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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO __________
COMMISSION FILE NUMBER 000-19480
PER-SE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 58-1651222
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2840 MT. WILKINSON PARKWAY 30339-3632
ATLANTA, GEORGIA (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
(770) 444-5300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 15, 2000 was approximately $186,676,156 calculated using
the closing price on such date of $6.25. The number of shares outstanding of the
Registrant's common stock (the "Common Stock") as of March 15, 2000 was
29,868,185.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 4, 2000 are incorporated herein by reference in Part III.
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PER-SE TECHNOLOGIES, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE OF
FORM 10-K
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Item 1. Business.................................................... 1
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 6
Item 5. Market for the Registrant's Common Equity and Related 8
Stockholder Matters.........................................
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations...................................
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting 18
and Financial Disclosure....................................
Item 10. Directors and Executive Officers of the Registrant.......... 18
Item 11. Executive Compensation...................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and 19
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 19
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 19
8-K.........................................................
</TABLE>
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THIS FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
PER-SE TECHNOLOGIES, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT"), AND THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 15 U.S.C.A
SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF PER-SE TECHNOLOGIES,
INC. AND MEMBERS OF ITS MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH
SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS
CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE
HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT
99.1 TO THIS FORM 10-K, AND ARE HEREBY INCORPORATED BY REFERENCE. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES
TO FUTURE OPERATING RESULTS OVER TIME.
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PART I
ITEM 1. BUSINESS
OVERVIEW OF COMPANY
Per-Se Technologies, Inc. ("Per-Se" or the "Company"), a corporation
organized in 1985 under the laws of the State of Delaware and formerly known as
Medaphis Corporation, is a global leader in delivering technology-enabled
business management services, financial and clinical software solutions and
Internet-enabled connectivity and e-health solutions to healthcare providers.
Per-Se delivers its services and products through its three operating segments:
Physician Services, Application Software and e-Health.
The Physician Services segment provides business management services to
physicians and healthcare organizations, including clinical data collection,
data input, medical coding, billing, contract management, cash collections and
accounts receivable management. These services are designed to assist healthcare
providers with the business management functions associated with the delivery of
healthcare services, allowing physicians and hospital staff to focus on
providing quality patient care. These services also assist physicians and
healthcare organizations in improving cash flows and reducing administrative
costs and burdens.
The Application Software segment provides financial and clinical software
including patient scheduling, staff management, clinical information systems and
patient financial management software. These applications enable healthcare
organizations to simultaneously optimize the quality of care delivered and the
profitability of business operations.
The e-Health segment offers Internet-enabled and private network
connectivity to both integrated healthcare delivery networks and physician
practices, including electronic claims processing, referral submissions,
eligibility verification and other electronic and paper transaction processing.
In addition, e-Health offers physician practice management software as
Application Service Provider ("ASP") to physician practices.
Per-Se markets its products and services primarily to integrated healthcare
delivery networks ("IDNs"), hospitals, physician practices, long-term care
facilities, home health providers and managed care organizations.
RECENT DEVELOPMENTS
In 1999, the Company completed the sale of its consulting services segment,
Impact Innovations Group ("Impact"), comprised of two divisions: commercial and
government. After reviewing several alternatives for Impact throughout 1998,
management concluded a sale of this segment would generate the greatest return
to the stockholders and finalized its plan to sell Impact. The Company sold the
commercial division of Impact to Complete Business Solutions, Inc. ("CBSI")
effective April 15, 1999 for $14.4 million, net of the final closing balance
sheet adjustment of $0.6 million which was paid on July 16, 1999. The government
division of Impact was sold on December 17, 1999 to J3 Technology Services Corp.
for initial consideration of $45.0 million, subject to certain closing
adjustments.
The results of operations for Impact and Medaphis Services Corporation
("Hospital Services"), which was sold in November of 1998, have been classified
as discontinued operations for all periods presented.
On August 16, 1999, the Company combined the operations of its core
businesses, Physician Services (formerly known as Medaphis Physician Services),
Application Software and e-Health (formerly known as Per-Se Technologies) and
changed its name from Medaphis Corporation to Per-Se Technologies, Inc. The new
organization reflects the Company's strategic focus on expanding its
leading-edge technology solutions and technology-enabled business management
services to create the market's most integrated end-to-end revenue optimization
solution for healthcare providers. Revenue optimization in healthcare refers to
providing the appropriate level of cost-effective, quality care and obtaining
the proper reimbursement as quickly as possible. The combined business offers a
unique portfolio of integrated software solutions, expert business management
services and Internet-enabled connectivity. In addition, the Company changed its
ticker symbol on The Nasdaq Stock Market(R)("Nasdaq") from MEDA to PSTI.
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On November 23, 1999, a special meeting of the Company's stockholders was
held at which the stockholders approved a one-for-three reverse split of the
Company's Common Stock (the "Reverse Split"). The Reverse Split reduced the
number of shares of the Company's Common Stock outstanding to approximately 30
million from approximately 90 million. This enabled the Company to bring its
number of outstanding shares down to a level more consistent with companies of
similar size and to maintain compliance with Nasdaq listing requirements. The
Reverse Split had no effect on the number of shares that the Company is
authorized to issue and no effect on the $0.01 par value of the Common Stock. No
fractional shares were issued in the Reverse Split; instead, stockholders will
be paid cash for any fractional shares. The numbers of shares, per share amounts
and market prices of the Company's Common Stock set forth herein have been
retroactively adjusted for all periods presented to reflect the Reverse Split.
On March 16, 2000, the Company announced the formation of a separate
e-Health segment. The e-Health segment has been managed historically as a part
of either the Company's Physician Services or Application Software segment.
Management believes that the formation of a separate segment will increase focus
and resources dedicated to e-Health initiatives, enabling the Company to
leverage its current capabilities. All business segment results set forth herein
have been retroactively adjusted for all periods presented to reflect the
formation of the e-Health segment.
DESCRIPTION OF BUSINESS BY INDUSTRY SEGMENT
The following description of the Company's business by industry segment
should be read in conjunction with Note 16 of Notes to Consolidated Financial
Statements included in Item 8. Financial Statements and Supplementary Data.
Physician Services
Physician Services is the largest provider of comprehensive business
management services, including clinical data collection, data input, medical
coding, billing, contract management, cash collections and accounts receivable
management to physicians and healthcare organizations in the United States.
Physician Services supports approximately 15,000 physician clients in 39 states,
offering practice support services, revenue growth consulting, cost management
consulting and practice security services designed to help its physician clients
optimize the business and administrative areas of their medical practices.
Practice support services include physician credentialing, scheduling,
coding and accounts receivable/revenue cycle management services. These services
are designed to allow physicians to focus on providing healthcare, maintaining a
stable patient base and remaining in compliance with complex healthcare rules
and regulations without having to manage the billing and collections.
Revenue growth consulting provides physician practices with a framework for
revenue growth through strategic planning including merger planning and
execution, fee schedule review utilizing geographic and specialty expertise and
billing and accounts receivable management in order to optimize revenue from
services provided while remaining in compliance with healthcare regulations.
In its cost management consulting services, Physician Services uses
proprietary technology solutions, industry expertise and a vast storehouse of
medical specialty specific information to provide operations planning,
benchmarking and productivity analysis for its physician clients. In addition,
in complete practice reviews, Physician Services analyzes client accounts
receivable and assists physician clients in optimizing payments while
maintaining compliance with healthcare regulations. This allows physicians to
better manage administrative productivity and control the expenses associated
with providing high quality healthcare.
Physician Services also provides practice security services that include
compliance program design, monitoring and consulting. These services may also be
utilized in conjunction with liability coverage for physician billing errors and
omissions through a business partner to provide physician clients with peace of
mind in the complex healthcare billing environment.
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Physician Services' systems currently support approximately 30 different
medical and surgical specialties. The majority of Physician Services' customers
are in the hospital-based physician market. However, Physician Services is
preparing for growth in the academic and surgical specialties markets.
The Physician Services business is highly competitive. Physician Services
competes with national and regional physician reimbursement organizations and
certain physician groups and hospitals that provide their own business
management services. Competition among these organizations is based upon the
relationship with the client or prospective client, the efficiency and
effectiveness of converting medical services to cash, the ability to provide
proactive practice management services and, to the extent that service offerings
are comparable, price.
Application Software
Application Software provides an integrated suite of patient-focused,
enterprise-wide software and services that enable healthcare organizations to
more effectively deliver quality care, manage resources, reduce costs, improve
productivity and drive operational effectiveness.
Application Software's products operate across the entire scope of the
healthcare enterprise -- IDNs, managed care organizations, physician groups,
payers, home health agencies and hospitals -- and manage more than 20 million
lives on line.
Application Software's customers, which include more than 2,000 healthcare
organizations, depend on Application Software's solutions for many critical
functions, including: providing access to real time, point-of-care clinical
information and decision analysis capability across the continuum of care;
automating enterprise-wide staff and patient scheduling; managing surgical
inventory; and enhancing enterprise-wide staff productivity.
Application Software is a market leader in several key areas of healthcare
information technology, including nurse scheduling and productivity management,
surgical scheduling and resource management and enterprise-wide staff and
productivity management.
Application Software competes against a variety of information technology
companies, including those marketing comprehensive, enterprise-wide health
information systems as well as niche and "best-of-breed" software application
vendors. Application Software's competitors are primarily national companies,
many of which have longer operating histories and greater financial resources
than those of Application Software.
Competition is based on product quality, ease of use and ease of
integration of new products with other existing and planned applications. Many
competitive offerings, however, operate on disparate technologies that are
linked through complex interfaces. Application Software's integrated approach to
its products and technologies enables it to deliver the real-time information
management capabilities that are so critical in today's age of enterprise-wide
healthcare.
e-Health
e-Health offers private network and Internet-based business-to-business
e-health solutions to healthcare providers. These solutions include electronic
claims and remittance advice processing, web-based provider compliance and
productivity management reporting, an ASP-based physician practice management
system, an Internet portal for healthcare statement review and electronic
payment processing and high speed print and mail services.
As a leader in electronic claims processing for healthcare, e-Health
processes more than two hundred million transactions per year for physicians and
healthcare organizations. This technology supports more than 140 governmental
payer connections in 46 states and more than 300 commercial connections as well
as claims processing for hospitals via more than 35 government connections in 15
states.
e-Health competes against a variety of Internet healthcare technology
companies, including those that have recently announced intentions to merge with
traditional healthcare technology vendors. Many competitive offerings, however
are entirely focused on the office-based physician, in contrast to e-Health's
current
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hospital-affiliated physician penetration. e-Health plans to extend its
penetration in hospital-affiliated specialties, such as radiology,
anesthesiology, pathology and emergency medicine, while also establishing a
customer base in various surgical specialties.
