadership Structure
We have separated the office of chief executive officer, held by
Mr. Lazenby, and the position of chairman of the board
of directors, held by Mr. Bahl. Our board of directors has
determined that this bifurcated leadership structure is
appropriate because it (i) enables Mr. Lazenby, in his
role as our Chief Executive Officer, to focus more directly upon
identifying and developing corporate priorities, executing our
business plan, providing daily leadership to foster senior
management accountability and guiding Emdeons senior
management team through the implementation of our strategic
initiatives and (ii) allows Mr. Bahl, in his role as
our Executive Chairman, to fulfill his duties of corporate
governance, facilitate the flow of information between our board
of directors and management and assist Mr. Lazenby in
overseeing the implementation of our strategic initiatives,
including emerging business opportunities.
Role
of our Board of Directors in Risk Oversight
Our board of directors exercises oversight of risk management
consistent with its duty to direct the management of the
business and affairs of Emdeon. The audit committee, pursuant to
its charter, is responsible for discussing with management
Emdeons major financial and other risk exposures, as well
as Emdeons risk assessment and risk management policies.
The audit committee works directly with members of senior
management and Emdeons internal audit staff to review and
assess our risk management initiatives, including Emdeons
compliance programs, and reports as appropriate to our board of
directors. In addition, the audit committee meets as appropriate
(i) as a committee to discuss Emdeons risk management
guidelines, policies and exposures and (ii) with
Emdeons independent auditors to review our internal
control environment and other risk exposures. The compensation
committee oversees the management of risks relating to our
executive compensation programs and employee benefit plans. In
fulfillment of its duties, the compensation committee reviews at
least annually our executive compensation programs, meets
regularly with management to understand the financial, human
resources and stockholder implications of compensation decisions
and reports as appropriate to our board of directors.
Our board of directors as a whole also engages in the oversight
of risk in various ways.
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During the course of each year, our board of directors reviews
the structure and operation of various departments and functions
of Emdeon. In these reviews, our board of directors discusses
with management risks affecting those departments and functions
and managements approaches to mitigating those risks.
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Our board of directors reviews and approves each years
management operating plan, and these reviews cover risks that
could affect the management operating plan and measures to cope
with those risks.
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In its review and approval of annual reports on
Form 10-K,
our board of directors reviews Emdeons business and
related risks, including as described in the
Business, Risk Factors and
Managements Discussion and Analysis sections
of the document. The audit committee updates this review
quarterly in connection with the preparation of quarterly
reports on
Form 10-Q.
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When our board of directors reviews particular transactions and
initiatives that require board approval, or that otherwise merit
board involvement, our board of directors generally includes
related risk analysis and mitigation plans among the matters
addressed with management.
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The
day-to-day
identification and management of risk is the responsibility of
Emdeons management. As the market environment, industry
practices, regulatory requirements and Emdeons business
evolve, it is expected that management and our board of
directors will respond with appropriate adaptations to risk
management and oversight.
Meetings
of our Board of Directors
Our board of directors and its committees meet periodically
during the year, hold special meetings as needed and act by
written consent from time to time as deemed appropriate. During
2010, our board of
12
directors held 6 meetings. Other than Mr. Korngold, no
director attended fewer than 75% of the aggregate of
(a) the total number of meetings of our board of directors
and (b) the total number of meetings held by all committees
of our board of directors on which such director served.
Mr. Korngold attended 4 of the 6 meetings of our board of
directors held in 2010.
Each of our directors is strongly encouraged to attend our
annual meetings of stockholders. Accordingly, we expect most, if
not all, of our directors to be in attendance at the Annual
Meeting. Five of our directors attended our 2010 annual meeting
of stockholders in person.
Executive
Sessions of our Board of Directors
Generally, an executive session of non-management directors is
held in conjunction with each regularly scheduled board meeting
and at other times as deemed appropriate. A non-management
director chosen by our board of directors presides over each
executive session. In addition, if our board of directors
includes a
non-management
director who is not independent as defined by the NYSE rules,
the independent directors will meet in executive session at
least one time each fiscal year. Each committee of our board of
directors also generally conducts an executive session in
conjunction with each regularly scheduled committee meeting and
at other times as deemed appropriate.
Committees
of our Board of Directors
Our board of directors has three standing committees: an audit
committee, a compensation committee and a nominating and
corporate governance committee. Each of the standing committees
operates pursuant to a written charter, which is available on
the Investors page of our website at
http://investors.emdeon.com
under the heading Corporate Governance. The
following is a brief description of the standing committees of
our board of directors, including their membership and
responsibilities.
Audit Committee. The audit committee assists our
board of directors in fulfilling its fiduciary oversight
responsibilities by reviewing: (i) the integrity of
financial information provided to stockholders, investors and
others; (ii) the performance of our internal audit function
and systems of internal controls; and (iii) our compliance
with legal and regulatory requirements. The audit committee also
has direct responsibility for the appointment, compensation,
retention (including termination) and oversight of our
independent registered public accounting firm and is responsible
for the preparation of an audit committee report to be included
in our annual proxy statement as required by the SEC. The audit
committee also reviews and approves related party transactions
in accordance with our Related Party Transaction Policy. See
Certain Relationships and Related Party
Transactions Related Party Transactions Policies and
Procedures. During 2010, the audit committee met 8 times.
Under applicable rules of the NYSE and pursuant to the
Stockholders Agreement, the audit committee must be
comprised entirely of independent directors. The audit committee
is currently comprised of Messrs. Devitre (chairman), Kever
and Pead, each of whom has the accounting and financial
expertise required by NYSE rules and is independent
as defined under the independence requirements of the NYSE and
the SEC applicable to audit committee members. In addition, our
board of directors has determined that Mr. Devitre
qualifies as an audit committee financial expert as that term is
defined under SEC rules.
Compensation Committee. The compensation committee
reviews and recommends policies relating to compensation and
benefits of our directors, employees and certain other persons
providing services to Emdeon, and is responsible for approving
the compensation of our Chief Executive Officer and other
executive officers. The compensation committee also oversees our
2009 Equity Incentive Plan (the 2009 Equity Plan),
Employee Stock Purchase Plan (the ESPP) and other
benefit programs. Pursuant to the 2009 Equity Plan, the
compensation committee may delegate to a committee of officers
the right to issue awards to employees other than to executive
officers. In addition, to the extent compensation is intended to
qualify as performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended (the Code), all such compensation
shall be established, administered and approved by a
sub-committee
of the compensation committee consisting of two or more members,
each of whom shall
13
qualify as an outside director under
Section 162(m) of the Code. During 2010, the compensation
committee met 4 times.
The Stockholders Agreement requires that the compensation
committee consist of four members, including one director
nominated by the General Atlantic Equityholders, one director
nominated by the H&F Equityholders and two independent
director nominated by our board of directors (upon the
recommendation of the nominating and corporate governance
committee). Each Principal Equityholders right to appoint
a member to the compensation committee will terminate when it is
no longer entitled to nominate a director to our board of
directors. In addition, under the Stockholders Agreement,
if each group of Principal Equityholders owns less than 10% of
the aggregate number of shares of Class A common stock
outstanding immediately prior to the consummation of the IPO (as
calculated in accordance with the Stockholders Agreement),
our board of directors is permitted to increase the size of the
compensation committee and add additional members.
The compensation committee currently is comprised of
Messrs. Dzialga (co-chairman), Thorpe
(co-chairman),
Devitre and Pead. Messrs. Dzialga and Thorpe serve as the
General Atlantic Equityholders designee and the H&F
Equityholders designee, respectively.
Nominating and Corporate Governance Committee. The
nominating and corporate governance committee provides
assistance to our board of directors in identifying and
recommending individuals qualified to serve as directors of
Emdeon, reviews the composition of our board of directors and
periodically evaluates the performance of our board of directors
and its committees. The nominating and corporate governance
committee also recommends our various committee memberships
based upon, among other considerations, a directors
available time commitment, background
and/or skill
set it deems appropriate to adequately perform the
responsibilities of the applicable committee. In addition, the
nominating and corporate governance committee develops and
recommends corporate governance policies and procedures for us,
including our Corporate Governance Guidelines, and monitors and
reviews compliance with those policies. During 2010, the
nominating and corporate governance committee met 3 times.
The Stockholders Agreement requires that the nominating
and corporate governance committee consist of three members,
including one director nominated by the General Atlantic
Equityholders, one director nominated by the H&F
Equityholders and one independent director nominated by our
board of directors (upon the recommendation of the nominating
and corporate governance committee). Each Principal
Equityholders right to appoint a member to the nominating
and corporate governance committee will terminate when it is no
longer entitled to nominate a director to our board of
directors. In addition, under the Stockholders Agreement,
if each of the Principal Equityholders owns less than 10% of the
aggregate number of shares of Class A common stock
outstanding immediately prior to the consummation of the IPO (as
calculated in accordance with the Stockholders Agreement),
our board of directors is permitted to increase the size of the
nominating and corporate governance committee and add additional
members.
The nominating and corporate governance committee currently is
comprised of Messrs. Bahl (chairman), Kever and Thorpe.
Messrs. Bahl and Thorpe serve as the General Atlantic
Equityholders designee and the H&F
Equityholders designee, respectively.
Communicating
with Members of our Board of Directors
Our board of directors has established procedures for our
stockholders or other interested parties to communicate directly
with members of our board of directors (including specific
directors or non-management directors as a group).
Mr. Thorpe, a non-management member of the nominating and
corporate governance committee, with the assistance of Gregory
T. Stevens, our Executive Vice President, General Counsel and
Secretary, is primarily responsible for monitoring
communications from stockholders and other interested parties
and for providing copies or summaries to the other directors as
considered appropriate. Stockholders and other interested
parties who wish to send communications to our board of
directors (or to an individual director or group of directors
(including the non-management directors as a group)) should mail
such communications, to 3055 Lebanon Pike, Suite 1000,
Nashville, Tennessee 37214, Attn: Gregory T. Stevens, Corporate
Secretary. A copy of the procedures for communicating with our
board of directors is posted on the
14
Investors page of our corporate website at
http://investors.emdeon.com
under the category Corporate Governance.
Corporate
Governance Guidelines and Code of Business Conduct and
Ethics
Our board of directors has adopted Corporate Governance
Guidelines and a Code of Business Conduct and Ethics that is
applicable to all members of our board of directors, executive
officers and employees. We have posted these documents on the
Investors page of our corporate website at
http://investors.emdeon.com
under the category Corporate Governance. We intend
to post amendments to or waivers from, if any, our Code of
Business Conduct and Ethics (to the extent applicable to our
directors, principal executive officer, principal financial
officer and principal accounting officer) at this location on
our website.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related
Party Transactions Policies and Procedures
Our board of directors has adopted a written Related Party
Transaction Policy (RPT Policy), which sets forth
our policy with respect to the review, approval, ratification
and disclosure of all related party transactions by the audit
committee. In accordance with the RPT Policy, the audit
committee has overall responsibility for the implementation and
compliance with this RPT Policy.
For the purposes of the RPT Policy, an interested
transaction is a transaction, arrangement or relationship
(or any series of similar transactions, arrangements or
relationships) in which we were, are or will be a participant
and the amount involved exceeds $100,000 and in which any
related party (as defined in the RPT Policy) had, has or will
have a direct or indirect material interest.
Our RPT Policy requires that the audit committee review all
interested transactions and either ratify, approve
or disapprove our entry into the transaction. In determining
whether to approve or ratify an interested
transaction, the audit committee shall consider all
relevant information and take into account necessary factors,
including whether the transaction is on terms less favorable
than terms generally available to an unaffiliated third party
under similar circumstances and the benefits to us of the
transaction. In addition, the following interested
transactions are deemed pre-approved by the audit
committee: (i) any employment relationship or transaction
involving an executive officer and any related compensation
resulting solely from that employment relationship;
(ii) any director compensation; (iii) any transactions
with another company at which a related partys only
relationship is as a director or beneficial owner of less than
10% of that companys shares, if the aggregate amount
involved does not exceed $100,000; or (iv) any transaction
where the related partys interest arises solely from the
ownership of our securities and all holders of such securities
received the same benefit on a pro rata basis.
Our RPT Policy also provides that the audit committee annually
review previously approved or ratified interested
transactions that are ongoing to determine whether the
transaction remains in our best interests or should otherwise be
modified or terminated. Additionally, we also make periodic
inquiries of directors, executive officers and the Principal
Equityholders with respect to any potential related person
transaction of which they may be a party or of which they may be
aware.
Transactions
Related to the IPO
In connection with the reorganization transactions that occurred
prior to the IPO, we entered into several agreements that are
not the type of agreement typically entered into with or
available to unaffiliated third parties. The following
discussion of certain relationships and related party
transactions is a summary and is qualified in its entirety by
reference to the full text of the applicable agreements, each of
which is on file with the SEC. Accordingly, we advise you to
review these agreements as a supplement to the following
descriptions.
15
Sixth
Amended and Restated EBS Master LLC Limited Liability Company
Agreement
In connection with the reorganization transactions, we entered
into the Sixth Amended and Restated EBS Master LLC Limited
Liability Company Agreement (the EBS LLC Agreement)
with EBS Master and the Management Equityholders who owned units
of membership interest in EBS Master (EBS Units). As
a result of the reorganization transactions and in accordance
with the terms of the EBS LLC Agreement, we, through EBS Master
and its subsidiaries, operate our business. As the managing
member of EBS Master, we have control over all of the affairs
and decision making of EBS Master. As such, we, through our
officers and directors, are responsible for all operational and
administrative decisions of EBS Master and the
day-to-day
management of EBS Masters and its subsidiaries
business.
The holders of EBS Units, including us, will generally incur
U.S. federal, state and local income taxes on their
proportionate share of any net taxable income of EBS Master. Net
profits and net losses of EBS Master generally will be allocated
to its members pro rata in accordance with the percentages of
their respective EBS Units, though certain non pro rata
adjustments will be made to reflect tax depreciation,
amortization and other allocations. To the extent permitted
under our credit agreements, the EBS LLC Agreement provides for
cash distributions to its members if the taxable income of EBS
Master will give rise to taxable income for its members. In
accordance with the EBS LLC Agreement and assuming EBS Master is
permitted to do so under our credit agreements, EBS Master will
make cash distributions to the extent feasible to the holders of
its EBS Units, including us, for purposes of funding the
tax obligations of the holders in respect of the income of EBS
Master that is allocated to them. Generally, these tax
distributions will be computed based on our estimate of the net
taxable income of EBS Master allocable to such holder of EBS
Units multiplied by an assumed tax rate equal to the highest
effective marginal combined U.S. federal, state and local
income tax rate prescribed for an individual or corporate
resident in New York, New York (taking into account the
nondeductibility of certain expenses and the character of our
income). In addition, to the extent permitted under our credit
agreements, EBS Master may make distributions to us without pro
rata distributions to other members in order to pay
(i) consideration, if any, for redemption, repurchase or
other acquisition of EBS Units to the extent such cash is used
to redeem, repurchase or otherwise acquire our Class A
common stock, (ii) operating, administrative and other
similar costs incurred by us, including payments on indebtedness
and preferred stock issued by us, to the extent we use the
proceeds from the issuance to pay expenses (in either case only
to the extent economically equivalent indebtedness or preferred
stock were not issued by EBS Master to us), (iii) payments
representing interest with respect to payments not made when due
under the terms of certain tax receivable agreements (as
described below) and (iv) other payments related to
(a) legal, tax, accounting and other professional fees and
expenses, (b) judgments, settlements, penalties, fines or
other costs and expenses in respect of any claims involving us
and (c) other fees and expenses related to the maintenance
of our existence or any securities offering, investment or
acquisition transaction authorized by our board of directors.
