EMAGEON INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
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EMAGEON INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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1200 Corporate Drive
Suite 200
Birmingham, Alabama 35242
April 26,
2007
Dear Fellow Stockholder:
I cordially invite you to attend Emageons 2007 Annual
Meeting of Stockholders, which will be held at our offices in
Birmingham, Alabama, at 11:00 a.m. Central Daylight Time on
Thursday, May 24, 2007. The formal meeting notice and proxy
statement are enclosed.
At this years Annual Meeting, stockholders will be asked
to elect two directors, to ratify the appointment of
Ernst & Young LLP to serve as Emageons
independent registered public accounting firm for the year
ending December 31, 2007, and to transact any other
business that may properly come before the Meeting.
Whether or not you plan to attend, it is important that your
shares be represented and voted at the Annual Meeting. We urge
you to vote promptly by mailing a completed proxy card in the
enclosed postage-paid envelope or by voting electronically over
the Internet or by telephone. If you will be voting over the
Internet or by telephone, please review the voting instructions
included with this mailing. Timely voting by any of these
methods will ensure your representation at the Annual Meeting.
We look forward to seeing you May 24.
Sincerely,
Charles A. Jett, Jr.
Chairman of the Board, President and
Chief Executive Officer
NOTICE OF THE ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD MAY 24,
2007
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of
Stockholders (the Annual Meeting) of Emageon Inc., a
Delaware corporation (the Company), will be held at
the principal executive offices of the Company at 1200 Corporate
Drive, Suite 200, Birmingham, Alabama 35242, at 11:00 a.m.
Central Daylight Time on Thursday, May 24, 2007, for the
following purposes, as more fully described in the Proxy
Statement accompanying this notice:
1. To elect two directors to serve on our Board of
Directors until the expiration of their terms
and/or until
their successors are duly elected and qualified. The nominees
for election are Mylle H. Mangum and Hugh H.
Williamson, III.
2. To ratify the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the
year ending December 31, 2007.
3. To transact such other business as may properly come
before the Annual Meeting or any adjournment(s) or
postponement(s) thereof.
All stockholders of record at the close of business
April 25, 2007 are entitled to notice of and to vote at the
Annual Meeting and any adjournment(s) or postponement(s) thereof.
We cordially invite all stockholders to attend the Annual
Meeting in person. Whether or not you plan to attend, it is
important that your shares be represented and voted at the
meeting. You can vote your shares by completing and returning
the enclosed proxy card or by voting electronically over the
Internet or by telephone. If your shares are held in
street name, that is, your shares are held in the
name of a brokerage firm, bank, or other nominee, you should
receive from that institution, in lieu of a proxy card, an
instruction form for voting by mail, and you may also be
eligible to vote your shares electronically. Should you receive
more than one proxy card or voting instruction form because your
shares are held in multiple accounts or registered in different
names or addresses, please sign, date, and return each proxy
card or voting instruction form to ensure that all of your
shares are voted. Your shares may also be voted in person at the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
John W. Wilhoite
Corporate Secretary
Birmingham, Alabama
April 26, 2007
TABLE OF
CONTENTS
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EMAGEON
INC.
PROXY
STATEMENT
FOR THE
2007 ANNUAL MEETING OF STOCKHOLDERS
MAY 24,
2007
INFORMATION
ABOUT THE ANNUAL MEETING
The enclosed proxy is solicited on behalf of the Board of
Directors (the Board) of Emageon Inc., a Delaware
corporation (the Company), for use at the
Companys 2007 Annual Meeting of Stockholders to be held
Thursday, May 24, 2007 (the Annual Meeting),
and at any adjournment(s) or postponement(s) thereof. The Annual
Meeting will be held at 11:00 a.m. Central Daylight Time at the
principal executive offices of the Company at 1200 Corporate
Drive, Suite 200, Birmingham, Alabama 35242. This Proxy
Statement, the enclosed form of proxy, and the attached Notice
of the Annual Meeting will be mailed, or made available
electronically for stockholders who have elected to access these
materials over the Internet, on or about April 27, 2007 to
all stockholders entitled to vote at the Annual Meeting.
Proposals 1 and 2, as further described in this Proxy
Statement, will be presented at the Annual Meeting by
management. The Company is not aware of any other matters to be
presented at the Annual Meeting.
With regard to Proposal 1, the form of proxy permits votes
for or withholding of votes as to each nominee for director, and
the form of proxy permits votes for, against, or abstention with
regard to Proposal 2. If the enclosed form of proxy is
properly executed, returned, and not revoked, it will be voted
in accordance with the specifications, if any, made by the
stockholder and, if specifications are not made, will be voted
FOR the nominees to the Board named in this Proxy
Statement, and FOR ratification of the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for the year ending
December 31, 2007. If your shares are held by your broker,
bank, or other nominee, often referred to as in street
name, you will receive a form from your broker or nominee
seeking instructions as to how your shares should be voted. If
you do not issue such instructions to your broker, your broker
may vote your shares in its discretion as to routine matters.
Both Proposal 1 and Proposal 2 are considered to be
routine matters.
The cost of solicitation of proxies will be borne by the
Company. Proxies may be solicited by directors, officers, or
other employees of the Company in person or by telephone or mail.
Stockholders who sign proxies have the right to revoke them at
any time before they are voted by filing with the Secretary of
the Company at 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242, an instrument revoking the proxy, by submitting a
duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.
The close of business on April 25, 2007 has been fixed as
the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting. As of such
record date, there were 21,333,391 shares of the
Companys common stock outstanding, each of which is
entitled to one vote on the matters to be presented at the
Annual Meeting.
The presence in person or by proxy of the holders of a majority
of the shares entitled to vote at the Annual Meeting will
constitute a quorum for the transaction of business. Failure of
a quorum to be represented at the Annual Meeting will
necessitate an adjournment or postponement and will subject the
Company to additional expense.
Proposal 1 discussed in this Proxy Statement requires the
affirmative vote of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting.
Proposal 2 discussed in this Proxy Statement requires the
affirmative vote of the holders of shares of common stock having
a majority of the votes cast by the holders of all of the shares
of common stock present or represented and voting at the Annual
Meeting.
Votes are counted by the Companys transfer agent. In
accordance with Delaware law, abstentions and broker non-votes
will have no effect on the outcome of Proposal 1. For
Proposal 2, abstentions will have the same effect as a vote
against, and broker non-votes will have no effect on the
outcome. Both abstentions and broker non-votes will be included
in the determination of the presence of a quorum.
2
MATTERS
TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL 1:
ELECTION
OF DIRECTORS
General
The Board of Directors of the Company is divided into three
classes with terms that expire at successive annual meetings.
Upon expiration of the term of a class of directors, directors
for that class will be nominated for three-year terms at the
annual meeting of stockholders in the year in which such term
expires. Any increase or decrease in the number of directors
will be distributed among the three classes so that, as nearly
as possible, each class will consist of one-third of the
directors.
The Board currently consists of nine directors. Chris H. Horgen,
the Companys Lead Independent Director and Chairman,
Compensation Committee, will retire from the Board of Directors
effective as of the close of the Annual Meeting, and two
directors will be elected at the Annual Meeting to serve for a
three-year term expiring at the annual meeting in 2010 or until
their successors have been duly elected and qualified, or until
the earliest of their death, resignation, or retirement. The
Board, acting upon the recommendation of the Governance
Committee, has nominated Mylle H. Mangum and Hugh H.
Williamson, III to be elected at the 2007 Annual Meeting as
directors whose terms will expire in 2010. Assuming that
Ms. Mangum and Mr. Williamson are elected, the Board
will consist of eight directors after the Annual Meeting.
The following table sets forth certain information regarding the
2007 Annual Meeting nominees and the other directors whose terms
of office will continue after the Annual Meeting. Information
about the share ownership of the nominees and other directors is
shown under Stock Ownership in this Proxy Statement.
Information regarding the compensation of directors is shown
under the heading Compensation of Directors in this
Proxy Statement.
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Name
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Age
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Director Since
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Positions With Emageon
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Nominees For Terms Expiring in 2010
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Mylle H. Mangum(1)
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2004
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Director
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Hugh H.
Williamson, III(2)
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2000
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Director
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Directors Whose Terms Expire in
2008
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Arthur P. Beattie(3)
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2004
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Director
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Fred C. Goad, Jr.(4)
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66
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2004
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Director
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Charles A. Jett, Jr.
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2000
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Chairman of the Board, Chief
Executive Officer, and President
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Directors Whose Terms Expire in
2009
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Roddy J.H. Clark(5)
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60
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2000
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Director
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Douglas D. French(6)
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2006
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Director
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John W. Thompson(7)
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2003
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Director
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Chairman, Governance Committee. Ms. Mangum will also
join the Compensation Committee effective as of the close of the
Annual Meeting. |
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Member, Compensation Committee. Mr. Williamson will
assume the positions of Lead Independent Director and Chairman,
Compensation Committee effective as of the close of the Annual
Meeting. |
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Chairman, Audit Committee. |
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Member, Audit Committee and Compensation Committee.
Mr. Goad will transition from the Audit Committee to the
Governance Committee effective as of the close of the Annual
Meeting, and will continue to serve as a member of the
Compensation Committee. |
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Member, Governance Committee. |
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Mr. French will become a Member of the Audit Committee
effective as of the close of the Annual Meeting. |
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Member, Audit Committee. |
3
Unless otherwise instructed, the proxy holders will vote the
proxies received by them FOR each of the two nominees
named above. Although it is anticipated that each nominee will
be able to serve as a director, should either nominee become
unavailable to serve, the proxies will be voted for such other
person or persons as may be designated by the Board. As of the
date of this Proxy Statement, the Board is not aware of any
nominee who is unable or will decline to serve as a director.
The following is a brief description of the business experience
and educational background of each of the Annual Meeting
nominees for director and the other directors whose terms will
continue after the Annual Meeting.
Mylle H. Mangum has served as a member of the Board since
June 2004. Ms. Mangum has served as Chief Executive Officer
of International Banking Technologies, a retail bank design and
consulting firm, since October 2003. She was Chief Executive
Officer of True Marketing Services LLC, a marketing services
company, from June 2002 through October 2003. She was Chief
Executive Officer of MMS Incentives, LLC, a private equity
company concentrating on high-tech marketing solutions, from
1999 to 2002. She previously served as Senior Vice President of
Carlson Wagonlit Travel Holdings, Inc. and Executive Vice
President of Holiday Inn Worldwide. Ms. Mangum is a
director of Barnes Group Inc., Haverty Furniture Companies,
Inc., Payless ShoeSource, Inc., and Respironics, Inc.
Hugh H. Williamson, III has served as a member of
the Board since January 2000. Mr. Williamson has served as
Chairman of the Board and Chief Executive Officer of XeDAR
Corporation since January 2007 and as Chief Executive Officer of
Cherry Creek Capital Partners, LLC, a private equity firm, since
1999. He has also served as a principal of Humanade, LLC, a
technology private equity firm, since 1995. Since 1992, he has
also served as Chief Executive Officer of Schutte &
Koerting, Inc. (formerly Ketema, Inc.), a privately held
industrial manufacturer of advanced materials, components, and
equipment, and is currently its sole shareholder and director.
Mr. Williamson is a director of several private companies.
Mr. Williamson was elected as Lead Independent Director of
Emageon on April 24, 2007, effective as of the close of the
Annual Meeting.
Arthur P. Beattie has served as a member of the Board
since August 2004. Mr. Beattie has served as Executive Vice
President, Chief Financial Officer and Treasurer of Alabama
Power Company, a subsidiary of Southern Company, since February
2005. Mr. Beattie previously served as Vice President and
Comptroller of Alabama Power Company since 1997.
Mr. Beattie is a director of several non-profit entities.
Fred C. Goad, Jr. has served as a member of the
Board since June 2004. Mr. Goad is a partner in Voyent
Partners LLC, a private equity firm that he co-founded in August
2001. Mr. Goad served as Co-Chief Executive Officer of the
Transaction Services Division of Healtheon/WebMD Corporation
(now Emdeon Corporation) from 1999 to 2001. He previously served
as Co-Chief Executive Officer and Chairman of ENVOY Corporation,
a provider of electronic transaction processing services for the
health care industry, which was acquired by WebMD in 1999.
Mr. Goad is a director of Performance Food Group Company,
Luminex Corp., and several private companies.