Competition in the e-health market is based on the number of electronic
connections a vendor provides between healthcare providers and payers, as well
as the value-added solutions that are offered (web-based reporting and
applications).
RESULTS BY INDUSTRY SEGMENT
Information relating to the Company's industry segments, including revenue,
operating profit or loss and identifiable assets attributable to each segment
for each of the fiscal years ended 1999, 1998 and 1997 and as of December 31,
1999 and 1998, is presented in Note 16 of Notes to Consolidated Financial
Statements in Item 8. Financial Statements and Supplementary Data.
HEALTHCARE INDUSTRY
The Company's business is affected by, among other things, trends in the
U.S. healthcare industry. As healthcare expenditures have grown as a percentage
of the U.S. gross national product, increasing focus has been placed on the
tremendous administrative costs associated with the delivery of care and the
increasing incidence of medical errors. Payers have actively sought to control
costs by, among other things, utilizing reimbursement methodologies, such as
managed care and fixed fee and capitated reimbursement models, to supplant the
more traditional fee-for-service structure. This shift to more restrictive
reimbursement models, coupled with extensive regulatory control and government
focus on fraud and abuse in the healthcare field, have helped to create a
significantly more complex accounting, coding, billing and collection
environment in healthcare. These issues create a positive marketing environment
for the sale of software and services that reduce the resources spent by
healthcare providers on administrative functions, that help ensure compliance in
an ever more complex regulatory environment and for solutions that can reduce
the opportunity for medical errors and improve the quality of care.
The healthcare industry, like many others, experienced pressures unique to
1999. During 1999, healthcare providers were very focused on the effects of the
Balanced Budget Act of 1997 (the "Balanced Budget Act"), on healthcare
reimbursements and on Year 2000 remediation to ensure that their operations
would not be adversely affected by the turn of the century. Management believes
that the increased focus on Year 2000 readiness resulted in reduced focus and
spending on new information technology or services projects. The Balanced Budget
Act may reduce the reimbursement available to healthcare providers, potentially
reducing the amount spent by healthcare providers for turnkey software
solutions, but at the same time, potentially shifting information technology
spending by healthcare providers to application service provider offerings or
outsourced services. Management believes that the Year 2000 focus has adversely
affected and could continue to adversely affect the revenue and profit margins
of the Company's operations through the first half of 2000. Management also
believes that the Balanced Budget Act will not affect the revenue and profit
margins of the Company's operations, but that it will affect the mix of software
and services that will be sold.
REGULATION
The Company's business is subject to numerous federal and state laws and to
a broad range of complex regulations, programs to combat fraud and abuse and
increasing restrictions on reimbursement for healthcare services. Each of the
major federal healthcare payment programs (Medicare, Medicaid and TRICARE) has
its own set of complex and sometimes conflicting regulations. Additional
regulations have been mandated by the Balanced Budget Act and the Health
Insurance Portability and Accountability Act ("HIPAA"), each of which could have
a significant impact on the Company's business. A number of states have also
imposed significant regulatory programs applicable to billing and payment for
healthcare services.
The federal government has maintained a significant emphasis on the
prevention of healthcare fraud and abuse. Pursuant to the False Claims Act, the
Medicare and Medicaid Patient and Program Protection Act and HIPAA, the federal
government has statutory authority to impose both civil and criminal sanctions
and
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penalties for submission of false claims to governmental payers. Civil monetary
penalties of up to $50,000 per offense may be imposed, as well as exclusion from
participation in Medicare and other governmental healthcare programs. In
addition, the False Claims Act allows a private party to bring a "qui tam" or
"whistleblower" suit alleging the filing of false or fraudulent Medicare or
Medicaid claims or other violations of the statute and to share in any damages
and civil penalties paid to the government. The U.S. Health Care Financing
Administration ("HCFA") also offers rewards for information leading to recovery
of Medicare funds, and the agency has begun to engage private contractors to
detect and investigate fraudulent billing practices.
The Office of Inspector General ("OIG") of the U.S. Department of Health
and Human Services has issued compliance guidance for third-party billing
companies, recommending components for an effective billing company compliance
program and identifying numerous risk areas associated with medical billing.
These risk areas include billing for services not documented, unbundling,
upcoding, routine waiver of copayment and deductible, etc. The OIG guidelines
are widely used by healthcare providers as a standard for evaluating prospective
billing contractors. The Company has an established compliance program
addressing each of the areas covered by the OIG release.
The OIG has announced plans to publish compliance guidance for physicians
during 2000. These guidelines will likely serve as a benchmark for physician
compliance plans.
Both governmental and private payers continue to implement measures to
restrict payments for healthcare services, including but not limited to bundling
edits, medical necessity edits and post-payment audits. These measures may
result in a decrease in revenue to the Company's provider clients and, as a
result, a decrease in revenue derived by the Company from such clients as well
as an increase in the cost of providing services.
EMPLOYEES
The Company currently employs approximately 5,750 full-time and part-time
employees. The Company has no labor union contracts and believes relations with
its employees are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive office is leased and is located in
Atlanta, Georgia. The lease for that office expires in February 2005.
Physician Services
Physician Services' principal office is leased and is located in Atlanta,
Georgia. The lease for that office expires in February 2005. In addition to its
principal office, Physician Services, through its two operating subsidiaries,
operates approximately 150 business offices throughout the United States. Two of
the facilities are owned, one of which is encumbered by a deed of trust. All of
the remaining facilities are leased with expiration dates ranging from March
2000 to June 2011.
Application Software
Application Software's principal office is leased and is located in
Atlanta, Georgia. The lease for that office expires in February 2005. In
addition to its principal office, Application Software, through its various
operating subsidiaries, currently operates seven offices in the United States,
Australia, Canada and Europe. These facilities are leased with expiration dates
from March 2000 to December 2004.
e-Health
e-Health's principal office is leased and is located in Atlanta, Georgia.
The lease for that office expires in February 2005. In addition to its principal
office, e-Health currently operates eight offices in the United States. These
facilities are leased with expiration dates from June 2000 to May 2005.
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ITEM 3. LEGAL PROCEEDINGS
The information required by this Item is included in Note 9 of Notes to
Financial Statements in Item 8. Financial Statements and Supplementary Data on
pages F-14 to F-15.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 23, 1999, a special meeting of the Company's stockholders was
held at which the stockholders approved the Reverse Split. Votes cast were
65,480,934 for, 4,304,557 against and 62,143 abstained.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company as of December 31, 1999:
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YEAR FIRST
NAME AGE POSITION ELECTED OFFICER
- ---- --- --------------------------------- ---------------
<S> <C> <C> <C>
Allen W. Ritchie.................... 42 President and Chief Executive 1998
Officer
Philip M. Pead...................... 47 Executive Vice President and 1999
Chief Operating Officer
Wayne A. Tanner..................... 45 Executive Vice President and 1998
Chief Financial Officer
Randolph L.M. Hutto................. 51 Executive Vice President, General 1997
Counsel and Secretary
William J. DeZonia, Jr.............. 47 Senior Vice President and 1999
Chief Compliance Officer
</TABLE>
Each of the above executive officers was elected by the Board of Directors
to hold office until the next annual election of officers and until his
successor is elected and qualified or until his earlier resignation or removal.
ALLEN W. RITCHIE has served as the President and Chief Executive Officer of
the Company since July 1998. He has also been a member of Per-Se's Board of
Directors since July 1998. From April 1998 to July 1998, Mr. Ritchie served as
President and Chief Operating Officer of the Company. From January 1998 to April
1998, he served as Executive Vice President and Chief Financial Officer of the
Company. From 1991 to 1997, Mr. Ritchie served as a senior executive of AGCO
Corporation, including as President and as a member of AGCO's Board of
Directors.
PHILIP M. PEAD has served as Executive Vice President and Chief Operating
Officer of the Company since August 1999. Mr. Pead joined the Company in April
1997 as a senior executive in the Application Software and e-Health segments of
the Company's business and he served as the President of those segments from May
1997 until August 1999. From May 1996 to April 1997, Mr. Pead was employed by
Dun & Bradstreet Application Software as a senior executive with responsibility
for international operations. From August 1994 to May 1996, he was employed by
Attachmate Corporation, a leading provider of communications software, as a
senior executive with responsibility for Asia Pacific and Latin American
operations.
WAYNE A. TANNER has served as Executive Vice President and Chief Financial
Officer of the Company since September 1998. From 1990 until he joined the
Company, Mr. Tanner was a partner with Arthur Andersen LLP. His business
experience includes financial and strategic consulting, including corporate and
operational finance, merger and acquisition assistance, troubled company and
bankruptcy consulting, resolution of complex legal disputes and accounting and
auditing services to numerous privately and publicly held companies.
RANDOLPH L. M. HUTTO has served as Executive Vice President, General
Counsel and Secretary of the Company since August 1997. From 1992 to August
1997, Mr. Hutto was employed by First Financial Management Corporation ("FFMC")
and by First Data Corporation after its merger with FFMC, where he served in a
variety of executive positions, including Senior Executive Vice
President -- General Counsel and, most recently, Senior Vice
President -- Planning and Development. Prior to that, Mr. Hutto was a partner in
the law firm of Sutherland, Asbill & Brennan.
WILLIAM J. DEZONIA, JR. has served as Senior Vice President and Chief
Compliance Officer of the Company since August 1999. Mr. DeZonia joined Per-Se
in December 1995 as a result of the acquisition of Medical Management Sciences,
Inc. ("MMS"), where he was president and chief operating officer. Mr. DeZonia
has more than 20 years experience in the healthcare industry. Prior to joining
MMS in 1980, he worked for Blue Cross and Blue Shield of Virginia in claims
processing and marketing capacities.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on Nasdaq under the symbol PSTI.
The prices in the table below represent the high and low sales prices, as
adjusted for the Reverse Split, for the Common Stock as reported on Nasdaq for
the periods presented. Such prices are based on inter-dealer bid and asked
prices without markup, markdown or commissions and may not represent actual
transactions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 HIGH LOW
- ---------------------------- ------- -------
<S> <C> <C>
First Quarter............................................. $16.875 $ 7.125
Second Quarter............................................ 17.438 7.500
Third Quarter............................................. 18.000 9.094
Fourth Quarter............................................ 10.500 6.000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 HIGH LOW
- ---------------------------- ------- -------
<S> <C> <C>
First Quarter............................................. $37.500 $18.000
Second Quarter............................................ 33.000 17.438
Third Quarter............................................. 19.875 10.125
Fourth Quarter............................................ 13.688 7.875
</TABLE>
The last reported sales price of the Common Stock as reported on Nasdaq on
March 15, 2000 was $6.25 per share. As of March 15, 2000, the Company's Common
Stock was held of record by 5,925 stockholders.