The EBS LLC Agreement provides that, except as otherwise
determined by us, and, at any time we issue a share of our
Class A common stock or any other equity security, other
than pursuant to an employee benefit plan or stockholder rights
plan, the net proceeds received by us with respect to such
issuance, if any, shall be concurrently invested in EBS Master
(unless such shares were issued by us solely to fund our ongoing
operations or the purchase of EBS Units or to pay our expenses
or other obligations) and EBS Master shall issue to us one EBS
Unit or other economically equivalent equity interest.
Conversely, if at any time, any shares of our Class A
common stock are redeemed, repurchased or otherwise acquired,
EBS Master shall redeem, repurchase or otherwise acquire an
equal number of EBS Units held by us, upon the same terms and
for the same price, as the shares of our Class A common
stock are redeemed, repurchased or otherwise acquired.
In accordance with the terms of the EBS LLC Agreement, holders
of EBS Units, other than us, generally have the right to
exchange their EBS Units (and corresponding shares of our
Class B common stock) with EBS Master for shares of our
Class A common stock on a
one-for-one
basis, subject to customary conversion rate adjustments for
stock splits, stock dividends and reclassifications. In
addition, certain EBS Units issued to members of our management
and board of directors are subject to vesting conditions that
must be satisfied before the EBS Units (and corresponding shares
of our Class B common stock) may be exchanged for shares
16
of our Class A common stock. As outstanding EBS Units (and
corresponding shares of our Class B common stock) are
exchanged for shares of our Class A common stock, our
membership interests in EBS Master will be correspondingly
increased. In connection with any proposed exchange of an EBS
Unit, we may, in our sole discretion, elect to purchase and
acquire the applicable EBS Units and corresponding Class B
common stock by paying either (i) cash in an amount equal
to the fair market value (determined by the volume weighted
average price of the shares of Class A common stock on the
date of purchase (ignoring the price paid in connection with any
block trades of 100,000 or more shares)) of the shares of
Class A common stock the member would have received in the
proposed exchange or (ii) the number of shares of
Class A common stock the member would have received in the
proposed exchange. Unless we make such an election, we have no
obligation to the exchanging member or EBS Master with respect
to the proposed exchange.
Under the EBS LLC Agreement, the members have agreed that the
affiliates of the H&F Equityholders that hold EBS Units
(the H&F Continuing LLC Members)
and/or one
or more of their respective affiliates are permitted to engage
in business activities or invest in or acquire businesses which
may compete with our business or do business with any client of
ours.
Under the EBS LLC Agreement, EBS Master will indemnify all of
its members, including us, against any and all losses and
expenses related thereto incurred by reason of the fact that
such person was a member of EBS Master. In the event that losses
are incurred as a result of a members fraud or willful
misconduct, such member is not entitled to indemnification under
the EBS LLC Agreement.
EBS Master may be dissolved only upon the first to occur of
(i) the sale of substantially all of its assets, or
(ii) the voluntary agreement of us and the H&F
Continuing LLC Members. Upon dissolution, EBS Master will be
liquidated and the proceeds from any liquidation will be applied
and distributed in the following manner: (a) first, to
creditors (including to the extent permitted by law, creditors
who are members) in satisfaction of the liabilities of EBS
Master, (b) second, to establish cash reserves for
contingent or unforeseen liabilities and (c) third, to the
members in proportion of their interests in EBS Master (other
than to members holding unvested EBS Units to the extent that
their units do not vest as a result of the event causing the
dissolution).
Stockholders
Agreement
In connection with the reorganization transactions, we entered
into the Stockholders Agreement with the General Atlantic
Equityholders, the H&F Equityholders and the Management
Equityholders. As described below, the Stockholders
Agreement contains restrictions and priorities with respect to
the transfer of shares of our capital stock and grants our
Principal Equityholders and Management Equityholders certain
registration rights. In addition, the Stockholders
Agreement contains provisions related to the composition of our
board of directors and the committees of our board of directors
and our corporate governance, which are more fully described
above under Corporate Governance.
Priorities
in Transfer
Under the Stockholders Agreement, subject to certain
limited exceptions, such as transfers to affiliates, in any
transfer of shares of our capital stock by the General Atlantic
Equityholders or the H&F Equityholders, the General
Atlantic Equityholders and the H&F Equityholders will be
entitled to transfer their shares of our common stock
(i) on a 70% / 30% basis (with the General
Atlantic Equityholders selling 70% and the H&F
Equityholders selling 30% of our common stock in any such
offering) or (ii) pro rata in accordance with the Principal
Equityholders voting power in us, depending on the
achievement of a specified valuation of Emdeon. The priorities
referred to in clause (i) above remain in effect until the
aggregate voting power in Emdeon held by the General Atlantic
Equityholders is equal to or less than the aggregate voting
power held by the H&F Equityholders, at which time the
Principal Equityholders may sell on a pro rata basis in
accordance with their voting power in us. These priorities in
the Stockholders Agreement will terminate on the earlier
of the date that each of the General Atlantic Equityholders and
the H&F Equityholders own less than 25% of the outstanding
shares of our common stock or two years from the consummation of
the IPO.
17
Registration
Rights
Under the Stockholders Agreement, each of the General
Atlantic Equityholders, the H&F Equityholders and the
Management Equityholders are entitled to certain registration
rights. Both the General Atlantic Equityholders and the H&F
Equityholders can cause us to register shares of Class A
common stock held by either of them so long as the aggregate
proceeds expected to be received from the sale of stock
requested to be included in the registration are expected to
exceed $100 million. In addition, the Principal
Equityholders and the Management Equityholders can cause us to
file a shelf registration statement to permit the resale of any
shares of Class A common stock held by them, provided that
we will not be obligated to file such registration statement if
we are not eligible to use
Form S-3
or the aggregate proceeds expected to be received from the sale
of securities requested to be included in the shelf registration
statement are not at least $15 million.
In any request for registration under the Stockholders
Agreement, the non-requesting Principal Equityholders and
Management Equityholders will be entitled to piggyback
registration rights with respect to the registration. If the
registration requested is in the form of an underwritten
offering, and if the managing underwriter of the offering
determines that the number of securities proposed to be offered
would have an adverse affect on the offering, the number of
shares included in the offering will be reduced pursuant to a
certain order of priority set forth in the Stockholders
Agreement. Each Principal Equityholder and Management
Equityholder is also entitled to piggyback registration rights
with respect to any registration initiated by us or another
stockholder or stockholders, subject to applicable limitations
and participation priorities set forth in the Stockholders
Agreement.
Under the Stockholders Agreement, so long as either group
of Principal Equityholders owns voting securities of ours
providing them with at least 50% of the voting power they had in
us immediately before the IPO, we may not grant any other person
registration rights unless we obtain the consent of that group
of Principal Equityholders.
In any registration for which registration rights are exercised,
we have agreed to indemnify and pay offering related expenses of
the selling stockholders who are party to the Stockholders
Agreement that participate in the offering, other than
underwriting discounts and commissions.
Tag-Along
Rights
Under the Stockholders Agreement, in connection with any
transfer or sale of Class A common stock by a group of
Principal Equityholders (other than a transfer in connection
with a public offering), the other group of Principal
Equityholders and the Management Equityholders have
tag-along rights that allow them to sell a
proportionate amount of their shares of Class A common
stock in such sale or transfer. This provision of the
Stockholders Agreement is only applicable if the group of
Principal Equityholders that initiates the sale holds more than
5% of our outstanding common stock at the time of the sale or
transfer.
Other
Provisions
The Stockholders Agreement contains covenants providing
that, unless we obtain the written consent of each group of
Principal Equityholders, (i) we must comply with all terms
and provisions of the EBS LLC Agreement and (ii) we may not
amend the EBS LLC Agreement. In the case of clause (ii), the
covenant will cease to apply at such time as each group of
Principal Equityholders holds less than 5% of the voting power
in Emdeon.
The Stockholders Agreement contains a covenant which
requires our amended and restated certificate of incorporation
to include provisions pursuant to which we elect not to be
governed by Section 203 of the Delaware General Corporation
Law. This covenant terminates when each group of Principal
Equityholders owns securities representing less than 5% of the
voting power in Emdeon.
In addition, we have agreed that the doctrine of corporate
opportunity does not apply against the Principal
Equityholders or any of our directors who are employees of the
Principal Equityholders in a manner
18
that would prohibit them from investing in competing businesses
or doing business with our clients and customers.
Under the Stockholders Agreement, we have agreed to
indemnify the Principal Equityholders from any losses arising
directly or indirectly out of the Principal Equityholders
actual, alleged or deemed control or ability to influence
control of us or the actual or alleged act or omission of any
Principal Equityholderss director nominees, including any
act or omission in connection with the IPO.
Under the Stockholders Agreement, we agreed to reimburse
each group of Principal Equityholders for all reasonable
out-of-pocket
fees and expenses incurred by each in connection with the
transactions contemplated by the Stockholders Agreement.
Tax
Receivable Agreements
Prior to the IPO, we and two of our subsidiaries purchased
membership interests in EBS Master. The purchases of these
membership interests resulted, and will result in, tax basis
adjustments to the assets of EBS Master, and these basis
adjustments have been allocated to us and to two of our
subsidiaries. In addition, outstanding EBS Units (along with the
corresponding shares of our Class B common stock) will be
exchangeable in the future for cash or shares of our
Class A common stock. These future exchanges are likely to
result in tax basis adjustments to the assets of EBS Master,
which adjustments would also be allocated to us. Both the
existing and the anticipated basis adjustments are expected to
reduce the amount of tax that we would otherwise be required to
pay in the future.
In connection with the reorganization transactions, we entered
into two tax receivable agreements with an entity controlled by
the Principal Equityholders (the Tax Receivable
Entity). One tax receivable agreement generally provides
for the payment by us to the Tax Receivable Entity of 85% of the
amount of cash savings, if any, in U.S. federal, state and
local income tax or franchise tax that we actually realize as a
result of (i) any
step-up in
tax basis in EBS Masters assets resulting from the
purchases by us and our subsidiaries of EBS Units prior to the
IPO; (ii) tax benefits related to imputed interest deemed
to be paid by us as a result of this tax receivable agreement;
and (iii) loss carryovers from prior periods (or portions
thereof).
The second of these tax receivable agreements generally provides
for the payment by us to the Tax Receivable Entity of 85% of the
amount of cash savings, if any, in U.S. federal, state and
local income tax or franchise tax that we actually realize as a
result of (i) any
step-up in
tax basis in EBS Masters assets resulting from
(a) exchanges by the H&F Continuing LLC Members of EBS
Units (along with the corresponding shares of our Class B
common stock) for cash or shares of our Class A common
stock or (b) payments under this tax receivable agreement
to the Tax Receivable Entity and (ii) tax benefits related
to imputed interest deemed to be paid by us as a result of this
tax receivable agreement.
We also entered into a third tax receivable agreement with
certain Management Equityholders (including
Messrs. Devitre, Kever, Pead, Lazenby, Bahl, Hardin,
Newport, Stevens and Stuart but not Mr. Lyle) which
generally provides for the payment by us to those Management
Equityholders of 85% of the amount of the cash savings, if any,
in U.S. federal, state and local income tax or franchise
tax that we actually realize as a result of (i) any
step-up in
tax basis in EBS Masters assets resulting from
(a) the purchases by us and our subsidiaries of EBS Units
from the Management Equityholders using a portion of the
proceeds from the IPO, (b) the exchanges by the Management
Equityholders of EBS Units (along with the corresponding shares
of our Class B common stock) for cash or shares of our
Class A common stock or (c) payments under this tax
receivable agreement to the Management Equityholders and
(ii) tax benefits related to imputed interest deemed to be
paid by us as a result of this tax receivable agreement.
The actual increase in tax basis, as well as the amount and
timing of any payments under these agreements, will vary
depending upon a number of factors, including the timing of
exchanges by the H&F Continuing LLC Members or the
Management Equityholders, as applicable, the price of our
Class A common stock at the time of the exchange, the
extent to which such exchanges are taxable, the amount and
timing of the taxable income we generate in the future and the
tax rate then applicable, our use of loss carryovers and
19
the portion of our payments under the tax receivable agreements
constituting imputed interest or amortizable basis.
We estimate that, as a result of the amount of the increases in
the tax basis of the tangible and intangible assets of EBS
Master and the loss carryovers from prior periods (or portions
thereof), assuming no material changes in the relevant tax law
and that we earn sufficient taxable income to realize in full
the potential tax benefit described above, future payments under
the tax receivable agreements in respect of the purchases and
the loss carryovers will aggregate approximately
$142 million and range from approximately $3 million
to $15 million per year over the next 15 years. These
amounts reflect only the cash savings attributable to current
tax attributes resulting from the purchases and the loss
carryovers. It is possible that future transactions or events
could increase or decrease the actual tax benefits realized and
the corresponding tax receivable agreement payments from these
tax attributes. Future payments under the tax receivable
agreements in respect of subsequent acquisitions of EBS Units
would be in addition to these amounts.
In addition, although we are not aware of any issue that would
cause the Internal Revenue Service to challenge the tax basis
increases or other benefits arising under the tax receivable
agreements, the Tax Receivable Entity and the Management
Equityholders will not reimburse us for any payments previously
made if such basis increases or other benefits are subsequently
disallowed, except that excess payments made to the Tax
Receivable Entity or the Management Equityholders will be netted
against payments otherwise to be made, if any, after our
determination of such excess. As a result, in such
circumstances, we could make payments under the tax receivable
agreements that are greater than our actual cash tax savings.
Finally, because we are a holding company with no operations of
our own, our ability to make payments under the tax receivable
agreements is dependent on the ability of our subsidiaries to
make distributions to us. Our credit agreements restrict the
ability of our subsidiaries to make distributions to us, which
could affect our ability to make payments under the tax
receivable agreements. To the extent that we are unable to make
payments under the tax receivable agreements for any reason,
such payments will be deferred and will accrue interest until
paid.
