þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2005 | ||
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Delaware
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94-3236644 | |
(State of incorporation) | (I.R.S. employer identification no.) | |
669 River Drive, Center 2 Elmwood Park, New Jersey |
07407-1361 (Zip code) |
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(Address of principal executive
office)
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Item 10. | Directors and Executive Officers of the Registrant |
Name
|
Age
|
Positions
|
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Mark J. Adler, M.D.(3)(4)
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49 | Director; Chairman of the Compensation Committee | ||||
Paul A. Brooke(1)(2)(5)(6)
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60 | Director | ||||
Kevin M. Cameron(1)
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39 | Director; Chief Executive Officer; and Acting CEO of our Emdeon Business Services segment | ||||
Neil F. Dimick(4)(5)
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56 | Director; Chairman of the Nominating Committee; Chairman of the Governance & Compliance Committee | ||||
James V. Manning(1)(2)(4)
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59 | Director; Chairman of the Audit Committee | ||||
Herman Sarkowsky(3)(5)(6)
|
80 | Director | ||||
Joseph E. Smith(1)(2)(3)(6)
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67 | Director | ||||
Martin J. Wygod(1)
|
66 | Chairman of the Board |
(1) | Member of the Executive Committee | |
(2) | Member of the Audit Committee | |
(3) | Member of the Compensation Committee | |
(4) | Member of the Governance & Compliance Committee | |
(5) | Member of the Nominating Committee | |
(6) | Member of the Related Parties Committee |
Name
|
Age
|
Positions
|
||||
Kevin M. Cameron
|
39 | Chief Executive Officer; and Acting CEO of our Emdeon Business Services segment | ||||
Andrew C. Corbin
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43 | Executive Vice President and Chief Financial Officer; and CEO of our Emdeon Practice Services segment | ||||
Wayne T. Gattinella
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54 | CEO and President of our WebMD segment | ||||
Charles A. Mele
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49 | Executive Vice President, General Counsel and Secretary | ||||
William G. Midgette
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50 | CEO of our Porex segment | ||||
Martin J. Wygod
|
66 | Chairman of the Board |
1
2
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| forwarded to the addressees or distributed at the next scheduled Board meeting; or | |
| if they relate to financial or accounting matters, forwarded to the Audit Committee or discussed at the next scheduled Audit Committee meeting; or | |
| if they relate to the recommendation of the nomination of an individual, forwarded to the Nominating Committee or discussed at the next scheduled Nominating Committee meeting; or | |
| if they relate to the operations of Emdeon, forwarded to the appropriate officers of Emdeon, and the response or other handling reported to the Board at the next scheduled Board meeting. |
| retaining and overseeing the registered public accounting firm that serves as our independent auditor and evaluating their performance and independence; | |
| reviewing our annual audit plan with Emdeons management and registered public accounting firm; | |
| pre-approving any permitted non-audit services provided by our registered public accounting firm; | |
| approving the fees to be paid to our registered public accounting firm; | |
| reviewing the adequacy and effectiveness of our internal controls with Emdeons management, internal auditors and registered public accounting firm; | |
| reviewing and discussing the annual audited financial statements and the interim unaudited financial statements with Emdeons management and registered public accounting firm; | |
| approving our internal audit plan and reviewing reports of our internal auditors; | |
| determining whether to approve related party transactions (other than transactions with WHC, approval of which has been delegated to the Related Parties Committee, as described below); and | |
| overseeing the administration of Emdeons Code of Business Conduct. |
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| oversight of our executive compensation program and our incentive and equity compensation plans; | |
| determination of compensation levels for and grants of incentive and equity-based awards to our executive officers; and | |
| review of and making recommendations regarding other matters relating to our compensation practices. |
| identifying individuals qualified to become Board members; | |
| recommending to the Board the director nominees for each Annual Meeting of Stockholders; and | |
| recommending to the Board candidates for filling vacancies that may occur between Annual Meetings. |
| the amount and type of the potential nominees managerial and policy-making experience in complex organizations and whether any such experience is particularly relevant to Emdeon; | |
| any specialized skills or experience that the potential nominee has and whether such skills or experience are particularly relevant to Emdeon; |
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| in the case of non-employee directors, whether the potential nominee has sufficient time to devote to service on the Emdeon Board and the nature of any conflicts of interest or potential conflicts of interest arising from the nominees existing relationships; | |
| in the case of non-employee directors, whether the nominee would be an independent director and would be considered a financial expert or financially literate under applicable listing standards of The NASDAQ Stock Market and applicable law; | |
| in the case of potential new members, whether the nominee assists in achieving a mix of Board members that represents a diversity of background and experience, including with respect to age, gender, race, areas of expertise and skills; and | |
| in the case of existing members, the nominees contributions as a member of the Board during his or her prior service. |
| evaluating and making recommendations to the Board regarding matters relating to the governance of Emdeon; | |
| assisting the Board in coordinating the activities of the Boards other standing committees, including with respect to Emdeons compliance programs and providing additional oversight of those compliance programs; and | |
| providing oversight of senior executive recruitment and management development. |
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| oversight of transactions between Emdeon and WHC; and | |
| oversight of other matters in which the interests of Emdeon and WHC conflict or may potentially conflict. |
| Messrs. Brooke, Manning, Sarkowsky and Smith and Dr. Adler are members of a special committee of the Board to oversee matters relating to the investigations described in Legal Proceedings Investigations by United States Attorney for the District of South Carolina and the SEC; | |
| Messrs. Dimick, Manning and Wygod are members of a special committee of the Board that provides oversight with respect to information technology matters relating to Emdeon Business Services (which we refer to as the Business Services IT Committee); and | |
| Dr. Adler and Messrs. Dimick and Wygod were members, during 2005, of a special committee of the Board to provide oversight of the preparations for WHCs initial public offering (which we refer to as the WebMD Health Transaction Committee); and | |
| Messrs. Wygod, Manning and Smith are members of a special committee of the Board authorized to make determinations relating to our stock repurchase program. |
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Item 11. | Executive Compensation |
Long-Term Compensation |
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Awards | ||||||||||||||||||||||||||||
Annual Compensation(1) |
Restricted |
Securities |
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Other Annual |
Stock |
Underlying |
All Other |
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Name and Principal
Position
|
Year | Salary($) | Bonus($) | Compensation($) | Awards($)(2) | Options (#)(3) | Compensation($) | |||||||||||||||||||||
Kevin M. Cameron
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2005 | 660,000 | 450,000 | | | 55,000 | W | 17,176 | (5) | |||||||||||||||||||
Chief Executive Officer(4)
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2004 | 502,500 | 402,000 | | 2,179,950 | E(6) | 1,700,000 | E | | |||||||||||||||||||
2003 | 270,000 | | | | | 588,580 | (7) | |||||||||||||||||||||
Andrew C. Corbin
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2005 | 450,000 | 375,000 | | 313,600 | E(8) | 200,000 | E | 17,033 | (9) | ||||||||||||||||||
Executive VP and Chief
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2004 | 450,000 | 415,000 | (10) | | 322,125 | E(11) | | | |||||||||||||||||||
Financial Officer; and
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2003 | 100,385 | (12) | 122,917 | (13) | | | 600,000 | E | | ||||||||||||||||||
CEO of our Emdeon Practice Services
segment
|
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David Gang
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2005 | 295,000 | (14) | 921,000 | (15) | 17,487 | (16) | 770,000 | W(17) | 176,000 | W | 30,000 | (18) | |||||||||||||||
Executive
VP Product &
|
952,000 | E(17) | 400,000 | E | ||||||||||||||||||||||||
Programming and Chief Technology