Charles A. Jett, Jr. has served as Chairman of the
Board and Chief Executive Officer since January 2000, and was
appointed President in March 2006. From 1997 through 1999,
Mr. Jett was Vice President and General Manager of Walker
Interactive Systems, Inc. (now Elevon, Inc.), a provider of
enterprise financial and management software. He joined Walker
Interactive upon its acquisition of Revere, Inc., a software
company, where Mr. Jetts position prior to the
acquisition was Chairman, President, and Chief Executive
Officer. Mr. Jett joined Revere, Inc. in 1988 as Vice
President of Sales, was promoted to President in 1991, and
assumed the Chairman and CEO positions in 1994. Prior to his
tenure at Revere, Mr. Jett was national sales manager of
Shoptrac Data Collection Systems, Inc. Mr. Jett is a
director of several non-profit entities and one private company.
Roddy J.H. Clark has served as a member of the Board
since June 2000. Mr. Clark has been a managing partner of
Redmont Venture Partners, Inc., a private equity firm
concentrating in technology markets, since 1998. Mr. Clark
is a director of several private companies.
4
Douglas D. French has served as a member of the Board
since October 2006. Since May 2004, Mr. French has been a
Principal of JD Resources, LLC, a private equity firm that
provides strategic advisory and venture capital services for
early stage healthcare companies. From January 2000 through May
2004, Mr. French served as President and Chief Executive
Officer of Ascension Health, the nations largest
non-for-profit
healthcare system and an Emageon customer. Mr. French
previously served as Executive Vice President and Chief
Operating Officer of Ascension Health from 1999 to 2000. Prior
to joining Ascension Health, Mr. French served, from 1998
to 1999, as Executive Vice President and Chief Operating Officer
of Daughters of Charity National Health System, and from 1994 to
1998, as President and Chief Executive Officer of The Central
Indiana Health System St. Vincent Hospitals and Health Systems.
Mr. French has over twenty-five years of professional
experience in hospital administration.
John W. Thompson has served as a member of the Board
since May 2003. Mr. Thompson has served as President of
Thompson Investment Management, LLC, a mutual fund investment
advisor, since January 2004. Previously, he served as President
of Thompson Plumb & Associates, LLC, a mutual fund
investment advisor, from 1984 to January 2004 and as its
Treasurer from 1993 to January 2004.
Required
Vote
Election of the nominees for director requires the affirmative
vote of a plurality of the votes cast by the stockholders
entitled to vote at the Annual Meeting.
Recommendation
of the Board of Directors
The Board of Directors unanimously recommends a vote FOR
the election of each of the nominees listed above. Unless
authority to do so is withheld, the proxy holders named in each
proxy will vote the shares represented thereby FOR the election
of each of the nominees listed above.
PROPOSAL 2:
RATIFICATION
OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has appointed the firm of Ernst &
Young LLP (Ernst & Young), the
Companys independent registered public accounting firm in
2006, to serve in the same capacity for the year ending
December 31, 2007, and has requested the Board to submit
this appointment for ratification by the Companys
stockholders at the Annual Meeting.
A representative of Ernst & Young is expected to be
present at the Annual Meeting, will have the opportunity to make
a statement if he or she desires to do so, and will be available
to respond to appropriate questions from stockholders.
Required
Vote
The affirmative vote of the holders of shares of common stock
having a majority of the votes cast by the holders of all of the
shares of common stock present or represented and voting at the
Annual Meeting is required to ratify the appointment of
Ernst & Young. Abstentions will have the same effect as
votes against the proposal, and broker non-votes will have no
effect on the outcome of voting on the proposal.
In the event that stockholders do not ratify the appointment of
Ernst & Young, the appointment will be reconsidered by
the Audit Committee. Even if the appointment is ratified, the
Audit Committee in its discretion may direct the appointment of
a different independent accounting firm at any time during the
year if the Audit Committee believes that such a change would be
in the best interests of the Company and its stockholders.
Recommendation
of the Board of Directors
The Board of Directors unanimously recommends a vote FOR
the ratification of the appointment of Ernst & Young to
serve as the Companys independent registered public
accounting firm for the year ending December 31, 2007.
Unless otherwise instructed, the proxy holders named in each
proxy will vote the shares represented thereby FOR the
ratification of the appointment of Ernst & Young.
5
BOARD
STRUCTURE AND CORPORATE GOVERNANCE
Board of
Directors and Meetings
The Board held four meetings during the year ended
December 31, 2006. Each director attended 75% or more of
the aggregate number of (i) meetings of the Board and
(ii) meetings of those committees of the Board on which he
or she served during 2006. Members of the Board and its
committees also consulted informally with management from time
to time and acted at various times by written consent without a
meeting during 2006.
The Company encourages its directors to attend its annual
stockholder meetings. Three of the Companys nine directors
attended the 2006 annual meeting of stockholders.
Board
Committees
The Board has established a standing Audit Committee,
Compensation Committee, and Governance Committee. Each committee
has a written charter that is reviewed annually and revised as
appropriate. A copy of each committees charter is
available on our website at www.emageon.com.
Additionally, a copy of each charter may be obtained, free of
charge, by writing to the Corporate Secretary, Emageon Inc.,
1200 Corporate Drive, Suite 200, Birmingham, Alabama 35242.
Audit Committee. The Board has determined that
each of the current members of the Audit Committee, consisting
of Mr. Beattie (Chairman), Mr. Goad, and
Mr. Thompson, are independent under the NASDAQ
Marketplace Rules and satisfy the other requirements of the
NASDAQ Marketplace Rules and rules of the Securities and
Exchange Commission (SEC) regarding audit committee
membership. The Board has also determined that Mr. Beattie
qualifies as an audit committee financial expert
under applicable SEC rules and regulations governing the
composition of audit committees and satisfies the
financial sophistication requirements of the NASDAQ
Marketplace Rules. The Committee held seven meetings during 2006.
The Audit Committee assists the Board in fulfilling its
oversight responsibility relating to (i) the integrity of
the Companys financial statements, (ii) the
Companys compliance with legal and regulatory
requirements, (iii) the independent registered
auditors qualifications and independence, (iv) the
compensation and performance of the Companys independent
registered public accounting firm, (v) the functioning of
the Companys systems of internal accounting and financial
reporting controls, (vi) the portions of the Code of Ethics
that relate to the integrity of accounting and financial
reporting, and (vii) review and approval of any related party
transactions. The Committees procedures for receipt,
retention, and treatment of complaints regarding accounting,
internal accounting and financial controls or auditing matters,
and the confidential anonymous submission by employees of
concerns regarding questionable accounting and auditing
practices may be found on our website at www.emageon.com.
The Companys independent registered public accounting firm
has unrestricted access to, and reports directly to, the Audit
Committee. The Audit Committee has selected Ernst &
Young LLP as the Companys independent registered public
accounting firm for the year ending December 31, 2007, and
the Board is recommending that stockholders ratify that
appointment at the Annual Meeting.
The Report of the Audit Committee for 2006 may be found on
page 30 of this Proxy Statement.
Compensation Committee. The Board has
determined that each of the current members of the Compensation
Committee, consisting of Mr. Horgen (Chairman), who is not
standing for re-election at the Annual Meeting, Mr. Goad,
and Mr. Williamson, are independent under the
current NASDAQ Marketplace Rules. The Compensation Committee
held seven meetings during 2006.
The Compensation Committee assists the Board in fulfilling its
oversight responsibility regarding (i) executive
compensation, including that of the Chief Executive Officer,
including salaries, bonuses, and equity grants,
(ii) evaluation of the performance of executive officers,
(iii) approval of stock options, restricted stock,
restricted stock units, and other equity grants to executive
officers of the Company, and (iv) approval of
6
the adoption, amendment, or termination of executive
compensation plans and other employee plans in which executive
officers may participate.
The Report of the Compensation Committee for 2006 may be found
on page 18 of this Proxy Statement.
Governance Committee. The Board has determined
that each of the current members of the Governance Committee,
consisting of Ms. Mangum (Chairman), Mr. Clark, and
Mr. Williamson, are independent under the
current NASDAQ Marketplace Rules. The Committee held five
meetings during 2006.
The Governance Committee assists the Board in fulfilling its
oversight responsibility regarding (i) the size,
composition, and structure of the Board, (ii) the
structure, responsibilities, and membership of the Boards
committees, (iii) criteria for the selection of qualified
directors and nominees for Board membership for recommendation
to the Board and stockholders, (iv) nominees for the Board
submitted by the stockholders in accordance with established
procedures for such nominations, (v) the resignation or
termination of directors, (vi) director compensation,
benefits, tenure, and retirement, (vii) evaluation of Board
and committee performance, and (viii) policies, practices,
and procedures regarding the Boards oversight of
management, and the Boards self-governance.
Criteria for Director Nominees. The Board
believes that it should be composed of directors with varied,
complementary backgrounds, and that directors should, at a
minimum, exhibit proven leadership capabilities and experience
at a high level of responsibility within their chosen fields.
Directors should possess the highest personal and professional
ethics, integrity and values and should be committed to
representing the long-term interests of the stockholders.
When considering a candidate for director, the Committee takes
into account a number of factors, including the following:
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independence from management;
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professional and educational background, reputation, industry
knowledge and business experience and its relevance;
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existing commitments to other businesses and the ability to
devote sufficient time to the Company;
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whether the candidate will complement the existing mix of skills
and talent resident in the Board;
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the candidates ability to fulfill the responsibilities of
one or more committees of the Board; and
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whether the candidate is financially literate or a financial
expert.
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Prior to nominating a sitting director for re-election at an
annual meeting of stockholders, the Committee will consider the
directors past attendance at, and participation in,
meetings of the Board and its committees and the directors
formal and informal contributions to the work of the Board and
its committees.
When seeking candidates for director, the Committee may solicit
suggestions from incumbent directors, management, stockholders,
and others, and may use the services of third party search firms
to assist in identifying appropriate candidates. After an
initial evaluation of a candidate, the Committee will interview
that candidate and may ask the candidate to meet with
management. If the Committee believes a candidate will be a
valuable addition to the Board, it may recommend to the Board
the nomination of that candidate.
Stockholder
Recommendations for Nominations to the Board
The Governance Committee will consider candidates for director
recommended by any stockholder who beneficially owns shares
representing more than 5% of the Companys then outstanding
shares of common stock and who has beneficially owned those
shares for more than two years at the time of submission. The
Committee will evaluate such recommendations applying its
regular criteria for nominees and may consider the additional
information set forth below. Eligible stockholders wishing to
recommend a candidate for nomination as a director are requested
to send the recommendation in writing to the Chairman,
Governance
7
Committee, Emageon Inc., 1200 Corporate Drive, Suite 200,
Birmingham, Alabama, 35242. A stockholder recommendation to the
Governance Committee must contain the following information:
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documentation supporting that the writer is a stockholder of
Emageon and has been a beneficial owner of shares representing
more than 5% of the Companys then outstanding shares of
common stock for more than two years, and a statement that the
writer is recommending a candidate for nomination as a director;
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a resume of the candidates business experience and
educational background, including the candidates name,
business and residence address, and principal occupation or
employment, and an explanation of how the candidates
background and qualifications are directly relevant to the
Companys business;
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the number of shares beneficially owned by the candidate;
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a statement detailing any relationship, arrangement, or
understanding, formal or informal, between or among the
candidate, any affiliate of the candidate, and any customer,
supplier, or competitor of the Company, or any other
relationship, arrangement, or understanding that might affect
the independence of the candidate as a member of the Board;
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detailed information describing any relationship, arrangement,
or understanding, formal or informal, between or among the
proposing stockholder, the candidate, and any affiliate of the
proposing stockholder or the candidate;
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any other information that would be required under SEC rules in
a proxy statement soliciting proxies for the election of such
candidate as a director; and
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a signed consent of the candidate to serve as a director, if
nominated and elected.
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In connection with its evaluation of director candidates, the
Governance Committee may request additional information from the
candidate or the recommending stockholder and may request an
interview with the candidate. The Committee has discretion to
decide which individuals, if any, to recommend for nomination as
directors. No candidates for director nominations were submitted
to the Governance Committee by any stockholder in connection
with the election of directors at the Annual Meeting.
Corporate
Governance
The Board believes that good corporate governance is paramount
in ensuring that Emageon is managed for the long-term benefit of
its stockholders. In establishing this governance, the Board and
management have looked to suggestions by various authorities in
corporate governance, the practices of other public companies,
the provisions of the Sarbanes-Oxley Act of 2002, various rules
of the SEC, and the NASDAQ Marketplace Rules.
The Board has adopted a Code of Business Ethics and Conduct and
charters for each of the Board committees that together reflect
the corporate governance principles that guide its actions with
respect to, among other things, the composition of the Board and
its decision making processes, Board meetings and involvement of
management, the Boards standing committees and procedures
for appointing members of the committees, and its performance
evaluation of the Chief Executive Officer. The Code of Business
Ethics and Conduct applies to all directors, officers, and
employees, including the Chief Executive Officer, Chief
Financial Officer, principal accounting officer, and other
senior financial officers. The Code of Business Ethics and
Conduct, as applied to our principal financial officers,
constitutes our code of ethics within the meaning of
Section 406 of the Sarbanes-Oxley Act and is our code
of conduct within the meaning of the NASDAQ Marketplace
Rules. We intend to disclose future amendments to our Code of
Ethics, if any, and any waivers of its provisions required to be
disclosed under the rules of the SEC or the NASDAQ Marketplace
Rules, at the same location on our website.