Rights to receive payments under the tax receivable agreements
may be terminated by the Tax Receivable Entity or the Management
Equityholders, as applicable, if as the result of an actual or
proposed change in law, the existence of the agreements would
cause recognition of ordinary income (instead of capital gain)
in connection with future exchanges of EBS Units for cash or
shares of our common stock or would otherwise have material
adverse tax consequences to the Tax Receivable Entity, its
owners or the Management Equityholders. In recent years, there
have been legislative proposals that, if enacted, would have
resulted in such ordinary income recognition. Further, in the
event of such a termination, the Tax Receivable Entity or the
Management Equityholders would have the right, subject to the
delivery of an appropriate tax opinion, to require us to
determine a lump sum amount in lieu of the payments otherwise
provided under the agreements. That lump sum amount would be
calculated by increasing the portion of the tax savings retained
by us to 30% (from 15%) and by calculating a present value for
the total amount that would otherwise be payable under the
agreements, using a discount rate equal to the lesser of LIBOR
plus 100 basis points and 6.5% per annum and assumptions as
to income tax rates and as to our ability to utilize the tax
benefits (including the assumption that we will have sufficient
taxable income). If the assumptions used in this calculation
turn out not to be true, we may pay more or less than the
specified percentage of our actual cash tax savings. This lump
sum amount may be paid in cash or by a subordinated note with a
seven-year maturity and an interest rate equal to the lesser of
LIBOR plus 200 basis points and 6% per annum. Any such
acceleration can occur only if the Tax Receivable Entity or any
Management Equityholders, as applicable, has terminated a
substantial portion of our obligations (or, in the case of a
Management Equityholder, such members share of our
obligations) under the applicable tax receivable agreement with
respect to exchanges of EBS Units. The ultimate impact of a
decision to accelerate will depend on what the ongoing payments
would have been under the tax receivable agreement absent
acceleration, which will in turn depend on the various factors
mentioned above.
In addition, the tax receivable agreements provide that, upon
certain mergers, asset sales, or other forms of business
combination or certain other changes of control, our or our
successors obligations with respect to tax benefits would
be based on certain assumptions, including that we or our
successor would have sufficient
20
taxable income to fully utilize the deductions arising from the
increased tax deductions and tax basis and other benefits
covered by the tax receivable agreements. As a result, upon a
change of control, we could be required to make payments under
the tax receivable agreements that are greater than or less than
the specified percentage of our actual cash tax savings.
Transfer
Restrictions
In connection with the reorganization transactions, each of the
Management Equityholders who is an employee of ours (including
Messrs. Lazenby, Bahl, Hardin, Newport, Stevens and Stuart
but not Mr. Lyle) agreed to restrict his ability to
transfer (i) EBS Units and corresponding shares of our
Class B common stock issued to them in the reorganization
transactions (including any shares of our Class A common
stock issuable upon the exchange of these EBS Units and
corresponding shares of our Class B common stock)
(Initial Unit Securities) and (ii) options to
purchase our Class A common stock issued in connection with
the IPO that are subject to a three-year vesting period
(including any shares of our Class A common stock issuable
upon the exercise of these options) (Initial Option
Securities). Subject to certain exceptions, such as
transfers to permitted transferees, such Management Equityholder
may not transfer his Initial Unit Securities or Initial Option
Securities in excess of specified threshold limitations. These
transfer restrictions will terminate upon the earlier of
(i) the third anniversary of the IPO, (ii) a change of
control of Emdeon and (iii) the termination of the
employment of the applicable Management Equityholder.
Indemnification
Agreements
In connection with the IPO, we entered into an indemnification
agreement with each of our executive officers and directors that
provides, in general, that we will indemnify them to the fullest
extent permitted by law in connection with their service to us
or on our behalf.
Other
Transactions
Agreements
with WebMD and its Affiliates
The following discussion contains summaries of certain
agreements we entered into with our former parent company, HLTH
Corporation and its affiliates, currently known as WebMD Health
Corp. (WebMD), that remain in effect. Prior to
November 2006, the group of companies that comprised Emdeon
Business Services was owned by WebMD. EBS Master was formed by
WebMD to act as a holding company for Emdeon Business Services.
In November 2006, the General Atlantic Equityholders purchased a
52% interest in EBS Master. In February 2008, WebMD sold its
remaining 48% interest in EBS Master to the General Atlantic
Equityholders and the H&F Equityholders (the 2008
Transaction).
Amended
and Restated Business Services Agreement
We and our subsidiaries entered into an Amended and Restated
Business Services Agreement with WebMD in connection with the
2008 Transaction related to the development of certain
applications that can be used in our business and the
integration of some of the data we collect in providing our
services with applications offered by WebMD. In particular, we
granted WebMD a right of first refusal with respect to the
development of applications and products that measure
non-financial, health-related information or that can be used by
customers to improve health or wellness. If WebMD elects to
exercise its right of first refusal for any application, the
parties are required to negotiate financial and contractual
terms relating to such application, including sharing of
revenues and profits, prior to commencing development. This
agreement will terminate on September 25, 2011.
Amended
and Restated Data License Agreement
We and our subsidiaries entered into an Amended and Restated
Data License Agreement with WebMD in connection with the 2008
Transaction under which we are required (on an exclusive basis)
to provide WebMD (subject to applicable law and our contractual
relationships with our customers) with certain
de-identified data that we collect in providing our
solutions for use in applications offered by WebMD primarily
related to
21
clinical purposes or created for clinical, non-financial
purposes. We also granted WebMD a non-exclusive license to use
such de-identified data in connection with any other
uses (other than financial or administrative applications or
products that are targeted to providers, payers or their
suppliers or that relate to claims submission). Under the
agreement, WebMD is required to pay us a royalty based on the
revenues it earns from use of the de-identified data
we provide. The agreement has an initial term of ten years from
February 8, 2008, and automatically renews for an
additional five year term unless terminated by either party
prior to extension.
In October 2009, Emdeon acquired certain additional rights to
specified uses of its data from WebMD in order to broaden
Emdeons ability to pursue business intelligence and data
analytics solutions for payers and providers. Emdeon previously
licensed exclusive rights to this data to WebMD pursuant to the
Amended and Restated Data License Agreement. In April 2010,
Emdeon exercised an option to acquire certain additional rights
to specified uses of its data from WebMD.
Provision
of Claims Administration Services
In 2009, we entered into an agreement with Patni Computer
Systems Ltd. (Patni) to provide us certain mailroom
and verification services in an arms length transaction.
Certain of the General Atlantic Equityholders are the beneficial
owner of approximately seventeen percent (17%) of the equity
shares of Patni. During 2010, Emdeon made payments of
approximately $3.9 million to Patni in connection with this
agreement. In January 2011, General Atlantic announced its
intention to sell all of its interests in Patni, subject to
customary closing conditions.
Agreements
with Allscripts Healthcare Solutions, Inc.
Following the merger of Allscripts and Eclipsys Corporation in
the third quarter of 2010, Mr. Pead was appointed as
executive Chairman of the Board of Allscripts. During 2010, the
Company made payments of approximately $2.3 million to
Allscripts under preexisting agreements between the Company and
Allscripts for connectivity and other services.
22
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us
regarding the beneficial ownership of our Class A common
stock as of March 29, 2011 by (i) each of our
executive officers who has been deemed a named executive
officer pursuant to SEC rules, (ii) each director,
(iii) all of our directors and executive officers as a
group and (iv) each person who is known by us to be the
beneficial owner of more than 5% of any class or series of our
capital stock. The number of shares of Class A common stock
and percentage of voting power included in the table below
assumes the exchange of all Class B common stock and EBS
Units for shares of Class A common stock.
The amounts and percentages of Class A common stock and
Class B common stock beneficially owned are reported on the
basis of the regulations of the SEC governing the determination
of beneficial ownership of securities. Under these rules, 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 of which that person has a
right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed to be a
beneficial owner of the same securities. Except as otherwise
indicated, the named persons below have sole voting and
investment power, or share voting and investment power with
their spouses, with respect to beneficially owned shares listed
below.
The percentages included in the table below are based on
115,816,321 shares, consisting of 91,127,179 shares of
Class A common stock and 24,689,142 shares of
Class B common stock, outstanding as of March 29, 2011:
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
Shares of Class A
|
|
Combined Voting
|
Name and Address of
Beneficial Owner
(1)
|
|
common stock
|
|
Power
(2)
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George I. Lazenby, IV
|
|
|
687,399(3)
|
|
|
*
|
Bob A. Newport, Jr.
|
|
|
228,418(4)
|
|
|
*
|
J. Philip Hardin
|
|
|
193,744(5)
|
|
|
*
|
Gregory T. Stevens
|
|
|
258,420(6)
|
|
|
*
|
Gary D. Stuart
|
|
|
277,914(7)
|
|
|
*
|
Tracy L. Bahl
|
|
|
379,029(8)
|
|
|
*
|
Dinyar S. Devitre
|
|
|
15,934(9)
|
|
|
*
|
Mark F. Dzialga
(10)(11)
|
|
|
49,131,313
|
|
|
42.4%
|
Philip U. Hammarskjold
(12)
|
|
|
34,246,087
|
|
|
29.5%
|
Jim D. Kever
|
|
|
15,934(9)
|
|
|
*
|
Jonathan C. Korngold
(10)(11)
|
|
|
49,131,313
|
|
|
42.4%
|
Philip M. Pead
|
|
|
40,934(9)
|
|
|
*
|
Allen R. Thorpe
(10)(13)
|
|
|
10,000
|
|
|
*
|
All Directors and Executive Officers as a group
(14 persons)
|
|
|
85,932,399
|
|
|
74.2%
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Atlantic LLC
3 Pickwick Plaza
Greenwich, CT 06830
(11)
|
|
|
49,121,313
|
|
|
42.4%
|
|
|
|
|
|
|
|
Hellman & Friedman LLC
One Maritime Plaza, 12th Floor
San Francisco, CA 94111
(12)
|
|
|
34,246,087
|
|
|
29.5%
|
|
|
|
|
|
|
|
Soros Fund Management LLC
88 Seventh Avenue, 33rd Floor
New York, New York 10106
(14)
|
|
|
7,787,218
|
|
|
6.7%
|
23
|
|
|
(1)
|
|
Unless otherwise indicated, the
address of each beneficial owner in the table above is: 3055
Lebanon Pike, Suite 1000, Nashville, TN 37214.
|
(2)
|
|
Percentage of combined voting power
represents voting power with respect to all shares of our
Class A common stock and Class B common stock, voting
together as a single class. Our Class B common stock does
not have any of the economic rights (including rights to
dividends and distributions upon liquidation) associated with
our Class A common stock.
|
(3)
|
|
Includes 375,591 vested EBS Units
(and corresponding shares of Class B common stock), 134,919
unvested EBS Units (and corresponding shares of Class B
common stock) and 172,140 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(4)
|
|
Includes 109,685 vested EBS Units
(and corresponding shares of Class B common stock), 45,312
unvested EBS Units (and corresponding shares of Class B
common stock) and 71,250 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(5)
|
|
Includes 94,224 vested EBS Units
(and corresponding shares of Class B common stock), 39,186
unvested EBS Units (and corresponding shares of Class B
common stock) and 59,034 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(6)
|
|
Includes 44,961 vested EBS Units
(and corresponding shares of Class B common stock), 64,404
unvested EBS Units (and corresponding shares of Class B
common stock) and 146,795 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(7)
|
|
Includes 150,965 vested EBS Units
(and corresponding shares of Class B common stock), 55,183
unvested EBS Units (and corresponding shares of Class B
common stock) and 69,147 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(8)
|
|
Includes 43,797 vested EBS Units
(and corresponding shares of Class B common stock), 240,644
unvested EBS Units (and corresponding shares of Class B
common stock) and 94,588 shares of Class A common
stock that may be acquired upon the exercise of options.
|
(9)
|
|
Includes 7,239 vested EBS Units
(and corresponding shares of Class B common stock),
2,500 shares of Class A common stock that may be
acquired upon the exercise of options and 6,195 shares of
Class A common stock underlying restricted stock units for
which applicable restrictions will lapse on May 27, 2011,
provided, however, that an applicable number of the shares, to
be determined based upon the fair market value of the shares on
that date, will be retained by the Company for the payment of
applicable tax withholdings.
|
(10)
|
|
Includes 10,000 shares of
Class A common stock that may be acquired upon the exercise
of options.
|
(11)
|
|
General Atlantic is the general
partner of General Atlantic GenPar L.P. (GA GenPar),
which is the general partner of General Atlantic Partners 83,
L.P. (GAP 83), General Atlantic Partners 84, L.P.
(GAP 84) and GAP-W, LLC (GAP-W). General
Atlantic is also the general partner of GAP Coinvestments CDA,
L.P. (GAPCO CDA). The officers and directors of
GapStar, LLC (GapStar), and the managing members of
GAP Coinvestments III, LLC (GAPCO III), and GAP
Coinvestments IV, LLC (GAPCO IV), are Managing
Directors of General Atlantic. GAPCO Management GmbH (GmbH
Management) is the general partner of GAPCO
GmbH & Co. KG (KG). Certain Managing
Directors of General Atlantic make voting and investment
decisions with respect to the securities held by KG and GmbH
Management. There are twenty-seven Managing Directors of General
Atlantic. General Atlantic, GAP 83, GAP 84, GAPCO III, GAPCO IV,
GapStar, KG, GAP-W, GAPCO CDA and GmbH Management are a
group within the meaning of
Rule 13d-5
promulgated under the Securities Exchange Act of 1934, as
amended, and may be deemed to own beneficially an aggregate of
49,121,313 shares of our Class A common stock. Mark F.
Dzialga and Jonathan Korngold are each Managing Directors of
General Atlantic and GmbH Management and Managing Members of
GAPCO III and GAPCO IV. Each of Messrs. Dzialga and
Korngold disclaims beneficial ownership of such shares
beneficially owned by them except to the extent of his pecuniary
interest therein. In addition, the other Managing Directors of
General Atlantic are Steven A. Denning, William E. Ford, John D.
Bernstein, Gabriel P. Caillux, Alexander A. Chulack, Abhay
Havaldar, Patricia L. Hedley, David C. Hodgson, René M.
Kern, Christopher G. Lanning, Jeff X. Leng, Anton J. Levy,
Adrianna Ma, Marc F. McMorris, John C. Morris, Thomas J. Murphy,
Matthew Nimetz, Fernando Oliveira, Ranjit Pandit, Andrew C.
Pearson, Brett B. Rochkind, David A. Rosenstein, Sunish Sharma
and Philip P. Trahanas. Each of these individuals disclaims
ownership of such shares owned by General Atlantic except to the
extent he or she has a pecuniary interest therein. Other than
their interest in General Atlantic, these individuals are not
affiliated with us or our management. The mailing address for
General Atlantic and the General Atlantic Stockholders (other
than KG and GmbH Management) is
c/o General
Atlantic Service Company, LLC, 3 Pickwick Plaza, Greenwich, CT
06830. The mailing address of KG and GmbH Management is
c/o General
Atlantic GmbH, Koenigsallee 63, 40212 Düsseldorf, Germany.
|
(12)
|
|
In addition to H&F Harrington
AIV II, L.P.s (H&F AIV) ownership of
11,639,697 shares of our Class A common stock and
20,000 vested options to purchase shares of our Class A
common stock held by Messrs. Hammarskjold and Thorpe for
the benefit of H&F AIV and HFCP VI Domestic AIV, L.P., each
H&F Continuing LLC Member holds EBS Units and an equal
number of shares of Class B common stock. Each H&F
Continuing LLC Member has the right at any time to exchange any
EBS Units (and a corresponding number of shares of Class B
common stock) for shares of Class A common stock on a
one-for-one
basis. Set forth below is a table that lists each H&F
Continuing LLC Member and its ownership amounts:
|
|
|
|
|
|
EBS Units and Class B
|
Name
|
|
common stock
|
|
HFCP VI Domestic AIV, L.P. (HFCP Domestic)
|
|
22,349,977
|
Hellman & Friedman Investors VI, L.P. (H&F
GP)
|
|
125,178
|
Hellman & Friedman Capital Executives VI, L.P.