Officer of our WebMD segment(19)
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Wayne T. Gattinella
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2005 | 525,000 | 280,000 | | 962,500 | W(20) | 220,000 | W | 5,042 | (21) | ||||||||||||||||||
CEO and President of our
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2004 | 450,000 | 300,000 | | 322,125 | E(22) | 250,000 | E | | |||||||||||||||||||
WebMD segment
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2003 | 450,000 | 125,000 | | | | | |||||||||||||||||||||
Charles A. Mele
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2005 | 450,000 | 325,000 | | | 44,000 | W | 15,421 | (23) | |||||||||||||||||||
Executive VP, General
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2004 | 450,000 | 300,000 | | 322,125 | E(24) | 250,000 | E | | |||||||||||||||||||
Counsel and Secretary
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2003 | 450,000 | | | | | | |||||||||||||||||||||
Martin J. Wygod
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2005 | 1,195,000 | 450,000 | | 962,500 | W(25) | 220,000 | W | 3,989 | (26) | ||||||||||||||||||
Chairman of the Board
|
2004 | 1,260,000 | 402,000 | | | | | |||||||||||||||||||||
2003 | 1,308,900 | | | | | |
(1) | Reflects all amounts paid by Emdeon and its subsidiaries (including WHC and its subsidiaries). WHC was formed in May 2005 to be the holding company for Emdeons WebMD segment and to conduct an initial public offering. All cash compensation paid to Messrs. Gattinella and Gang was paid by WHC or was an expense allocated to WHC in the preparation of its financial statements. None of the other Named Executive Officers cash compensation in 2005 was paid by or allocated to WHC. | |
(2) | Grants by Emdeon are noted with an E and grants by WHC are noted with a W. Holders of restricted shares of Emdeon Common Stock (which we refer to as Emdeon Restricted Stock) and holders of restricted shares of WHCs Class A Common Stock (which we refer to as WHC Restricted Stock and which, together with Emdeon Restricted Stock, we refer to as Restricted Stock) have voting power and the right to receive dividends, if any that are declared on those shares, but their ability to sell shares of Restricted Stock is subject to vesting requirements based on continued employment, as described in the footnotes below. The dollar value of Restricted Stock listed in this column is calculated by multiplying the number of shares granted by the closing market price on the date of each grant, as described in the footnotes below. | |
(3) | All grants reflected in this column prior to 2005 are grants of options to purchase Emdeon Common Stock. All grants reflected in this column in 2005 are grants of options to purchase WHC Class A Common Stock, except the grant of options to purchase 400,000 shares of Emdeon Common Stock to |
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Mr. Gang and the grant of options to purchase 200,000 shares of Emdeon Common Stock to Mr. Corbin. Grants by Emdeon are noted with an E and grants by WHC are noted with a W. | ||
(4) | Mr. Cameron became our Chief Executive Officer in October 2004. | |
(5) | Consists of: (a) $3,150 in company matching contributions under Emdeons 401(k) and Employee Stock Ownership Plan (which we refer to as the Emdeon 401(k) Plan); (b) $1,712 of company-paid supplemental disability insurance; and (c) an automobile allowance of $12,314. | |
(6) | The dollar value listed in the table is for 305,000 shares of Emdeon Restricted Stock granted during 2004 and is based on: (a) $8.59 per share, the closing market price of Emdeon Common Stock on March 17, 2004, the date of grant of 30,000 shares of Emdeon Restricted Stock, of which (i) 10,000 shares vested on March 17, 2005, (ii) 10,000 shares vested on March 17, 2006 and (iii) 10,000 shares are scheduled to vest on March 17, 2007; and (b) $6.99 per share, the closing market price of Emdeon Common Stock on October 1, 2004, the date 275,000 shares of Restricted Stock were granted to Mr. Cameron upon becoming Chief Executive Officer of Emdeon, of which (i) 46,750 shares vested on October 1, 2005, (ii) 50,875 shares are scheduled to vest on October 1, 2006, (iii) 55,000 shares are scheduled to vest on October 1, 2007, (iv) 59,125 shares are scheduled to vest on October 1, 2008 and (v) 63,250 shares are scheduled to vest on October 1, 2009. As of December 31, 2005, the aggregate value of the 248,250 unvested shares of Emdeon Restricted Stock then held by Mr. Cameron was $2,100,195, based on the closing market price of $8.46 per share of Emdeon Common Stock on the last trading day of 2005. | |
(7) | Consists of: (a) $500,000 for the forgiveness, in January 2003, of the then outstanding principal amount of a loan that we made to Mr. Cameron in September 2000 and (b) $88,580 in long-term disability payments made to Mr. Cameron by insurance companies. | |
(8) | The dollar value listed in the table is based on $7.84 per share, the closing market price of Emdeon Common Stock on November 4, 2005, the date of grant of 40,000 shares of Emdeon Restricted Stock, of which (i) 8,800 shares are scheduled to vest on November 4, 2006, (ii) 9,600 shares are scheduled to vest on November 4, 2007, (iii) 10,400 shares are scheduled to vest on November 4, 2008, and (iv) 11,200 shares are scheduled to vest on November 4, 2008. As of December 31, 2005, the aggregate value of the 40,000 shares of Emdeon Restricted Stock, all of which were unvested at that date, was $338,400, based on the closing market price of $8.46 per share of Emdeon Common Stock on the last trading day of 2005. | |
(9) | Consists of: (a) $2,112 in company matching contributions under the Emdeon 401(k) Plan; (b) $2,921 of company-paid supplemental disability insurance; and (c) an automobile allowance of $12,000. | |
(10) | Consists of: (a) a bonus for 2004 of $270,000 and (b) a one-time bonus payment of $145,000 made on the first anniversary of Mr. Corbins employment and included in the terms of his employment agreement as an inducement to enter into the employ of Emdeon. | |
(11) | The dollar value listed in the table is based on $8.59 per share, the closing market price on March 17, 2004, the date of grant of 37,500 shares of Emdeon Restricted Stock, of which (i) 12,500 shares vested on March 17, 2005, (ii) 12,500 shares vested on March 17, 2006 and (iii) 12,500 shares are scheduled to vest on March 17, 2007. As of December 31, 2005, the aggregate value of the 25,000 unvested shares of Emdeon Restricted Stock then held by Mr. Corbin was $211,500, based on the closing market price of $8.46 per share of Emdeon Common Stock on that date. | |
(12) | Mr. Corbin was not employed by Emdeon prior to October 13, 2003. As a result, only compensation that we paid to Mr. Corbin beginning on that date is reflected in this table. | |
(13) | Consists of: (a) a bonus for 2003 of $56,250 and (b) a one-time bonus payment of $66,667 made as an inducement to enter into the employ of Emdeon, pursuant to the terms of Mr. Corbins employment agreement. | |
(14) | Mr. Gang began employment in May 2005. The amount of salary listed in the table for 2005 reflects amounts paid from that time until the end of 2005. His annual base salary is $450,000. | |
(15) | Consists of: (a) a bonus for 2005 of $421,000; and (b) a one-time bonus payment of $500,000 made as an inducement to enter the employ of WHC pursuant to the terms of Mr. Gangs employment agreement. |
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(16) | The amount under Other Annual Compensation reflects reimbursement by WHC of amounts required to pay income taxes in connection with reimbursement by WHC of relocation expenses in the amount under All Other Compensation. | |
(17) | The total dollar value is $1,722,000 for 44,000 shares of WHC Restricted Stock granted on September 28, 2005 in connection with its initial public offering and for 100,000 shares of Emdeon Restricted Stock granted on May 16, 2005 in connection with Mr. Gangs initial employment. The value of the WHC Restricted Stock is based on $17.50 per share, the initial public offering price of WHC Class A Common Stock. The value of the Emdeon Restricted Stock is based on $9.52 per share, the closing market price of Emdeon Common Stock on the date of grant. The vesting schedule for the WHC Restricted Stock grant is as follows: 11,000 shares on September 28, 2006; 11,000 shares on September 28, 2007; 11,000 shares on September 28, 2008; and 11,000 shares on September 28, 2009. The vesting schedule for the Emdeon Restricted Stock grant is as follows: 25,000 shares on May 16, 2006; 25,000 shares on May 16, 2007; 25,000 shares on May 16, 2008; and 25,000 shares on May 16, 2009. As of December 31, 2005, the aggregate value of the 44,000 shares of WHC Restricted Stock and the 100,000 shares of Emdeon Restricted Stock, all of which were unvested at that date, was $2,124,200, based on the closing market prices on the last trading day of 2005 of $29.05 per share of WHC Class A Common Stock and $8.46 per share of Emdeon Common Stock. | |
(18) | Represents reimbursement of relocation expenses. | |
(19) | As of July 13, 2005, Mr. Gang no longer served as an executive officer of Emdeon; he continues to serve as an executive officer of WHC. | |
(20) | The dollar value listed in the table is for 55,000 shares of WHC Restricted Stock granted in connection with WHCs initial public offering and is based on $17.50 per share, the initial public offering price of WHC Class A Common Stock. The vesting schedule for this grant is as follows: (a) 13,750 shares on September 28, 2006, (b) 13,750 shares on September 28, 2007, (c) 13,750 shares on September 28, 2008, and (d) 13,750 shares on September 28, 2009. As of December 31, 2005, the aggregate value of the 55,000 shares of WHC Restricted Stock, all of which were unvested at that date, was $1,597,750, based on the closing market price of $29.05 per share of WHC Class A Common Stock on the last trading day of 2005. | |