8
Corporate
Website
We maintain a corporate governance section on our website that
contains copies of our principal governance documents. The
corporate governance section may be found at www.emageon.com
under Investor Corporate Governance.
This section contains the following documents, which are also
available in print to any stockholder who requests a copy in
writing to Emageon Inc., 1200 Corporate Drive, Suite 200,
Birmingham, Alabama, 35242:
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Code of Business Ethics and Conduct;
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Audit Committee Charter;
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Compensation Committee Charter; and
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Governance Committee Charter.
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Communications
with Directors
Stockholders and other interested parties may send
communications to the Board of Directors, the Lead Independent
Director, the non-management directors as a group, or any
specific director by mailing the communication to the Board of
Directors, c/o Corporate Secretary, Emageon Inc., 1200
Corporate Drive, Suite 200, Birmingham, Alabama, 35242.
Emageons Corporate Secretary will forward the
correspondence to the Chairman of the Governance Committee
unless it is addressed to an individual director or the Lead
Independent Director, in which case the correspondence will be
forwarded accordingly. The Board of Directors has requested that
certain items unrelated to its duties be excluded, such as
solicitations and advertisements, junk mail, product-related
communications, job referral materials such as resumes, and
surveys.
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Mr. Horgen
(Chairman), Mr. Goad, and Mr. Williamson. None of the
members of the Committee were officers or employees of the
Company during 2006 or at any other time. During 2006 no
executive officer of the Company served as a member of the board
of directors or compensation committee of any other entity whose
executive officer(s) served on the Companys Board or
Compensation Committee.
Director
Independence
The Corporate Governance Guidelines provide that a majority of
the Board and all members of the Audit, Compensation, and
Governance Committees of the Board shall be independent. The
Board makes an annual determination as to the independence of
each Board member in accordance with the current standards for
independence under NASDAQ Marketplace Rules and
federal securities laws. Before the meeting at which this review
occurs, each director is asked to supply the Governance
Committee and the full Board with complete information about the
directors relationship with the Company and with its
senior management and their affiliates. Senior management
provides additional information about transactions,
relationships or arrangements between the Company and the
directors or parties related to the directors. The Governance
Committee reviews this information and makes its own
determinations of the independence of each director. It reports
its findings and the reasons for those findings to the full
Board, which then makes the final determinations of director
independence. In October 2006, the Governance Committee and
Board determined that Douglas D. French would qualify as an
independent director under NASDAQ Marketplace Rules upon
election to the Board. In April 2007 the Board determined that
all of its directors and nominees for election at the Annual
Meeting are independent under these standards except for
Mr. Jett, who is the Chairman, Chief Executive Officer, and
President of the Company.
9
Certain
Relationships and Related Transactions
Policy
on Related Party Transactions
The Company recognizes that transactions between the Company or
its subsidiaries and any of its directors or executive officers
can present potential or actual conflicts of interest.
Accordingly, as a general matter it is the Companys
preference to avoid such transactions. Nevertheless, the Company
recognizes that there are circumstances where such transactions
may be in, or not inconsistent with, the best interests of the
Company. Therefore, the Company has adopted a formal policy that
requires the Companys Audit Committee to review and, if
appropriate, approve or ratify any such transactions. Pursuant
to the policy, the Audit Committee will review any transaction
in which the Company is or will be a participant and the amount
involved exceeds $120,000, and in which any of the
Companys directors, executive officers or 5% shareholders
had, has or will have a direct or indirect material interest.
After its review, the Audit Committee will only approve or
ratify those transactions that are in, or are not inconsistent
with, the best interests of the Company and its shareholders.
On April 10, 2007, the Company purchased $125,000 of shares
of Series A Preferred Stock of Optimal Reading Services
Group, Inc. (Optimal), a company that provides
24-hour
diagnostic reading services, offering subspecialty, overflow,
and
after-hours
remote reading services as a supplement for local diagnostic
services. The Companys investment in Optimal represents
approximately 1.1% of the capital stock of Optimal on a fully
diluted basis. Craig A. Parker, the former General Counsel and
Secretary of the Company, is the Chief Executive Officer of
Optimal. Fred C. Goad, Jr. and Douglas D. French, members
of the Companys Board of Directors, are also investors in
Optimal, and hold an aggregate of 2% of the capital stock of
Optimal on a fully diluted basis.
From January 2001 to May 2004, Mr. French served as the
President and Chief Executive Officer of Ascension Health.
Ascension Health is the Companys largest customer,
accounting for 27% of the Companys total revenue during
2006. In addition, from May 2005 to October 2006, the Company
was party to a consulting arrangement with French Management
Group, LLC, a limited liability company founded and managed by
Mr. French. Under the consulting arrangement, French
Management Group received a monthly retainer of $5,000 from the
Company in exchange for certain management and consulting
services. The consulting arrangement was terminated prior to the
appointment of Mr. French to the Board on October 16,
2006, and neither French Management Group nor the Company have
any continuing obligations related thereto.
10
STOCK
OWNERSHIP
Beneficial
Ownership
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of its common
stock as of March 31, 2007 by (i) each director and
each nominee for director, (ii) the named executive
officers of the Company (iii) all directors and officers of
the Company as a group, and (iv) any person who is known by
the Company to be the beneficial owner of more than 5% of the
Companys common stock as defined in accordance with
Rule 13d-3
under the Exchange Act.
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Common Shares
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Percent
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Beneficial Owner
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Owned (1)(2)
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Owned(3)
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Non-Employee Directors and
Nominees(4)
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Arthur P. Beattie
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14,409
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*
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Roddy J.H. Clark
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13,924
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*
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Douglas D. French
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5,750
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*
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Fred C. Goad, Jr.
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14,409
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*
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Chris H. Horgen
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30,227
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*
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Mylle H. Mangum
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14,409
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*
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John W. Thompson
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183,279
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(5)
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*
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Hugh H. Williamson, III
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11,560
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*
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Named Executive
Officers(4)
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Charles A. Jett, Jr.
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515,040
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2.41
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%
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W. Randall Pittman
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159,280
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*
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Grady O. Floyd
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19,728
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*
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Robert W. Grubb
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89,548
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*
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Wendell G. R. Brown
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6,564
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*
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Milton G. Silva-Craig
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Craig A. Parker
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All Directors, Nominees and
Named Executive Officers as a Group (15 Persons)
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1,132,328
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5.12
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%
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Five Percent or Greater
Stockholders
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Deerfield Capital, L.P.
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Deerfield Management Company,
L.P.(6)
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1,603,100
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7.51
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%
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James E. Flynn
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Wells Fargo & Company(7)
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1,507,645
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7.07
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%
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Brown Advisory Holdings
Incorporated(8)
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1,314,668
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6.12
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%
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HealthCor Management, L.P.
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Arthur Cohen(9)
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1,200,000
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5.62
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%
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Joseph Healey
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(1) |
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Except as indicated in the footnotes to this table, the persons
listed have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. |
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(2) |
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Includes beneficial ownership of the following numbers of shares
that may be acquired with exercise of stock options that are
currently exercisable or exercisable within 60 days after
March 31, 2007: |
11
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Beneficial Owner
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Shares
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Arthur P. Beattie
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12,409
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Roddy J.H. Clark
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11,924
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Douglas D. French
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3,750
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Fred C. Goad, Jr.
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12,409
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Chris H. Horgen
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9,500
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Mylle H. Mangum
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12,409
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John W. Thompson
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9,500
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Hugh H. Williamson, III
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9,500
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Charles A. Jett, Jr.
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450,420
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W. Randall Pittman
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147,354
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Grady O. Floyd
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19,728
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Robert W. Grubb
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89,548
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Wendell G. R. Brown
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6,564
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Milton G. Silva-Craig
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Craig A. Parker
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(3) |
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The percentage of shares beneficially owned is based on
21,333,391 shares of common stock outstanding as of
March 31, 2007. Shares of common stock subject to options
that are currently exercisable or exercisable within
60 days after March 31, 2007 are deemed to be
outstanding and beneficially owned by the person holding the
options for the purpose of computing the number of shares
beneficially owned and the percentage of ownership of such
person, but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. |
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(4) |
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The address of all the directors, nominees and named executive
officers is 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242. |
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(5) |
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Includes the shares held by the Marianna Thompson Trust for the
benefit of Mr. Thompsons spouse. Does not include
212,622 shares held by two grantor retained annuity trusts,
all the beneficiaries of which are Mr. Thompsons
adult children. Mr. Thompson does not have voting or
dispositive power with respect to the shares held by these
trusts. |
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(6) |
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Information regarding Deerfield Capital, L.P., Deerfield
Management Company, L.P. and James E. Flynn is based solely upon
a Schedule 13G filed by Deerfield Capital, L.P., Deerfield
Management Company, L.P. and Mr. Flynn with the SEC on
January 23, 2007. Deerfield Capital, L.P. beneficially owns
610,274 shares, and Deerfield Management Company, L.P.
beneficially owns 992,826 shares. Shares listed as
beneficially owned by Deerfield Capital, L.P. are owned by the
following entities: Deerfield Partners, L.P. and Deerfield
Special Situations Fund, L.P. Shares listed as beneficially
owned by Deerfield Management Company, L.P. are owned by the
following entities: Deerfield International Limited and
Deerfield Special Situations Fund International Limited.
James E. Flynn is the managing member of J.E. Flynn Capital LLC,
the general partner of Deerfield Capital, L.P., and is the
managing member of Flynn Management LLC, the managing member of
Deerfield Management Company, L.P. The address for Deerfield
Capital, L.P., Deerfield Management Company, L.P. and
Mr. Flynn is 780 Third Avenue, 37th Floor, New York,
NY 10017. |
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(7) |
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Information regarding Wells Fargo & Company is based
solely upon a Schedule 13G filed by Wells Fargo &
Company with the SEC on January 24, 2007. The
Schedule 13G was filed by Wells Fargo & Company on
its own behalf and on behalf of the following subsidiaries on a
consolidated basis: Wells Capital Management Incorporated, a
registered investment advisor; Wells Fargo Funds Management,
LLC, a registered investment advisor; Peregrine Capital
Management, Inc., a registered investment advisor; and Wells
Fargo Bank, National Association, a bank. The address for Wells
Fargo & Company is 420 Montgomery Street,
San Francisco, CA 94104. |
12
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(8) |
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Information regarding Brown Advisory Holdings Incorporated is
based solely upon a Schedule 13G filed by Brown Advisory
Holdings Incorporated with the SEC on February 14, 2007.
The address for Brown Advisory Holdings Incorporated is 901
South Bond Street, Suite 400, Baltimore, MD 21231. |
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(9) |
|
Information regarding HealthCor Management, L.P. and
Messrs. Healey and Cohen is based solely upon a
Schedule 13G filed by Healthcor Management, L.P. and
Messrs. Healey and Cohen with the SEC on February 14,
2007. Messrs. Healey and Cohen are Managers of HealthCor
Associates, LLC, the general partner of HealthCor Management,
L.P. The address for HealthCor Management and Mr. Healey is
152 West 57th Street, 47th Floor, New York, New
York 10019. The address for Mr. Cohen is 12 South Main
Street, #203 Norwalk, CT 06854. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Members of the Board of the Company, executive officers of the
Company, and persons who beneficially own more than 10% of the
outstanding common stock of the Company, if any, are subject to
the requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, which requires them to file
reports with the SEC with respect to their ownership and changes
in their ownership of the Companys common stock. Based
solely upon (i) the copies of Section 16(a) reports
received by the Company from such persons for their transactions
in 2006 in the Companys common stock and their common
stock holdings, and (ii) the written representations
received from such persons that no annual Form 5 reports
were required to be filed by them for 2006, the Company believes
that all reporting requirements under Section 16(a) for
such year were met in a timely manner by the Companys
directors, executive officers, and greater than 10% owners of
the Companys common stock, except that Grady O. Floyd
filed one late report with respect to an award of stock options
and restricted stock units in April 2006. These awards were
reported to the SEC on January 3, 2007.
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
Executive
Officers
The following sets forth certain information regarding the
Companys executive officers as of December 31, 2006:
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Name
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Age
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Position with Company
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Charles A. Jett, Jr.