(H&F Capital Executives)
|
|
99,940
|
Hellman & Friedman Capital Associates VI, L.P.
(H&F Capital Associates)
|
|
11,295
|
24
Hellman & Friedman is the
general partner of H&F GP and H&F GP is the general
partner of HFCP Domestic, H&F AIV, H&F Capital
Executives and H&F Capital Associates (collectively, the
H&F Entities). As the general partner of
H&F GP, which is the general partner of each of the
H&F Entities, Hellman & Friedman may be deemed to
have beneficial ownership of the securities over which any of
H&F GP or the H&F Entities has voting or dispositive
power. The investment committee of Hellman & Friedman
has power to vote or to direct the vote of, and to dispose or to
direct the disposition of the securities that are held by or for
the benefit of H&F GP and the H&F Entities. The
members of the investment committee of Hellman &
Friedman are Brian M. Powers, Philip U. Hammarskjold, Patrick J.
Healy and Thomas F. Steyer. Each member of the investment
committee of Hellman & Friedman, including
Mr. Hammarskjold, disclaims beneficial ownership of such
securities. The address of Hellman & Friedman,
H&F GP, the H&F Entities and Mr. Hammarskjold is
c/o Hellman &
Friedman LLC, One Maritime Plaza, 12th Floor,
San Francisco, California 94111.
|
|
|
(13)
|
|
Mr. Thorpe is a Managing
Director of Hellman & Friedman, but is not a member of
its investment committee. Mr. Thorpe disclaims beneficial
ownership of the securities held by the H&F Entities,
except to the extent of his pecuniary interests therein, if any.
The address for Mr. Thorpe is
c/o Hellman &
Friedman LLC, 390 Park Avenue, 21st Floor, New York, New York
10022.
|
|
(14)
|
|
Based solely on an amended
Schedule 13G filed with the SEC on February 16, 2011.
The amended Schedule 13G relates to shares of our
Class A common stock held for the account of Quantum
Partners Ltd., a Cayman Islands exempted limited liability
company (Quantum Partners). Soros
Fund Management LLC (SFM LLC) serves as
principal investment manager to Quantum Partners. As such, SFM
LLC has been granted investment discretion over portfolio
investments, including the shares of our Class A common
stock, held for the account of Quantum Partners. George Soros
serves as Chairman of SFM LLC, Robert Soros serves as Deputy
Chairman of SFM LLC, and Jonathan Soros serves as President and
Deputy Chairman of SFM LLC. The amended Schedule 13G
reports sole power to vote or direct the voting of
7,787,218 shares of our Class A common stock and sole
power to dispose or direct the disposition of
7,787,218 shares of our Class A common stock.
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), requires our executive
officers and directors and the holders of greater than 10% of
our common stock to file initial reports of ownership and
reports of changes in ownership with the SEC and to furnish us
with copies of these reports. Each director, other than
Messrs. Hammarskjold and Thorpe, and executive officer has
provided Emdeon with a power of attorney to file the required
reports electronically on their behalf. Based solely upon a
review of the copies of these reports furnished to us and
written representations from such directors, executive officers
and stockholders with respect to the period from January 1,
2010 through December 31, 2010, we are not aware of any
required Section 16(a) reports that were not filed on a
timely basis.
Copies of Section 16(a) reports can be found on the
Investors page of our corporate website at
http://investors.emdeon.com
under the category SEC Filings.
25
EXECUTIVE
OFFICERS
Biographical information for each of our current executive
officers is set forth below, excluding the biographies of
Messrs. Lazenby and Bahl, which are included under the
heading Proposal 1 Election of
Directors above.
Bob A. Newport, Jr. Mr. Newport, 51, has
been our Chief Financial Officer since September 2008 and has
served as the Chief Financial Officer of Emdeon Business
Services since April 2006. Prior to that, Mr. Newport
served as Vice President of Financial Planning &
Analysis of Emdeon Business Services from January 2005 to March
2006 and Vice President of Finance of Emdeon Business Services
from December 2003 to December 2004. From October 2002 to
December 2003, Mr. Newport served as Chief Financial
Officer of Medifax EDI, Inc. Prior to joining Medifax,
Mr. Newport was with Lattimore Black Morgan &
Cain, a regional CPA firm, where he practiced approximately
20 years, including the last 10 as a principal.
Mr. Newport is a certified public accountant and received a
B.S. in Accounting from Carson-Newman College.
J. Philip Hardin. Mr. Hardin, 47,
has been our Executive Vice President Provider
Services since September 2008 and has served in the same
position for Emdeon Business Services since June 2007. Prior to
that, Mr. Hardin served as Executive Vice President of
Product Management of WebMD, from May 2004 to June 2007 and as
President of Emdeon Dental, a division of WebMD, from January
2003 to April 2004. Mr. Hardin received a B.S. in
Accounting from the University of Georgia and received an M.B.A.
from Stanford University.
Mark Lyle. Mr. Lyle, 55, has been our
Senior Vice President Pharmacy Services since July
2009 when Emdeon acquired eRx Network L.L.C. Prior to that,
Mr. Lyle served as President and CEO of eRx Network from
February 2002 until July 2009. Mr. Lyle received a B.S.E.
in Electrical Engineering from the University of Alberta.
Gregory T. Stevens. Mr. Stevens, 46, has
been our Executive Vice President, General Counsel and Secretary
since September 2008 and has served in the same position for
Emdeon Business Services since July 2008. Prior to joining us,
Mr. Stevens served as Chief Administrative Officer, General
Counsel, Secretary and Chief Compliance Officer of Spheris Inc.
from July 2003 to June 2008. During February 2010, Spheris filed
a voluntary petition under Chapter 11 of the
U.S. Bankruptcy Code in order to facilitate the sale of
Spheris pursuant to Section 363 thereunder to MedQuist
Holdings, Inc. From March 2002 to June 2003, Mr. Stevens
served as Acting General Counsel and Secretary of Luminex
Corporation. From 1996 to 2002, Mr. Stevens served as the
Senior Vice President and General Counsel for Envoy Corporation.
Prior to joining Envoy, Mr. Stevens practiced corporate and
securities law with Bass, Berry & Sims PLC.
Mr. Stevens received a B.A. in Economics and History and a
J.D. from Vanderbilt University.
Gary D. Stuart. Mr. Stuart, 46, has been
our Executive Vice President Payer Services since
August 2008 and has served in the same position for Emdeon
Business Services since March 2006. Prior to that,
Mr. Stuart served as Executive Vice President of Payer and
Vendor Strategy for Emdeon Business Services since August 2005.
Mr. Stuart also served as Senior Vice President of Sales in
the Transaction Services Division of WebMD Envoy from July 2002
to February 2005 and in various other capacities with WebMD
since July 1998. Mr. Stuart received a B.A. in Business
Administration from Texas State University.
26
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
The following discussion analyzes our executive compensation
program with respect to our named executive officers and the
material elements of the compensation packages awarded to such
officers. This discussion also describes our compensation
philosophy and the policies and processes that we follow in
reaching compensation decisions. The individuals whose
compensation is discussed below are our Chief Executive Officer,
George I. Lazenby, IV; our Chief Financial Officer, Bob A.
Newport, Jr.; our Executive Vice President
Provider Services, J. Philip Hardin; our Executive Vice
President, General Counsel and Secretary, Gregory T. Stevens;
and our Executive Vice President Payer Services,
Gary D. Stuart. We collectively refer to these individuals in
the following discussion as our named executive
officers.
The Role
of the Compensation Committee
The responsibilities of the compensation committee of our board
of directors include:
|
|
|
|
|
reviewing and approving corporate goals and objectives for the
chief executive officer and the executive chairman;
|
|
|
|
evaluating the performance of the chief executive officer and
the executive chairman;
|
|
|
|
reviewing and approving compensation of executive officers and
other senior executives;
|
|
|
|
reviewing and approving the following as they affect the
executive officers and other senior executives: all cash-based
and equity-based incentive awards, employment agreements,
severance arrangements, any change in control agreements and any
special or supplemental compensation and benefits;
|
|
|
|
overseeing and administering our equity incentive plans;
|
|
|
|
making recommendations to our board of directors with respect to
non-employee director compensation;
|
|
|
|
assessing, together with management, potential risks to Emdeon
associated with our employee compensation programs;
|
|
|
|
reviewing and discussing with management the compensation
discussion and analysis required by SEC rules for inclusion in
our proxy statements and preparing the compensation committee
report required by SEC rules; and
|
|
|
|
monitoring equity ownership by our directors and executive
officers.
|
With respect to the compensation of our named executive officers
other than our chief executive officer and executive chairman,
the compensation committee works with our chief executive
officer to conduct these reviews. To this end, our chief
executive officer completes an evaluation of each such named
executive officer, makes recommendations regarding the
compensation of such officer and presents his evaluations and
compensation recommendations to the compensation committee.
After considering our chief executive officers evaluations
and recommendations and such other factors as the nature and
responsibilities of each named executive officers
position, the named executive officers experience,
Emdeons achievement of corporate goals, the named
executive officers achievement of individual goals and
competitive industry compensation, the compensation committee
sets the annual compensation of the named executive officers.
The compensation committee then sets the compensation of our
chief executive officer and executive chairman in a meeting at
which neither is present. The compensation for each of our named
executive officers is set and recommended for adoption at
meetings of the compensation committee generally held in the
first quarter of each year.
27
Compensation
Philosophy and Objectives
Our compensation is centered around a
pay-for-performance
philosophy and is designed to reward our named executive
officers for their abilities, experience and efforts. We believe
our services, solutions and products reflect the individual and
combined knowledge and performance that our compensation
programs are structured to reward. Our ability to attract,
retain and motivate the highly-qualified and experienced
professionals who are vital to our success as a company is
directly tied to the compensation programs we offer.
We believe that having compensation programs designed to align
executive officers interests with those of Emdeon in
achieving positive business results and to reinforce
accountability is the cornerstone to successfully implementing
and achieving our strategic plans. In determining the
compensation of our named executive officers, we are guided by
the following key principles:
Competitiveness of Compensation. Compensation should
be responsive to the competitive marketplace so that we continue
to be able to attract, retain and motivate talented executives.
Accountability for Overall Business Performance. A
portion of compensation should be tied to our overall
performance so that our named executive officers are held
accountable through their compensation for the performance of
Emdeon as a whole.
Accountability for Individual Performance. A portion
of compensation should be tied to the named executive
officers own individual performance to encourage and
reflect individual contributions to our performance.
Alignment with Stockholder Interests. A portion of
compensation should be tied to our market performance through
equity awards to align our named executive officers
interests with those of our stockholders.
We seek to maintain a performance-oriented culture and a
compensation approach that rewards our named executive officers
when we achieve our goals and objectives, while putting at risk
an appropriate portion of their compensation against the
possibility that our goals and objectives may not be achieved.
Consistent with this philosophy, we have sought to create an
executive compensation package that balances short-term versus
long-term components, cash versus equity elements and fixed
versus contingent payments in ways that we believe are most
appropriate to motivate our named executive officers.
Compensation
Consultant
Neither Emdeon nor the compensation committee engaged a
compensation consultant in determining or recommending the
amount or form of executive and director compensation paid
during 2010. In September 2010, the compensation committee
engaged Veritas Executive Compensation Consultants, LLC
(Veritas) to assist the compensation committee in
evaluating our executive compensation policies and practices. At
the request of the compensation committee, Veritas reviewed our
executive compensation policies and practices and prepared its
own analysis of the multiple components and design of our
executive compensation programs, as well as an analysis of the
positioning of these programs in the competitive market. In
February 2011, Veritas presented its findings and
recommendations regarding executive compensation components,
including base salary, performance bonus compensation and the
use of performance-based stock awards, to the compensation
committee. The compensation committee considered these analyses
and recommendations as one of several factors in making its
decisions with respect to 2011 compensation for the named
executive officers.
Overview
of Components of Compensation
Compensation for our named executive officers consists of the
following key components:
|
|
|
|
|
base salary;
|
|
|
|
annual cash bonuses; and
|
|
|
|
equity-based awards.
|
28
The first component of named executive officer compensation is
base salary, which is intended to secure the services of the
executive and compensate him for his functional roles and
responsibilities.
The second component is annual cash bonuses, which are based
upon a combination of Company and individual performance. These
cash bonuses are intended to link executive pay directly to
achievement of annual company operating
and/or other
performance objectives. We believe this compensation component
aligns the interests of our named executive officers with the
interests of our stockholders in the pursuit of short to
medium-term
performance that should create value for our stockholders.
The third component is equity-based awards which provide a
long-term incentive component to named executive officer
compensation packages. Equity-based awards granted to our named
executive officers align a portion of our named executive
officers compensation to the interests of our investors
and to each other, further reinforcing collaborative efforts for
their mutual success. Equity-based compensation also fosters a
long-term commitment from our named executive officers to the
Company and balances the shorter-term cash components of
compensation that we provide.
In addition, our named executive officers are eligible to
receive the same benefits that we provide and to participate in
all plans that we offer to other full-time employees, including
health and welfare benefits and participation in our 401(k)
Savings Plan and ESPP.
We also provide our named executive officers with severance
payments and benefits in the event of an involuntary or
constructive termination of employment without cause and
accelerated equity award vesting in connection with a change in
control of the Company.
Base
Salary
We provide each named executive officer with a base salary for
the services that he performs for us. This compensation
component constitutes a stable element of compensation while
other compensation elements are variable. Base salaries are
reviewed annually and may be increased in light of the
individual past performance of the named executive officer,
company performance, any change in the executives position
within our business, the scope of his responsibilities and any
changes thereto and his tenure with Emdeon.
During 2010, the base salary for Messrs. Lazenby, Stevens
and Stuart was $500,000, $300,000 and $300,000, respectively. In
February 2010, Mr. Newport received an increase in base
salary from $300,000 to $315,000 and Mr. Hardin received an
increase from $275,000 to $290,000. For 2010, salaries comprised
25%, 32%, 42%, 34% and 39% of total compensation for
Messrs. Lazenby, Newport, Hardin, Stevens and Stuart,
respectively.
In February 2011, Mr. Newport received an increase in base
salary from $315,000 to $325,000, Mr. Stevens received an
increase from $300,000 to $315,000 and Mr. Stuart received
an increase from $300,000 to $325,000. To date, none of our
other named executive officers has received a salary increase in
2011.
Annual
Cash Bonuses
We provide our named executive officers with the opportunity to
share in our success through annual bonuses based upon a
combination of objective performance measures and a subjective
evaluation of the executives performance and contributions
to Emdeon during the year. In March 2010, the compensation
committee approved the Emdeon Management Bonus Program (the
Management Bonus Program). The Management Bonus
Program provides Emdeons executive officers and certain
key employees the opportunity to earn compensation in addition
to their base salaries up to a target bonus potential. Under the
Management Bonus Program, the target bonus is calculated as a
percentage of the participants annual base salary as of
the end of each fiscal year, with the target percentages
generally being aligned with the participants level and
role at Emdeon. The amount of compensation received under the
Management Bonus Program is determined at the discretion of the
compensation committee and is based upon a combination of
(i) the objective performance of Emdeon as a whole and of
the operating division or divisions of which the participant is
part and (ii) a subjective evaluation of the individual
participants performance. The compensation committee, with
the
29
recommendations of Mr. Lazenby (other than with respect to
himself and the executive chairman), is responsible for
(i) setting the annual performance targets,
(ii) reviewing actual performance and
(iii) determining the amount of the compensation payable to
each participant. The compensation committee has general
authority for oversight and interpretation of the Management
Bonus Program.