(21) | Consists of: (a) $1,056 in company matching contributions under the Emdeon 401(k) Plan; and (b) $3,986 of company-paid supplemental disability insurance. | |
(22) | The dollar value listed in the table is based on $8.59 per share, the closing market price of Emdeon Common Stock on March 17, 2004, the date of grant of 37,500 shares of Emdeon Restricted Stock, of which (a) 12,500 shares vested on March 17, 2005, (b) 12,500 shares vested on March 17, 2006 and (c) 12,500 shares are scheduled to vest on March 17, 2007. As of December 31, 2005, the aggregate value of the 25,000 unvested shares of Emdeon Restricted Stock then held by Mr. Gattinella was $211,500, based on the closing market price of $8.46 per share of Emdeon Common Stock on the last trading day of 2005. | |
(23) | Consists of: (a) $3,421 of company-paid supplemental disability insurance; and (b) an automobile allowance of $12,000. | |
(24) | The dollar value listed in the table is based on $8.59 per share, the closing market price of Emdeon Common Stock on March 17, 2004, the date of grant of 37,500 shares of Emdeon Restricted Stock, of which (a) 12,500 shares vested on March 17, 2005, (b) 12,500 shares vested on March 17, 2006 and (c) 12,500 shares are scheduled to vest on March 17, 2007. As of December 31, 2005, the aggregate value of the 25,000 unvested shares of Emdeon Restricted Stock then held by Mr. Mele was $211,500, based on the closing market price of $8.46 per share of Emdeon Common Stock on the last trading day of 2005. | |
(25) | The dollar value listed in the table is for 55,000 shares of WHC Restricted Stock granted in connection with WHCs initial public offering and is based on $17.50 per share, the initial public offering price of WHC Class A Common Stock. The vesting schedule for this grant is as follows: (a) 13,750 shares on September 28, 2006, (b) 13,750 shares on September 28, 2007, (c) 13,750 shares on September 28, 2008, and (d) 13,750 shares on September 28, 2009. As of December 31, 2005, the aggregate value of the |
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55,000 shares of WHC Restricted Stock, all of which were unvested at that date, was $1,597,500, based on the closing market price of $29.05 per share of WHC Class A Common Stock on the last trading day of 2005. | ||
(26) | Represents company-paid supplemental disability insurance. |
Individual Grants | ||||||||||||||||||||
Number of |
Percent of |
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Securities |
Total Options |
Exercise |
||||||||||||||||||
Underlying |
Granted to |
or |
Grant Date |
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Options |
Employees in |
Base Price |
Expiration |
Present |
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Name
|
Granted (#) | 2005(1) | ($/Share) | Date | Value($)(2) | |||||||||||||||
Kevin M. Cameron
|
55,000 | W(3) | 1.2 | 17.50 | 9/28/2015 | 543,830 | ||||||||||||||
Andrew C. Corbin
|
200,000 | E(4) | 6.3 | 7.84 | 11/4//2015 | 774,364 | ||||||||||||||
David Gang
|
176,000 | W(3) | 3.8 | 17.50 | 9/28/2015 | 1,748,230 | ||||||||||||||
400,000 | E(5) | 12.6 | 9.52 | 5/16/2015 | 1,880,090 | |||||||||||||||
Wayne T. Gattinella
|
220,000 | W(3) | 4.8 | 17.50 | 9/28/2015 | 2,185,288 | ||||||||||||||
Charles A. Mele
|
44,000 | W(3) | 1.0 | 17.50 | 9/28/2015 | 435,064 | ||||||||||||||
Martin J. Wygod
|
220,000 | W(3) | 4.8 | 17.50 | 9/28/2015 | 2,185,288 |
(1) | Percent is calculated, with respect to grants by Emdeon, based upon the total number of options that Emdeon granted during 2005 and is calculated, with respect to grants by WHC, based upon the total number of options that WHC granted during 2005. | |
(2) | The estimated grant date present value for options to purchase Emdeon Common Stock reflected in the above table was determined using the Black-Scholes model and the following data and assumptions: (a) the applicable option exercise prices; (b) the exercise of options within three years of the date that they become exercisable; (c) a risk-free interest rate of (i) 3.6% per annum with respect to options granted on May 16, 2005 and (ii) 4.4% per annum with respect to options granted on November 4, 2005; (d) volatility of (i) 0.5 for Emdeon Common Stock with respect to options granted on May 16, 2005 and (ii) 0.45 for Emdeon Common Stock with respect to options granted on November 4, 2005; and (e) that no dividends are paid on Emdeon Common Stock. | |
The estimated grant date present value for options to purchase WHC Class A Common Stock reflected in the above table was determined using the Black-Scholes model and the following data and assumptions: (a) the option exercise price of $17.50; (b) the exercise of options within three years of the date that they become exercisable; (c) a risk-free interest rate of 4.0% per annum for options granted to Messrs. Cameron and Mele and 4.2% for options granted to Messrs. Gang, Gattinella and Wygod; (d) volatility of 0.6; and (e) that no dividends are paid on WHC Class A Common stock. | ||
The ultimate values of the options will depend on the future market price of the underlying common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of the underlying common stock over |
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the exercise price on the date the option is exercised. We cannot predict whether the value realized by an optionee will be at or near the value estimated by the Black-Scholes model or any other model applied to value the options. | ||
(3) | These options to purchase WHC Class A Common Stock were granted on September 28, 2005 and are scheduled to vest and become exercisable in equal installments over four years upon each anniversary of the grant date. | |
(4) | These options to purchase Emdeon Common Stock were granted on November 4, 2005 and are scheduled to vest and become exercisable as follows: 44,000 on May 1, 2007; 48,000 on May 1, 2008; 52,000 on May 1, 2009; and 56,000 on May 1, 2010. | |
(5) | These options to purchase Emdeon Common Stock were granted on May 16, 2005 and are scheduled to vest and become exercisable in equal installments over four years upon each anniversary of the grant date. |
Number of |
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Securities Underlying |
Value of Unexercised |
|||||||||||||||||||||||
Shares |
Unexercised Options at |
In-the-Money Options |
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Acquired on |
Value |
December 31, 2005 (#) | at December 31, 2005 ($)(2) | |||||||||||||||||||||
Name
|
Exercise (#) | Realized ($)(1) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Kevin M. Cameron
|
| | 1,783,834 | 1,378,334 | 1,316,305 | 1,830,150 | (E) | |||||||||||||||||
| | | 55,000 | | 635,250 | (W) | ||||||||||||||||||
Andrew C. Corbin
|
| | 300,000 | 500,000 | 99,000 | 223,000 | (E) | |||||||||||||||||
David Gang
|
| | | 400,000 | | | (E) | |||||||||||||||||
| | | 176,000 | | 2,032,800 | (W) | ||||||||||||||||||
Wayne T. Gattinella
|
80,300 | 335,960 | 603,033 | 166,667 | 1,896,905 | | (E) | |||||||||||||||||
| | | 220,000 | | 2,541,000 | (W) | ||||||||||||||||||
Charles A. Mele
|
| | 2,601,333 | 166,667 | 2,515,000 | | (E) | |||||||||||||||||
| | | 44,000 | | 508,200 | (W) | ||||||||||||||||||
Martin J. Wygod
|
| | 3,685,000 | | | | (E) | |||||||||||||||||
| | | 220,000 | | 2,541,000 | (W) |
(1) | The value realized is calculated based on the amount by which the aggregate market price, on the date of exercise, of the shares received exceeded the aggregate exercise price paid, regardless of whether such shares were sold or retained by the optionholder on that date. | |
(2) | The value of unexercised in-the-money options to purchase Emdeon Common Stock is calculated based on the closing market price per share of Emdeon Common Stock as of December 31, 2005 which was $8.46, net of the applicable option exercise price per share. The value of unexercised in-the-money options to purchase WHC Class A Common Stock is calculated based on the closing market price per share of WHC Class A Common Stock as of December 31, 2005 which was $29.05, net of the applicable option exercise price per share. | |
(E) | All information on this line relates to options to purchase shares of Emdeon Common Stock. | |
(W) | All information on this line relates to options to purchase shares of WHC Class A Common Stock. |
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| The agreement provides for an employment period through October 1, 2009. | |
| The agreement provides for an annual base salary of $660,000 and an annual bonus of up to 100% of base salary. For the fiscal year ended December 31, 2005, Mr. Cameron received a bonus of $450,000, determined by the Compensation Committee in its discretion, based on both his own and our companys performance. The agreement provides that, for the fiscal year ending December 31, 2006 and subsequent years, the amount of the bonus will be based upon performance goals to be approved by the Compensation Committee with respect to each such year. | |