Per-Se has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future but intends instead
to retain any future earnings for reinvestment in its business. The Indenture
dated as of February 20, 1998, with respect to the Company's outstanding 9 1/2%
Senior Notes due 2005, contains restrictions on the Company's ability to declare
or pay cash dividends on its Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
for Per-Se for and as of each of the five fiscal years in the period ended
December 31, 1999. The selected consolidated financial information of Per-Se has
been derived from the audited consolidated financial statements of Per-Se which
give retroactive effect to the 1995 mergers with Automation Atwork ("Atwork")
and Healthcare Recoveries, Inc. ("HRI"), which was subsequently sold during
1997, and the 1996 mergers with Rapid Systems Solutions, Inc. ("Rapid Systems"),
which was subsequently sold during 1999, BSG Corporation ("BSG"), which was
subsequently sold in 1999 and Health Data Sciences Corporation ("HDS"), all of
which have been accounted for using the pooling-of-interests method of
accounting. All periods present the operations of Hospital Services and Impact
(which primarily consists of Rapid Systems and BSG) as discontinued operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Revenue........................... $322,129 $ 349,823 $392,420 $ 400,451 $369,034
Salaries and wages................ 212,940 226,894 242,228 247,204 207,332
Other operating expenses.......... 104,192 126,183 123,094 130,007 106,000
Depreciation...................... 20,177 23,848 22,481 20,266 9,358
Amortization...................... 9,293 18,077 21,069 21,382 14,107
Interest expense, net............. $ 16,102 $ 23,494 $ 23,398 $ 11,585 $ 10,156
Intangible asset impairment....... -- 390,641 -- -- --
Litigation settlements............ 24,811 35,987 52,500 -- --
Restructuring and other charges... -- 5,191 16,741 119,434 48,750
Loss from continuing operations... (64,776) (558,957) (92,523) (99,644) (17,704)
Net loss(1)....................... (33,702) (560,214)(2) (19,303)(3) (137,337) (2,650)
Pro forma net loss(4)............. (33,702) (560,214) (19,303) (136,358) (4,780)
Weighted average shares
outstanding.................... 28,097 25,673 24,226 23,742 17,530
PER SHARE DATA(4)
Pro forma basic loss from
continuing operations.......... $ (2.31) $ (21.77) $ (3.82) $ (4.20) $ (1.01)
Pro forma basic net loss.......... $ (1.20) $ (21.82) $ (0.80) $ (5.74) $ (0.27)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital................... $ 93,304 $ 86,215 $ 64,522 $ 23,708 $ 54,909
Intangible assets................. 46,446 48,241 459,129 477,545 532,356
Total assets...................... 265,017 286,721 847,145 901,997 908,456
Total debt........................ 177,138 176,080 200,691 271,424 153,842
Convertible subordinated
debentures..................... -- -- -- -- 63,375
Stockholders' equity.............. $ 1,440 $ 2,323 $501,781 $ 508,525 $554,008
</TABLE>
- ---------------
(1) Reflects the income (loss) from discontinued operations of $3.4 million, $
(0.1) million, $(0.7) million, $(37.7) million and $15.1 million for 1999,
1998, 1997, 1996 and 1995, respectively, and the gain on sale of
discontinued operations of $27.7 million in 1999 and $7.2 million in 1998.
(2) Reflects an $8.4 million extraordinary charge for the early extinguishment
of debt.
(3) Reflects the extraordinary income of $76.4 million relating to the sale of
HRI and a $2.5 million charge for the change in accounting for business
process reengineering costs incurred in connection with an information
technology project, pursuant to Emerging Issues Task Force Consensus No.
97-13, Accounting for Costs Incurred in Connection with a Consulting or an
Internal Project that Combines Business Process Reengineering and
Information Technology.
9
<PAGE> 12
(4) In 1995 and 1996, the Company acquired Atwork, Consort Technologies, Inc
("Consort"), Intelligent Visual Computing ("IVC"), Rapid Systems and BSG in
merger transactions accounted for as poolings-of-interests. Prior to the
mergers, Atwork, Consort, IVC, Rapid Systems and a company acquired by BSG
prior to the Company's merger with BSG had elected "S" corporation status
for income tax purposes. As a result of the mergers (or, in the case of the
company acquired by BSG, its acquisition by BSG), such entities terminated
their "S" corporation elections. Pro forma net income (loss) and pro forma
net income (loss) per common share are presented in the consolidated
statements of operations as if each of these entities had been a "C"
corporation during the periods presented.
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Fiscal 1999 compared to Fiscal 1998
REVENUE. Revenue classified by the Company's reportable segments is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Physician Services.......................................... $240,200 $264,323
Application Software........................................ 62,145 70,849
e-Health.................................................... 31,343 25,886
Eliminations................................................ (11,559) (11,235)
-------- --------
$322,129 $349,823
======== ========
</TABLE>
Revenue for the Physician Services segment decreased 9% to $240.2 million
in 1999 from $264.3 million in 1998. The decline in revenue is primarily
attributable to Per-Se and client initiated discontinuances during the last
quarter of 1998 and throughout 1999. However, the rate of client-initiated
discontinuances continues to decrease. Physician Services recorded annualized
new sales in 1999 of $41 million compared to $22 million in 1998.
The decrease in Application Software's revenue of 12% from 1998 to 1999 was
primarily attributable to percentage of completion accounting initiated in 1999
and lower clinical systems and scheduling products sales in 1999. Percentage of
completion accounting delays software revenue recognition over the
implementation period.
e-Health revenue increased by 21% in 1999 as compared with 1998. This
increase is a result of greater internal and external claims processing.
Approximately $3.1 million, or 57%, of this increase was attributable to
increases in volume in the Company's statement processing center ("Laser
Center"). Approximately $1.9 million, or 35%, of the revenue increase resulted
from electronic claims processed for Physician Services clients.
OPERATING LOSS. Operating loss, which excludes restructuring and other
charges, litigation settlements, intangible asset impairment and net interest
expense, classified by the Company's different operating segments is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Physician Services.......................................... $ (5,541) $(12,608)
Application Software........................................ (1,071) (8,932)
e-Health.................................................... (190) (912)
Corporate................................................... (17,671) (22,727)
-------- --------
$(24,473) $(45,179)
======== ========
</TABLE>
Operating loss for the Physician Services segment decreased 56% to $5.5
million in 1999 compared to $12.6 million in 1998. The decrease is primarily
attributable to the following: (1) decrease in depreciation expense due to
assets becoming fully depreciated, (2) decrease in amortization expense due to
the intangible asset impairment charge in 1998 and (3) a gain on the sale of an
unprofitable portion of the Physician Services' emergency medicine services
operations.
Application Software's 1999 operating loss was 88% lower than in 1998. The
decrease is primarily the result of increases to the allowance for doubtful
accounts recognized in 1998 and lower salaries and wages expense in 1999.
The operating loss for e-Health in 1999 was 79% lower than in 1998
primarily due to the previously mentioned increase in revenue.
11
<PAGE> 14
The Company's corporate overhead costs decreased by 22% to $17.7 million in
1999 compared to $22.7 million in 1998. This reduction is primarily related to
management's continued commitment to reduce operating costs while improving
process efficiency. For the year ended 1998, certain corporate overhead expenses
of $6.8 million and $2.6 million have been reclassified to the Physician
Services segment and the Application Software segment, respectively.
INTEREST. Net interest expense was $16.1 million for the year ended
December 31, 1999 as compared to $23.5 million in the same period in 1998. The
decrease is primarily related to less debt outstanding and interest income of
$2.4 million generated from the short-term investment of cash.
LITIGATION SETTLEMENTS. In June 1999, the Company accrued an estimated
litigation settlement liability of $21.5 million related to the Company's legal
dispute with Foundation Health Services, Inc. ("Foundation"), formerly Health
Systems International, Inc., arising from Per-Se's June 1996 acquisition of
Health Data Sciences Corporation ("HDS"). The estimated liability was based upon
an agreement in principle with Foundation. When the agreement was finalized in
October 1999, the cost to the Company was reduced to $17.0 million and as a
result, $4.4 million of the litigation settlement liability was reversed.
Also in June 1999, the Company accrued litigation settlement charges of
$6.0 million related to litigation arising from Per-Se's December 1995
acquisition of Medical Management Sciences, Inc. ("MMS"). In addition, the
Company paid $1.8 million to settle contract claims against the Company's
wholly-owned operating subsidiary, PST Emergency Medicine Services, Inc.
(formerly known as Gottlieb's Financial Services, Inc. or GFS) (the "Emergency
Medicine" division) which arose in January 1998 in the ordinary course of
business.
The Company accrued $19.5 million during the third quarter of 1998 as a
result of its resolution of two federal investigations into billing and
collection practices of the Company.
In June 1998, the Company accrued an estimated litigation settlement
liability of $21.3 million associated with claims made on behalf of certain
former BSG Corporation ("BSG") shareholders in connection with Per-Se's
acquisition of BSG in June 1996. Such liability was estimated based upon a
proposed settlement of approximately 1.1 million shares of Common Stock. This
settlement was subsequently finalized for 1.7 million shares of Common Stock,
and, based on the prevailing market price, the settlement was valued at $15.9
million. The Company reversed approximately $5.4 million of the litigation
settlement liability in the fourth quarter of 1998 to reflect the final
settlement value.
RESTRUCTURING AND OTHER CHARGES. In 1999, the Company reevaluated the
adequacy of its reserves for lease termination costs established in prior
periods. As a result of this evaluation, the Company increased its lease
termination reserve for Physician Services by $0.3 million and reduced
Application Software's lease termination reserve by $0.3 million.
In December 1998, management of Application Software adopted a plan to
restructure its operations to align Application Software's resources more
appropriately with future operational needs and new product development. In
order to accomplish these objectives, Application Software's executive
management terminated approximately 35 employees, primarily in the areas of
professional services and research and development, and recorded severance costs
of approximately $1.3 million.
Other components of the 1998 charges were: (i) $0.7 million in non-cash
property and equipment impairment charges associated with certain properties
held for sale; (ii) $2.0 million in legal costs associated with various lawsuits
and investigations; and (iii) $1.2 million of severance costs, primarily related
to former executive officers.