For 2010, the compensation committee determined that 45% of the
objective performance measures under the Management Bonus
Program were based on Adjusted EBITDA targets and 55% were based
on revenue targets. For the year ended December 31, 2010,
annual cash bonuses were linked to achievement of Adjusted
EBITDA within a range of $270 million to $317 million
and achievement of revenue from $1.0 billion to
$1.1 billion. We believe the combination of these
performance factors and the proportionate weighting assigned to
each reflected our overall Company goals for 2010, which
balanced the achievement of revenue growth and improving our
operating efficiency. These measures were calculated in the same
manner as reported in our financial results, except for
adjustments to exclude certain operating expenses associated
with cost reduction initiatives not taken into account when
setting 2010 financial targets.
Our named executive officers target annual cash bonuses
for 2010 as a percentage of base salary were 60% for
Mr. Lazenby and 50% for each of Messrs. Newport,
Hardin, Stevens and Stuart. The compensation committee, together
with Mr. Lazenby, reviewed the Company and individual
performance results at its first quarter 2011 meetings. Under
the objective performance criteria of the Management Bonus
Program, the Company achieved certain threshold performance
levels but did not achieve full target performance levels for
2010. The compensation committee exercised its discretion under
the Management Bonus Program in awarding bonuses to all program
participants, including the named executive officers, after
determining that the significant efforts expended by program
participants, the continued advancement of the Companys
strategic objectives and the financial results achieved by the
Company in light of the impact of lower healthcare utilization
trends affecting the entire healthcare industry merited
recognition and reward.
The compensation committee determined the actual amount of bonus
paid to Mr. Lazenby, and together with
Mr. Lazenbys input, determined the bonus payment for
each other named executive officer. Based upon both achievement
of threshold Adjusted EBITDA and revenue as calculated under the
Management Bonus Program and each named executive officers
performance review, together with the compensation
committees exercise of discretion as discussed above,
Messrs. Lazenby, Newport, Hardin, Stevens and Stuart
received bonuses of $91,679, $48,131, $44,311, $45,839 and
$45,839, respectively, for 2010. These bonus amounts were paid
in March 2011. These amounts comprised 30.6% of each named
executive officers target annual cash bonus for 2010 under
the Management Bonus Program.
In March 2011, the compensation committee determined the
objective performance measures for 2011 under the Management
Bonus Program. For the year ending December 31, 2011, 60%
of the objective performance measures will be based on Adjusted
EBITDA targets and 40% will be based on revenue targets. After
the objective performance measures are calculated, adjustments
to the annual cash bonuses payable for 2011 will be made based
on the executives achievement of individual objectives and
contributions to us during the year. For 2011, our named
executive officers target annual cash bonuses as a
percentage of base salary are 75% for Mr. Lazenby, 60% for
each of Messrs. Newport, Stevens and Stuart and 50% for
Mr. Hardin. The relative percentages of the performance
measures, as well as the target bonus percentage amounts, were
adjusted by the compensation committee for 2011 to better align
the interests of our named executive officers with the interests
of our stockholders in the pursuit of short to medium-term
performance while also increasing accountability for overall
business performance.
Equity-Based
Awards
In addition to base salary and cash bonus compensation, we
provide each of our named executive officers equity-based award
compensation. The 2009 Equity Plan, which was adopted by our
stockholders in July 2009 in anticipation of our IPO, provides
us with a competitive edge in attracting, retaining and
motivating employees, directors and consultants. The
compensation committee administers the 2009 Equity Plan and has
the authority to determine who will be granted awards, to set
the terms and conditions of such awards and to adopt, alter and
repeal rules, guidelines and practices relating to the 2009
Equity Plan and any awards granted.
30
The terms of all awards granted pursuant to the 2009 Equity Plan
are reflected in individual award agreements entered into by us
and the individual award recipient. Generally, awards granted to
the named executive officers pursuant to the 2009 Equity Plan
consist of options to purchase our Class A common stock and
restricted stock units representing a contingent right to
receive shares of our Class A common stock
(RSUs). The awards generally vest in equal annual
installments over a period of four years from the date of grant,
subject to the named executive officers continued
employment with us. Unless otherwise determined by the
compensation committee, unvested options will cease to vest and
RSUs on which restrictions have not yet lapsed will be forfeited
if the named executive officers employment with us is
terminated. RSUs are settled automatically upon the applicable
lapse date and the named executive officer will receive delivery
of an equal number of unrestricted shares of Class A common
stock, less any shares retained by us for the payment of
applicable tax withholdings. In addition, awards granted
pursuant to the 2009 Equity Plan are generally subject to
accelerated vesting in connection with a change in control (as
defined under the 2009 Equity Plan) if the holder either
(i) remains employed through the first year following such
change in control or (ii) his employment is terminated
during that year by us without cause or by him for good reason.
2010
Awards
In March 2010, we granted to our named executive officers
options to purchase shares of Class A common stock and RSUs
pursuant to the 2009 Equity Plan. The options were granted with
an exercise price per share of $16.51 and vest in equal annual
installments over a four year period from the date of grant.
Restrictions on the RSUs also lapse in equal annual installments
over a four year period from the date of grant. See
Executive Compensation Grants of Plan-Based
Awards During 2010 below for a more detailed discussion of
these equity-based awards.
2011
Awards
In March 2011, the compensation committee granted the named
executive officers the following equity awards under the 2009
Equity Plan: Mr. Lazenby was granted options to purchase
75,000 shares of Class A common stock and 15,000 RSUs;
Mr. Newport was granted options to purchase
60,000 shares of Class A common stock and 12,000 RSUs;
Mr. Hardin was granted options to purchase
25,000 shares of Class A common stock and 5,000 RSUs;
Mr. Stevens was granted options to purchase
50,000 shares of Class A common stock and 12,000 RSUs;
and Mr. Stuart was granted options to purchase
50,000 shares of Class A common stock and 10,000 RSUs.
The options granted permit the named executive officers to
purchase the underlying shares of Class A common stock for
$15.42 per share and vest annually in equal installments over
four years from the date of grant. Restrictions on the RSUs also
lapse annually in equal installments over four years from the
date of grant.
Perquisites
and Other Benefits
Our named executive officers are eligible to receive the same
benefits we provide and to participate in all plans we offer to
other full-time employees, including health and dental
insurance, group term life insurance, short- and long-term
disability insurance, other health and welfare benefits, our
401(k) Savings Plan (including Emdeons matching
contribution), the ESPP and other voluntary benefits.
Perquisites, however, are not a material component of our
executive compensation programs. In 2010, the only perquisite or
other compensation benefits deemed to be other compensation to
our named executive officers for purposes of the Summary
Compensation Table were matching contributions made by Emdeon on
their behalf to our 401(k) Savings Plan. See Executive
Compensation Summary Compensation Table below.
A brief description of the ESPP and our 401(k) Savings Plan is
set forth below.
Employee
Stock Purchase Plan
In July 2009, our board of directors adopted, and our
stockholders approved, the ESPP pursuant to which we offer our
employees the opportunity to make periodic purchases of shares
of our Class A common stock through payroll deductions. We
initially reserved 8.9 million shares of our Class A
common stock for sale under the ESPP. The compensation committee
is the administrator of the ESPP and sets the terms for each six-
31
month offering period, which commence on January 1 and July 1 of
each calendar year. If the compensation committee elects, the
purchase price for an offering period may be discounted from the
market price of Class A common stock, but not below 85% of
the market price on the first or last day of the offering
period, whichever price is lower. Participation in the ESPP
commenced on July 1, 2010 and, for the period ended
December 31, 2010, participants were eligible to purchase
shares of Class A common stock at a price equal to 85% of
the market price on July 1, 2010 pursuant to accrued
pay-roll deductions as of December 31, 2010. Our named
executive officers may elect to participate in the ESPP in the
same manner as our other employees.
Retirement
Plans
Effective January 1, 2011, we increased our matching
contribution in our 401(k) Savings Plan from a match of fifty
percent (50%) of contributions up to four percent (4%) of
eligible compensation to a match of fifty percent (50%) of
contributions up to five percent (5%) of eligible compensation.
Our named executive officers participate in and make elective
contributions under our 401(k) Savings Plan in the same manner
as our other employees.
Severance
and Change in Control Protection
Each of our named executive officers is party to an employment
agreement with us. Pursuant to the employment agreements, we
provide salary continuation and other benefits in the event of
involuntary or constructive termination of employment without
cause. Each such employment agreement was negotiated with the
respective named executive officer and specifies certain terms
of compensation, including an annual rate of base salary and
eligibility for an annual cash bonus. Pursuant to these
employment agreements, each named executive officer is subject
to restrictive covenants, including confidentiality,
non-competition and
non-solicitation
obligations. The employment of each named executive officer
under these employment agreements will continue in effect until
terminated by us or by the named executive officer.
Pursuant to the award agreements under the 2009 Equity Plan, as
well as agreements governing awards granted to our named
executive officers in connection with our IPO (Management
Awards), the awards granted to our named executive
officers fully vest in connection with a change in control (as
defined in the 2009 Equity Plan or the Management Awards, as
applicable) if the named executive officer either
(i) remains employed through the first year following such
change in control or (ii) his employment is terminated
during that year by us without cause or by him for good reason.
The protections afforded by these agreements are designed to
provide financial security in the event of certain corporate
transactions
and/or
qualifying termination of employment, as well as consideration
for the executives compliance with post-employment
restrictive covenants. We believe that these protections assist
in retaining our named executive officers and provide a basis
for continuing the cohesive operation of our business.
These payments and benefits are described in more detail below
under Executive Compensation Potential
Payments Upon Termination or Change in Control.
Minimum
Equity Retention Policy
Our board of directors believes that each individual (each, a
Participant) who is (i) a director,
(ii) an officer subject to the insider reporting
requirements of Section 16 of the Exchange Act
(Section 16 Officer) or (iii) a designated
member of senior management should demonstrate a long-term
commitment to Emdeon and to our stockholders by acquiring and
holding a meaningful investment in our equity securities. Our
board of directors believes that requiring Participants to hold
a significant long-term stake in Emdeons equity
accomplishes the principal goals of further aligning long-term
economic interests of Participants and our stockholders by
encouraging Participants to think and behave like long-term
investors and promoting sound corporate governance. Accordingly,
in November 2009, our board of directors adopted the Emdeon Inc.
Minimum Equity Retention Policy (the Equity Retention
Policy).
32
Pursuant to the Equity Retention Policy, Participants are
expected to build and maintain their equity ownership in Emdeon.
Participants (including those who become subject to the Equity
Retention Policy after its effective date, as well as those who
become subject to an increased targeted ownership level as a
result of promotions or otherwise) have up to five years to
satisfy their targeted ownership level and to maintain such
ownership thereafter. The value of a Participants owned
equity securities is calculated by multiplying the
then-applicable
market trading price of our Class A common stock by the
number of shares beneficially owned. The targeted ownership
levels are as follows:
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Directors: $250,000;
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Chief Executive Officer and Executive Chairman: five
(5) times the then-applicable base salary;
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Other Section 16 Officers and heads of business
units: three (3) times the then-applicable base
salary; and
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Other designated members of senior management: two
(2) times the then-applicable base salary.
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Each Participant who has not yet achieved the Participants
target ownership level may dispose of a portion of his Emdeon
securities, but is expected to retain a certain amount of shares
of Class A common stock that are delivered through
Emdeons equity compensation plans (Net
Shares). Net Shares refer to shares that remain after
shares are sold or netted to pay the exercise price of stock
options and applicable income and employment taxes arising in
connection with the settlement of equity awards for shares of
Class A common stock. The minimum Net Share percentages
are: (i) 50% for the directors, Chief Executive Officer,
Executive Chairman, other Section 16 Officers and heads of
business units; and (ii) 25% for all other Participants.
Once a Participant achieves the target ownership level, such
Participant may sell or otherwise dispose of Net Shares so long
as such transaction would not cause the Participant to fail to
satisfy the target ownership level. If a Participants
ownership subsequently falls below such Participants
target ownership level, the Participant will again be subject to
the Net Share retention requirement.
The compensation committee and our General Counsel are
authorized to make temporary exemptions to the foregoing target
ownership level requirements in their discretion, where
compliance would impose an economic hardship or otherwise
prevent a Participant from complying with a court order.
Risk
Guidelines
The structure of our compensation programs is designed to
promote behavior that supports value creation for our
stockholders. We believe that the attention of our named
executive officers and other key employees should be focused
upon key strategic, operational and financial measures. To this
end, a considerable portion of the compensation packages of our
named executive officers and other key employees are driven by
our long-term success. By focusing upon our sustained
profitability and growth, we believe our compensation programs
discourage our named executive officers and other employees from
engaging in unnecessary and excessive risk taking.
Accounting
and Tax Matters
We operate our compensation programs with the intention of
complying with Section 409A of the Code. We account for
stock-based payments in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718,
Compensation Stock Compensation (FASB ASC
Topic 718).
Given the three-year transitional rule under Section 162(m)
of the Code for newly-public companies, any compensation deemed
paid to a named executive officer when he exercises an
outstanding option under the 2009 Equity Plan granted prior to
the end of the transition period with an exercise price equal to
the fair market value of the option shares on the grant date
will qualify as performance-based compensation, which will not
be subject to the $1 million limitation under
Section 162(m) of the Code. To the extent deemed
appropriate by the compensation committee, we will generally
attempt to structure our executive compensation programs to
qualify as performance-based compensation that is not subject to
the $1 million limitation under Section 162(m) of the
Code. Because the amount and mix of individual compensation are
based upon
33
competitive and other considerations (including Company and
individual performance in accordance with our executive officer
compensation philosophy), however, named executive officer
compensation that is not performance-based (as qualified under
Section 162(m)) may exceed $1 million in a given year.
Although it will consider the tax, accounting and disclosure
implications of its compensation decisions under applicable
rules and regulations, including FASB ASC Topic 718 and
Section 162(m) of the Code, the compensation committee
believes its primary focus should be to attract, retain and
motivate executives and to align the executives interests
with those of our stockholders. Accordingly, we presently
consider the tax, accounting and disclosure consequences to be
influential but not determinant factors in the design of our
named executive officer compensation packages.
Compensation
Committee Interlocks and Insider Participation
The following non-employee directors are the current members of
the compensation committee: Messrs. Dzialga, Thorpe,
Devitre and Pead. None of our executive officers serves as a
member of the board of directors or compensation committee of
any entity that has one or more executive officers who serve on
our board of directors or the compensation committee.
34
COMPENSATION
COMMITTEE REPORT
The compensation committee has reviewed the foregoing
Compensation Discussion and Analysis and discussed it with
management and, based on such review and discussion, recommended
to the board of directors that the Compensation Discussion and
Analysis be included in this Proxy Statement and incorporated by
reference into Emdeons Annual Report on
Form 10-K
for the year ended December 31, 2010.