| In connection with his election as Chief Executive Officer, Mr. Cameron received grants, effective October 1, 2004, of: (a) options to purchase 1,500,000 shares of Emdeon Common Stock at an exercise price of $6.99, the closing market price on that date; and (b) 275,000 shares of Emdeon Restricted Stock. The vesting schedule for the options and the Emdeon Restricted Stock is as follows: 17% on the first anniversary of the grant date (which vested on October 1, 2005); 18.5% on the second anniversary; 20% on the third anniversary; 21.5% on the fourth anniversary; and 23% on the fifth anniversary. | |
| In the event of the termination of Mr. Camerons employment by us without Cause or by Mr. Cameron for Good Reason, prior to a Change in Control (as those terms are described below), he would be entitled to: |
(a) | continue to receive his base salary at the rate in effect at the time of termination for a period of time equal to the length of his employment after October 1, 2004, rounded down to the nearest six months, but not longer than three years; and |
(b) | continue to participate in our benefit plans (or comparable plans) for the duration of the severance period. |
| For purposes of the employment agreement, (a) Cause includes (i) any willful misconduct relating, directly or indirectly, to Emdeon or any of its affiliates, that remains uncured, if susceptible to cure, after 30 days following written notice from Emdeon detailing such misconduct; (ii) any breach of any material provision contained in the employment agreement or any material policy, which breach remains uncured, if susceptible to cure, after 30 days following written notice from Emdeon detailing such breach; or (iii) conviction of a felony or crime involving moral turpitude; and (b) Good Reason includes any of the following which remains uncured 30 days after written notice is provided to Emdeon: (i) Emdeons material breach of the employment agreement, (ii) a material demotion of his position, and (iii) required relocation from his present residence or is required to commute, on a regular |
13
| For purposes of the employment agreement: |
(a) | a Change in Control of Emdeon includes (i) a change in the majority of the Board of Directors of Emdeon without the consent of the incumbent directors, (ii) any person or entity becoming the beneficial owner of 25% or more of the voting shares of Emdeon and the Compensation Committee determines that such transaction constitutes a change in control, taking into consideration all relevant facts, (iii) consummation of a reorganization, merger or similar transaction where Emdeons stockholders no longer represent 50% of the voting power and (iv) consummation of a sale of all or substantially all of Emdeons assets; and |
(b) | a Change in Control of WHC includes (i) a change in the majority of the Board of Directors of WHC without the consent of the incumbent directors, (ii) any person or entity becoming the beneficial owner of 50% or more of the voting shares of WHC, (iii) consummation of a reorganization, merger or similar transaction where WHCs stockholders no longer represent 50% of the voting power and (iv) consummation of a sale of all or substantially all of WHCs assets; |
| Mr. Cameron may terminate his employment upon 30 days notice after 11 months following a Change in Control of Emdeon and, if this occurs: |
(a) | Mr. Cameron would be entitled to continue to receive his base salary at his then current rate through October 1, 2009 (or, if longer, for three years following the termination); |
(b) | Mr. Cameron would be entitled to annual bonus payments for the period of salary continuance in an amount equal to the amount of his bonus for the year prior to the termination or, if higher, the bonus paid for the year immediately prior to the Change in Control; |
(c) | his participation in our benefit plans (or comparable plans) would continue for the duration of the salary continuation period; |
(d) | all options to purchase Emdeon Common Stock and Emdeon Restricted Stock granted to Mr. Cameron at or prior to the date of the employment agreement which have not vested prior to the date of termination would be vested as of the date of termination and all such options would remain exercisable as if he remained in our employ through the expiration date specified in the respective stock option plans and agreements; and |
(e) | any remaining unvested portion of the option to purchase WHC Class A Common Stock would be vested as of the date of termination and all such options would remain exercisable through the 90 day post-termination exercise period plus the Section 409A Extension Period. |
| In the event of a Change in Control of WHC or if WHC is no longer an affiliate of Emdeon, the options granted to Mr. Cameron by WHC on September 28, 2005 that have not vested prior to such event would be vested as of the date of such event and would remain exercisable for 90 days plus the Permitted 409A Extension Period. | |
| If Mr. Camerons employment is terminated by us for Cause or by him without Good Reason, he (a) would not entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to his stock options following the date of termination. |
14
| In the event of the termination of Mr. Camerons employment as a result of his death or permanent disability, he (or his estate) would be entitled to three years of salary continuation, three years of benefit continuation and three years of vesting of the equity granted on or prior to October 1, 2004 and three years of continued exercisability of options to purchase Emdeon Common Stock. In accordance with WHCs Long-Term Incentive Plan, the options to purchase WHC Class A Common Stock would vest on the date of termination as a result of death or disability and remain outstanding for one year. | |
| The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the second anniversary of the date of cessation of Mr. Camerons employment. | |
| The employment agreement contains a tax gross-up provision relating to any excise tax that Mr. Cameron incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the Internal Revenue Code. | |
| Severance payments, if any, will be made in accordance with Section 409A to avoid subjecting Mr. Cameron to adverse tax consequences. | |
| The employment agreement is governed by the laws of New Jersey. |
| The employment agreement provides for an employment period through October 13, 2008. | |
| The employment agreement provides for an annual base salary of $450,000 and an annual bonus, with a target of up to 50% of his base salary. For the fiscal year ended December 31, 2005, Mr. Corbin received a bonus of $375,000, determined by the Compensation Committee in its discretion, based upon both his own and our companys performance. As an inducement to enter into the employ of Emdeon, Mr. Corbins employment agreement provided for a one-time bonus payment of $66,667 at the time he commenced employment and an additional one-time bonus payment of $145,000 made on the first anniversary of commencement of his employment. | |
| In the event of the termination of Mr. Corbins employment by us without Cause or by Mr. Corbin for Good Reason (as those terms are described below), he would be entitled to: |
(a) | continue to receive his base salary at the rate in effect at the time of termination for one year; |
(b) | payment (at the time bonuses are paid to executive officers generally) of the bonus for the year of termination calculated based upon the bonus program in effect, provided that if no such bonus program is in effect, such bonus would be 50% of base salary; and |
(c) | continue to participate in our benefit plans (or comparable plans) for the duration of the severance period. |
15
| For purposes of the employment agreement, (a) Cause includes (i) willful failure to perform duties or bad faith in connection with the performance of duties that remains uncured for 30 days following written notice from the Emdeon Board detailing the specific acts, (ii) engaging in any misconduct, negligence, act of dishonesty, violence or threat of violence that is demonstrably injurious to Emdeon or any of its affiliates, (iii) material breach of the employment agreement or of a policy of Emdeon or any of its Affiliates, which breach is not remedied (if susceptible to remedy) within 30 days following written notice by the Board of Directors of Emdeon or its designee detailing the specific breach, and (iv) commission of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude; and (b) Good Reason includes (i) a material breach by Emdeon of its obligations under the employment agreement, (ii) a material demotion of Mr. Corbins position with Emdeon, and (iii) required relocation to a location that is more than 50 miles from the Companys headquarters and such new headquarters is outside of the New York City metropolitan area; provided that Mr. Corbin has agreed that, while he is serving in the dual roles described above, he will report to both Elmwood Park, New Jersey and Tampa, Florida and that, at such time as he serves solely as Chief Executive Officer of Emdeon Practice Services, he would report to Tampa, Florida. | |
| Mr. Corbin may terminate his employment upon 30 days notice at any time after the first anniversary of a Change in Control (as that term is described below) and, if this occurs: (a) Mr. Corbin would be entitled to continue to receive his base salary for three years at his then current rate; (b) Mr. Corbin would be entitled to his bonus for the year of termination calculated in the same manner as if his employment was terminated without cause; (c) his participation in our benefit plans (or comparable plans) would continue for three years; and (d) the options to purchase 600,000 shares of Emdeon Common Stock granted in connection with his initial employment would remain outstanding and continue to vest as if he remained in our employ through the last vesting date applicable to the option. | |