INCOME TAXES. During 1999 and 1998, the Company reassessed the
recoverability of its deferred tax asset. Based on its analysis, the Company
recorded a full valuation allowance against the net deferred tax asset in both
years. If, during future periods, management believes the Company will generate
sufficient taxable income to realize the deferred tax asset, the Company will
adjust this valuation reserve accordingly.
12
<PAGE> 15
DISCONTINUED OPERATIONS. Summarized financial information for the
discontinued operations for the years ended December 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998
------- -----------------------------
HOSPITAL
IMPACT SERVICES IMPACT TOTAL
------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue......................................... $54,916 $100,081 $79,731 $179,812
======= ======== ======= ========
Income (loss) from discontinued operations
before taxes.................................. 3,958 5,192 (5,263) (71)
Income tax expense (benefit).................... 555 2,079 (2,079) --
------- -------- ------- --------
Income (loss) from discontinued operations, net
of tax........................................ $ 3,403 $ 3,113 $(3,184) $ (71)
======= ======== ======= ========
</TABLE>
Management initiated a plan to focus the Company's financial and management
resources on its three core healthcare segments, in an effort to return the
Company to profitability. Management defined these segments as: Physician
Services, Application Software and e-Health. In 1998, management began to seek
alternatives for the remaining non-core business segments: Hospital Services and
Impact. Although Hospital Services provided business management and accounts
receivable management services to approximately 1,200 hospitals, the Company's
management deemed the segment non-core as a substantial portion of the services
offered was bad debt collection. Impact was deemed non-core as it did not
provide consulting services to the healthcare industry.
On November 30, 1998, the Company completed the sale of Hospital Services
to NCO Group, Inc. ("NCO") for initial consideration of $107.5 million. In
February 1999, the Company received additional proceeds of $0.5 million based on
the Hospital Services final closing balance sheet. In addition, Per-Se could
receive a purchase price adjustment of up to $10.0 million subject to Hospital
Services' achievement of various operational targets in 1999. The purchase price
adjustment will be determined by the second quarter of 2000. The Company
recorded a $6.8 million gain, net of taxes of $5.4 million, as a result of this
sale.
In 1999, the Company completed the sale of both divisions of Impact. After
reviewing several alternatives for Impact throughout 1998, management concluded
a sale of this segment would generate the greatest return to the stockholders
and finalized its plan to sell Impact. The Company sold the commercial division
of Impact to Complete Business Solutions, Inc. ("CBSI") effective April 15, 1999
for $14.4 million, net of the final closing balance sheet adjustment of $0.6
million which was paid on July 16, 1999. The government division of Impact was
sold on December 17, 1999 to J3 Technology Services Corp. for initial
consideration of $45.0 million, subject to certain closing adjustments. The
Company recorded a $28.1 million gain as a result of the Impact sales.
The results of operations for Hospital Services and Impact have been
classified as discontinued operations for all periods presented.
Fiscal 1998 compared to Fiscal 1997
REVENUE. Revenue classified by the Company's reportable segments is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Physician Services.......................................... $264,323 $278,475
Application Software........................................ 70,849 85,037
e-Health.................................................... 25,886 25,342
HRI......................................................... -- 14,720
Eliminations................................................ (11,235) (11,154)
-------- --------
$349,823 $392,420
======== ========
</TABLE>
13
<PAGE> 16
Physician Services' revenue decreased by 5% in 1998 as compared to 1997.
This decline was attributable both to operating problems at the Emergency
Medicine division and to an increase in client losses within the entire
Physician Services segment. Revenue declines attributable to client losses in
1998 at the Emergency Medicine division and Physician Services were
approximately $22.9 million and $54.7 million, respectively. In addition, the
Physician Services segment was affected by the revenue pressures on the
physician accounts receivable operations resulting from an increase in managed
care.
Application Software's revenue decreased 17% in 1998 as compared with 1997.
Approximately 67% of this decrease was a result of a slowdown in the sale of
software licenses in its scheduling product lines. Management believes the
slowdown was due primarily to certain technical problems with a prior release
within its patient scheduling product line. Management believes these problems
have been corrected and Application Software has made progress in rebuilding its
relationship with clients. The overall revenue decline at Application Software
was also impacted by a 13% decrease in revenue from the sale and support of
clinical information systems. In the fourth quarter of 1998, the Company sold
its first license for its newly released Patient1(TM) product; revenue from this
license sale was recognized in 1999 over the installation period using the
percentage of completion method of accounting.
On May 28, 1997, Per-Se completed the sale of HRI and, as a result, there
are only five months of revenue from HRI in 1997 and none in 1998.
OPERATING PROFIT (LOSS). Operating profit (loss), which excludes
restructuring and other charges, litigation settlements, intangible asset
impairment and net interest expense, classified by the Company's different
operating segments is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Physician Services.......................................... $(12,608) $(11,402)
Application Software........................................ (8,932) 19,560
e-Health.................................................... (912) 613
HRI......................................................... -- 3,685
Corporate................................................... (22,727) (28,908)
-------- --------
$(45,179) $(16,452)
======== ========
</TABLE>
The increase in the 1998 operating loss as compared to 1997 for the
Physician Services segment is directly attributable to revenue declines
resulting from the various operational issues in the Emergency Medicine division
and client losses throughout the segment.
The operating loss for Application Software in 1998 as compared to 1997's
operating profit, was primarily a result of the previously mentioned decline in
software license sales, increases in investments in new product development and
an increase in its allowance for doubtful accounts receivable. During 1998,
Application Software increased its reserves for bad debt by $7.3 million related
to various receivables, including receivables from Allegheny Health, Education
and Research Foundation and certain affiliates ("AHERF"), which filed for
protection under Chapter 11 of the United States Bankruptcy Code.
The Company believes that Application Software has corrected the problems
in its patient scheduling product and that it has made progress in rebuilding
its relationships with clients. These improvements are reflected in Application
Software's 43% increase in its patient scheduling license sales in the fourth
quarter of 1998 as compared with the sales in the third quarter of 1998.
The operating loss for e-Health in 1998 as compared to an operating profit
in 1997 was primarily the result of higher operating expenses.
The Company's corporate overhead costs decreased by 21% for the year ended
December 31, 1998 as compared to the previous year. This reduction is primarily
the result of fewer professional service fees and a reduction of headcount
resulting from process improvement initiatives.
14
<PAGE> 17
INTEREST. Net interest expense in 1998 was approximately the same as it
was in 1997.
INTANGIBLE ASSET IMPAIRMENT. At September 30, 1998, the Company recorded
an intangible asset impairment charge of $390.6 million to adjust the intangible
assets of the Physician Services segment to their fair value. Management
regularly monitors its results of operations and other developments within the
industry to adjust its cash flow forecast, as necessary, to determine if an
adjustment is necessary to the carrying value of the Company's intangible
assets.
LITIGATION SETTLEMENTS. The Company accrued $19.5 million during the third
quarter of 1998 as a result of its resolution with the government concerning two
federal investigations into billing and collection practices of the Company.
In June 1998, the Company accrued an estimated litigation settlement
liability of $21.3 million associated with claims made on behalf of certain
former BSG shareholders in connection with Per-Se's acquisition of BSG in June
1996. Such liability was estimated based upon a proposed settlement of
approximately 1.1 million shares of Common Stock. This settlement was
subsequently finalized for 1.7 million shares of Common Stock, and, based on the
prevailing market price, the settlement was valued at $15.9 million. The Company
reversed approximately $5.4 million of the litigation settlement liability in
the fourth quarter of 1998 to reflect the final settlement value.
In 1997, the Company accrued a non-cash litigation settlement liability of
$52.5 million for the settlement of a class action legal matter brought against
the Company in 1996. The settlement was comprised of approximately 1.3 million
shares of Common Stock and warrants to purchase 1.8 million shares of Common
Stock at $36 per share for a five-year period.
RESTRUCTURING AND OTHER CHARGES. In December 1998, management of
Application Software adopted a plan to restructure its operations to align
Application Software's resources more appropriately with future operational
needs and new product development. In order to accomplish these objectives,
Application Software's executive management terminated approximately 35
employees, primarily in the areas of professional services and research and
development, and recorded severance costs of approximately $1.3 million.
During 1997, the Company adopted a restructuring plan to combine the
operations of Application Software and Impact (the "Application Software
Restructuring"). The objective of the Application Software Restructuring was to
improve profitability thorough capitalizing on perceived synergies of these
similar businesses and better utilizing office space and other resources. In
connection with the Application Software Restructuring, the Company recorded
charges of approximately $1.1 million, primarily consisting of lease termination
costs and severance costs. See "-- Discontinued Operations" where management's
decision to sell Impact is discussed.
In early 1995, the Company initiated a reengineering program focused upon
its billing and accounts receivable management operations (the "Reengineering
Project"). The objectives of the Reengineering Project were: (i) to improve
profitability in the near term through office consolidations (the "Physician
Services Restructuring Plan"); (ii) to improve longer-term profitability by
developing technology and then leveraging such technology to make the Company's
workflow process more efficient; and (iii) to standardize operating procedures
through Physician Services. During 1997, the Company recognized additional
restructuring expenses of approximately $1.7 million related to adjustments to
the lease termination costs associated with the Physician Services Restructuring
Plan.
Other components of the 1998 charges were: (i) $0.7 million in non-cash
property and equipment impairment charges associated with certain properties
held for sale; (ii) $2.0 million in legal costs associated with various lawsuits
and investigations; and (iii) $1.2 million of severance costs, primarily related
to former executive officers.
Other components of the 1997 amounts were: (i) $5.0 million in non-cash
property and equipment impairment charges associated with Company's assessment
of the recoverability of certain of its long-lived assets; (ii) $2.6 million in
legal costs associated with various lawsuits and investigations; and (iii) $6.4
million of various other costs, including severance and other individually
insignificant, non-recurring items.
15
<PAGE> 18
INCOME TAXES. During 1998, the Company reassessed the recoverability of
its deferred tax asset. Based on its analysis, the Company recorded a full
valuation allowance against the net deferred tax asset.
Effective income tax rates for 1997 vary from statutory rates primarily as
a result of nondeductible goodwill associated with merger transactions
consummated by the Company in previous years.