Submitted by the compensation committee of the board of
directors,
Mark F. Dzialga (Co-Chairman)
Allen R. Thorpe (Co-Chairman)
Dinyar S. Devitre
Philip M. Pead
35
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table summarizes the compensation earned by each
of our named executive officers for the years ended
December 31, 2010, 2009 and 2008.
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Non-Equity
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Stock
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Option
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Incentive Plan
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All Other
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Name and Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Compensation
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Total
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Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)
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George I. Lazenby, IV
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2010
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500,000
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429,260
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962,208
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91,679
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4,615
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1,987,762
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Chief Executive Officer
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2009
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519,231
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150,000
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661,000
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271,810
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3,200
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1,605,241
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2008
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500,000
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80,000
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220,157
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3,321
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803,478
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Bob A. Newport, Jr.
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2010
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310,961
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206,375
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407,088
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48,131
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4,900
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977,455
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Chief Financial Officer
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2009
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309,231
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150,000
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594,900
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135,905
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2,825
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1,192,861
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2008
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287,115
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70,000
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106,409
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3,330
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466,854
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J. Philip Hardin
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2010
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285,962
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123,825
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222,048
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44,311
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4,900
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681,046
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Executive Vice President -
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2009
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279,808
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20,000
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528,800
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96,266
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3,700
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928,574
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Provider Services
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2008
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250,000
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41,125
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3,488
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294,613
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Gregory T. Stevens
(7)
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2010
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300,000
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165,100
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370,080
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45,839
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4,900
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885,919
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Executive Vice President, General
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2009
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311,538
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150,000
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330,500
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546,930
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135,905
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4,273
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1,479,146
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Counsel & Secretary
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2008
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126,923
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60,000
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1,468,000
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110,079
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590
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1,765,592
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Gary D. Stuart
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2010
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300,000
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123,825
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296,064
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45,839
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4,900
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770,628
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Executive Vice President -
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2009
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311,538
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20,000
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330,500
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72,310
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123,550
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4,273
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862,171
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Payer Services
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2008
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300,000
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102,055
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4,471
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406,526
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(1)
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Due to the calendar year end for
2009 coinciding with the end of a pay period, 27 paychecks were
issued in 2009 rather than the standard 26. This schedule caused
each named executive officer to receive taxable salary for 2009
in the amount indicated rather than his annual base salary
amount because salary is reported on a cash basis.
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(2)
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The amounts reported in this column
for 2008 reflect a special bonus paid in recognition of
exceptional contributions to the Company in connection with the
consummation of the 2008 Transaction and the preparation of the
IPO. The amounts reported in this column for 2009 reflect a
special bonus paid in recognition of significant efforts made in
connection with the consummation of the IPO.
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(3)
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The amounts reported in this column
for 2010 represent the aggregate grant date fair value of
awarded RSUs computed in accordance with FASB ASC Topic 718.
Additional information regarding the RSUs is set forth in the
tables and notes under Grants of
Plan-Based
Awards During 2010, Outstanding
Equity Awards at December 31, 2010, and
Equity Awards Exercised and Vested for Year
Ended at December 31, 2010. The amounts reported in
this column for 2009 and 2008 represent the aggregate grant date
fair value of pre-IPO awards (Grant Units) computed
in accordance with FASB ASC Topic 718. In connection with the
reorganization transactions that occurred in connection with the
IPO, these Grant Units were converted into vested and unvested
EBS Units (and corresponding shares of Class B common
stock) governed by individual Management Awards and options to
purchase Class A common stock that vest over three and four
year periods and are governed by the 2009 Equity Plan. Please
see Note 16 to the Consolidated Financial Statements
included in Emdeons Annual Report on
Form 10-K
for the year ended December 31, 2010 for more information
on how these amounts were calculated.
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(4)
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The amounts reported in this column
for 2010 represent the aggregate grant date fair value of the
stock options computed in accordance with FASB ASC Topic 718.
Additional information regarding the awards is set forth in the
tables and notes under Grants of Plan-Based
Awards During 2010, Outstanding Equity
Awards at December 31, 2010, and
Equity Awards Exercised and Vested for Year
Ended at December 31, 2010. The amounts reported in
this column for 2009 represent the incremental grant date fair
value of the stock options that were granted as part of the
conversion of Grant Units in connection with the IPO computed in
accordance with FASB ASC Topic 718. Please see Note 16 to
the Consolidated Financial Statements included in Emdeons
Annual Report on
Form 10-K
for the year ended December 31, 2010 for more information
on how amounts in this column are calculated.
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(5)
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The amounts reported in this column
were paid under our annual cash bonus program.
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(6)
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For 2010, each named executive
officers additional compensation consists of matching
contributions to our 401(k) Savings Plan.
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(7)
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Mr. Stevens joined us in July
2008.
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36
Grants of
Plan-Based Awards During 2010
The following table summarizes (i) awards granted under our
Management Bonus Program, (ii) awards of options to
purchase shares of our Class A common stock and
(iii) awards of RSUs. The options and RSUs were granted
pursuant to the 2009 Equity Plan.
GRANTS OF
PLAN-BASED AWARDS DURING 2010
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All Other
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|
|
|
|
|
Estimated Future Payouts Under
|
|
All Other Stock
|
|
Option
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
Estimated Future Payouts
|
|
Equity Incentive Plan
|
|
Awards:
|
|
Awards:
|
|
or Base
|
|
Fair Value of
|
|
|
|
|
Under Non-Equity Incentive Plan
Awards(1)
|
|
Awards
|
|
Number of
|
|
Number of
|
|
Price of
|
|
Stock and
|
|
|
|
|
Thresh-
|
|
|
|
|
|
Thresh-
|
|
|
|
Maxi-
|
|
Shares of
|
|
Securities
|
|
Option
|
|
Option
|
|
|
|
|
old
|
|
Target
|
|
Maximum
|
|
old
|
|
Target
|
|
mum
|
|
Stock or Units
|
|
Underlying
|
|
Awards
|
|
Awards
|
Name
|
|
Grant Date
|
|
($)(2)
|
|
($)
|
|
($)(3)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(4)
|
|
Options(5)
|
|
($/Sh)
|
|
($)(6)
|
|
George I. Lazenby, IV
|
|
N/A
|
|
|
75,000
|
|
|
|
300,000
|
|
|
|
525,000
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Chief Executive
|
|
3/11/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
|
|
|
|
|
|
|
|
429,260
|
Officer
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
|
|
|
124,800
|
|
|
|
16.51
|
|
|
962,208
|
Bob A. Newport, Jr.
|
|
N/A
|
|
|
39,375
|
|
|
|
157,500
|
|
|
|
275,625
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Chief Financial
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
12,500
|
|
|
-
|
|
|
|
-
|
|
|
206,375
|
Officer
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
52,800
|
|
|
|
16.51
|
|
|
407,088
|
J. Philip Hardin
|
|
N/A
|
|
|
36,250
|
|
|
|
145,000
|
|
|
|
253,750
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Executive Vice President-
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
7,500
|
|
|
-
|
|
|
|
-
|
|
|
123,825
|
Provider Services
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
28,800
|
|
|
|
16.51
|
|
|
222,048
|
Gregory T. Stevens
|
|
N/A
|
|
|
37,500
|
|
|
|
150,000
|
|
|
|
262,500
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Executive Vice President,
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
10,000
|
|
|
-
|
|
|
|
-
|
|
|
165,100
|
General Counsel
& Secretary
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
48,000
|
|
|
|
16.51
|
|
|
370,080
|
Gary D. Stuart
|
|
N/A
|
|
|
37,500
|
|
|
|
150,000
|
|
|
|
262,500
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Executive Vice President-
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
7,500
|
|
|
-
|
|
|
|
-
|
|
|
123,825
|
Payer Services
|
|
3/11/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
38,400
|
|
|
|
16.51
|
|
|
296,064
|
|
|
|
(1)
|
|
The amounts reported in these
columns reflect amounts payable pursuant to our Management Bonus
Program for 2010 at various points within the range of Company
performance goals, assuming the satisfaction of individual
performance criteria. For a description of the material terms of
these awards and actual payouts made, see Compensation
Discussion and Analysis Annual Cash Bonuses.
|
|
(2)
|
|
The threshold
represents the amount payable upon achievement at the starting
point of the targeted ranges of Adjusted EBITDA and revenue, as
calculated under the Management Bonus Program for 2010.
|
|
(3)
|
|
The maximum represents
the amount payable upon achievement at the top of the targeted
ranges of Adjusted EBITDA and revenue, as calculated under the
Management Bonus Program for 2010.
|
|
(4)
|
|
Awards reported in this column
include grants of RSUs. Each RSU represents a contingent right
to receive one share of Class A common stock. The
restrictions on the RSUs will lapse in equal annual installments
over a four year period from the date of grant beginning
March 11, 2011.
|
|
(5)
|
|
Awards reported in this column
include options to purchase shares of Class A common stock.
The options will vest in equal annual installments over a four
year period from the date of grant beginning on March 11,
2011.
|
|
(6)
|
|
The amounts reported in this column
represent the aggregate grant date fair value of the award
computed in accordance with FASB ASC Topic 718. Please see
Note 16 to the Consolidated Financial Statements included
in Emdeons Annual Report on
Form 10-K
for the year ended December 31, 2010 for more information
on how these amounts were calculated.
|
37
Outstanding
Equity Awards at December 31, 2010
The following table provides information regarding outstanding
equity awards held by each of our named executive officers as of
December 31, 2010, including options to purchase shares of
our Class A common stock, RSUs and EBS Units (and
corresponding shares of Class B common stock). The EBS
Units (and corresponding shares of Class B common stock)
were issued pursuant to individual Management Awards rather than
pursuant to an equity plan. To assist with the understanding of
outstanding awards, however, we have included information
regarding the EBS Units in the following table.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
Market
|
|
|
of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)(4)
|
|
($)(5)
|
|
George I. Lazenby, IV
|
|
|
140,940
|
(1)
|
|
|
295,632
|
(2)
|
|
|
0
|
|
|
|
15.50
|
|
|
|
8/11/2019
|
|
|
|
-
|
|
|
|
-
|
|
Chief Executive Officer
|
|
|
0
|
|
|
|
124,800
|
(3)
|
|
|
0
|
|
|
|
16.51
|
|
|
|
3/11/2020
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
166,995
|
|
|
|
2,261,112
|
|
Bob A. Newport, Jr.
|
|
|
58,050
|
(1)
|
|
|
123,527
|
(2)
|
|
|
0
|
|
|
|
15.50
|
|
|
|
8/11/2019
|
|
|
|
-
|
|
|
|
-
|
|
Chief Financial Officer
|
|
|
0
|
|
|
|
52,800
|
(3)
|
|
|
0
|
|
|
|
16.51
|
|
|
|
3/11/2020
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,280
|
|
|
|
856,811
|
|
J. Philip Hardin
|
|
|
51,834
|
(1)
|
|
|
111,420
|
(2)
|
|
|
0
|
|
|
|
15.50
|
|
|
|
8/11/2019
|
|
|
|
-
|
|
|
|
-
|
|
Executive Vice President-
|
|
|
0
|
|
|
|
28,800
|
(3)
|
|
|
0
|
|
|
|
16.51
|
|
|
|
3/11/2020
|
|
|
|
-
|
|
|
|
-
|
|
Provider Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,547
|
|
|
|
697,946
|
|
Gregory T. Stevens
|
|
|
134,795
|
(1)
|
|
|
290,840
|
(2)
|
|
|
0
|
|
|
|
15.50
|
|
|
|
8/11/2019
|
|
|
|
-
|
|
|
|
-
|
|
Executive Vice President,
|
|
|
0
|
|
|
|
48,000
|
(3)
|
|
|
0
|
|
|
|
16.51
|
|
|
|
3/11/2020
|
|
|
|
-
|
|
|
|
-
|
|
General Counsel & Secretary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
77,442
|
|
|
|
1,048,565
|
|
Gary D. Stuart
|
|
|
59,547
|
(1)
|
|
|
125,346
|
(2)
|
|
|
0
|
|
|
|
15.50
|
|
|
|
8/11/2019
|
|
|
|
-
|
|
|
|
-
|
|
Executive Vice President-
|
|
|
0
|
|
|
|
38,400
|
(3)
|
|
|
0
|
|
|
|
16.51
|
|
|
|
3/11/2020
|
|
|
|
-
|
|
|
|
-
|
|
Payer Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,721
|
|
|
|
889,862
|
|
|
|
|
(1)
|
|
Represents options issued under
the 2009 Equity Plan as part of the conversion of Grant Units in
connection with the IPO. Exercisable options vest over both
3 year and 4 year service periods, respectively, as
follows: the awards for Mr. Lazenby were 127,190 and
13,750; the awards for Mr. Newport were 50,625 and 7,425;
the awards for Mr. Hardin were 44,084 and 7,750; the awards
for Mr. Stevens were 113,545 and 21,250; and the awards for
Mr. Stuart were 53,297 and 6,250. The options vest in equal
portions over either a three or four-year period beginning on
August 11, 2010.
|
|
(2)
|
|
Represents options issued under the
2009 Equity as part of the conversion of Grant Units in
connection with the IPO. Unexercisable options vest over both
3 year and 4 year service periods, respectively, as
follows: the awards for Mr. Lazenby were 254,382 and
41,250; the awards for Mr. Newport were 101,252 and 22,275;
the awards for Mr. Hardin were 88,170 and 23,250; the
awards for Mr. Stevens were 227,090 and 63,750; and the
awards for Mr. Stuart were 106,596 and 18,750. The options
vest in equal portions over either a three or four-year period
beginning on August 11, 2010.
|
|
(3)
|
|
The options vest in equal annual
installments over a four-year period beginning on March 11,
2011.
|
|
(4)
|
|
Represents both unvested RSUs and
EBS Units (and corresponding shares of Class B common
stock). The restrictions on the RSUs lapse in equal annual
installments over a four-year period beginning March 11,
2011. EBS Units, received as part of the conversion of Grant
Units in connection with the IPO, vest pursuant to the terms set
forth in the individual Management Awards. At December 31,
2010, each named executive officer held the following unvested
RSUs and EBS Units (and corresponding shares of Class B
common stock):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested EBS
|
|
|
|
|
|
|
Units and Class B
|
|
|
|
|
Name
|
|
common stock
|
|
Unvested RSUs
|
|
Total
|
|
George I. Lazenby, IV
|
|
|
140,995
|
|
|
|
26,000
|
|
|
|
166,995
|
|
Bob A. Newport, Jr.
|
|
|
50,780
|
|
|
|
12,500
|
|
|
|
63,280
|
|
J. Philip Hardin
|
|
|
44,047
|
|
|
|
7,500
|
|
|
|
51,547
|
|
Gregory T. Stevens
|
|
|
67,442
|
|
|
|
10,000
|
|
|
|
77,442
|
|
Gary D. Stuart
|
|
|
58,221
|
|
|
|
7,500
|
|
|
|
65,721
|
|
|
|
|
(5)
|
|
Based on $13.54, the closing price
per share of our Class A common stock on December 31,
2010.
|
38
Equity
Awards Exercised and Vested During the Year Ended
December 31, 2010
The following table provides information about the value
realized by each of our named executive officers during the year
ended December 31, 2010 upon the vesting of EBS Units (and
corresponding shares of Class B common stock).