| For purposes of the employment agreement, Change in Control includes (a) any person, entity or group, other than Mr. Wygod and his affiliates, acquiring at least 50% of the voting power of the outstanding voting securities of Emdeon; (b) a merger involving Emdeon in which Emdeon is not the surviving entity; (c) a sale or other disposition of all or substantially all of the assets of Emdeon; or (d) a complete liquidation or dissolution of Emdeon | |
| If Mr. Corbins employment is terminated by us for Cause or by him without Good Reason, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to his stock options following the date of termination. | |
| In the event of the termination of Mr. Corbins employment as a result of his death or permanent disability, he (or his estate) would be entitled to the same benefits as if his employment was terminated by Emdeon without Cause. | |
| The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the eighteen-month anniversary of the date of cessation of Mr. Corbins employment. | |
| The employment agreement contains a tax gross-up provision relating to any excise tax that Mr. Corbin incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the Internal Revenue Code. | |
| The employment agreement is governed by the laws of the State of New Jersey. |
16
| The employment agreement provides that Mr. Gang will receive an annual base salary of $450,000 and is eligible to earn a bonus of up to 100% of his base salary. For 2005, Mr. Gang received a bonus of $421,000, determined by WHCs Compensation Committee in its discretion, based on both his own and WHCs performance. Mr. Gang also received a signing bonus of $500,000 in 2005 in connection with his initial employment by our company. The employment agreement provides that, in 2006 and subsequent years, achievement of 50% of Mr. Gangs bonus will be based upon WHCs attainment of corporate financial and strategic goals to be established by its Compensation Committee, with the financial goals generally related to revenue and/or other measures of operating results, and that achievement of the remaining 50% of Mr. Gangs bonus will be based on performance goals to be established by WHCs Compensation Committee. |
| Pursuant to the employment agreement, Mr. Gang was granted, on the first day of his employment, options to purchase 400,000 shares of Emdeon Common Stock. The exercise price is $9.52 per share, the closing price of Emdeon Common Stock on such date. The options will vest in equal annual installments over four years upon each anniversary of the grant date. In the event that WHC ceases to be a subsidiary of Emdeon, the unvested portion of the options would terminate while the vested portion would remain outstanding in accordance with its terms. If such an event occurs within the first twelve months from the grant date, the unvested portion would continue to vest through the first scheduled vesting date. |
| Mr. Gang also received 100,000 shares of Emdeon Restricted Stock on the first day of his employment. The Emdeon Restricted Stock is scheduled to vest in equal annual installments over four years upon each anniversary of the grant date. In the event that WHC ceases to be a subsidiary of Emdeon, the Emdeon Restricted Stock not yet vested at that time would be forfeited. | |
| Pursuant to the employment agreement, Mr. Gang was granted 44,000 shares of WHC Restricted Stock and nonqualified options to purchase 176,000 shares of WHCs Class A Common Stock in connection with WHCs initial public offering. The per share exercise price of the options is the initial public offering price of $17.50. The WHC Restricted Stock and the options are scheduled to vest in equal installments over four years upon each anniversary of the grant date. In the event of a Change in Control of WHC, the unvested portion of the options to purchase WHC Class A Common Stock would continue to vest until the later of (a) two years from the date of grant and (b) the next scheduled vesting date following the Change in Control. The continued vesting applies only if Mr. Gang remains employed until six months following such Change in Control or is terminated by WHCs successor without Cause or he resigns for Good Reason during such six-month period. | |
| In the event of the termination of Mr. Gangs employment, prior to the fourth anniversary of the start date, by WHC without Cause or by Mr. Gang for Good Reason, he would be entitled to continue to receive his base salary for one year from the date of termination, to receive any unpaid bonus for the year preceding the year in which the termination occurs and, to receive health coverage until the earlier of one year following his termination and the date upon which he receives comparable coverage under another plan. In the event that a termination of Mr. Gangs employment by WHC without Cause or by Mr. Gang for Good Reason occurs before the fourth anniversary of Mr. Gangs start date, 25% of the options to purchase WHC Class A Common Stock described above would continue to vest through the next vesting date following the date of termination. | |
| The employment agreement and the related agreement described below are governed by the laws of the State of New York. |
17
| Mr. Gattinella currently receives an annual base salary of $560,000 and is eligible to earn a bonus of up to 100% of his base salary. For 2005, Mr. Gattinella received a bonus of $280,000, determined by WHCs Compensation Committee in its discretion, based on both his own and WHCs performance. With respect to 2006 and subsequent years, the employment agreement provides that achievement of 50% of Mr. Gattinellas bonus will be based upon WHCs attainment of corporate financial and strategic goals to be established by its Compensation Committee, with the financial goals generally related to revenue and/or other measures of operating results and achievement of the remaining 50% of Mr. Gattinellas bonus will be based on performance goals to be established by WHCs Compensation Committee. | |
| Pursuant to the employment agreement, Mr. Gattinella was granted 55,000 shares of WHC Restricted Stock and nonqualified options to purchase 220,000 shares of WHCs Class A Common Stock in connection with our initial public offering. The per share exercise price of the options is the initial public offering price of $17.50. The WHC Restricted Stock and the options are scheduled to vest in equal installments over four years upon each anniversary of the grant date. | |
| In the event of the termination of Mr. Gattinellas employment, prior to April 30, 2009, by WHC without Cause or by Mr. Gattinella for Good Reason (as those terms are described below), he would be entitled to continue to receive his base salary for one year from the date of termination, to receive any unpaid bonus for the year preceding the year in which the termination occurs, and to receive healthcare coverage until the earlier of one year following his termination and the date upon which he receives comparable coverage under another plan. In the event that a termination of Mr. Gattinellas employment by WHC without Cause or by Mr. Gattinella for Good Reason occurs before the fourth anniversary of the grant of the options to purchase WHC Class A Common Stock, 25% of such options would continue to vest through the next vesting date following the date of termination. | |
| In the event of a Change in Control of WHC (as that term is described below), the unvested portion of the options to purchase WHC Class A Common Stock would continue to vest until the later of (a) two years from the date of grant and (b) the next scheduled vesting date following the Change in Control. The continued vesting applies only if Mr. Gattinella remains employed until six months following such Change in Control or is terminated by our successor without Cause or he resigns for Good Reason during such six-month period. For purposes of the employment agreement, a Change in Control would occur when: (i) a person, entity or group acquires more than 50% of the voting power of WHC, (ii) there is a reorganization, merger or consolidation or sale involving all or substantially all of WHCs assets, or (iii) there is a complete liquidation or dissolution of WHC. | |
| For purposes of the employment agreement: (a) Cause includes (i) a continued willful failure to perform duties after 30 days written notice, (ii) willful misconduct or violence or threat of violence that would harm WHC, (iii) a material breach of WHCs policies, the employment agreement, or the Trade Secret and Proprietary Information Agreement (as described below), that remains unremedied after 30 days written notice, or (iv) conviction of a felony in respect of a dishonest or fraudulent act or other crime of moral turpitude; and (b) Good Reason includes any of the following conditions or events remaining in effect after 30 days written notice: (i) a reduction in base salary, (ii) a material reduction in authority, or (iii) any material breach of the employment agreement by WHC. | |
| The employment agreement and the related agreement described below are governed by the laws of the State of New York. |
18
| The agreement provides for an employment period through February 1, 2011. | |
| Mr. Mele receives an annual base salary of $450,000. The amount of any bonus will be in the discretion of the Compensation Committee of the Board of Emdeon. For 2005, Mr. Mele received a bonus of $325,000, determined by the Compensation Committee in its discretion, based on both his own and our companys performance. | |