DISCONTINUED OPERATIONS. Summarized financial information for the
discontinued operations for the years ended December 31, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997
----------------------------- ------------------------------
HOSPITAL HOSPITAL
SERVICES IMPACT TOTAL SERVICES IMPACT TOTAL
-------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue...................... $100,081 $79,731 $179,812 $97,095 $101,524 $198,619
======== ======= ======== ======= ======== ========
Income (loss) from
discontinued operation
before taxes............... 5,192 (5,263) (71) 9,508 (10,419) (911)
Income tax expense
(benefit).................. 2,079 (2,079) -- 3,910 (4,115) (205)
-------- ------- -------- ------- -------- --------
Income (loss) from
discontinued operations,
net of tax................. $ 3,113 $(3,184) $ (71) $ 5,598 $ (6,304) $ (706)
======== ======= ======== ======= ======== ========
</TABLE>
EXTRAORDINARY ITEMS. In February 1998, the Company used the proceeds from
the February 1998 issuance of Notes (see Liquidity and Capital Resources) and
the Credit Facility to redeem the Company's then-current debt facility. In
November 1998, the Company used $71.5 million of the $103.2 million net proceeds
received from the sale of Hospital Services to repay and terminate the Credit
Facility. The Company recorded extraordinary charges in 1998 of $8.4 million,
net of tax of $3.8 million, to write-off the unamortized costs associated with
the early extinguishment of both the Company's previous debt facility and the
Credit Facility.
On May 28, 1997, Per-Se sold HRI through an initial public offering of 100%
of its stock, which generated net proceeds to the Company of $126.4 million. The
Company recorded an extraordinary gain on the sale of HRI of $76.4 million, net
of tax of $46.2 million, in the second quarter of 1997. Per-Se had acquired HRI
on August 28, 1995 through a business combination accounted for as a
pooling-of-interests.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In November 1997, the Emerging
Issues Task Force ("EITF") issued EITF 97-13 Accounting for Costs Incurred in
Connection with a Consulting Contract or an Internal Project that Combines
Business Process Reengineering and Information Technology ("EITF 97-13"). EITF
97-13 requires process reengineering costs, as defined, which had been
previously capitalized as part of an information technology project to be
expensed in the quarter which includes November 1997. The Company recorded a
charge of $2.5 million, net of tax of $1.6 million, in the fourth quarter of
1997 as a result of EITF 97-13.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $93.3 million at December 31, 1999,
including $74.4 million of unrestricted cash and cash equivalents. The $19.9
million increase in cash and cash equivalents from December 31, 1998 is
primarily the result of net proceeds from the sale of non-core operations and
other assets totaling $57.2 million. The increase was offset by the payment of
semi-annual interest payments required under the $175 million of 9 1/2% Senior
Notes due 2005 (the "Notes") and payments related to the legal settlements with
the government concerning the Emergency Medicine division and with Foundation.
The Notes, which were sold on February 20, 1998, bear interest at the rate
of 9 1/2% per annum, payable semi-annually on February 15 and August 15,
commencing on August 15, 1998, and will mature on February 15, 2005. The Notes
are redeemable at the option of the Company, in whole or in part, at any time on
or after February 15, 2002, at a declining premium to par until 2004 and at par
thereafter, plus accrued and unpaid interest. In addition, at any time on or
prior to February 15, 2001, the Company may redeem up to 35%
16
<PAGE> 19
of the original principal amount of the Notes at a redemption price equal to
109.5% of the principal amount thereof, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds of one or more equity offerings;
provided that at least $100 million aggregate principal amount of the Notes
remain outstanding immediately following any such redemption.
Payment of principal, premium, if any, and interest on the Notes is fully
and unconditionally guaranteed, on a senior unsecured basis, jointly and
severally by all of the Company's present and future domestic restricted
subsidiaries (the "Subsidiary Guarantors"). The financial statements of the
Subsidiary Guarantors have not been presented as all subsidiaries, except for
certain insignificant foreign subsidiaries, have provided guarantees and the
parent company does not have any significant operations or assets, separate from
its investment in subsidiaries. Any non-guarantor subsidiaries are insignificant
individually and in the aggregate to the consolidated financial statements.
The Company completed its divestiture of non-core operations in December
1999. The Company sold Hospital Services on November 30, 1998 for $103.2 million
net proceeds. In February 1999, the Company received additional proceeds of $0.5
million based on Hospital Services' tangible net worth at closing. In addition,
Per-Se could receive a purchase price adjustment of up to $10.0 million subject
to Hospital Services' achievement of various operational targets in 1999. The
purchase price adjustment will be determined by the second quarter of 2000.
The Company sold the commercial division of Impact effective April 15, 1999
for $14.4 million, net of the final closing balance sheet adjustment of $0.6
million which was paid on July 16, 1999. The Company sold the government
division of Impact on December 17, 1999 for approximately $45.0 million, subject
to final closing adjustments that the Company expects to finalize in the first
quarter of 2000.
Under the Indenture governing the Notes, the balance of the excess
proceeds, as defined, from the sale of Hospital Services, the two divisions of
Impact or the sale of any other asset having a fair value in excess of $1.0
million, must be invested in the Company's business within 360 days of receipt
of proceeds related to the sale. To the extent that such excess proceeds are not
invested and the aggregate of excess proceeds is greater than $10.0 million, the
Company is required to offer to repurchase the Notes at par with such proceeds.
As of December 31, 1999, excess proceeds related to the sale of non-core
operations and other assets totaled approximately $64.4 million. The excess
proceeds are the result of various asset sales and, as such, these proceeds must
be invested in the Company's business at varying points in time during 2000. The
Company must invest a minimum of approximately $7.1 million by April 14, 2000 to
preclude the Company's obligation to make an offer to repurchase Senior Notes at
par during the second quarter of 2000 and a minimum of approximately $52.1
million must be invested by December 11, 2000 to preclude the Company's
obligation to make an offer to repurchase Senior Notes at par in the first
quarter of 2001.
The Company believes that its current cash flow is sufficient to permit the
Company to meet its operating expenses, service its debt requirements as they
become due in the next twelve months and for the long term and to invest in the
business; however, there can be no assurance that such results will be achieved.
If the Company is unable to service its indebtedness, it will be required to
adopt alternative strategies, which may include actions such as reducing or
delaying capital expenditures, selling assets, restricting or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms.
The degree to which the Company is leveraged could have the following
consequences: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or other general
corporate purposes may be impaired; and (ii) a substantial portion of the
Company's cash flow from operations may be dedicated to the payment of principal
and interest on its indebtedness thereby reducing the funds available to the
Company for its operations. In addition, the Indenture for the Notes contains
restrictive covenants, including without limitation those restricting the
incurrence of additional indebtedness, the creation of liens, the payment of
dividends and sales of assets.
17
<PAGE> 20
To enhance the Company's financial flexibility, management is currently
considering a new credit facility. This flexibility may enhance management's
ability to make strategic investments in the business and better align working
capital with Company operations.
YEAR 2000
The Company did not experience any impact from the date change occurring
between December 31, 1999 and January 1, 2000 (commonly known as the "Year 2000"
problem) and does not expect to experience any significant impact from the Year
2000 problem (including related issues such as leap year) on its operations
going forward. However, it is possible that the full impact of the Year 2000
problem has not yet been manifested and billing, payroll, monthly, quarterly or
annual financial closings or other matters may be impacted by the Year 2000
problem.
In conjunction with its Year 2000 efforts the Company replaced some
outdated hardware and non-compliant software and consolidated its billing
platforms from eighteen systems to six compliant systems ("Systems
Assimilation") rather than make all the systems Year 2000 compatible. The
Company completed the required transitions before the end of 1999. Through
December 31, 1999, the Company had spent approximately $11.4 million on its Year
2000 and Systems Assimilation efforts.
The Company developed contingency plans during the fourth quarter of 1998
and throughout 1999 in response to assessments of the Year 2000 readiness of
customers, vendors and resellers. Although these contingency plans remain
readily available, the Company was not required to implement any of them during
1999 or through current date 2000.
NEW ACCOUNTING PRONOUNCEMENTS
On December 3, 1999, the Securities and Exchange Commission (the
"Commission") issued Staff Accounting Bulletin Number 101, Revenue Recognition
in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the
Commission's views in applying generally accepted accounting principles to
revenue recognition in financial statements. SAB 101 provides interpretative
guidance on the unbilled accounts receivable and related revenue recognition
within the Company's industry. The Commission's guidance requires the accounting
change to be reflected by the Company's quarter ended March 31, 2000. Therefore,
consistent with the Commission's guidance and changing industry practice, the
Company will begin recognizing revenue in its Physician Services segment on an
"as billed" basis in fiscal 2000. The Company does not expect this change to
significantly affect annual recognized revenue amounts. The change in accounting
method will result in the elimination of approximately $38 million of unbilled
accounts receivable. The one-time, cumulative charge in the Company's March 31,
2000 statement of operations will be approximately $23 million, on a net of tax
basis. This will have no effect on cash flow.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements appear beginning at page
F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors and
executive officers of the Registrant, except certain information regarding
executive officers which is contained in Part I of this Report pursuant to
General Instruction G of Form 10-K, is included in the sections entitled
"Management of the Company" and
18
<PAGE> 21
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" of the
Proxy Statement for the Annual Meeting of Stockholders to be held on May 4, 2000
and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the sections entitled
"Certain Information Regarding Executive Officers," "Compensation Committee
Report on Executive Compensation," "Compensation Committee Interlocks and
Insider Participation" and "Stock Price Performance Graph" of the Proxy
Statement for the Annual Meeting of Stockholders to be held on May 4, 2000 and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the sections entitled
"Management Common Stock Ownership" and "Principal Stockholders" of the Proxy
Statement for the Annual Meeting of Stockholders to be held on May 4, 2000 and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
Report of Independent Accountants;
Consolidated Balance Sheets -- as of December 31, 1999 and 1998;
Consolidated Statements of Operations -- years ended December 31,
1999, 1998 and 1997;
Consolidated Statements of Cash Flows -- years ended December 31,
1999, 1998 and 1997;
Consolidated Statements of Stockholders' Equity -- years ended
December 31, 1999, 1998 and 1997; and Notes to Consolidated Financial
Statements.
2. Financial Statement Schedules
Included in Part IV of the report:
Report of Independent Accountants;
Schedule II -- Valuation and Qualifying Accounts -- years ended
December 31, 1999, 1998 and 1997
Schedules, other than Schedule II, are omitted because of the absence
of the conditions under which they are required.