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47
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Chairman of the Board, Chief
Executive Officer, and President
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Grady O. Floyd
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44
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Chief Operating Officer
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W. Randall Pittman
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|
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53
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|
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Chief Financial Officer and
Treasurer
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Robert W. Grubb
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40
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|
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Senior Vice President, Sales
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Wendell G. R. Brown
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45
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Senior Vice President, Business
Development
|
The following is a brief description of the business experience
and background of each of the Companys executive officers.
The description for Mr. Jett appears under
Proposal 1: Election of Directors in this Proxy
Statement.
Grady O. Floyd was appointed as Chief Operating Officer
of the Company effective March 22, 2006. Mr. Floyd was
a co-founder of Vasant, LLC, a consulting firm specializing in
health care technology business development, and served as its
Chief Operating Officer from September 2004 to March 2006. From
September 2002 to April 2004, Mr. Floyd was President and
Chief Executive Officer of CardioNow, Inc., a cardiology image
and information system company, where he also served as Chief
Operating Officer from August 2001 to September 2002. He served
as President and Chief Operating Officer of Cemax-Icon, Inc., a
medical image information system company specializing in the
PACS-RIS and TeleRadiology filmless enterprise marketplace, from
January 1999 to August 2001, and in a variety of other
capacities prior to that, including Vice President, Operations
from January 1997 to January 1999, a tenure that included the
sale of the company to Eastman Kodak Company. Mr. Floyd has
additionally held senior positions at several other advanced
imaging companies. He began his career as a software systems
engineer, and received a Bachelor of Science degree in
industrial engineering from Stanford University.
13
W. Randall Pittman has served as Chief Financial
Officer and Treasurer since November 2002. From 2000 to November
2002, he was Chief Financial Officer of BioCryst
Pharmaceuticals, Inc., a biotechnology company. From 1998 to
1999 he was Chief Financial Officer of ScandiPharm, Inc., a
pharmaceutical company. He previously served as Sr. Vice
President of MedPartners, Inc., (now Caremark Rx, Inc.), a
pharmacy benefit management company, and Executive Vice
President and Controller of AmSouth Bancorporation.
Mr. Pittman earned a Bachelor of Science degree from Auburn
University and has been a Certified Public Accountant since
1978. Mr. Pittman is a director of the Regions Morgan
Keegan Select funds, the RMK High Income Fund, Inc., the
RMK Advantage Income Fund, Inc., the RMK Strategic Income Fund,
Inc., and the RMK Multi-Sector High Income Fund, Inc.
Robert W. Grubb has served as Senior Vice President of
Sales since June 2004. From September 2001 to June 2004,
Mr. Grubb served as Vice President of Sales
East Region for the Company. Prior to joining the Company, from
August 1989 to August 2001 Mr. Grubb led marketing and
sales efforts for several other software companies including
SunGard Data Systems and Electronic Healthcare Systems.
Mr. Grubb received his Bachelor of Science Degree from the
University of North Alabama.
Wendell G. R. Brown has served as Senior Vice President
of Marketing and Business Strategy since March 2006. From
November 2002 to March 2006, Mr. Brown served as President
and Chief Operating Officer of Camtronics Medical Systems Inc.,
Canada where he was responsible for operations, product
development, and customer service for cardiology image and
information management systems provided through the Canadian
subsidiary of Camtronics Medical Systems, Ltd., which was
acquired by Emageon in November 2005. Prior to joining
Camtronics, Mr. Brown served as Executive Vice President
and Chief Operating Officer of VMI Medical, Inc. from June 1999
to November 2002, where his responsibilities included sales,
product development, customer service, and finance functions
serving customers in the pediatric cardiology marketplace.
Mr. Brown held various positions with MCI/SHL Systemhouse
Inc. from April 1993 through June 1999. Mr. Brown received
a Bachelor of Science with Honors in Computing Science and
Mathematics from Queens University, Kingston, Ontario.
Compensation
Discussion & Analysis
This Compensation Discussion and Analysis section addresses the
following topics: (i) the members and role of the
Compensation Committee of the Board of Directors; (ii) the
process by which executive compensation is set; (iii) the
Companys compensation philosophy; (iv) the components
of the Companys executive compensation program;
(v) executive compensation decisions for 2006; and
(vi) certain executive compensation decisions for 2007.
In this Proxy Statement, the individuals whose compensation is
reported in the Summary Compensation
Table 2006 are referred to as the
named executive officers and in this
Compensation Discussion and Analysis section, the
terms, we, our, us, and the
Committee refer to the Compensation Committee.
The
Compensation Committee
Committee Members and
Independence. Mr. Horgen (Chairman),
Mr. Goad, and Mr. Williamson are the current members
of the Committee. Mr. Williamson, who has served on the
Board of Directors since 2000, was elected as the Companys
Lead Director on April 24, 2007, effective as of the close
of the Annual Meeting, and will also serve as Compensation
Committee Chairman following the Annual Meeting. Ms. Mangum
will join the Compensation Committee at the close of the Annual
Meeting. Each member of the Committee qualifies as an
independent director under the NASDAQ Marketplace Rules.
Role of the Committee. The Committee
administers the compensation program for the named executive
officers and certain key employees of the Company and makes all
related decisions. The Committee also administers the
Companys equity incentive plans. The Committee ensures
that the total compensation paid to the named executive officers
is fair, reasonable and competitive. In 2006, the Committee
enlisted the services of Mercer Human Resource Consulting, an
internationally recognized compensation consulting firm, to
provide additional information for its evaluation of the
competitiveness of the compensation packages of the
14
Companys named executive officers. The Committee operates
under a written charter adopted by the Board. The charter is
available at www.emageon.com.
The fundamental responsibilities of the Committee are:
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to review at least annually the goals and objectives and the
structure of the Companys plans for executive
compensation, incentive compensation, equity-based compensation,
and its general compensation plans and employee benefit plans
(including retirement and health insurance plans);
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to evaluate annually the performance of the Chief Executive
Officer in light of the goals and objectives of the Company and
its executive compensation plans, and to determine his or her
compensation level based on this evaluation;
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to review annually and determine the compensation level of all
other executive officers of the Company, in light of the goals
and objectives of the Company and its executive compensation
plans;
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periodically, as the Committee deems necessary or desirable and
pursuant to the applicable equity-based compensation plan, to
grant, or recommend that the Board grant, equity-based
compensation awards to any officer or employee of the Company
for such number of shares of common stock as the Committee, in
its sole discretion, shall deem to be in the best interest of
the Company; and
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to review and recommend to the Board all equity-based
compensation plans.
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Committee Meetings. The Compensation Committee
meets as often as necessary to perform its duties and
responsibilities. The Committee held seven meetings during 2006
and has held five meetings during 2007. The Committee typically
meets with the Chief Executive Officer and also meets in
executive session without management.
The
Compensation-Setting Process
The Committee meets in executive session each year to evaluate
the performance of the named executive officers and certain key
employees, to determine their incentive bonuses for the prior
fiscal year, to set their base salaries for the next calendar
year, and to consider and approve any grants to them of equity
incentive compensation.
Although many compensation decisions are made in the fourth and
first quarters, the compensation planning process continues
throughout the year. Compensation decisions are designed to
promote the Companys fundamental business objectives and
strategy. Business and succession planning, evaluation of
management performance and consideration of the business
environment are year-round processes.
Management plays a significant role in the compensation-setting
process. The most significant aspects of managements role
are:
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evaluating employee performance; and
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recommending salary levels and option awards to the Committee.
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The Chief Executive Officer also participates in Committee
meetings at the Committees request to provide:
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background information regarding the Companys strategic
objectives;
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his evaluation of the performance of the named executive
officers and other key employees; and
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compensation recommendations as to the named executive officers
(other than himself).
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Executive
Compensation Philosophy
The Companys executive compensation program is based on a
pay-for-performance
philosophy. The Company believes in rewarding executives based
on individual performance and aligning the executives
interests with those of the stockholders with the ultimate
objective of improving stockholder value. To that
15
end, the Committee believes executive compensation packages
provided by the Company to its executives should include both
cash and stock-based compensation that reward performance. The
Committee has not adopted any formal or informal policy for
allocating compensation between long-term and short-term,
between cash and non-cash or among the different possible forms
of non-cash compensation.
The Committee seeks to attract, retain and motivate key
executives and to reward executives for value creation. The
individual judgments made by the Committee are subjective and
are based largely on the Committees perception of each
executives contribution to both past performance and the
long-term growth potential of the Company. Therefore, a
substantial portion of executive officers compensation is
determined by each executive officers contribution to the
growth of the Companys revenue and earnings per share.
The Committee also believes that total compensation and
accountability should increase with position and responsibility.
Consistent with this philosophy, total compensation is higher
for individuals with greater responsibility and greater ability
to influence the Companys targeted results and strategic
initiatives. As position and responsibility increase, a greater
portion of the named executive officers total compensation
is performance-based pay.
In addition, our compensation methods focus management on
achieving strong annual performance in a manner that supports
and ensures the Companys long-term success and
profitability. The Committee believes that stock options and
restricted stock units issued under the Companys equity
compensation plans create long-term incentives that align the
interests of management with the interests of long-term
stockholders.
Finally, while the Companys overall compensation levels
must be sufficiently competitive to attract talented leaders,
the Committee believes that compensation should be set at
responsible levels. The Companys executive compensation
programs are intended to be consistent with its cost control
strategies.
2006
Compensation
Executive Summary. The primary components of
total compensation for the Companys named executive
officers during fiscal year 2006 were base salary, cash
incentives (bonus), and equity incentive compensation. The
overall compensation decisions made for fiscal 2006 for the
named executive officers were as follows:
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increases were made in base salaries for the named executive
officers based on the Committees evaluation of individual
performance and the recommendations of the Companys Chief
Executive Officer;
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cash incentive (bonus) payments were made to certain named
executive officers at reduced levels based upon the Company
having achieved 50% of the performance metrics established by
the Committee in March 2006; and
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stock option and restricted stock unit awards were granted to
named executive officers.
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Base Salary. On an annual basis the Committee
determines the base salary for each of the named executive
officers. In determining base salaries, the Committee considers
the executives qualifications and experience, scope of
responsibilities, the goals and objectives established for the
executive, the executives past performance, internal pay
equity, the tax deductibility of base salary and cash incentive
payments and the extent to which the Companys earnings
were affected by the executives actions. The minimum
levels of some of these base salaries are mandated by employment
agreements with the named executive officers (which are
described in more detail below under the heading
Additional Discussion of Material Items in Summary
Compensation Table 2006). The relative
amounts of the base salary and bonus of the named executive
officers are set at levels so that a significant portion of the
total compensation that such executive can earn is
performance-based pay. The Committee believes that base salaries
are an important part of the Companys executive
compensation program because they provide the named executive
officers with a steady income stream that is not contingent upon
the Companys overall performance.
The amount of base salary is largely determined based on the
subjective judgment of the Committee without the use of a
formula, taking into account the factors described above. In
determining the base salary
16
of the named executive officers, the Committee may periodically
benchmark against an applicable peer group and refer to surveys
of compensation data for similar positions with similar
companies.
For 2006, the annual salary increase for each of our named
executive officers (ranging from 0% to 13.6%) was individually
approved by the Compensation Committee and took effect on
January 1, 2006. The base salaries in 2006 for the named
executive officers are set forth in the Summary
Compensation Table 2006.
Cash Bonus. The Company utilizes annual cash
bonuses to reward the named executive officers for their
performance and the performance of the Company during the prior
year. The Company utilizes an informal performance-based annual
bonus program whereby the Committee approves a target bonus for
each named executive officer as a percentage of base salary. The
named executive officer may earn his bonus based on the
achievement of financial goals set by the Committee. Additional
details regarding the Companys financial goals and related
bonus levels set by the Committee for 2006 are set forth under
the heading Additional Discussion of Material Items in
Summary Compensation Table 2006 below.
Equity Incentives. We consider equity-based
awards to be an important part of the Companys executive
compensation program. Stock options, restricted stock units, and
other equity-based awards provide the named executive officers
with a strong link to the Companys long-term performance,
promote an ownership culture, and more closely align the
interests of the named executive officers with those of the
Companys stockholders.
The named executive officers are eligible to receive stock
options and restricted stock units under the Emageon Inc. 2005
Equity Incentive Plan. This plan provides the Committee with
broad discretion to fashion the terms of awards to provide
eligible participants with such stock-based incentives as the
Committee deems appropriate. It permits the issuance of awards
in a variety of forms, including non-qualified stock options and
incentive stock options, stock appreciation rights, restricted
stock awards and performance shares.