EQUITY
AWARDS EXERCISED AND VESTED DURING THE YEAR ENDED DECEMBER 31,
2010
|
|
|
|
|
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
|
EBS Units
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
|
on Vesting
|
|
on
Vesting(1)
|
Name
|
|
(#)
|
|
($)
|
|
George I. Lazenby, IV
|
|
128,842
|
|
1,742,382(2)
|
Chief Executive Officer
|
|
|
|
|
Bob A. Newport, Jr.
|
|
39,843
|
|
538,310(3)
|
Chief Financial Officer
|
|
|
|
|
J. Philip Hardin
|
|
34,324
|
|
463,723(4)
|
Executive Vice President -
Provider Services
|
|
|
|
|
Gregory T. Stevens
|
|
22,480
|
|
299,452(5)
|
Executive Vice President,
General Counsel & Secretary
|
|
|
|
|
Gary D. Stuart
|
|
52,145
|
|
705,097(6)
|
Executive Vice President -
Payer Services
|
|
|
|
|
|
|
|
(1)
|
|
Value for vesting dates assumes
that on the vesting date, the EBS Units (and corresponding
shares of Class B common stock) were exchanged on a
one-for-one
basis for shares of Class A common stock.
|
|
(2)
|
|
Valuation is based on the closing
price of our Class A common stock on the vesting dates,
which was $13.39 for 6,075 EBS Units vested on May 26, 2010
and $13.53 for 122,767 EBS Units vested on November 15,
2010.
|
|
(3)
|
|
Valuation is based on the closing
price of our Class A common stock on the vesting dates,
which was $13.39 for 5,468 EBS Units vested on May 26, 2010
and $13.53 for 34,375 EBS Units vested on November 15, 2010.
|
|
(4)
|
|
Valuation is based on the closing
price of our Class A common stock on the vesting dates,
which was $13.39 for 4,860 EBS Units vested on May 26, 2010
and $13.53 for 29,464 EBS Units vested on November 15, 2010.
|
|
(5)
|
|
Valuation is based on the closing
price of our Class A common stock on the vesting dates,
which was $13.39 for 3,038 EBS Units vested on May 26, 2010
and $13.31 for 19,442 EBS Units vested on June 1, 2010.
|
|
(6)
|
|
Valuation is based on the closing
price of our Class A common stock on the vesting dates,
which was $13.39 for 3,038 EBS Units vested on May 26, 2010
and $13.53 for 49,107 EBS Units vested on November 15, 2010.
|
Potential
Payments Upon Termination or Change in Control
The following summaries and table describe and quantify the
potential payments and benefits that we would provide to our
named executive officers in connection with termination of
employment
and/or
change in control. In determining amounts payable, we have
assumed in all cases that the terms of the executives
current employment agreement with us were in effect on, and the
termination of employment and change in control occurred on
December 31, 2010.
Severance
Benefits-Employment Agreements
The employment of each named executive officer may be terminated
by us or by the executive at any time, with or without cause.
Pursuant to each named executive officers employment
agreement, the applicable named executive officer is entitled to
receive severance benefits upon termination by us without
cause, upon his resignation for good
reason, or upon his termination due to his death or
permanent disability. Upon an eligible termination, each named
executive officer is entitled to continued payment of his base
salary for 12 months (24 months in the case of
Mr. Lazenby and 18 months in the case of
Mr. Stevens) and reimbursement for COBRA health insurance
premiums (up to the amount we pay for active employees) for
12 months (18 months in the case of
Messrs. Lazenby and Stevens). The executives
entitlement to these
39
severance payments and benefits is generally conditioned on
continued compliance with his obligations not to compete with us
and not to solicit our employees or customers (for
Mr. Lazenby for two years following termination of
employment, and for Messrs. Newport, Hardin, Stevens and
Stuart, for 18 months following termination of employment)
and his release of all claims against us.
A termination for cause generally includes any of
the following: failure to comply with our employment policies;
misconduct or dishonesty in connection with his duties; or
conviction of a felony or crime involving moral turpitude.
Resignation for good reason generally includes: a
reduction in the executives base salary; a reduction in
the executives title, authority or duties or a relocation
by more than fifty miles of the executives principal place
of employment. For Messrs. Hardin and Stuart, severance
benefits are payable only upon resignation for good
reason within 24 months following a change in
control. A transaction that results in a change in
control is a sale or merger of Emdeon in which our
stockholders do not hold a majority of the surviving or
successor corporation; the acquisition by any person other than
the General Atlantic Equityholders and the H&F
Equityholders of 50% or more of our voting stock; a change in
the composition of our board of directors members as a result of
a proxy contest; or stockholder approval of a liquidation, sale,
or other disposition of substantially all Emdeons assets.
Under the terms of their employment agreements,
Messrs. Lazenby, Newport and Stevens are entitled to
severance benefits in the event of resignation for good
reason whether before or after a change in
control transaction.
No named executive officer has any right to receive a
gross up for any excise tax imposed by
Section 4999 of the Code, or any other federal, state and
local income tax.
Accelerated
Vesting of Equity-Based Awards
If Mr. Lazenbys employment is terminated for any
reason other than by us for cause, he is entitled to
an extra year of vesting credit for his EBS Units (and
corresponding shares of Class B common stock) and his
outstanding stock options that vest in equal annual installments
over a three-year period. In addition, each named executive
officers EBS Units (and corresponding shares of
Class B common stock) and options to purchase Class A
common stock are subject to 100% accelerated vesting in
connection with a change in control (as defined in the
Management Award or the 2009 Equity Plan, as applicable) if the
holder either (i) remains employed through the first year
following the change in control or (ii) his
employment is terminated during that year by us without
cause or by him for good reason.
40
Calculations
of Benefits to Which Executives Would be Entitled
Assuming termination of employment occurred on December 31,
2010, the dollar value of the payments and other benefits to be
provided to each named executive officer under his employment
agreement with us as currently in effect are estimated to be as
follows:
Estimated
Payments And Benefits Upon Termination
|
|
|
|
|
|
|
|
|
Termination by us Without
|
|
|
|
Resignation for Good
|
|
|
Cause or Upon Death
|
|
Resignation for
|
|
Reason Following a Change
|
Name
|
|
Or Disability
|
|
Good Reason
|
|
in Control
|
|
George I. Lazenby, IV
Chief Executive Officer
|
|
Salary Continuation $1,000,000 Insurance Coverage $24,468
Additional year of vesting for EBS Units and 3-year options
|
|
Salary Continuation $1,000,000 Insurance Coverage $24,468
Additional year of vesting for EBS Units and 3-year options
|
|
Salary Continuation $1,000,000 Insurance Coverage $24,468
Additional year of vesting for EBS Units and 3-year options
|
|
|
|
|
|
|
|
Bob A. Newport, Jr
Chief Financial Officer
|
|
Salary Continuation $315,000 Insurance Coverage $14,168
|
|
Salary Continuation $315,000 Insurance Coverage $14,168
|
|
Salary Continuation $315,000 Insurance Coverage $14,168
|
|
|
|
|
|
|
|
J. Philip Hardin
Executive Vice President Provider Services
|
|
Salary Continuation $290,000 Insurance Coverage $16,312
|
|
|
|
Salary Continuation $290,000 Insurance Coverage $16,312
|
|
|
|
|
|
|
|
Gregory T. Stevens
Executive Vice President, General Counsel & Secretary
|
|
Salary Continuation $450,000 Insurance Coverage $24,356
|
|
Salary Continuation $450,000 Insurance Coverage $24,356
|
|
Salary Continuation $450,000 Insurance Coverage $24,356
|
Gary D. Stuart
Executive Vice President
Payer Services
|
|
Salary Continuation $300,000 Insurance Coverage $16,312
|
|
|
|
Salary Continuation $300,000 Insurance Coverage $16,312
|
In addition, if a change in control of Emdeon had
occurred in 2010, and the named executive officers
employment was terminated by us without cause or by
him for good reason during 2010, the vesting of all
of his EBS Units (and corresponding shares of Class B
common stock), stock options and RSUs would have accelerated and
become vested as of the date of his termination of employment.
DIRECTOR
COMPENSATION
This section describes the compensation we provide to our
non-employee directors. Directors who are employed by us are not
compensated by us for their services as directors. The table
below shows amounts paid to our non-employee directors for the
year ended December 31, 2010.
DIRECTOR
COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
or
|
|
|
|
|
|
|
|
|
Paid in
|
|
Stock
|
|
Option
|
|
|
|
|
Cash
|
|
Awards
|
|
Awards
|
|
Total
|
Name
|
|
($)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
Dinyar S. Devitre
|
|
67,083(1)
|
|
84,995
|
|
|
|
152,078
|
Mark F. Dzialga
|
|
40,000
|
|
|
|
|
|
40,000
|
Philip U. Hammarskjold
|
|
40,000
|
|
|
|
|
|
40,000
|
Jim D. Kever
|
|
60,000
|
|
84,995
|
|
|
|
144,995
|
Jonathan C. Korngold
|
|
40,000
|
|
|
|
|
|
40,000
|
Philip M. Pead
|
|
60,000
|
|
84,995
|
|
|
|
144,995
|
Allen R. Thorpe
|
|
40,000
|
|
|
|
|
|
40,000
|
|
|
|
(1)
|
|
Includes prorated amount paid to
Mr. Devitre for his service on the compensation committee
beginning in August 2010.
|
|
(2)
|
|
The amounts reported in this column
represent the aggregate grant date fair value of the award
computed in accordance with FASB ASC Topic 718. Please see
Note 16 to the Consolidated Financial Statements included
in Emdeons Annual Report on
Form 10-K
for the year ended December 31, 2010 for more information
on how these amounts were calculated.
|
41
Our board of directors approved a program prior to the IPO under
which non-employee directors (other than representatives of our
Principal Equityholders) receive an annual retainer of $50,000,
and representatives of our Principal Equityholders receive an
annual retainer of $40,000. Non-employee directors who are not
representatives of our Principal Equityholders also receive
incremental committee retainers as follows: the audit committee
chairman receives an additional annual retainer of $15,000 and
other members of the audit committee receive an additional
annual retainer of $5,000; the chairmen of each of the
compensation committee and the nominating and corporate
governance committee receive an additional annual retainer of
$7,500 and other members of those committees receive an
additional annual retainer of $5,000 for each committee. In
addition, each non-employee director (other than representatives
of our Principal Equityholders) receives an annual grant of
$85,000 of RSUs with respect to shares of Class A common
stock on the date of each annual meeting of our stockholders,
based upon the closing price of our Class A common stock on
such date. The restrictions on the RSUs lapse one year from the
date of grant, subject to continued membership on our board of
directors, and are subject to accelerated vesting in connection
with a change in control (as defined under the 2009 Equity Plan)
if the director is involuntarily removed from, or not nominated
for
re-election
to, our board of directors other than for cause prior to the
vesting date.
In addition to the non-employee directors identified in the
table above, our board of directors included George I. Lazenby,
IV, our Chief Executive Officer, and Tracy L. Bahl, our
Executive Chairman, during 2010. Mr. Bahl has been an
executive officer of Emdeon since May 2009 and is party to an
employment agreement with us . For 2010, Mr. Bahl received
a base salary of $500,000 and an annual cash bonus of $76,399,
or 30.6% of his target bonus for 2010, under the Management
Bonus Program. Mr. Bahl did not receive any equity-based
compensation in 2010 or 2011. Mr. Lazenby and Mr. Bahl
do not receive any additional compensation for services provided
as a director.
42
AUDIT
COMMITTEE REPORT
The audit committee assists the board of directors in its
oversight of Emdeons financial reporting process and
implementation and maintenance of effective controls to prevent,
deter and detect fraud by management. Management is responsible
for the preparation, presentation and integrity of Emdeons
consolidated financial statements and internal control over
financial reporting. The independent registered public
accounting firm of Ernst & Young LLP is responsible
for performing an independent audit of Emdeons
consolidated financial statements and internal control over
financial reporting. The audit committees responsibility
is to monitor and oversee these processes.
The members of the audit committee are not professionally
engaged in the practice of accounting or auditing and are not
professionals in these fields. The audit committee relies,
without independent verification, on the information provided by
and on the representations made by management regarding the
effectiveness of internal control over financial reporting, that
the consolidated financial statements have been prepared with
integrity and objectivity and that such consolidated financial
statements have been prepared in conformity with generally
accepted accounting principles. The audit committee also relies
on the opinions of the independent auditor on Emdeons
consolidated financial statements and internal control over
financial reporting.
In overseeing the preparation of Emdeons consolidated
financial statements, the audit committee met with both
management and Ernst & Young LLP to review and discuss
the financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the audit
committee that all financial statements were prepared in
accordance with generally accepted accounting principles. The
audit committee discussed with Ernst & Young LLP
matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1. AU section 380).
The audit committee also is responsible for assisting the board
of directors in the oversight of the qualification, independence
and performance of Emdeons independent auditor. The audit
committee has received from Ernst & Young LLP the
written disclosures and the letter required by applicable
requirements of the Public Company Accounting Oversight Board
regarding Ernst & Young LLPs communications with
the audit committee concerning independence and has discussed
with Ernst & Young LLP its independence. In addition,
the audit committee has considered whether the provision of
non-audit services, and the fees charged for such services, by
Ernst & Young LLP are compatible with maintaining the
independence of Ernst & Young LLP from Emdeon.
Based upon the review and discussions referred to above, the
audit committee recommended to the board of directors that
Emdeons audited consolidated financial statements be
included in Emdeons Annual Report on
Form 10-K
for the year ended December 31, 2010. The audit committee
has selected, and the board of directors has approved, the
appointment of Ernst & Young LLP as Emdeons
independent auditor for the year ending December 31, 2011.
Submitted by the audit committee of the board of directors:
Dinyar S. Devitre (Chairman)
Jim D. Kever
Philip M. Pead
The foregoing report shall not be deemed incorporated by
reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of
1933, as amended, or under the Exchange Act, except to the
extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under such
Acts.
43
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of our board of directors has appointed
Ernst & Young LLP to serve as Emdeons
independent registered public accounting firm for the year
ending December 31, 2011. The audit committee has further
determined that management should submit the appointment of
Ernst & Young LLP to the stockholders at the Annual
Meeting. Ernst & Young LLP has audited the
consolidated financial statements of Emdeon and its predecessors
since November 2006. Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting.
Ernst & Young LLP will have an opportunity to make a
statement if they desire to do so and will be available to
respond to appropriate questions from stockholders.