19
<PAGE> 22
3. Exhibits
The following list of exhibits includes both exhibits submitted with this
Form 10-K as filed with the Commission and those incorporated by reference to
other filings:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C> <C>
2.1 -- Stock Purchase Agreement dated as of October 15, 1998,
between Registrant and NCO Group, Inc. (incorporated by
reference to Exhibit 2.1 to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
2.2 -- Stock Purchase Agreement dated as of April 20, 1999, among
Complete Business Solutions, Inc., E-Business Solutions.com,
Inc., Impact Innovations Holdings, Inc. and Registrant
(incorporated by reference to Exhibit 2.1 to Current Report
on Form 8-K filed on May 5, 1999).
2.3 -- Stock Purchase Agreement dated as of November 4, 1999, among
J3 Technology Services Corp., Impact Innovations Holdings,
Inc., Impact Innovations Government Group, Inc. and
Registrant (incorporated by reference to Exhibit 2.3 to
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999).
3.1 -- Restated Certificate of Incorporation of Registrant.
3.2 -- Restated By-laws of Registrant.
4.1 -- Specimen Common Stock Certificate.
4.2 -- Form of Option Agreement relating to Registrant's Second
Amended and Restated Non-Qualified Stock Option Plan.
4.3 -- Form of Option Agreement relating to Registrant's Senior
Executive Performance Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-1, File No. 33-42216).
4.4 -- Form of Option Agreement relating to Registrant's
Non-Qualified Stock Option Plan for Employees of Acquired
Companies (incorporated by reference to Exhibit 4.4 to
Registration Statement on Form S-3, File No. 33-71552).
4.5 -- Form of Option Agreement relating to Registrant's
Non-Employee Director Stock Option Plan.
4.6 -- Form of Option Agreement relating to Registrant's
Non-Qualified Stock Option Plan for Non-Executive Employees.
4.7 -- Form of Option Agreement relating to Registrant's Restricted
Stock Plan (incorporated by reference to Exhibit 4.5 to
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 000-19480 (the "1995 Form
10-K")).
4.8 -- Indenture dated as of February 20, 1998, among Registrant,
as Issuer, the Subsidiary Guarantors named in the Indenture
and State Street Bank and Trust Company, as Trustee
(including form of note) (incorporated by reference to
Exhibit 10.3 to Current Report on Form 8-K filed on March 3,
1998).
4.9 -- Warrant Agreement dated as of July 8, 1998, between
Registrant and SunTrust Bank, Atlanta, as Warrant Agent
(including form of warrant certificate) (incorporated by
reference to Exhibit 4.2 to Registration Statement on Form
8-A filed on July 21, 1998).
4.10 -- Rights Agreement dated as of February 11, 1999, between
Registrant and American Stock Transfer & Trust Company
(including form of rights certificates) (incorporated by
reference to Exhibit 4 to Current Report on Form 8-K filed
on February 12, 1999).
4.11 -- Registration Rights Letter Agreement dated as of May 3,
1999, among NFT Ventures Inc., Raymond J. Noorda, Mark
Rogers, NP Ventures, Ltd., Steven G. Papermaster and
Registrant (incorporated by reference to Exhibit 4.8 to
Registration Statement on Form S-3, file No. 333-78775).
10.1 -- Second Amended and Restated Per-Se Technologies, Inc.
Non-Qualified Stock Option Plan.
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C> <C>
10.2 -- Registrant's Senior Executive Performance Non-Qualified
Stock Option Plan (incorporated by reference to Exhibit 28.2
to Registration Statement on Form S-8, File No. 33-46847).
10.3 -- First Amendment to Registrant's Senior Executive Performance
Non-Qualified Stock Option Plan (incorporated by reference
to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
10.4 -- Registrant's Non-Qualified Stock Option Plan for Employees
of Acquired Companies (incorporated by reference to Exhibit
99.1 to Registration Statement on Form S-8, File No.
33-67752).
10.5 -- First Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 99 to Registration Statement on Form
S-8, File No. 33-71556).
10.6 -- Second Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 99 to Registration Statement on Form
S-8, File No. 33-88442).
10.7 -- Third Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 10.14 to the 1995 Form 10-K).
10.8 -- Fourth Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 99.2 to Registration Statement on Form
S-8, File No. 333-3213).
10.9 -- Fifth Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 99.1 to Registration Statement on Form
S-8, File No. 333-07627).
10.10 -- Sixth Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by
reference to Exhibit 10.21 to Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 Form
10-K")).
10.11 -- Seventh Amendment to Registrant's Non-Qualified Stock Option
Plan for Employees of Acquired Companies (incorporated by.
reference to Exhibit 10.23 to Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (the "1998 Form
10-K")).
10.12 -- Eighth Amendment to Registrant's Non-Qualified Stock Option
Plan For Employees of Acquired Companies.
10.13 -- Registrant's Non-Employee Director Stock Option Plan, dated
as of August 12, 1994 (incorporated by reference to Exhibit
10.2 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
10.14 -- First Amendment to Registrant's Non-Employee Director Stock
Option Plan (incorporated by reference to Exhibit 10.25 to
the 1998 Form 10-K).
10.15 -- Second Amendment to Registrant's Non-Employee Director Stock
Option Plan (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for the quarter ended March
31, 1999).
10.16 -- Third Amendment to Registrant's Non-Employee Director Stock
Option Plan.
10.17 -- Registrant's Non-Qualified Stock Option Plan for
Non-Executive Employees (incorporated by reference to
Exhibit 10.23 to the 1996 Form 10-K).
10.18 -- First Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.24 to the 1996 Form 10-K).
10.19 -- Second Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.25 to Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "1997 Form 10-K")).
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C> <C>
10.20 -- Third Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.26 to the 1997 Form 10-K).
10.21 -- Fourth Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.27 to the 1997 Form 10-K).
10.22 -- Fifth Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.28 to the 1997 Form 10-K).
10.23 -- Sixth Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees (incorporated by reference
to Exhibit 10.32 to the 1998 Form 10-K).
10.24 -- Seventh Amendment to Registrant's Non-Qualified Stock Option
Plan for Non-Executive Employees.
10.25 -- Restricted Stock Plan of the Registrant, dated as of August
12, 1994 (incorporated by reference to Exhibit 10.2 to
Registration Statement on Form S-4, File No. 33-88910).
10.26 -- The Per-Se Technologies Employees' Retirement Savings Plan.
10.27 -- Retirement Savings Trust (incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1, File
No. 33-42216).
10.28 -- Registrant's Deferred Compensation Plan (incorporated by
reference to Exhibit 99 to Registration Statement on Form
S-8, Registration No. 33-90874).
10.29 -- First Amendment to Registrant's Deferred Compensation Plan
(incorporated by reference to Exhibit 10.2 to Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997).
10.30 -- Second Amendment to Registrant's Deferred Compensation Plan
(incorporated by reference to Exhibit 10.3 to Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997).
10.31 -- Third Amendment to Registrant's Deferred Compensation Plan
(incorporated by reference to Exhibit 10.76 to the 1997 Form
10-K).
10.32 -- Fourth Amendment to Registrant's Deferred Compensation Plan.
10.33 -- Written description of Registrant's Non-Employee Director
Compensation Plan (incorporated by reference to Exhibit 10.4
to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997).
10.34 -- Registrant's Non-Employee Director Deferred Stock Credit
Plan (incorporated by reference to Exhibit 10.5 to Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997).
10.35 -- Registrant's Long Term Incentive Plan (incorporated by
reference to Exhibit 10.3 to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
10.36 -- Employment Agreement dated November 19, 1996, between
Registrant and David E. McDowell (incorporated by reference
to Exhibit 10.49 to the 1996 Form 10-K).
10.37 -- Amendment Number 1 to Employment Agreement by and between
Registrant and David E. McDowell, dated October 20, 1999.
10.38 -- Employment Agreement dated July 28, 1997, between Registrant
and Randolph L.M. Hutto (incorporated by reference to
Exhibit 10.10 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
10.39 -- Employment Agreement dated January 25, 1998, between
Registrant and Allen W. Ritchie (incorporated by reference
to Exhibit 10.69 to the 1997 Form 10-K).
10.40 -- Employment Agreement dated July 27, 1998, between Registrant
and Wayne A. Tanner (incorporated by reference to Exhibit
10.1 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C> <C>
10.41 -- Employment Agreement dated as of June 1, 1999, between
Registrant and Philip M. Pead (incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.42 -- Employment Agreement dated as of June 25, 1999, between
Medaphis Physician Services Corporation and William J.
DeZonia.
10.43 -- Corporate Integrity Agreement between the Office of the
Inspector General of the Department of Health and Human
Services and Registrant (incorporated by reference to
Exhibit 10.4 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.44 -- Settlement Agreement and Full and Complete Release dated
June 24, 1999, among James F. Thacker, et al., and
Registrant (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999).
10.45 -- First Amendment to Second Amended and Restated Per-Se
Technologies, Inc. Non-Qualified Stock Option Plan.
10.46 -- Fourth Amendment to Registrant's Non-Employee Director Stock
Option Plan.
21 -- Subsidiaries of Registrant.
23.1 -- Consent of PricewaterhouseCoopers LLP.
27 -- Financial Data Schedule (for SEC use only).
99.1 -- Safe Harbor Compliance Statement for Forward-Looking
Statements.
</TABLE>
- ---------------
* The exhibits, which are referenced in the above documents, are hereby
incorporated by reference. Such exhibits have been omitted for purposes of
this filing but will be furnished supplementary to the Commission upon
request.
(b) Reports on Form 8-K
Two reports on Form 8-K were filed during the quarter ended December 31,
1999:
<TABLE>
<CAPTION>
FINANCIAL
STATEMENTS
ITEM REPORTED FILED DATE OF REPORT
------------- ---------- --------------
<S> <C> <C>
Registrant's stockholders approved a one-for-three reverse
stock split of Registrant's common stock.................. No November 24, 1999
Sale of remaining operations of Impact Innovations Group to
J3 Technologies Services Corp............................. No December 30, 1999
</TABLE>
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Per-Se Technologies, Inc.
(Registrant)
By: /s/ WAYNE A. TANNER
------------------------------------
Wayne A. Tanner
Executive Vice President and
Chief Financial Officer
/s/ MARY C. BLACKADAR
------------------------------------
Mary C. Blackadar
Vice President and Controller
(Principal Accounting Officer)
Date: March 27, 2000
24
<PAGE> 27
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
March 27, 2000 /s/ DAVID E. MCDOWELL
-----------------------------------------------------
David E. McDowell
Chairman and Director
March 27, 2000 /s/ ALLEN W. RITCHIE
-----------------------------------------------------
Allen W. Ritchie
President, Chief Executive Officer, and Director
March 27, 2000 /s/ WAYNE A. TANNER
-----------------------------------------------------
Wayne A. Tanner
Executive Vice President and Chief Financial Officer
March 27, 2000 /s/ MARY C. BLACKADAR
-----------------------------------------------------
Mary C. Blackadar
Vice President and Controller (Principal Accounting
Officer)
March 27, 2000 /s/ RODERICK M. HILLS
-----------------------------------------------------
Roderick M. Hills
Director
March 27, 2000 /s/ DAVID R. HOLBROOKE, M.D.