| If Mr. Meles employment is terminated due to his death or disability, by us without Cause or by Mr. Mele for Good Reason (as those terms are described below), he would be entitled to: (a) continuation of his base salary, at the rate then in effect, for three years; (b) an amount for each of the three years equal to the greater of the average bonus he received in the three years prior to termination or the amount of the bonus he received in the last of those years; and (c) continued participation in our benefit plans (or comparable plans) for three years. If such termination occurs after the end of a fiscal year but before payment of the bonus for that year, he would also be entitled to receive the bonus, if any, earned for that fiscal year; provided, however, that if the termination is for Good Reason or without Cause following a Change in Control of Emdeon, the payments in (a) and (b) above will continue for the remainder of the term of the agreement, if longer. In addition: |
| all options to purchase Emdeon Common Stock and Emdeon Restricted Stock granted to Mr. Mele by Emdeon prior to the date of the agreement that have not vested prior to the date of termination would be vested as of the date of termination and the options would remain exercisable as if he remained in our employ through the expiration date specified in each applicable stock option agreement, except that the options granted to Mr. Mele on March 17, 2004 would remain exercisable only for 90 days plus the Permitted 409A Extension Period; and | |
| the portion of the options to purchase WHC Class A Common Stock granted to Mr. Mele by WHC on September 28, 2005 that would have vested on the next vesting date following the date of termination will vest on the date of termination and the vested portion of those options will remain exercisable for 90 days plus the Permitted 409A Extension Period; provided, however, that, if termination is for Good Reason or without Cause following a Change in Control of Emdeon, all of the options that have not vested prior to the date of termination would be vested as of the date of termination. |
| In the event of a Change in Control of WHC or if WHC is no longer an affiliate of Emdeon, the options granted to Mr. Mele by WHC on September 28, 2005 that have not vested prior to such event would be vested as of the date of such event and would remain exercisable for 90 days plus the Permitted 409A Extension Period. | |
| If Mr. Meles employment is terminated by us for Cause or by him without Good Reason, he (a) would not be entitled to any further compensation or benefits and (b) would not be entitled to any additional rights or vesting with respect to the stock options or restricted stock following the date of termination. |
19
| For purposes of Mr. Meles employment agreement: (a) Cause includes (i) a material breach of the employment agreement that remains unremedied after 30 days written notice, or (ii) conviction of a felony; and (b) good reason includes (i) a material reduction in title or responsibilities, (ii) requiring Mr. Mele to report to anyone other than the Chief Executive Officer of Emdeon, (iii) a reduction in base salary or material fringe benefits, (iv) a material breach of the employment agreement, (v) requiring Mr. Mele to relocate to a location that is more than 25 miles from his current residence, or (vi) a Change in Control of Emdeon occurs and he remains in the employ of Emdeon for six months after the Change in Control. | |
| Payment of severance, if any, will be made in accordance with Section 409A to avoid subjecting Mr. Mele to adverse tax consequences. | |
| Mr. Mele is subject to confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that survive for two years or, if applicable, for the three year period in which severance is payable under the agreement. | |
| There is a tax gross-up provision relating to any excise tax that Mr. Mele incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the Internal Revenue Code. Any excess parachute payments and related tax gross-up payments made to Mr. Mele will not be deductible by Emdeon for federal income tax purposes. |
| The employment agreement provides for an employment period through August 3, 2010. | |
| Under the employment agreement, Mr. Wygod received an annual base salary of $1.26 million until the completion of WHCs initial public offering; when the initial public offering was completed in September 2005, Mr. Wygods base salary was reduced to $975,000 per year. For 2005, Mr. Wygod received a bonus of $450,000, determined by the Compensation Committee in its discretion, based on both his own and our companys performance. | |
| Pursuant to the employment agreement, Mr. Wygod was granted 55,000 shares of WHC Restricted Stock and nonqualified options to purchase 220,000 shares of WHCs Class A Common Stock in connection with WHCs initial public offering. The per share exercise price of the options is the initial public offering price of $17.50. The WHC Restricted Stock and the options are scheduled to vest in equal installments over four years upon each anniversary of the grant date. | |
| In the event of termination of Mr. Wygods employment by us without Cause or by Mr. Wygod for Good Reason (as those terms are described below), Mr. Wygod would become a consultant for us and would be entitled to receive his salary, at the rate then in effect, and continuation of benefits until the later of (i) two years following such termination or (ii) August 3, 2010. In addition, all options, or other forms of equity compensation, granted to Mr. Wygod by us or any of our affiliates (which would include WHC) that have not vested prior to the date of termination would become vested as of the date of termination and, assuming there has not been a Change in Control of Emdeon or of WHC, would continue to be exercisable as long as he remains a consultant (or longer if the plan or agreement expressly provided). In the event that Mr. Wygods employment is terminated due to death or disability, he or his estate would receive the same benefits as described above. |
20
| The employment agreement provides that in the event there is Change in Control of Emdeon, all outstanding options and other forms of equity compensation (including equity compensation granted by WHC) would become immediately vested on the date of the Change in Control and, if following the Change in Control, Mr. Wygods employment terminates for any reason other than Cause, they would continue to be exercisable until the tenth anniversary of the applicable date of grant. A Change in Control of Emdeon is also an event that constitutes Good Reason for purposes of a termination by Mr. Wygod. In the event there is a Change in Control of WHC, any portion of Mr. Wygods equity that relates to WHC will fully vest and become exercisable on the date of such event, and if following such event, Mr. Wygods engagement with WHC is terminated for any reason other than Cause, such equity will remain outstanding until the expiration of its original term. | |
| For purposes of the employment agreement: (a) Cause includes a final court adjudication that Mr. Wygod (i) committed fraud or a felony directed against our company relating to his employment, or (ii) materially breached any of the material terms of the employment agreement; (b) the definition of Good Reason includes the following conditions or events: (i) a material reduction in title or responsibility that remains in effect for 30 days after written notice, (ii) a final court adjudication that we materially breached any material provisions of the employment agreement, (iii) failure to serve on our Board or Executive Committee of our Board, or (iv) the occurrence of a Change in Control of Emdeon. | |
| In the event Mr. Wygod terminates his engagement with WHC for Good Reason (as described in the following sentence), any portion of equity that relates to WHC will fully vest and become exercisable on the date his engagement terminates and will remain exercisable for the period beginning on such date and ending on the later of two years following such termination or August 3, 2010. For the purposes of a termination of Mr. Wygods engagement with WHC by him, Good Reason means a material reduction in Mr. Wygods title or responsibilities as Chairman of the Board of WHC. | |
| In the event that Mr. Wygods employment with Emdeon is terminated for any reason, but he remains Chairman of the Board of WHC, WHC will have no obligation to pay a salary to Mr. Wygod. | |
| The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that continue until the second anniversary of the date his employment has ceased. | |
| The employment agreement contains a tax gross-up provision relating to any excise tax that Mr. Wygod incurs by reason of his receipt of any payment that constitutes an excess parachute payment as defined in Section 280G of the Internal Revenue Code. Any excess parachute payments and related tax gross-up payments made to Mr. Wygod will not be deductible for federal income tax purposes. |
| Audit Committee $15,000; | |
| Compensation Committee and Nominating Committee $5,000; | |
| Governance & Compliance Committee $10,000; and | |
| Related Parties Committee $10,000. |
21
| Compensation Committee and Nominating Committee $2,500; and | |
| Audit Committee and Governance & Compliance Committee $10,000. |
22
23
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Common |
Total |
Percent of |
||||||||||||||
Name and Address of Beneficial
Owner
|
Stock(1) | Other(2) | Shares | Outstanding(2) | ||||||||||||
FMR Corp.
|
44,292,576 | (3) | | 44,292,576 | 16.2 | % | ||||||||||
82 Devonshire Street
Boston, Massachusetts 02109 |
||||||||||||||||
Mark J. Adler, M.D.