In determining the number of options and restricted stock units
to be granted to named executive officers, and the frequency of
such grants, the Committee takes into account the
executives title, scope of responsibility, ability to
affect the profitability of the Company, the executives
performance and the value of stock options and restricted stock
units in relation to other elements of total compensation. In
addition, because the Company believes that revenue and stock
price appreciation are the most useful measures of
managements effectiveness in creating value for the
stockholders, the Companys revenue and stock price
appreciation over the applicable performance measurement periods
are also taken into account when determining the number of
options to be granted to executives.
The Company grants all stock options based on the fair market
value of its common stock as of the date of grant. The exercise
price for stock option grants is determined by reference to the
closing price per share on the NASDAQ Global Market at the close
of business on the date of grant.
Option awards under the compensation programs discussed above
are made at regular or special Compensation Committee meetings.
The effective date for such grants is the date of such meeting,
or such future date as the Committee may specify. The Company
may also make grants of equity incentive awards at the
discretion of the Committee or the Board of Directors in
connection with the hiring of new executive officers and other
employees.
During 2006, the named executive officers received options to
purchase an aggregate of 276,016 shares and 25,779
restricted stock units under the Companys 2005 Equity
Compensation Plan. For a more complete description of the
individual awards, see the Grants of Plan Based
Awards table below.
Perquisites and Other Personal Benefits
Compensation. The Company provides named
executive officers with perquisites and other personal benefits
that the Company and the Committee believe are reasonable and
consistent with its overall compensation program to better
enable the Company to attract and retain superior employees for
key positions. The Committee periodically reviews the levels of
perquisites and other personal benefits provided to named
executive officers. The amounts shown in the Summary
Compensation Table under the heading All Other
Compensation represent the value of Company matching
contributions to the executive
17
officers 401(k) Plan accounts, the value of certain life
insurance benefits, and club memberships. Executive officers did
not receive any other perquisites or other personal benefits or
property.
Accounting for Stock-Based
Compensation. Beginning on January 1, 2006,
the Company began accounting for stock-based payments, including
its 2005 Equity Incentive Plan, in accordance with the
requirements of Statement of Financial Accounting Standards
No. 123 (revised), Share-Based Payment
(FAS 123R).
Other Compensation. The named executive
officers are entitled to the same benefits that are otherwise
available to all employees. Benefits which are available to all
employees generally include company-paid basic group term life
insurance and basic accidental death and dismemberment
insurance, and an employer match of eligible compensation that
employees invest in their 401(k) Plan accounts.
2007
Compensation Decisions
The following table summarizes the Committees 2007 base
salary decisions for the named executive officers. The base
salary amounts were effective February 15, 2007.
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Name
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Base Salary
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Charles A. Jett
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$
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353,000
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W. Randall Pittman
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255,000
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Grady O. Floyd
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255,000
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Robert W. Grubb
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190,000
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Wendell G. R. Brown
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195,000
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REPORT OF
THE COMPENSATION COMMITTEE
To the Stockholders of Emageon Inc.:
The Compensation Committee has submitted the following report
for inclusion in this Proxy Statement:
Our Committee has reviewed and discussed the Compensation
Discussion and Analysis contained in this Proxy Statement with
management. Based on our Committees review of and the
discussions with management with respect to the Compensation
Discussion and Analysis, our Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement and in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2006 for filing with the
SEC.
Notwithstanding anything to the contrary set forth in any of the
Companys previous filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, that incorporate future filings, including this Proxy
Statement, in whole or in part, the foregoing Compensation
Committee Report shall not be incorporated by reference into any
such filings.
The foregoing report is provided by the following directors, who
constitute the Committee:
COMPENSATION COMMITTEE
Chris H. Horgen (Chairman)
Fred C. Goad, Jr.
Hugh H. Williamson, III
18
Summary
Compensation Table 2006
The following table provides certain summary information
concerning the compensation earned for services rendered in all
capacities to the Company for the years ended December 31,
2006 by our named executive officers. Mr. Silva-Craig
resigned his position as Chief Operating Officer and President
of the Company effective March 22, 2006, and
Mr. Parker resigned his position as General Counsel and
Secretary of the Company effective May 1, 2006.
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Non-Equity
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Incentive
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All
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Stock
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Option
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Plan
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Other
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Name and Principal Position
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Year
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Salary(1)
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Awards(2)
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Awards(3)
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Compensation
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Compensation(4)
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Total
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Charles A. Jett, Jr.
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2006
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$
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336,000
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$
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32,615
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$
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738,082
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$
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84,000
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(5)
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$
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4,528
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$
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1,195,225
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Chairman, Chief Executive Officer,
and
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President
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W. Randall Pittman
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2006
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233,000
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9,694
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219,327
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46,600
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(5)
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4,781
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513,402
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Chief Financial Officer
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and Treasurer
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Grady O. Floyd
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2006
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202,256
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21,494
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118,752
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26,769
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369,271
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Chief Operating Officer(6)
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Robert W. Grubb
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2006
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185,000
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200,397
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247,160
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(7)
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3,882
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636,439
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Senior Vice President, Sales
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Wendell G. R. Brown
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2006
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185,000
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15,353
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28,730
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30,525
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(5)
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259,608
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Senior Vice President, Business
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Development
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Milton G. Silva-Craig
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2006
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206,782
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302,397
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3,746
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512,925
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Former Chief Operating Officer
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and President(8)
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Craig A. Parker
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2006
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122,092
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331,408
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3,607
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457,107
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Former General Counsel
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and Secretary(9)
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(1) |
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Includes amounts deferred under the Companys employee
savings plan under Section 401(k) of the Internal Revenue
Code. The Company contributed $437,532 to this plan in 2006 on
behalf of all of its eligible participating employees. |
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(2) |
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Represents the amount recognized by the Company as an expense in
2006 for financial reporting purposes pursuant to FAS 123R
with respect to restricted stock unit awards, but disregarding
for this purpose the estimate of forfeitures related to
service-based vesting conditions. Amounts include awards granted
in and prior to 2006. The methodology and assumptions used to
calculate the cost of each named executive officers
outstanding restricted stock unit grants for 2006 are described
in Note 2, Summary of Significant Accounting
Policies, beginning on
page F-8,
and Note 14, Stock-Based Compensation Expense,
beginning on
page F-22
of the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. No restricted
stock unit grants to the named executive officers listed above
were forfeited in 2006. |
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(3) |
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Represents the amount recognized by the Company as an expense in
2006 for financial reporting purposes pursuant to FAS 123R
with respect to options, but disregarding for this purpose the
estimate of forfeitures related to service-based vesting
conditions. Amounts include awards granted in and prior to 2006.
The methodology and assumptions used to calculate the cost of
each named executive officers outstanding stock option
grants for 2006 are described in Note 2, Summary of
Significant Accounting Policies, beginning on
page F-8,
and Note 14, Stock-Based Compensation Expense,
beginning on
page F-22
of the Companys Annual Report on Form
10-K for the
fiscal year ended December 31, 2006. No stock option grants
to the named executive officers listed above were forfeited in
2006. |
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(4) |
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Includes life insurance premiums paid on behalf of the named
executive officers and matching contributions to the
executives 401(k) Plan accounts. Other compensation for
Mr. Floyd also includes $26,290 of moving expenses for
which Mr. Floyd was reimbursed in 2006. No other
perquisites or personal benefits exceeded $10,000 for any named
executive officer. |
19
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(5) |
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Consists of cash bonus awarded under the Companys
performance-based annual bonus program. For 2006, the
Compensation Committee established two performance metrics for
the non-equity incentive bonus plan:
(i) $122-125 million in Company revenue, and
(ii) earnings per share of $.02 (before acquisition-related
charges). The Company achieved the revenue performance metric,
but did not achieve the earnings per share target; thus,
non-equity cash incentive bonus payments were made to executives
at 50% of target bonus range. Target bonus ranges for 2006 are
listed in the Grants of Plan-Based Awards
Table 2006 below. |
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(6) |
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The Company first employed Mr. Floyd in March 2006. |
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(7) |
|
Mr. Grubb received $247,160 in non-equity incentive plan
compensation pursuant to a sales incentive compensation plan. |
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(8) |
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Mr. Silva-Craig resigned his position as Chief Operating
Officer and President of the Company effective March 22,
2006, but continued to be employed by the Company on a full-time
basis through September 30, 2006. |
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(9) |
|
Mr. Parker resigned his position as General Counsel and
Secretary of the Company effective May 1, 2006, but
continued to be employed by the Company on a full-time basis
through June 30, 2006. |
Additional
Discussion of Material Items in Summary Compensation
Table 2006
The Companys executive compensation policies and
practices, pursuant to which the compensation set forth in the
Summary Compensation Table 2006 was paid or
awarded, are described above under Compensation Discussion
and Analysis. A summary of certain material terms of the
Companys compensation plans and arrangements is set forth
below.
Employment
Agreements of Named Executive Officers
Mr. Jett, Chairman of the Board, Chief Executive Officer,
and President; Mr. Pittman, Chief Financial Officer and
Treasurer; and Mr. Floyd, Chief Operating Officer, have
employment agreements with the Company. The term of
Mr. Jetts employment agreement is two years, the term
of Mr. Pittmans employment agreement is one year, and
the term of Mr. Floyds employment agreement is
eighteen months. The terms of the agreements automatically renew
on a daily basis unless notice is given by the Company or by the
executive to cease the automatic renewal.
Pursuant to the terms of the agreements, each of these executive
officers is entitled to a base annual salary, subject to annual
increase as recommended by the Compensation Committee, and is
eligible for an annual targeted cash bonus equal to a percentage
of annual salary. Target bonuses are paid if in the judgment of
the Compensation Committee certain target levels of revenue and
earnings are achieved and if certain other criteria are met. In
addition, these executives are eligible for the same employee
benefits, including health, life, disability, dental, and
retirement benefits, as are available to all employees of the
Company.
The Company is also party to a letter agreement with
Mr. Grubb, dated September 11, 2006, regarding
severance payments to be made to Mr. Grubb in the event
that his employment is terminated other than for cause or as a
result of a change in control of the Company. The terms of these
severance arrangements are described in more detail under the
heading Potential Payments Upon Termination or Change in
Control below.
The Company is not a party to any written employment agreement
with Mr. Brown.
2005
Equity Incentive Plan
The Board of Directors adopted the Emageon Inc. 2005 Equity
Incentive Plan in January 2005. The plan gives the Compensation
Committee broad discretion to fashion the terms of awards to
provide eligible participants with such equity-based incentives
as the Compensation Committee deems appropriate. It permits the
issuance of awards in a variety of forms, including
non-qualified stock options and incentive stock options,
restricted stock, restricted stock units, stock appreciation
rights, and performance shares.
20
Cash
Bonus Program
The Company utilizes a performance-based annual bonus program
whereby the Committee approves a target bonus for each named
executive officer (and certain other employees) as a percentage
of base salary, with the bonus payable if the Company reaches
certain financial performance metrics and the executive meets
certain performance objectives. Additional detail regarding the
program is set forth under the heading Compensation
Discussion and Analysis above.
For 2006, the Compensation Committee established two performance
metrics for this bonus plan:
(i) $122-125 million
in Company revenue, and (ii) earnings per share of $.02
(before acquisition-related charges). In addition, the
Compensation Committee determined that the target cash incentive
amount for which Mr. Jett would be eligible would be 50% of
his base salary, and the target cash incentive amounts for which
the Companys other named executive officers would be
eligible would range from 33% to 40% of the executives
base salary. One-half of the cash incentive amount would be
payable to the named executive officer if the Company achieved
the total revenue target, and one-half would be payable if the
Company achieved the earnings per share target. No cash
incentive would be paid in the event the Companys
performance fell below both the revenue target and the earnings
per share target.
The Company achieved the revenue performance metric, but did not
achieve the earnings per share target; thus, non-equity cash
incentive bonus payments were made to executives at 50% of
target bonus range. The amounts of the target bonuses for each
named executive officer are set forth in the Grants of
Plan-Based Awards Table 2006 below, and
the actual cash bonus payments made to the named executive
officers for 2006 are set forth in the Summary
Compensation Table 2006 above.
Sales
Incentive Compensation Plan
The Company has agreed to a sales incentive compensation plan
with Mr. Grubb that provides for payment of quarterly and
annual incentive compensation equal to a percentage of new sales
bookings by the Companys sales team, subject to
achievement of certain minimum bookings targets and certain
minimum annual revenue targets.
Defined
Contribution Benefit Plan
The Company has established a 401(k) plan for all eligible
employees pursuant to Section 401(k) of the Internal
Revenue Code. Prior to 2006, the Company made no contributions
to this plan. Effective January 1, 2006, the Company began
matching employee contributions to the plan at a rate of 50% of
employee contributions up to a maximum of 3% of the
employees annual salary. The Companys aggregate
contribution to the plan for all participating employees for the
year ended December 31, 2006 was $437,532.