Audit and
Non-Audit Fees
The following table presents the aggregate fees billed by
Ernst & Young LLP for the two most recent fiscal years
ended December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit
Fees(1)
|
|
$
|
1,246,329
|
|
|
$
|
1,775,446
|
|
Audit-Related
Fees(2)
|
|
$
|
115,940
|
|
|
|
|
|
Tax
Fees(3)
|
|
$
|
96,352
|
|
|
$
|
499,784
|
|
All Other
Fees(4)
|
|
$
|
1,995
|
|
|
$
|
1,995
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
1,460,616
|
|
|
$
|
2,277,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Fees for audit services include
fees relating to the audit of annual consolidated financial
statements, the review of quarterly financial statements, audit
services performed in connection with the IPO and fees
associated with the audit of a subsidiary required pursuant to
Emdeons credit agreements.
|
|
(2)
|
|
Fees for audit-related services
include fees relating to SAS 70 internal audit reports and due
diligence services.
|
|
(3)
|
|
Fees for tax services include fees
for tax compliance, tax advice and tax planning related to,
among other things, the IPO and our corporate structure.
|
|
(4)
|
|
All other fees consist of
subscription fees for a global accounting and auditing research
tool.
|
Pre-Approval
Policies and Procedures
Pursuant to the audit committees charter, the audit
committee reviews and pre-approves audit and non-audit services
performed by Emdeons independent registered public
accounting firm, as well as the terms and fees charged for such
services. Additionally, the audit committee reviews and
discusses with the firm documentation supplied by the firm as to
the nature and scope of any tax services to be approved, as well
as the potential effects of the provision of such services on
the firms independence. The audit committee may delegate
to one or more designated committee members the authority to
grant pre-approvals of audit and permitted non-audit services,
provided that any decisions to pre-approve shall be presented to
the full audit committee at its next scheduled meeting. For
2010, all of the audit and non-audit services provided by
Emdeons independent registered public accounting firm were
pre-approved by the audit committee in accordance with the audit
committee charter.
The audit committee has determined that the provision of
non-audit services, including tax and other services, by
Ernst & Young LLP is compatible with maintaining the
independence of Ernst & Young LLP.
The audit committee is not bound by a vote either for or against
Proposal 2. The audit committee will consider a vote
against the firm by the stockholders in selecting our
independent registered public accounting firm in the future.
Even if the selection is ratified, the audit committee may, in
its discretion, select a different independent registered public
accounting firm at any time during the year if it determines
that such a change would be in the best interests of Emdeon and
its stockholders.
ON BEHALF OF THE AUDIT COMMITTEE, THE BOARD OF DIRECTORS
RECOMMENDS A
VOTE FOR PROPOSAL 2.
44
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 14A of the Exchange Act requires that we seek
advisory stockholder approval of the compensation of our named
executive officers as described in the Compensation
Discussion and Analysis and the Executive
Compensation sections of this Proxy Statement, beginning
on pages 27 and 36 respectively.
As described in this Proxy Statement, we seek to closely align
the interests of our named executive officers with the interests
of our stockholders. Our compensation is centered around a
pay-for-performance
philosophy and is designed to reward our named executive
officers for their abilities, experience and efforts. Our
ability to attract, retain and motivate the highly-qualified and
experienced professionals who are vital to our success as a
company is directly tied to the compensation programs we offer.
We believe that having compensation programs designed to align
executive officers interests with those of Emdeon in
achieving positive business results and to reinforce
accountability is the cornerstone to successfully implementing
and achieving our strategic plans. To that end, our compensation
programs are designed to reward our named executive officers for
the achievement of short-term and long-term strategic and
operational goals and the achievement of increased total
stockholder return, while at the same time avoiding the
encouragement of unnecessary or excessive risk-taking. By this
Proposal 3, we are seeking your approval of our
compensation philosophy and the components of our compensation
programs as described in this Proxy Statement.
The vote on Proposal 3 is not intended to address any
specific element of compensation and is advisory, which means
that the vote is not binding on the Company, our board of
directors or the compensation committee. However, our board of
directors and the compensation committee will review the voting
results in connection with their ongoing evaluation of the
Companys compensation programs and will consider the
outcome of the vote when making future compensation decisions.
Accordingly, we ask our stockholders to vote on the following
resolution at the Annual Meeting:
RESOLVED, that the compensation paid to the named
executive officers, as disclosed in the Proxy Statement on
Schedule 14A pursuant to Item 402 of
Regulation S-K,
including the Compensation Discussion and Analysis, compensation
tables and narrative discussion, is hereby APPROVED.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR ADVISORY APPROVAL
OF THE RESOLUTION SET FORTH ABOVE.
45
PROPOSAL 4
ADVISORY VOTE ON THE FREQUENCY OF
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 14A of the Exchange Act also provides that
stockholders must be given the opportunity to vote, on a
non-binding advisory basis, for their preference as to how
frequently we should seek future advisory votes on the
compensation of our named executive officers.
By voting with respect to this Proposal 4, stockholders may
indicate whether they would prefer that we conduct future
advisory votes on executive compensation every one, two or three
years. Stockholders also may, if they wish, abstain from casting
a vote on this Proposal 4. Our board of directors has not
made a recommendation on Proposal 4 because it has decided
to consider the views of the stockholders before making a
determination.
Your determination of the preferred frequency of a vote on
executive compensation will depend upon your judgment about the
relative benefits and burdens of each of the options. There have
been diverging views expressed on this question. Some have
argued that a less frequent vote would allow stockholders to
focus on overall design of compensation programs, would align
with the goal of compensation programs which are designed to
reward performance that promotes long-term stockholder value and
would avoid the burden that annual votes would impose on
stockholders required to evaluate the compensation programs each
year. Others believe that an annual vote gives stockholders the
opportunity to react promptly to emerging trends in
compensation, provide feedback before those trends become
pronounced over time and give boards of directors and their
compensation committees the opportunity to evaluate individual
compensation decisions each year in light of the ongoing
feedback from stockholders.
The vote on Proposal 4 is advisory and not binding on the
Company or our board of directors in any way. Our board of
directors will consider the outcome of the vote when determining
the frequency of future advisory votes on executive
compensation. Our board of directors may decide that it is in
the best interests of our stockholders and the Company to hold
an advisory vote on executive compensation more or less
frequently than the frequency receiving the most votes cast by
our stockholders.
In voting on Proposal 4, you should mark your proxy card
for one, two or three years based on your preference as to the
frequency with which an advisory vote on executive compensation
should be held. If you have no preference you should abstain.
THE BOARD
OF DIRECTORS HAS NOT MADE A RECOMMENDATION ON
PROPOSAL 4.
46
EQUITY
COMPENSATION PLANS
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides information with respect to the
2009 Equity Plan and the ESPP under which our equity securities
are authorized for issuance as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available
|
|
|
Number of Securities
|
|
|
|
for Future Issuance
|
|
|
to be Issued upon
|
|
Weighted Average
|
|
under Equity
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Compensation Plans
|
|
|
Outstanding Options,
|
|
Outstanding Options
|
|
(excluding securities
|
Plan Category
|
|
Warrants and Rights
|
|
Warrants and Rights
|
|
reflected in column
(a))
|
|
Equity compensation plans approved by security holders
|
|
7,725,089(1)
|
|
$15.39
|
|
17,733,920(2)
|
Equity compensation plans not approved by security
holders(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
7,725,089
|
|
|
|
17,733,920
|
|
|
|
(1)
|
|
Includes 714,543 RSUs that are not
included in the calculation of the Weighted Average Exercise
Price column.
|
|
(2)
|
|
Consists of 8,862,562 securities
available for issuance under the 2009 Equity Plan and 8,871,358
securities available for issuance under the ESPP.
|
|
(3)
|
|
Does not include EBS Units (and
corresponding shares of Class B common stock) that can be
exchanged on a
one-for-one
basis for shares of Class A common stock, which were issued
pursuant to the Management Awards. Moreover, the Management
Awards were not made pursuant to any equity compensation plan.
|
47
ADDITIONAL
INFORMATION
Stockholder
Proposals for Emdeons 2012 Annual Meeting
We expect our annual meeting of stockholders to generally be
held in May of each year. We will consider for inclusion in our
proxy materials for the 2012 annual meeting of stockholders
proposals that are received no later than December 15, 2011
and that comply with all applicable requirements of
Rule 14a-8
promulgated under the Exchange Act, and our by-laws.
Stockholders must submit their proposals to our corporate
headquarters located at 3055 Lebanon Pike, Suite 1000,
Nashville, Tennessee 37214, Attention:
Gregory T. Stevens, Corporate Secretary.
In addition, any stockholder who wishes to propose a nominee to
our board of directors or propose any other business to be
considered by the stockholders (other than a stockholder
proposal to be included in our proxy materials pursuant to
Rule 14a-8
of the Exchange Act) must comply with the advance notice
provisions and other requirements of Article 2,
Section 2.2 of our by-laws, a copy of which is on file with
the SEC and may be obtained from our Corporate Secretary upon
request. These notice provisions require that nominations of
persons for election to our board of directors and proposals of
business to be considered by the stockholders for the 2012
annual meeting of stockholders must be made in writing and
submitted to our Corporate Secretary at the address above no
earlier than January 27, 2012 and no later than
February 26, 2012. A more detailed discussion regarding the
submission of director nominations for the 2012 annual meeting
of stockholders is provided under Corporate
Governance Information about our Board of
Directors Process for Identifying and Nominating
Directors above.
Requesting
Emdeons Annual Report
Our Annual Report on
Form 10-K
for the year ended December 31, 2010, as filed with the
SEC, is available on the Investors page of our corporate website
at
http://investors.emdeon.com
under the category SEC Filings. If you wish to
receive a copy of our Annual Report on
Form 10-K
for the year ended December 31, 2010, as well as a copy of
any exhibit specifically requested, we will mail these documents
to you without charge. Requests should be sent to 3055 Lebanon
Pike, Suite 1000, Nashville, Tennessee 37214, Attn: Gregory
T. Stevens, Corporate Secretary. A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2010 also has been filed
with the SEC and may be accessed from the SECs website at
www.sec.gov.
The Annual Report on
Form 10-K
for the year ended December 31, 2010 is not deemed to be a
part of our proxy materials.
Cost of
Proxy Solicitation
We will pay for the entire cost of soliciting proxies. In
addition to the costs of mailing the Notice of Internet
Availability of Proxy Materials, posting the proxy materials on
the Internet and mailing any requested proxy materials, our
directors and employees also may solicit proxies in person, by
telephone or by other means of communication. Directors and
employees will not be paid any additional compensation for
soliciting proxies. We also may reimburse brokerage firms, banks
and other agents for the cost of forwarding proxy materials to
beneficial owners.
Householding
The SEC has adopted rules that permit companies and
intermediaries (such as a broker, bank or other agent) to
implement a delivery procedure called householding.
Under this procedure, multiple stockholders who reside at the
same address may receive a single copy of our proxy materials,
including this Proxy Statement, the Notice of Internet
Availability of Proxy Materials and our Annual Report, unless
the affected stockholder has provided us with contrary
instructions. This procedure provides extra convenience for
stockholders and cost savings for companies.
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Emdeon and some brokers, banks or other agents may be
householding our proxy materials, including the Notice of
Internet Availability of Proxy Materials and our Annual Report.
A single Notice of Internet Availability of Proxy Materials and,
if applicable, a single set of this Proxy Statement, the Annual
Report and other proxy materials will be delivered to multiple
stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. Once you have
received notice from your broker, bank or other agent that it
will be householding communications to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If you did not respond that you
did not want to participate in householding, you were deemed to
have consented to the process. Stockholders may revoke their
consent at any time by contacting Broadridge ICS, either by
calling toll-free
(800) 542-1061
or by writing to Broadridge ICS, Householding Department, 51
Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, Emdeon will promptly deliver a
separate copy of the Notice of Internet Availability of Proxy
Materials and, if applicable, this Proxy Statement, the Annual
Report and other proxy materials to any stockholder at a shared
address to which a single copy of any of those documents was
delivered. To receive a separate copy of the Notice of Internet
Availability of Proxy Materials and, if applicable, this Proxy
Statement, the Annual Report and other proxy materials, you may
send a written request to 3055 Lebanon Pike, Suite 1000,
Nashville, Tennessee 37214, Attention: Gregory T. Stevens,
Corporate Secretary or call
(615) 932-3000.
In addition, if you are receiving multiple copies of the Notice
of Internet Availability of Proxy Materials and, if applicable,
this Proxy Statement, the Annual Report and other proxy
materials, you can request householding by contacting our
Corporate Secretary in the same manner.
OTHER
MATTERS
Our management is not aware of any other matter to be presented
for action at the Annual Meeting other than those mentioned in
the Notice of Annual Meeting of Stockholders and referred to in
this Proxy Statement. However, should any other matter requiring
a vote of the stockholders arise, the representatives named on
the accompanying proxy will vote in accordance with their
discretion.
By order of the board of directors,
Gregory T. Stevens
Executive Vice President, General Counsel and
Secretary
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EMDEON INC.
3055 LEBANON PIKE, SUITE 1000
NASHVILLE, TN 37214
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information until 11:59 p.m. Eastern Time on May 24, 2011. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and to create an electronic
voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by Emdeon in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that you
agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions until
11:59 p.m. Eastern Time on May 24, 2011.
Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to Emdeon, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M34914-P07922 |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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EMDEON INC.
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For |
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Withhold |
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For All |
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To withhold authority to vote for any individual |
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The Board of Directors
recommends you vote
FOR the following proposal: |
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All |
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Except |
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nominee(s), mark For All Except and write the |
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number(s) of the nominee(s) on the line below. |
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01) |
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George I. Lazenby, IV |
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06) |
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Jim D. Kever |
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02) |
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Tracy L. Bahl |
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Jonathan C. Korngold |
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Dinyar S. Devitre |
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Philip M. Pead |
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04) |
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Mark F. Dzialga |
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Allen R. Thorpe |
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Philip U. Hammarskjold |
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The Board of Directors recommends you vote
FOR proposals 2 and
3:
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Abstain |
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2.
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To ratify the appointment
of Ernst & Young LLP as the independent public accounting firm
for the Company for the fiscal year ending December 31, 2011.
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3.
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To approve the advisory
resolution on executive compensation.
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The Board of Directors does not have a recommendation for voting
on the following proposal:
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1 Year |
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2 Years |
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Abstain |
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4.
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To recommend holding
an advisory vote on executive compensation every one, two or three
years.
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NOTE:
In their discretion, the proxy holders are authorized to vote upon
such other business as may properly come before the
Annual Meeting.
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For
address change/comments, mark here.
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(see reverse for instructions)
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Please sign exactly as your name(s) appear(s) hereon. When signing
as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally.
All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners) |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report on Form 10-K are available
at www.proxyvote.com.
M34915-P07922
EMDEON INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2011
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned
hereby constitutes and appoints George I. Lazenby, IV and Tracy L. Bahl,
and each of them, as proxies, with full power of substitution, to vote all
shares of Class A common stock and Class B common stock of Emdeon Inc. (the
Company) which the undersigned would be entitled to vote if
present at the Annual Meeting of Stockholders of the Company to be held
at the Sheraton Music City Hotel located at 777 McGavock Pike, Nashville,
Tennessee 37214 at 8:30 a.m. Central Time on Wednesday, May 25, 2011, and
any adjournment or postponement thereof.
The shares represented by this Proxy will be voted as directed by
the undersigned. If no direction is given when the duly executed Proxy is returned, such shares will be voted FOR the
election of all nominees for director in Proposal 1; FOR Proposals 2 and 3; ABSTAIN from Proposal 4; and according to
the discretion of the proxy holders on any other matters that may properly come before the Annual Meeting and any adjournment
or postponement thereof.
(If you
noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side