-----------------------------------------------------
David R. Holbrooke, M.D.
Director
March 27, 2000 /s/ KEVIN E. MOLEY
-----------------------------------------------------
Kevin E. Moley
Director
March 27, 2000 /s/ C. CHRISTOPHER TROWER
-----------------------------------------------------
C. Christopher Trower
Director
-----------------------------------------------------
John C. Pope
Director
</TABLE>
25
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Per-Se Technologies, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Per-Se
Technologies, Inc. and its subsidiaries (the "Company") at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 8, 2000
F-1
<PAGE> 29
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Current Assets:
Cash:
Cash and cash equivalents.............................. $ 74,354 $ 54,409
Restricted cash........................................ 7,519 5,754
--------- ---------
Total cash........................................ 81,873 60,163
Accounts receivable, billed (less allowances of $11,613
and $17,160)........................................... 46,097 54,800
Accounts receivable, unbilled............................. 42,813 46,757
Other..................................................... 7,394 8,022
--------- ---------
Total current assets.............................. 178,177 169,742
Property and equipment...................................... 34,103 47,954
Intangible assets........................................... 46,446 48,241
Net assets of discontinued operations....................... -- 11,872
Other....................................................... 6,291 8,912
--------- ---------
$ 265,017 $ 286,721
========= =========
Current Liabilities:
Accounts payable.......................................... $ 10,005 $ 8,550
Accrued compensation...................................... 21,842 21,234
Accrued expenses.......................................... 26,449 22,361
Accrued litigation settlements............................ 4,043 12,026
Current portion of long-term debt......................... 2,138 1,067
--------- ---------
64,477 65,238
Deferred revenue.......................................... 20,396 18,289
--------- ---------
Total current liabilities......................... 84,873 83,527
Long-term debt.............................................. 175,000 175,013
Accrued litigation settlements.............................. -- 20,250
Other obligations........................................... 3,704 5,608
--------- ---------
Total liabilities................................. 263,577 284,398
--------- ---------
Commitments and contingencies (Notes 8 and 9)
Stockholders' Equity:
Preferred stock, no par value, 20,000 authorized; none
issued................................................. -- --
Common stock, voting, $0.01 par value, 200,000 authorized,
29,575 and 78,745 issued and outstanding in 1999 and
1998, respectively..................................... 296 787
Common stock, non-voting, $0.01 par value, 600 authorized;
none issued............................................ -- --
Paid-in capital........................................... 771,864 740,014
Warrants.................................................. 1,495 --
Accumulated deficit....................................... (772,215) (738,390)
--------- ---------
1,440 2,411
Less treasury stock, at cost -- 15 shares in 1998......... -- 88
--------- ---------
Total stockholders' equity........................ 1,440 2,323
--------- ---------
$ 265,017 $ 286,721
========= =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 30
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Revenue..................................................... $322,129 $ 349,823 $392,420
-------- --------- --------
Salaries and wages.......................................... 212,940 226,894 242,228
Other operating expenses.................................... 104,192 126,183 123,094
Depreciation................................................ 20,177 23,848 22,481
Amortization................................................ 9,293 18,077 21,069
Interest expense, net....................................... 16,102 23,494 23,398
Intangible asset impairment................................. -- 390,641 --
Litigation settlements...................................... 24,811 35,987 52,500
Restructuring and other charges............................. -- 5,191 16,741
-------- --------- --------
Total expenses.................................... 387,515 850,315 501,511
-------- --------- --------
Loss before income taxes.................................... (65,386) (500,492) (109,091)
Income tax (benefit) expense................................ (610) 58,465 (16,568)
-------- --------- --------
Loss from continuing operations............................. (64,776) (558,957) (92,523)
-------- --------- --------
Discontinued operations, net of tax:
Income (loss) from discontinued operations............. 3,403 (71) (706)
Gain on sale of subsidiaries........................... 27,671 7,214 --
-------- --------- --------
31,074 7,143 (706)
-------- --------- --------
Loss before extraordinary item and cumulative effect of
accounting change......................................... (33,702) (551,814) (93,229)
Extraordinary items, net of tax............................. -- (8,400) 76,391
Cumulative effect of accounting change, net of tax.......... -- -- (2,465)
-------- --------- --------
Net loss.......................................... $(33,702) $(560,214) $(19,303)
======== ========= ========
Basic net (loss) income per share:
Loss from continuing operations........................ $ (2.31) $ (21.77) $ (3.82)
Income (loss) from discontinued operations, net of
tax.................................................. 1.11 0.28 (0.03)
Extraordinary items, net of tax........................ -- (0.33) 3.15
Cumulative effect of accounting change, net of tax..... -- -- (0.10)
-------- --------- --------
Net loss............................................... $ (1.20) $ (21.82) $ (0.80)
======== ========= ========
Weighted average shares outstanding......................... 28,097 25,673 24,226
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 31
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(33,702) $(560,214) $ (19,303)
Adjustments to reconcile net loss to net cash used for
operating activities:
(Income) loss from discontinued operations................ (3,403) 71 706
Depreciation and amortization............................. 29,470 41,925 43,550
Gain on sale of subsidiaries.............................. (27,997) (12,229) (122,583)
Gain (loss) on long-lived assets.......................... (4,772) 391,322 7,098
Cumulative effect of accounting change.................... -- -- 4,094
Non-cash litigation settlement costs...................... 16,433 -- --
Early extinguishment of debt.............................. -- 12,145 --
Deferred income taxes..................................... -- 58,465 15,492
Changes in assets and liabilities, excluding effects of
acquisitions and divestitures:
Restricted cash......................................... (572) (2,504) (1,698)
Accounts receivable, billed............................. 8,703 13,800 (6,055)
Accounts receivable, unbilled........................... 3,863 13,471 1,054
Accounts payable........................................ 1,455 (514) 1,382
Accrued compensation.................................... 608 (5,392) 6,031
Accrued expenses........................................ (6) (3,712) (22,539)
Accrued litigation settlements.......................... (11,971) 32,639 52,500
Deferred revenue........................................ 2,107 2,124 9,216
Other, net.............................................. 820 6,966 6,961
-------- --------- ---------
Net cash used for continuing operations................. (18,964) (11,637) (24,094)
Net cash (used for) provided by discontinued
operations........................................... (2,942) 5,240 4,114
-------- --------- ---------
Net cash used for operating activities............. (21,906) (6,397) (19,980)
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired.......................... (32) (670) (6,103)
Purchases of property and equipment......................... (10,418) (23,789) (10,995)
Net proceeds from sale of subsidiaries...................... 47,986 103,204 126,375
Proceeds from sale of property and equipment................ 12,003 915 3,644
Software development costs.................................. (7,498) (4,515) (5,203)
-------- --------- ---------
Net cash provided by investing activities.......... 42,041 75,145 107,718
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock............................. 920 1,447 1,216
Proceeds from the exercise of stock options................. 217 5,688 6,104
Proceeds from borrowings.................................... -- 386,969 327,325
Payments of debt............................................ (1,042) (410,712) (398,058)
Debt issuance costs......................................... (285) (12,460) (13,596)
-------- --------- ---------
Net cash used for financing activities............. (190) (29,068) (77,009)
-------- --------- ---------
CASH AND CASH EQUIVALENTS:
Net change.................................................. 19,945 39,680 10,729
Balance at beginning of period.............................. 54,409 14,729 4,000
-------- --------- ---------
Balance at end of period.................................... $ 74,354 $ 54,409 $ 14,729
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 32
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PREFERRED TREASURY
COMMON STOCK PREFERRED STOCK PAID-IN ACCUMULATED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT WARRANTS AMOUNT
------- ------ --------- --------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1996...................... 71,705 $ 717 -- $ -- $666,673 $(158,696) $ -- $(169)
Issuance of common stock.... 205 2 -- -- 1,214 -- -- --
Exercise of stock options
(including tax benefit of
$2,762)................... 1,303 13 -- -- 8,594 -- -- 259
Net loss.................... -- -- -- -- -- (19,303) -- --
Other....................... (9) -- -- -- 2,517 50 -- (90)
------- ----- -- ------ -------- --------- ------ -----
BALANCE AT DECEMBER 31,
1997...................... 73,204 732 -- -- 678,998 (177,949) -- --
Issuance of common stock.... 272 3 -- -- 1,444 -- -- --
Exercise of stock options... 1,242 12 -- -- 5,582 (49) -- 143
Funding of litigation
settlements............... 3,985 40 -- -- 53,587 -- -- (70)
Net loss.................... -- -- -- -- -- (560,214) -- --
Other....................... 42 -- -- -- 403 (178) -- (161)
------- ----- -- ------ -------- --------- ------ -----
BALANCE AT DECEMBER 31,
1998...................... 78,745 787 -- -- 740,014 (738,390) -- (88)
Issuance of common stock.... 316 3 -- -- 917 -- -- --
Exercise of stock options... 159 2 -- -- 215 -- -- --
Funding of litigation
settlements............... 9,500 95 -- -- 30,131 -- 1,495 --
Reverse 1 for 3 stock
split..................... (59,151) (591) -- -- 567 -- -- --
Net loss.................... -- -- -- -- -- (33,702) -- --
Other....................... 6 -- -- -- 20 (123) 88
------- ----- -- ------ -------- --------- ------ -----
BALANCE AT DECEMBER 31,
1999...................... 29,575 $ 296 -- $ -- $771,864 $(772,215) $1,495 $ --
======= ===== == ====== ======== ========= ====== =====
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE AT DECEMBER 31,
1996...................... $ 508,525
Issuance of common stock.... 1,216
Exercise of stock options
(including tax benefit of
$2,762)................... 8,866
Net loss.................... (19,303)
Other....................... 2,477
---------
BALANCE AT DECEMBER 31,
1997...................... 501,781
Issuance of common stock.... 1,447
Exercise of stock options... 5,688
Funding of litigation
settlements............... 53,557
Net loss.................... (560,214)
Other....................... 64
---------
BALANCE AT DECEMBER 31,
1998...................... 2,323
Issuance of common stock.... 920
Exercise of stock options... 217
Funding of litigation
settlements............... 31,721
Reverse 1 for 3 stock
split..................... (24)
Net loss.................... (33,702)
Other....................... (15)
---------
BALANCE AT DECEMBER 31,
1999...................... $ 1,440
=========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 33
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of Per-Se Technologies, Inc. and its subsidiaries ("Per-Se" or the
"Company"). All significant intercompany transactions have been eliminated.