21
Grants of
Plan-Based Awards Table 2006
The following table sets forth information on non-equity
incentive plans and grants of equity awards to our named
executive officers in fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Value of
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Stock
|
|
|
|
|
|
|
Non-Equity Incentive Plans(1)
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
and
|
|
|
Approval
|
|
Grant
|
|
|
|
|
|
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
Name
|
|
Date
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units(2)
|
|
Options(3)
|
|
Awards ($/Sh)
|
|
Awards(4)
|
|
Charles A. Jett, Jr.
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
168,000
|
|
|
$
|
168,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,622
|
|
|
|
|
|
|
|
|
|
|
$
|
175,900
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,600
|
|
|
$
|
16.56
|
|
|
$
|
987,548
|
|
W. Randall Pittman
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
93,200
|
|
|
$
|
93,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,157
|
|
|
|
|
|
|
|
|
|
|
$
|
52,280
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,416
|
|
|
$
|
16.56
|
|
|
$
|
293,537
|
|
Grady O. Floyd(5)
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
$
|
115,920
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,000
|
|
|
$
|
16.56
|
|
|
$
|
640,460
|
|
Robert W. Grubb
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
See Note 6
|
|
|
|
See Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
$
|
16.56
|
|
|
$
|
774,750
|
|
Wendell G. R. Brown
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
61,050
|
|
|
$
|
61,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
82,800
|
|
|
|
|
3/31/2006
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
$
|
16.56
|
|
|
$
|
154,950
|
|
Milton Silva-Craig
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig A. Parker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These columns indicate the range of payouts targeted for 2006
performance under the Companys annual cash bonus program
as described under the headings Compensation Discussion
and Analysis and Additional Discussion of Material
Items in Summary Compensation Table 2006.
The actual payment for 2006 to each named executive officer is
shown in the Summary Compensation
Table 2006 in the column titled
Non-Equity Incentive Plan Compensation. |
|
(2) |
|
These restricted stock units vest in 48 approximately equal
monthly installments commencing on May 3, 2006. |
|
(3) |
|
These options have a ten-year term. Twenty-five percent of these
options vested in one installment on April 3, 2007, with
the balance vesting in 36 approximately equal monthly
installments commencing May 3, 2007. |
|
(4) |
|
The methodology and assumptions used to calculate the grant date
fair value of each named executive officers restricted
stock unit and stock option grants for 2006 are described in
Note 2, Summary of Significant Accounting
Policies, beginning on
page F-8,
and Note 14, Stock-Based Compensation Expense,
beginning on
page F-22
of the Companys Annual Report on Form
10-K for the
fiscal year ended December 31, 2006, but disregarding for
this purpose the estimate of forfeitures related to
service-based vesting conditions. |
|
(5) |
|
Mr. Floyd became employed by the Company in March 2006 and
therefore was not paid non-equity incentive compensation during
2006. |
|
(6) |
|
Mr. Grubbs sales incentive compensation plan with the
Company provides for payment of quarterly and annual incentive
compensation equal to a percentage of new sales bookings by the
Companys sales team and is subject to achievement of
certain minimum bookings targets and certain minimum annual
revenue targets. |
22
Outstanding
Equity Awards at Fiscal Year-End 2006
The following table sets forth information on stock options and
stock awards held by the named executive officers at
December 31, 2006. The market value of the stock awards is
based upon the closing market price for the Companys
common stock as of December 29, 2006, the last trading day
in 2006, which was $15.36.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Units of
|
|
|
or Units
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Stock
|
|
|
of Stock
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
That
|
|
|
That
|
|
|
|
Date of
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Award
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Vested
|
|
|
Vested
|
|
|
Charles A. Jett, Jr.
|
|
|
7/1/2000
|
|
|
|
148,187
|
|
|
|
0
|
|
|
|
4.70
|
|
|
|
7/1/2010
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2000
|
|
|
|
57,152
|
|
|
|
0
|
|
|
|
4.70
|
|
|
|
10/30/2010
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
12/14/2001
|
|
|
|
78,000
|
|
|
|
0
|
|
|
|
1.73
|
|
|
|
12/14/2011
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2003
|
|
|
|
9,538
|
|
|
|
0
|
|
|
|
4.70
|
|
|
|
1/28/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2004
|
|
|
|
33,053
|
|
|
|
21,430
|
|
|
|
5.52
|
|
|
|
2/11/2014
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
1/7/2005
|
|
|
|
0
|
|
|
|
61,641
|
|
|
|
7.17
|
|
|
|
1/7/2015
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
11/1/2005
|
|
|
|
27,083
|
|
|
|
72,917
|
|
|
|
12.72
|
|
|
|
11/1/2015
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
0
|
|
|
|
95,600
|
|
|
|
16.56
|
|
|
|
4/3/2016
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,852
|
(9)
|
|
$
|
135,967
|
|
W. Randall Pittman
|
|
|
11/1/2002
|
|
|
|
100,453
|
|
|
|
0
|
|
|
|
4.70
|
|
|
|
11/1/2012
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2004
|
|
|
|
10,400
|
|
|
|
5,357
|
|
|
|
5.52
|
|
|
|
2/11/2014
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
1/7/2005
|
|
|
|
0
|
|
|
|
20,606
|
|
|
|
7.17
|
|
|
|
1/7/2015
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
11/1/2005
|
|
|
|
8,124
|
|
|
|
21,876
|
|
|
|
12.72
|
|
|
|
11/1/2015
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
0
|
|
|
|
28,416
|
|
|
|
16.56
|
|
|
|
4/3/2016
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,631
|
(9)
|
|
$
|
40,410
|
|
Grady O. Floyd
|
|
|
4/3/2006
|
|
|
|
0
|
|
|
|
62,000
|
|
|
|
16.56
|
|
|
|
4/3/2016
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,834
|
(9)
|
|
$
|
89,600
|
|
Robert W. Grubb
|
|
|
11/1/2002
|
|
|
|
54,305
|
|
|
|
0
|
|
|
|
4.70
|
|
|
|
11/1/2012
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2004
|
|
|
|
3,199
|
|
|
|
1,649
|
|
|
|
5.52
|
|
|
|
2/11/2014
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
11/4/2004
|
|
|
|
7,999
|
|
|
|
4,121
|
|
|
|
7.17
|
|
|
|
11/4/2014
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
16.56
|
|
|
|
4/3/2016
|
(8)
|
|
|
|
|
|
|
|
|
Wendell G. R. Brown
|
|
|
4/3/2006
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
16.56
|
|
|
|
4/3/2016
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,167
|
(9)
|
|
$
|
64,005
|
|
Milton Silva-Craig
|
|
|
2/11/2004
|
|
|
|
0
|
|
|
|
12,859
|
|
|
|
5.52
|
|
|
|
05/29/2007
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
1/7/2005
|
|
|
|
0
|
|
|
|
39,756
|
|
|
|
7.17
|
|
|
|
05/29/2007
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
11/1/2005
|
|
|
|
833
|
|
|
|
29,167
|
|
|
|
12.72
|
|
|
|
05/29/2007
|
(12)
|
|
|
|
|
|
|
|
|
Craig A. Parker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These options vested in four equal annual installments
commencing July 1, 2001. |
|
(2) |
|
These options vested in four equal annual installments
commencing October 30, 2001. |
|
(3) |
|
These options vested in three approximately equal annual
installments commencing December 14, 2002. |
|
(4) |
|
These options vested in three approximately equal annual
installments commencing January 28, 2004. |
|
(5) |
|
These options vested in three approximately equal annual
installments commencing February 11, 2005. |
|
(6) |
|
Fifty percent of these options vested in one installment on
January 7, 2007, with the balance vesting in two equal
annual installments commencing January 7, 2008. |
|
(7) |
|
Twenty-five percent of these options vested in one installment
on November 1, 2006, with the balance vesting in 36
approximately equal monthly installments commencing
December 1, 2006. |
23
|
|
|
(8) |
|
Twenty-five percent of these options vested in one installment
on April 3, 2007, with the balance vesting in 36
approximately equal monthly installments commencing May 3,
2007. |
|
(9) |
|
These restricted stock units vest in 48 approximately equal
monthly installments commencing on May 3, 2006. |
|
|
|
(10) |
|
These options vested in three approximately equal annual
installments commencing November 1, 2002. |
|
(11) |
|
These options vested in three approximately equal annual
installments commencing September 10, 2004. |
|
(12) |
|
These options terminate 90 days following the one year
anniversary of Mr. Silva-Craigs resignation as an
officer of the Company. |
Option
Exercises and Stock Vested Table 2006
The following table provides information, for the named
executive officers, on stock option exercises during 2006,
including the number of shares acquired upon exercise and the
value realized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
Name
|
|
Acquired on Exercise
|
|
|
Exercise(1)
|
|
|
Acquired on Vesting(2)
|
|
|
Vesting(3)
|
|
|
Charles A. Jett, Jr.
|
|
|
47,492
|
|
|
$
|
|
|
|
|
1,770
|
|
|
$
|
27,026
|
|
W. Randall Pittman
|
|
|
40,000
|
|
|
|
440,711
|
|
|
|
526
|
|
|
|
8,071
|
|
Grady O. Floyd
|
|
|
|
|
|
|
|
|
|
|
1,167
|
|
|
|
17,854
|
|
Robert W. Grubb
|
|
|
6,300
|
|
|
|
81,910
|
|
|
|
|
|
|
|
|
|
Wendell G. R. Brown
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
12,718
|
|
Milton Silva-Craig
|
|
|
97,994
|
|
|
|
914,484
|
|
|
|
|
|
|
|
|
|
Craig A. Parker
|
|
|
63,999
|
|
|
|
576,947
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value realized on exercise represents the difference between
the exercise price of the stock options and the trading price of
the Companys common stock on the NASDAQ Global Market upon
the sale of the stock, multiplied by the number of shares
underlying the option exercised. |
|
(2) |
|
Represents restricted stock units granted on April 3, 2006
that vested during 2006. These restricted stock units vest in 48
equal monthly installments. |
|
(3) |
|
Amounts reflect the market value of the stock, as determined by
the closing price per share on the NASDAQ Global Market, on the
day the stock vested. |
Potential
Payments Upon Termination or Change in Control
The Company is party to employment agreements with certain of
its named executive officers, and has also entered into
severance agreements with certain of its named executive
officers. These employment and severance agreements address,
among other things, compensation and benefits that would be paid
to each of the named executive officers if his employment is
terminated for various reasons, including termination for cause
or without cause, and termination in connection with a change in
control of the Company.
In addition, certain of the Companys equity-based
incentive plans and the award agreements under those plans call
for compensation to be provided under certain circumstances in
connection with the termination of a named executive
officers employment or a change in control of the Company.
Potential
Payments
Assuming that a termination event or change in control had
occurred on December 31, 2006, the value of potential
payments and benefits payable to each of Messrs. Jett,
Pittman and Floyd is set forth in the following tables.
Additional information regarding these potential payments as
well as potential payments to the Companys other named
executive officers in connection with a termination event or
change in control is provided following these tables.
24
The price per share of the Companys common stock used for
purposes of the following calculations is the closing market
price on the NASDAQ Global Market as of December 29, 2006,
the last trading day in 2006, which was $15.36. The tables
exclude (i) amounts accrued through December 31, 2006
that would be paid in the normal course of continued employment,
such as accrued but unpaid salary and earned annual bonus for
2006, (ii) vested account balances in our contributory
retirement plan that are generally available to all of the
Companys U.S. salaried employees, and (iii) any
amounts to be provided under any arrangement that does not
discriminate in scope, terms, or operation in favor of named
executive officers and that is available generally to all
salaried employees. Actual amounts to be paid can only be
determined at the time of such executives termination.