|
32,600 | (4) | 170,166 | 202,766 | * | |||||||||||
Paul A. Brooke
|
371,667 | (5) | 144,166 | 515,833 | * | |||||||||||
Kevin M. Cameron
|
325,155 | (6) | 1,783,834 | 2,108,989 | * | |||||||||||
Andrew C. Corbin
|
69,176 | (7) | 300,000 | 369,176 | * | |||||||||||
Neil F. Dimick
|
| 53,332 | 53,332 | * | ||||||||||||
David Gang
|
100,000 | (8) | 100,000 | 200,000 | * | |||||||||||
Wayne T. Gattinella
|
24,904 | (9) | 603,033 | 627,937 | * | |||||||||||
James V. Manning
|
859,047 | (10) | 182,166 | 1,041,213 | * | |||||||||||
Charles A. Mele
|
143,075 | (11) | 2,601,333 | 2,744,408 | * | |||||||||||
Herman Sarkowsky
|
533,494 | (12) | 444,166 | 977,660 | * | |||||||||||
Joseph E. Smith
|
29,250 | 170,166 | 199,416 | * | ||||||||||||
Martin J. Wygod
|
8,912,395 | (13) | 3,685,000 | 12,597,395 | 4.6 | % | ||||||||||
All executive officers and
directors as a group (12 persons)
|
11,230,607 | 10,340,695 | 21,571,302 | 7.6 | % |
* | Less than 1%. | |
(1) | The amounts set forth below include 236 shares allocated to each of Messrs. Gattinella, Mele and Wygod and 155 shares allocated to Mr. Cameron pursuant to the Emdeon Corporation Performance Incentive Plan, a retirement plan intended to be qualified under Section 401(a) of the Internal Revenue Code (which we refer to in this table as PIP Shares), which was merged into our 401(k) Savings Plan on March 1, 2006 and renamed the Emdeon Corporation 401(k) Savings and Employee Stock Ownership Plan. The amount set forth below for All executive officers and directors as a group includes an aggregate of 863 PIP Shares. Performance Incentive Plan participants do not have dispositive power with respect to PIP Shares (including vested PIP Shares) until the shares are distributed in accordance with the terms of the Plan. Generally, one-third of the number of PIP Shares allocated to each participant vested |
24
on each December 31 following the allocation. Messrs. Cameron, Corbin, Gang, Gattinella, Mele and Wygod are beneficial owners of shares of common stock of Emdeon subject to vesting requirements based on continued employment by Emdeon (which we refer to as Emdeon Restricted Stock) in the respective amounts stated in the footnotes below. Holders of Emdeon Restricted Stock have voting power, but not dispositive power, with respect to unvested shares of Emdeon Restricted Stock. For information regarding the vesting schedules of the Emdeon Restricted Stock, see Executive Compensation Summary Compensation Table above. | ||
(2) | Beneficial ownership is determined under the rules and regulations of the SEC, which provide that shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing the total number of shares beneficially owned by that person and the percentage ownership of that person. However, those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Accordingly, we have set forth, in the column entitled Other, with respect to each person listed, the number of shares of Emdeon Common Stock that such person has the right to acquire pursuant to options that are currently exercisable or that will be exercisable within 60 days of April 14, 2006. We have calculated the percentages set forth in the column entitled Percent of Outstanding based on the number of shares outstanding as of April 14, 2006 (which was 273,147,499) plus, for each listed person or group, the number of additional shares deemed outstanding, as set forth in the column entitled Other. | |
(3) | The information shown is as of December 31, 2005 and is based upon information disclosed by FMR Corp., Fidelity Management and Research Company, Fidelity Growth Company Fund and Edward C. Johnson, 3d in a Schedule 13G filed with the SEC. Such persons reported that FMR Corp. and the other members of the filing group had, as of December 31, 2005, sole power to dispose of or to direct the disposition of 44,292,576 shares of Emdeon Common Stock and sole power to vote or to direct the vote of 3,414,607 shares of Emdeon Common Stock. Sole power to vote the other shares of Emdeon Common Stock beneficially owned by the filing group resides in the respective boards of trustees of the funds that have invested in the shares. The interest of Fidelity Growth Company Fund, an investment company registered under the Investment Company Act of 1940, amounted to 23,729,200 shares of Emdeon Common Stock as of December 31, 2005. | |
(4) | Represents 10,000 shares held by Dr. Adler, 22,000 shares held by the Adler Family Trust and 600 shares held by Dr. Adlers son. | |
(5) | Represents 170,000 shares held by Mr. Brooke and 201,667 shares held by PMSV Holdings LLC, of which Mr. Brooke is the managing member. | |
(6) | Represents 86,750 shares held by Mr. Cameron, 155 PIP Shares and 238,250 unvested shares of Emdeon Restricted Stock. | |
(7) | Represents 16,676 shares held by Mr. Corbin and 52,500 unvested shares of Emdeon Restricted Stock. | |
(8) | Represents 100,000 unvested shares of Emdeon Restricted Stock. | |
(9) | Represents 12,168 shares held by Mr. Gattinella, 236 PIP Shares and 12,500 unvested shares of Emdeon Restricted Stock. | |
(10) |
Represents 787,800 shares held by Mr. Manning and
71,247 shares held by Synetic Foundation, Inc. (d/b/a Emdeon Charitable Fund), a charitable foundation of which Messrs. Manning and Wygod are trustees and share voting and dispositive power. |
|
(11) | Represents 111,733 shares held by Mr. Mele, 1,622 shares allocated to Mr. Meles account under a 401(k) Plan, 236 PIP Shares, 12,500 unvested shares of Emdeon Restricted Stock and 16,984 shares held by the Rose Foundation, a private charitable foundation of which Messrs. Mele and Wygod are trustees and share voting and dispositive power. | |
(12) | Represents 437,662 shares held by Mr. Sarkowsky and 95,832 shares held by Sarkowsky Family L.P. | |
(13) | Represents 8,504,966 shares held by Mr. Wygod, 236 PIP Shares, 150,000 shares of unvested Emdeon Restricted Stock, 7,600 shares held by Mr. Wygods spouse, 161,332 shares held by SYNC, Inc., which is controlled by Mr. Wygod, 16,984 shares held by Synetic Foundation, Inc. (d/b/a Emdeon Charitable Fund), a charitable foundation of which Messrs. Wygod and Manning are trustees and share voting and |
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dispositive power, and 71,247 shares held by the Rose Foundation, a private charitable foundation of which Messrs. Wygod and Mele are trustees and share voting and dispositive power. |
(c) |
||||||||||||
(b) |
Number of securities |
|||||||||||
(a) |
Weighted-average |
remaining available for |
||||||||||
Number of securities to be |
exercise price of |
future issuance under equity |
||||||||||
issued upon exercise of |
outstanding |
compensation plans |
||||||||||
outstanding options, warrants |
options, warrants |
(excluding securities |
||||||||||
Plan category(1)
|
and rights | and rights | reflected in column (a)) | |||||||||
Equity compensation plans approved
by security holders
|
37,075,526 | $ | 10.95 | 15,166,301 | (2) | |||||||
Equity compensation plans not
approved by security holders(3)
|
15,685,138 | $ | 9.52 | 2,350,357 | (4) | |||||||
Total
|
52,760,664 | $ | 10.54 | 17,516,658 | (2)(4) | |||||||
(1) | This table does not include (a) outstanding options to acquire 40,973,433 shares of Emdeon Common Stock at a weighted-average exercise price of $16.10 per share that were assumed by Emdeon in mergers or acquisitions or (b) outstanding warrants to acquire 9,035 shares of Emdeon Common Stock at a weighted-average exercise price of $3.84 per share that were assumed by Emdeon in mergers or acquisitions. We cannot grant additional awards under these assumed plans. For additional information regarding the assumed options, see Note 15 to the Consolidated Financial Statements in this Annual Report. In addition, this table does not include equity plans of WebMD Health Corp. providing for options to purchase shares of WHC Class A Common Stock and shares of WHC Restricted Stock. For information regarding those equity compensation plans, see Note 15 to the Consolidated Financial Statements in this Annual Report. | |
(2) | Includes 6,218,561 shares of common stock reserved for issuance under our 1998 Employee Stock Purchase Plan. For additional information regarding the Employee Stock Purchase Plan, see Note 15 to the Consolidated Financial Statements in this Annual Report. | |
(3) | The plans included in this category did not require approval of our stockholders under applicable law and NASDAQ rules at the time the plans were adopted. In accordance with the rules and regulations of the SEC, equity compensation plans includes warrants issued to third parties. Accordingly, this category includes warrants to acquire 5,551,002 shares of Emdeon Common Stock at a weighted-average exercise price of $13.04 per share. None of these warrants are held by Emdeon employees. We cannot grant additional awards under the relevant agreements pursuant to which those warrants were issued. The warrants were issued in a variety of transactions, including transactions with strategic partners, suppliers and service providers. For additional information regarding these warrants, see Notes 4 and 14 to the Consolidated Financial Statements in this Annual Report. See Description of Plans Not Approved by Stockholders for descriptions of the other equity compensation plans in this category. | |
(4) | Includes 770,721 shares of Emdeon Common Stock available for grant of restricted stock awards under our 2002 Restricted Stock Plan. |
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Item 13. | Certain Relationships and Related Transactions |
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| the operations of WHCs business; | |
| any material untrue statements or omissions in the Prospectus included in the IPO Registration Statement, other than material untrue statements or omissions contained in or pertaining to information relating solely to Emdeon; and | |
| guarantees or undertakings made by Emdeon to third parties in respect of WHCs liabilities or obligations or those of WHCs subsidiaries. |
| the operations of the Emdeons business; | |
| any material untrue statements or omissions in the Prospectus included in the IPO Registration Statement, other than material untrue statements or omissions contained in or pertaining to information relating solely to WHC; and | |