Charles
A. Jett, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
Termination by
|
|
|
Company without
|
|
|
Voluntary
|
|
|
|
Company without
|
|
|
Cause or by Named
|
|
|
Termination by
|
|
|
|
Cause or by Named
|
|
|
Executive Officer with
|
|
|
Named Executive
|
|
|
|
Executive Officer
|
|
|
Good Reason Following
|
|
|
Officer Following a
|
|
Payment or Benefit
|
|
with Good Reason
|
|
|
a Change in Control
|
|
|
Change in Control
|
|
|
Severance payment(s)(1)
|
|
$
|
1,008,000
|
|
|
$
|
1,008,000
|
|
|
$
|
504,000
|
|
Continued healthcare and life
insurance coverage(2)
|
|
|
14,617
|
|
|
|
14,617
|
|
|
|
7,309
|
|
Tax
gross-up
|
|
|
|
|
|
|
918,171
|
(3)
|
|
|
664,419
|
(3)
|
Market value of stock options
vesting on termination
|
|
|
955,822
|
|
|
|
955,822
|
|
|
|
955,822
|
|
Market value of restricted stock
units vesting on termination
|
|
|
135,967
|
|
|
|
135,967
|
|
|
|
135,967
|
|
|
|
|
(1) |
|
Represents Mr. Jetts then-current base salary and
maximum 2006 cash bonus multiplied by the applicable severance
period under his employment agreement. |
|
(2) |
|
Represents the product of the Companys monthly premium
costs for such benefits multiplied by the applicable severance
period under Mr. Jetts employment agreement. |
|
(3) |
|
The amount shown is an estimate of the tax gross up payment
payable to Mr. Jett. This amount is an estimate only, and
is calculated using the full market value of restricted stock
that would vest upon such a termination and the difference
between the full market value and the exercise price of stock
options that would vest upon such a termination. Under the IRS
rules governing parachute payments, only a portion of this value
would likely be considered a parachute payment; a lower
parachute payment would result in a lower gross up payment. For
purposes of this estimate, no value has been assigned to the
restrictive covenants to which Mr. Jett would be subject
under his employment agreement. |
25
W. Randall
Pittman and Grady O. Floyd
|
|
|
|
|
|
|
Termination by Company
|
|
|
|
without Cause or by Named
|
|
|
|
Executive Officer
|
|
Name and Payment or Benefit
|
|
with Good Reason
|
|
|
W. Randall Pittman
|
|
|
|
|
Severance payment(s)(1)
|
|
$
|
326,200
|
|
Continued healthcare and life
insurance coverage(2)
|
|
|
7,574
|
|
Market value of stock options
vesting on termination
|
|
|
279,232
|
|
Market value of restricted stock
units vesting on termination
|
|
|
40,410
|
|
Grady O. Floyd
|
|
|
|
|
Severance payment(s)(1)
|
|
$
|
535,000
|
|
Continued healthcare coverage(2)
|
|
|
10,063
|
|
Market value of restricted stock
units vesting on termination
|
|
|
89,600
|
|
|
|
|
(1) |
|
Represents the named executive officers then-current base
salary and maximum 2006 cash bonus multiplied by the applicable
severance period under his employment agreement. |
|
(2) |
|
Represents the product of the Companys monthly premium
cost for such benefit multiplied by the applicable severance
period under the named executive officers employment
agreement. |
Employment
and Severance Agreements
Messrs. Jett, Pittman and Floyd. The
Companys employment agreements with Messrs. Jett,
Pittman and Floyd address the rights and obligations of the
Company in connection with the termination of the
executives employment in different situations. Under each
agreement:
|
|
|
|
|
Upon any termination of the executives employment,
including if the executives employment is terminated by
the Company for cause by the Company or the
executive by reason of death or disability, by the executive
without good reason, or by virtue of the expiration
of the term of the agreement, the executive (or his estate or
beneficiaries, as applicable) will be entitled to receive all
compensation due to him under the agreement through his last day
of employment.
|
|
|
|
If the executive terminates his employment for good
reason or the Company terminates the executives
employment other than for cause, death or
disability, then the executive will be entitled to receive a
lump sum payment that is equal to (i) his then-current
monthly base salary plus one-twelfth of his target annual bonus
multiplied by (ii) the number of months in the
severance period. The severance period is equal to
the greater of 12 months or the number of months remaining
under the term of the employment agreement; provided that the
severance period for Mr. Jett in connection with a
voluntary termination (i.e., for other than good
reason) of his employment following a change in control is
12 months. In addition, the executives coverage under
the Companys health, dental, and life insurance plans
would continue during the severance period, and, for each of
Messrs. Jett and Pittman, his outstanding stock options and
restricted stock units will become fully vested.
|
Each of the employment agreements provides for tax protection in
the form of a gross up payment to reimburse the executive for
any excise tax under Internal Revenue Code Section 4999 as
well as any additional income and employment taxes resulting
from such reimbursement. Code Section 4999 imposes a 20%
non-deductible excise tax on the recipient of an excess
parachute payment and Code Section 280G disallows the
tax deduction to the payor of any amount of an excess parachute
payment that is contingent on a change in control. Additionally,
each of the employment agreements contains non-compete,
non-solicitation, confidentiality and related provisions
covering the term of employment and, post-termination, for the
longer of the severance period or one year.
Under the employment agreements, the definition of
cause includes (i) the willful and continued
breach of duties by the executive, (ii) willfully engaging
in illegal conduct or gross misconduct that is demonstrably
26
and materially injurious to the Company, (iii) material
breach by the executive of the employment agreement,
(iv) breach by the executive of the non-solicitation,
non-compete or confidentiality provisions in the employment
agreement, and (v) conviction of a felony or serious
misdemeanor involving moral turpitude, theft, or dishonesty.
Under the employment agreements, the definition of good
reason includes (i) a material reduction in the
executives duties or responsibilities, (ii) a
reduction in the executives base salary or target bonus,
(iii) the failure by the Company to maintain a benefit
program that is material to the executives overall
compensation, (iv) the relocation of the executives
office or the Companys headquarters to a location more
than 35 miles away from its present location, and
(v) material breach by the Company of the employment
agreement. In addition, under his employment agreement,
Mr. Jett may terminate his employment for any reason during
specified periods following a change in control of
the Company.
Mr. Grubb. The Companys severance
letter agreement with Mr. Grubb provides that if his
employment is terminated for any reason other than for
cause, or is terminated in connection with a change
in control of the Company, Mr. Grubb will be entitled to
receive a lump sum payment equal to six months of his
then-current base salary. Assuming that Mr. Grubbs
employment was terminated on December 31, 2006 by the
Company other than for cause or in connection with a change in
control of the Company, Mr. Grubb would have been entitled
to receive a payment of $92,500.
Under the severance letter agreement, cause is
defined to include (i) insubordination, (ii) any act
or omission that is, or is likely to be, injurious to the
Company or its business reputation, (iii) dishonesty,
fraud, malfeasance, gross negligence, or misconduct,
(iv) failure to satisfactorily perform duties or follow the
policies, procedures, and rules of the Company, and
(v) arrest, indictment for, or conviction of, or entry of a
plea of guilty or no contest to, a felony or crime involving
moral turpitude.
Termination
of Employment of Messrs. Silva-Craig and
Parker
Milton Silva-Craig. In April 2006, the Company
entered into a letter agreement with Milton Silva-Craig, who
resigned his position as the Companys President and Chief
Operating Officer as of March 22, 2006. The letter
agreement amended Mr. Silva-Craigs employment
agreement and set forth certain other understandings and
arrangements between the Company and Mr. Silva-Craig
regarding the termination of his employment. The letter
agreement provided that Mr. Silva-Craig would remain
employed with the Company on a full-time basis through
September 30, 2006, performing such duties as may be
assigned from time to time by the Chief Executive Officer of the
Company. During that period, Mr. Silva-Craig was paid his
then-current annual base salary of $254,576, and continued to
receive certain other benefits that he was being provided on the
date of his resignation. The letter agreement further provided
that from October 1, 2006 through February 28, 2007,
Mr. Silva-Craig would be considered a part-time employee of
the Company and would make himself available as reasonably
requested by the Company at a reduced level of compensation, and
would be eligible to participate in the Companys benefit
plans generally available to part-time employees. Additionally,
the letter agreement provided that the vesting of
Mr. Silva-Craigs outstanding stock options would
continue throughout the five month period ended
February 28, 2007. Mr. Silva-Craig is bound by the
obligations of confidentiality, non-solicitation,
non-competition and non-disparagement that were set forth in his
original employment agreement through February 29, 2008.
Craig A. Parker. Mr. Parker resigned his
position as General Counsel and Secretary of the Company
effective May 1, 2006. Mr. Parker remained employed by
the Company in other capacities until August 31, 2006, and
was paid his then-current annual base salary of $216,660, and
continued to participate in the Companys benefit plans,
through that date.
Change
in Control and Termination Provisions of the Companys
Other Benefit Plans
2005 Equity Incentive Plan. Under the terms of
the Companys 2005 Equity Incentive Plan, unless otherwise
provided in a restricted stock unit, employment or other
agreement, if one of the named executive officers becomes
disabled, his restricted stock units will become fully vested
and nonforfeitable, but if he dies
27
while actively employed by the Company or his employment is
terminated for any other reason, all unvested restricted stock
units are forfeited.
Compensation
of Directors
The following table sets forth the compensation earned by or
awarded to each director who is not an employee of the Company
and also served on the Companys Board of Directors in
2006. Mr. Jett, the only employee director of the Company,
receives no additional cash compensation for his service as a
director. Information regarding the compensation awarded
Mr. Jett for his service as an employee is shown under
Summary Compensation Table 2006 in
this Proxy Statement.
Non-Employee
Director Compensation Table 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
|
Awards(1)
|
|
|
Awards(2)(3)(4)
|
|
|
Compensation
|
|
|
Total
|
|
|
Arthur P. Beattie
|
|
$
|
32,500
|
|
|
$
|
31,080
|
|
|
$
|
40,260
|
|
|
$
|
|
|
|
$
|
103,840
|
|
Roddy J.H. Clark
|
|
|
26,500
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
97,840
|
|
Douglas D. French(5)
|
|
|
6,000
|
|
|
|
6,663
|
|
|
|
22,213
|
|
|
|
45,000
|
|
|
|
79,876
|
|
Fred C. Goad, Jr.
|
|
|
31,000
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
102,340
|
|
Chris H. Horgen(6)
|
|
|
29,000
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
100,340
|
|
Mylle H. Mangum
|
|
|
29,500
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
100,840
|
|
John W. Thompson
|
|
|
27,500
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
98,840
|
|
Hugh H. Williamson, III
|
|
|
30,000
|
|
|
|
31,080
|
|
|
|
40,260
|
|
|
|
|
|
|
|
101,340
|
|
|
|
|
(1) |
|
Represents the amount recognized by the Company as an expense in
2006 for financial reporting purposes pursuant to FAS 123R with
respect to restricted stock unit awards, but disregarding for
this purpose the estimate of forfeitures related to
service-based vesting conditions. Each director other than
Mr. Jett and Mr. French was granted 2,000 restricted
shares of our common stock at a price of $15.54 per share
on January 10, 2006. The shares vested on January 10,
2007. The grant date fair value of the restricted shares granted
to each director was $31,080. Mr. French was granted
2,000 shares of restricted common stock at a price of
$15.99 per share on October 16, 2006. These shares
vest on October 16, 2007. The grant date fair value of the
restricted shares granted to Mr. French was $31,980. The
methodology and assumptions used to calculate the cost of each
directors outstanding restricted stock unit grants for
2006 are described in Note 2, Summary of Significant
Accounting Policies, beginning on
page F-8,
and Note 14, Stock-Based Compensation Expense,
beginning on
page F-22
of the Companys Annual Report on Form
10-K for the
fiscal year ended December 31, 2006, but disregarding for
this purpose the estimate of forfeitures related to
service-based vesting conditions. |
|
(2) |
|
Represents the amount recognized by the Company as an expense in
2006 for financial reporting purposes pursuant to FAS 123R
with respect to options, but disregarding for this purpose the
estimate of forfeitures related to service-based vesting
conditions. Amounts include awards granted in and prior to 2006.
The methodology and assumptions used to calculate the cost of
each directors stock option grants for 2006 are described
in Note 2, Summary of Significant Accounting
Policies, beginning on page F-8, and Note 14,
Stock-Based Compensation Expense, beginning on page
F-22 of the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. No stock
option grants to the directors listed above were forfeited in
2006. |
|
(3) |
|
Each director other than Mr. Jett and Mr. French was
granted options to purchase 7,500 shares of common stock at
an exercise price of $13.55 per share on May 25, 2006.
These options have a ten-year term and vest on May 24,
2007. The grant date fair value of the options granted to each
Director was $63,525. Mr. French was granted options to
acquire 3,750 shares of common stock at an exercise price
of $15.99 upon his election to the Board on October 16,
2006. The grant date fair value of the options granted to
Mr. French was $37,200. The methodology and assumptions
used to calculate the cost of each directors outstanding
stock option grants for 2006 are described in Note 2,
Summary of Significant Accounting Policies,
beginning on
page F-8,
and Note 14, Stock-Based Compensation Expense,
beginning on |
28
|
|
|
|
|
page F-22
of the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, but
disregarding for this purpose the estimate of forfeitures
related to service-based vesting conditions. |
|
(4) |
|
Each director had the following unexercised options outstanding
at December 31, 2006: Mr. Beattie, options to purchase
12,409 shares; Mr. Clark, options to purchase
11,924 shares; Mr. French, options to purchase
3,750 shares; Mr. Goad, options to purchase
12,409 shares; Mr. Horgen, options to purchase
9,500 shares; Ms. Mangum, options to purchase
12,409 shares; Mr. Thompson, options to purchase
9,500 shares; and Mr. Williamson, options to purchase
9,500 shares. |
|
(5) |
|
All Other Compensation for Mr. French consists
of $45,000 in consulting fees under a Consulting Agreement with
the Company that was terminated in October 2006 prior to
Mr. Frenchs election to the Board of Directors. |
|
(6) |
|
Mr. Horgen will retire from the Board of Directors
effective as of the close of the Annual Meeting. |
Director
Compensation
Directors of the Company receive both cash compensation and
equity compensation.
Cash Compensation. For the year ended
December 31, 2006 and subsequent years, the Board has
approved cash compensation to be paid non-employee directors as
follows:
|
|
|
|
|
an annual retainer fee of $20,000;
|
|
|
|
a per meeting fee of $1,000;
|
|
|
|
a per committee meeting fee of $500; and
|
|
|
|
an annual retainer fee for committee chairmen of $5,000 for the
Audit Committee and $3,000 for the Compensation and Governance
Committees.
|
Equity Compensation. Under the Companys
2005 Non-Employee Director Stock Incentive Plan (the
Director Plan), the Compensation Committee of the
Board, or other committee designated by the Board, may grant to
the group of non-employee directors a maximum of
500,000 shares of the Companys common stock in the
form of non-qualified stock options, stock appreciation rights,
restricted stock, or restricted stock units. The Committee has
the discretion to determine the terms and conditions of the
awards, including the type, number of shares, duration,
conditions of exercise, and consequences of a directors
termination of service or a change in control of the Company.
The Committee may amend or terminate the Director Plan and may
amend outstanding awards provided that no such amendment will
adversely affect the rights and obligations of a non-employee
director without his or her consent. All options are granted at
the fair market value of the Companys stock on the date of
grant.
The Director Plan provides for an automatic award of stock
options to each non-employee director each year on the day
following the annual meeting, and for the award of stock options
to each person first elected as a director on a date other than
the annual meeting date. The Director Plan also allows the
administering committee to make discretionary grants to
non-employee directors. For the year ended December 31,
2006 and subsequent years, the Board approved the automatic
award to non-employee directors of an option for
7,500 shares of common stock on the day following the
annual meeting and, for 2006 only, an award of 2,000 shares
of restricted common stock.
29
Equity
Compensation Plan Information
The following sets forth information regarding the
Companys equity compensation plans as of December 31,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Shares of Common
|
|
|
|
|
|
|
|
|
|
Stock Remaining
|
|
|
|
Number of Shares of
|
|
|
|
|
|
Available for Future
|
|
|
|
Common Stock to be
|
|
|
Weighted Average
|
|
|
Issuance Compensation
|
|
|
|
Issued on Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Column A)
|
|
|
Equity Compensation Plans Approved
by Stockholders(1)
|
|
|
1,756,485
|
|
|
$
|
9.25
|
|
|
|
3,384,327
|
|
Equity Compensation Plans Not
Approved By Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,756,485
|
|
|
|
9.25
|
|
|
|
3,384,327
|
|
|
|
|
(1) |
|
Each January 1st, beginning January 1, 2006 and ending
January 1, 2009, the maximum number of shares available for
issuance under the Companys 2005 Equity Incentive Plan
will automatically increase by the lesser of the number of
shares subject to awards granted under the 2005 Equity Incentive
Plan during the prior calendar year or 650,000 shares. |
AUDIT-RELATED
MATTERS
Report of
the Audit Committee
Notwithstanding anything to the contrary set forth in any of
our previous or future filings under the Securities Act of 1933
or the Securities Exchange Act of 1934 that might incorporate
future filings by reference, including this Proxy Statement, in
whole or in part, the following report of the Audit Committee
shall not be deemed to be incorporated by reference into any
such filings and shall not otherwise be deemed filed under such
acts.
The Audit Committee of the Board of Directors of the Company is
currently composed of three members and acts under a written
charter adopted and approved by the Board of Directors in
January 2005, which is available on our website at
www.emageon.com. The current members of the Audit
Committee are Mr. Beattie (Chairman), Mr. Goad and
Mr. Thompson. The current members of the Audit Committee
are independent directors, as defined under the NASDAQ
Marketplace Rules, and those independence requirements
contemplated by
Rule 10A-3
under the Exchange Act.
The Audit Committee is responsible for reviewing the
Companys financial reporting process, its systems of
internal controls, the audit process and compliance with laws
and regulations. Management has the primary responsibility for
the financial statements and the reporting process, including
the systems of internal control. In this context, the Audit
Committee has met and held discussions with management and the
Companys independent registered public accounting firm.
The Audit Committee also has the authority and responsibility to
select, evaluate and, when it deems it to be appropriate,
replace the independent registered public accounting firm.
The Audit Committee has met and held discussions with management
and the independent registered public accounting firm.
Management represented to the Audit Committee that the
Companys consolidated financial statements were prepared
in accordance with U.S. generally accepted accounting
principles, and the Audit Committee has reviewed and discussed
the consolidated financial statements with management and
Ernst & Young LLP, the Companys independent
registered public accounting firm. The Audit Committee discussed
with the independent registered public accounting firm matters
required to be discussed by Statement on Auditing Standards
No. 61 Communications with Audit Committees, as
amended.
The Companys independent registered public accounting firm
also provided to the Audit Committee the written disclosures and
letter required by Independence Standards Board Standard
No. 1 Independence
30
Discussions with Audit Committees, and the Audit Committee
discussed with the independent registered public accounting firm
that firms independence.
Based upon the Audit Committees discussion with management
and the independent registered public accounting firm and the
Audit Committees review of the representation of
management and the report of the independent registered public
accounting firm to the Audit Committee, the Audit Committee
recommended that the Board of Directors include the audited
consolidated financial statements in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2006 filed with the
Securities and Exchange Commission.
By the Audit Committee:
|
|
|
|
|
Arthur P. Beattie,
Chairman
|
Fred C. Goad, Jr.
John W. Thompson
Fees Paid
To Independent Registered Public Accounting Firm
The following table presents the aggregate fees billed for the
indicated services performed by Ernst & Young LLP
during the years ended December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit Fees
|
|
$
|
1,005,112
|
|
|
$
|
453,702
|
|
Audit Related Fees
|
|
|
|
|
|
|
250,922
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
1,005,112
|
|
|
$
|
704,624
|
|
|
|
|
|
|
|
|
|
|
Audit fees. Audit fees consist of fees billed
by Ernst & Young LLP for professional services rendered
in connection with the audit of the Companys annual
consolidated financial statements and the review of interim
consolidated financial statements included in the Companys
quarterly reports on
Form 10-Q
and, for 2006 only, the audit of the Companys internal
controls over financial reporting.
Audit related fees. Audit related fees consist
of fees billed for professional services that are reasonably
related to the performance of the audit or review of the
Companys consolidated financial statements but not
reported under Audit fees. Such fees include those
for services performed in 2005 in connection with the initial
public offering of the Companys common stock in February
2005, and the Companys acquisition of Camtronics Medical
Systems, Ltd. in 2005.
Tax fees and all other fees. There were no
fees billed by Ernst & Young LLP for tax or other
services in 2005 and 2006.
The Audit Committee has determined that all non-audit services
provided by Ernst & Young LLP are compatible with
maintaining Ernst & Young LLPs audit independence.
Policy on
Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services
Under its charter, the Audit Committee must pre-approve all
engagements of the Companys independent registered public
accounting firm. Any proposed services exceeding pre-approved
cost parameters also require specific pre-approval. The Audit
Committee has delegated to its Chairman the authority to
evaluate and approve service engagements on behalf of the full
Committee in the event a need arises for specific pre-approval
between Committee meetings.
31
OTHER
INFORMATION
Date For
Receipt Of Stockholder Proposals For 2008 Annual
Meeting
In the event a stockholder desires to have a proposal considered
for presentation at the 2008 Annual Meeting of Stockholders and
included in the Companys proxy statement and form of proxy
card used in connection with that meeting, the proposal must be
forwarded in writing to the Secretary of the Company at the
Companys principal executive offices so that it is
received no later than December 25, 2007. Any such proposal
must comply with the requirements of
Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as
amended.
In addition, for any proposal or nomination for director that a
stockholder wishes to present at the 2008 Annual Meeting,
regardless of whether the stockholder is seeking to have such
proposal included in the Companys proxy statement, notice
as required by the Companys bylaws must be received by the
Secretary of the Company at the Companys principal
executive offices no later than January 24, 2008; if such
notice is not timely received, the matter or nomination will not
be considered at the 2008 Annual Meeting. Notwithstanding the
foregoing, if the number of directors to be elected to the Board
of Directors of the Company is increased and there is no public
announcement by the Company naming all of the nominees for
director or specifying the size of the increased Board of
Directors on or before March 14, 2008, a stockholders
notice of a nomination for director at the 2008 Annual Meeting
will be considered timely, but only with respect to nominees for
any new positions created by such increase, if it is delivered
to the Secretary at the principal executive offices of the
Company not later than the close of business on the
10th day following the day on which such public
announcement is first made by the Company.
Please address any stockholder proposals or notices of proposals
to the Secretary, Emageon Inc., 1200 Corporate Drive,
Suite 200, Birmingham, Alabama 35242.
Form 10-K
for 2006
A copy of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2006 as filed with the SEC
on March 16, 2007, has been mailed concurrently with this
Proxy Statement to all stockholders entitled to notice of and to
vote at the Annual Meeting. Stockholders may also obtain a copy
of the
Form 10-K
and any of our other SEC reports free of charge from the SEC
website at www.sec.gov or from our website at www.emageon.com,
or by writing to the Company at 1200 Corporate Drive,
Suite 200, Birmingham, Alabama 35242. The 2006 Annual
Report on
Form 10-K
and information contained on our website, other than this Proxy
Statement, are not considered proxy solicitation material and
are not incorporated by reference herein.
32
OTHER
MATTERS
The Company and its Board know of no other matters that will be
presented for consideration at the Annual Meeting. If any other
business properly comes before the Annual Meeting, it is the
intention of the proxy holders to vote the shares they represent
as the Board may recommend. Discretionary authority with respect
to such other business is expressly granted by the completion of
the enclosed proxy card or voting instruction form. The proxy
holders shall vote in their discretion on any procedural matters
that may come before the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
John W. Wilhoite
Corporate Secretary
Birmingham, Alabama
April 26, 2007
33
EMAGEON INC. THIS PROXY IS SOLICITED ON BEHALF OF THE EMAGEON INC. BOARD OF DIRECTORS The
undersigned stockholder of Emageon Inc. (Emageon) hereby appoints Charles A. Jett, Jr. and John
W. Wilhoite and each of them individually, with full power of substitution, as Proxies of the
undersigned, and hereby authorizes them to represent and to vote and act for the undersigned, at
the Annual Meeting of Stockholders of Emageon to be held on Thursday, May 24, 2007 at 11:00 a.m.
Central Daylight Time at the offices of Emageon, 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242, and at any adjournment or postponement thereof, according to the number of votes
which the undersigned is now, or may then be, entitled to cast. This proxy revokes all prior
proxies given by the undersigned with respect to the matters covered hereby. The undersigned
acknowledges receipt of the Proxy Statement dated April 26, 2007 and the related Notice of Annual
Meeting of Stockholders. The Board of Directors recommends that you vote FOR the following
proposals. (Continued and to be signed on the reverse side.) |
ANNUAL MEETING OF STOCKHOLDERS OF EMAGEON INC. May 24, 2007 Please date, sign and mail your proxy
card in the envelope provided as soon as possible. Please detach along perforated line and mail in
the envelope provided. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE LISTED NOMINEES AND FOR
THE FOLLOWING PROPOSAL. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x FOR AGAINST ABSTAIN 1. Election of Directors:
2. Proposal to ratify the appointment of Ernst & Young LLP as the Companys independent registered
public accounting firm for NOMINEES: the current fiscal year. FOR ALL NOMINEES O Mylle H. Mangum O
Hugh H. Williamson, III 3. In the discretion of the Proxies on any other matter that may properly
come WITHHOLD AUTHORITY FOR ALL NOMINEES before the Meeting or any adjournment(s) or
postponement(s) thereof. FOR ALL EXCEPT This proxy when properly executed will be voted in the
manner directed (See instructions below) herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR Proposal One and Proposal Two and at the discretion of the proxy
holders as to any other business that may properly come before the Annual Meeting or any
adjournment(s) or postponement(s) thereof. INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish
to withhold, as shown here: To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note that changes to the
registered name(s) on the account may not be submitted via this method. Signature of Stockholder
Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this
Proxy. When shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by authorized person. |