| certain pre-existing legal proceedings. |
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| online tools and applications that are displayed to physicians and consumers that provide quality ratings of providers and that analyze patient care (we refer to these types of applications as External Clinical Quality Applications); and | |
| online tools and applications that are displayed to end-user consumers, plan members and/or patients to assist in (a) communicating with, or viewing information from, providers or payers, (b) making informed benefit, provider and/or treatment choices, through access to content, personal health records, plan comparison tools, benefit comparison tools, cost treatment indicators, calculators, etc. or (c) managing and utilizing consumer-directed health plans and the related health savings accounts and other consumer directed financial accounts (we refer to all of these types of applications as Consumer-Directed Applications). |
| Under CDHPs, consumers are required to assume greater responsibility for the financial impact of their personal healthcare decisions. Accordingly, consumers in CDHPs require tools that can assist them in making more informed decisions. In providing services that help meet those needs, WHC will have |
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| The agreements are expected to lead to new capabilities for data sharing that will enable WHC and Emdeon to develop new services that facilitate appropriate payment to providers for their services, and inform patients of their financial responsibility for a specific procedure or treatment. | |
| Emdeons agreement to market the WHC CDHP/HSA offering to Emdeons health plan customers is expected to help accelerate WHCs market penetration of these new services. |
| External Clinical Quality Applications. Emdeon will provide a perpetual license to WHC of Emdeons External Clinical Quality Applications. In addition, WHC will be permitted to develop, market and sell its own or other third party External Clinical Quality Applications. During the term of this Agreement, Emdeon will not provide External Clinical Quality Applications as stand-alone products other than through WHC Health; provided, however, that Emdeon will be permitted to offer External Clinical Quality Applications to its potential or current payer customers in connection with the integration of External Clinical Quality Applications with other Emdeon core services. During the term of this agreement, WHC will pay Emdeon a 20% royalty on net sales of Emdeons External Clinical Quality Applications (or, in particular instances, such other mutually agreed on royalty). In addition, if WHC requires customization or incremental development of an Emdeon External Clinical Quality Application in connection with a potential sale, and/or if WHC needs assistance in resolving a performance issue regarding an Emdeon External Clinical Quality Application, Emdeon will charge WHC customary rates for such assistance. The pricing pursuant to which WHC will make the Emdeon External Clinical Quality Applications available to an Emdeon customer will be competitive with the pricing it provides to other similar customers purchasing substantially the same products at the same volume or commitment levels. The provisions of the agreement do not apply to Emdeons electronic health record applications, products that provide for sending and receiving of prescriptions and lab results and other similar applications provided by Emdeon and reasonable extensions of such products. Upon termination of the agreement, Emdeon has agreed to provide WHC with a copy of the underlying source code and documentation for the External Clinical Quality Applications so that WHC may continue to use the perpetual license to such products. | |
| Internal Clinical Quality Applications. Emdeon may make available to WHC customers Emdeons Internal Clinical Quality Services for integration with WHCs products and services. The pricing pursuant to which Emdeon will make Emdeons Internal Clinical Quality Services available to WHC customers will be competitive with the pricing it provides to other similar customers purchasing substantially the same products at the same volume/commitment levels. WHC may also develop and sell its own Internal Clinical Quality Services or license and work with third parties for such services. Emdeon will pay WHC a 10% sales commission on net sales of Emdeons Internal Clinical Quality Services by WHC. | |
| Consumer-Directed Applications. Emdeon has, in general, agreed that WHC will manage the product development and marketing of Consumer-Directed Applications and that, except as described below, Emdeon will not make such applications available itself or through a third party, other than in conjunction with WHC. |
| If Emdeon identifies a need for a Consumer-Directed Application in order to support a business requirement related to the marketing of its core services, Emdeon will first present WHC with the opportunity to meet Emdeons requirement. If WHC elects not to pursue this opportunity or if, after electing to do so, fails to meet the applicable delivery schedule, Emdeon may pursue that opportunity through a third party or on its own, on substantially the same terms. For each Consumer-Directed Application provided to Emdeon, WHC is paid the greater of: (a) WHCs cost plus 50%; or (ii) WHCs established market price for such product (which price will be competitive |
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with the pricing WHC provides to other similar customers purchasing substantially the same products at the same volume/commitment levels). In addition, if Emdeon sells the Consumer-Directed Application to a third party, Emdeon will pay WHC a 10% royalty on net sales of the application. |
| In addition, WHC and Emdeon have agreed to work together to develop a potential Consumer Directed Application that may provide information regarding the potential cost of care or financial responsibility for individual medical and/or drug claims. Emdeon has agreed that any such product developed that provides a patient or plan member view as to the portion of the cost of care for which the patient or plan member is responsible shall be provided through WHC, and during the term of this agreement, Emdeon will not make such product available itself or through a third party other than in conjunction with WHC. If Emdeon and WHC develop such product, they have agreed to negotiate an equitable allocation between the parties of the sales price for such product. | |
| The provisions of the agreement relating to Consumer-Directed Applications do not apply to the following Emdeon products and services: (a) paper and electronic invoices, statements, checks and explanation of benefits forms (EOBs), along with reasonable extensions of these products and services; (b) currently contemplated patient-facing applications linked to the practice management systems and electronic medical records systems of Emdeon Practice Services; (c) services provided by VIPS under contracts with the United States government and/or state governments; and (d) distribution (in addition to through WHC), through portals that are not competitive with the WHC Health consumer portal, of online consumer access for healthcare payment and billing services referred to above in clause (a). |
| Emdeons Business Services segment will market to its payer customers, for integration into their CDHP offerings, WHCs online decision-support tools that support CDHPs and HSAs, including retirement health care and HSA planners, cost estimator and expense alerts (we refer to these tools, collectively, as HSA Tools). During the term of the agreement, Emdeon has agreed not to market other services that are similar to the HSA Tools. | |
| Emdeon will receive a commission of 10% of the net sales of HSA Tools made through Emdeon. |
| Emdeon and WHC have agreed to attempt to integrate WHCs personal health record with the clinical products, including the electronic medical record, of Emdeons Practice Services segment to allow import of data from one to the other, subject to applicable law and privacy and security requirements. | |
| To the extent that Emdeon desires to integrate its electronic health record product with a personal health record, it has agreed to do so through WHC. |
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Item 14. | Principal Accountant Fees and Services |
Type of Fees
|
2005 | 2004 | ||||||
Audit Fees
|
$ | 4,870,853 | $ | 3,262,600 | ||||
Audit-Related Fees
|
93,600 | 323,970 | ||||||
Tax Fees
|
76,512 | 27,680 | ||||||
All Other Fees
|
1,750 | 1,750 | ||||||
Total Fees
|
$ | 5,042,715 | $ | 3,616,000 | ||||
| audit fees include: (a) fees billed for professional services (i) for the audit of the consolidated financial statements included in our Annual Report on Form 10-K for that fiscal year, (ii) for review of the consolidated financial statements included in our Quarterly Reports on Form 10-Q filed for that fiscal year; (b) fees billed for the audit of internal control over financial reporting and managements assessment of internal control over financial reporting; (c) fees billed for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements; and (d) for 2005, included fees billed for a standalone audit of WHC; | |
| audit-related fees are fees billed in the year for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, and consisted of fees related to audits of our employee benefit plans and, for 2004, fees for acquisition due diligence assistance; | |
| tax fees are fees billed in the year, if any, for professional services for tax compliance, tax advice, and tax planning and consisted of fees for tax consulting related to net operating loss analysis and for compliance assistance; and | |
| all other fees are fees billed in the year, if any, for any products and services not included in the first three categories and consisted of a subscription to Ernst & Young Online, a research tool. |
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By: | /s/ Andrew C. Corbin |
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