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform to the current year presentation. Per-Se completed the
sale of Medaphis Services Corporation ("Hospital Services") in 1998 and Impact
Innovations Group ("Impact") in 1999. The results of these segments are
classified as discontinued operations for all periods presented. See Note 2 for
further discussion of the Company's discontinued operations.
NATURE OF OPERATIONS. Per-Se provides business management services,
application software solutions and Internet-based connectivity primarily to the
healthcare industry throughout the United States. The Company historically has
not experienced any significant losses related to individual clients, classes of
clients or groups of clients in any geographical area.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION. Fees for the Company's business management services
are primarily based on a percentage of net collections on clients' patient
accounts, and revenue is recognized as such business management services are
performed. Accounts receivable, billed, represents amounts invoiced to clients.
Accounts receivable, unbilled, represents amounts recognized for services
rendered but not yet invoiced and is based on the Company's estimate of the fees
that will be invoiced when collections on patient accounts are received.
On December 3, 1999, the Securities and Exchange Commission (the
"Commission") issued Staff Accounting Bulletin Number 101, Revenue Recognition
in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the
Commission's views in applying generally accepted accounting principles to
revenue recognition in financial statements. SAB 101 provides interpretative
guidance on the unbilled accounts receivable and related revenue recognition
within the Company's industry. The Commission's guidance requires the accounting
change to be reflected by the Company's quarter ending March 31, 2000.
Therefore, consistent with the Commission's guidance and changing industry
practice, the Company will begin recognizing revenue in its Physician Services
segment on an "as billed" basis in fiscal 2000. The Company does not expect this
change to significantly affect annual recognized revenue amounts. The change in
accounting method will result in the elimination of approximately $38 million of
unbilled accounts receivable. The one-time, cumulative charge in the Company's
March 31, 2000 statement of operations will be approximately $23 million, on a
net of tax basis. This will have no effect on cash flow.
For software license sales where no significant contractual obligations
remain outstanding, the Company recognizes revenue upon shipment. For contracts
under which the Company is required to make significant production, modification
or customization changes, revenue from software licenses is recognized using the
percentage-of-completion method over the implementation period. Where services
are considered essential to the functionality of the arrangement, the software
license is recognized over the implementation period using the percentage of
completion method. When the Company receives payment prior to shipment or
fulfillment of significant vendor obligations, such payments are recorded as
deferred revenue and are recognized as revenue upon shipment or fulfillment of
significant vendor obligations. The license agreements typically provide for
partial payments upon shipment; such terms result in an unbilled receivable at
the date the revenue is recognized. Revenue from software implementation
services is recognized as the services are performed.
F-6
<PAGE> 34
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Software maintenance payments received in advance are deferred and recognized
ratably over the term of the maintenance agreement, which is typically one year.
Revenue from systems integration contracts is recorded based on the terms
of the underlying contracts, which are primarily time and material or fixed
price contracts. Revenue from time and material type contracts is recognized as
services are rendered and costs are incurred based on contractual rates. Revenue
from fixed price contracts is recorded using the percentage of completion
method. Anticipated losses, if any, are charged to operations in the period that
such losses are determined. Revenue for which customers have not yet been
invoiced is reflected as unbilled accounts receivable in the accompanying
consolidated balance sheets.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include all highly
liquid investments with an initial maturity of no more than three months.
RESTRICTED CASH. Restricted cash principally represents amounts collected
on behalf of certain clients, a portion of which is held in trust until remitted
to such clients. In 1999, the Company also had restrictions on $4.6 million of
its cash as security for certain of the Company's letters of credit.
PROPERTY AND EQUIPMENT. Property and equipment, including equipment under
capital leases, are stated at cost. Depreciation is computed using the straight
line method over the estimated useful lives of the assets, generally ten years
for furniture and fixtures, three to ten years for equipment and twenty years
for buildings.
INTANGIBLE ASSETS. Intangible assets are composed principally of goodwill,
client lists and software development costs.
Goodwill and Client Lists. Goodwill represents the excess of the cost of
the businesses acquired over the fair value of net identifiable assets at the
date of the acquisition and is amortized over its estimated useful life using
the straight-line method. The Company is amortizing its goodwill of $10.4
million over its remaining useful life of fifteen years and its client lists of
$21.3 million over their remaining estimated nine-year period of benefit.
The Company monitors events and changes in circumstances that could
indicate the carrying amounts of the intangible assets may not be recoverable.
When events or changes in circumstances are present that indicate the carrying
amount of intangible assets may not be recoverable, the Company assesses the
recoverability of the intangible assets by determining whether the carrying
value of such intangible assets will be recovered through undiscounted expected
future cash flows. Should the Company determine that the carrying values of
specific intangible assets are not recoverable, as was the case during 1998, the
Company would record a charge to reduce the carrying value of such assets to
their fair values. The Company determines fair value based on discounted
expected future cash flows during the period of benefit. See Note 5 where the
1998 impairment of intangibles assets is discussed. No impairment losses that
were related to goodwill or clients lists from continuing operations were
recorded in 1999 or 1997.
Software Development Costs. Intangible assets include software development
costs incurred in the development or the enhancement of software developed by
the Application Software and e-Health segments for resale. Software development
costs are capitalized upon the establishment of technological feasibility for
each product and capitalization ceases when the product or process is available
for general release to customers. Software development costs are amortized using
the straight-line method over the estimated economic lives of the assets, which
are generally three to five years.
STOCK-BASED COMPENSATION PLANS. The Company accounts for its stock-based
compensation plans under Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB No. 25"). In Note 12, the Company presents
the disclosure requirements of Statement of Financial Accounting Standards No.
123, Accounting for Stock-based Compensation ("SFAS No. 123"). SFAS No. 123
requires that companies which elect to not account for stock-based compensation
as prescribed by
F-7
<PAGE> 35
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that statement shall disclose, among other things, the pro forma effects on net
income (loss) and basic net income (loss) per share as if SFAS No. 123 had been
adopted.
LEGAL COSTS. The Company records charges for the legal and administrative
fees, costs and expenses and damages or settlements it anticipates incurring in
conjunction with its legal matters when management can reasonably estimate these
costs.
INCOME TAXES. Deferred income taxes are recognized for the tax
consequences of "temporary differences" between financial statement carrying
amounts and the tax bases of existing assets and liabilities. The measurement of
deferred tax assets and liabilities is predominantly determined by reference to
the tax laws and changes to such laws. Management includes the consideration of
future events in assessing the likelihood that tax benefits will be realized in
the future. See Note 13 where the Company discusses the realizability of the
deferred tax assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of the Company's
financial instruments, including total cash, accounts receivable, accounts
payable, accrued compensation, accrued expenses and current portion of long-term
debt approximates fair value.
BASIC NET LOSS PER COMMON SHARE. Basic net loss per common share is based
on the weighted average number of shares of common stock outstanding during the
period. Diluted net loss per common share is not presented as it is
antidilutive. Stock options and warrants are the only securities issued that
would have been included in the pro forma diluted earnings per share
calculation.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In November 1997, the Emerging
Issues Task Force ("EITF") issued EITF 97-13, Accounting for Costs Incurred in
Connection with a Consulting Contract or an Internal Project that Combines
Business Process Reengineering and Information Technology ("EITF 97-13"). EITF
97-13 requires process reengineering costs, as defined, which had been
previously capitalized as part of an information technology project to be
expensed in the quarter including November 1997. The Company recorded a charge
of $2.5 million, net of tax of $1.6 million, in the fourth quarter of 1997 as a
result of EITF 97-13.
SEGMENT REPORTING. In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the
way companies report information about operating segments including the related
disclosures about products and services. The Company adopted SFAS No. 131 during
the year ended December 31, 1997 and, as required, restated prior years for
comparability. See Note 16 where the Company discloses information about its
reportable segments.
COMPREHENSIVE INCOME. On January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Company's net loss, as presented in the Consolidated Statements of Operations,
approximates the Company's other comprehensive income amount, as defined, for
all periods presented.
2. DISCONTINUED OPERATIONS AND DIVESTITURES
Management initiated a plan to focus the Company's financial and management
resources on its three core healthcare segments, in an effort to return the
Company to profitability. Management defined these segments as: Physician
Services, Application Software and e-Health. In 1998, management began to seek
alternatives for the remaining non-core business segments: Hospital Services and
Impact. Although Hospital Services provided business management and accounts
receivable management services to approximately 1,200 hospitals, the Company's
management deemed the segment non-core as a substantial portion of the services
offered was bad debt collection. Impact was deemed non-core as it did not
provide consulting services to the healthcare industry.
F-8
<PAGE> 36
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 30, 1998, the Company completed the sale of Hospital Services
to NCO Group, Inc. ("NCO") for initial consideration of $107.5 million. In
February 1999, the Company received additional proceeds of $0.5 million based on
the Hospital Services final closing balance sheet. In addition, Per-Se could
receive a purchase price adjustment of up to $10.0 million subject to Hospital
Services' achievement of various operational targets in 1999. The purchase price
adjustment will be determined by the second quarter of 2000. The Company
recorded a $6.8 million gain, net of taxes of $5.4 million, as a result of this
sale.
In 1999, the Company completed the sale of both divisions of Impact. After
reviewing several alternatives for Impact throughout 1998, management concluded
a sale of this segment would generate the greatest return to the stockholders
and finalized its plan to sell Impact. The Company sold the commercial division
of Impact to Complete Business Solutions, Inc. ("CBSI") effective April 15, 1999
for $14.4 million, net of the final closing balance sheet adjustment of $0.6
million which was paid on July 16, 1999. The government division of Impact was
sold on December 17, 1999 to J3 Technology Services Corp. for initial
consideration of $45.0 million, subject to certain closing adjustments. The
Company recorded a $28.1 million gain as a result of the Impact sales.
Pursuant to APB No. 30, Reporting the Results of Operations -- Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, the consolidated financial
statements of the Company have been presented to reflect both Hospital Services
and Impact as discontinued operations for all periods presented.
The net operating results of these segments have been reported in the
Consolidated Statements of Operations as "Income (loss) from discontinued
operations"; the net assets have been reported in the Consolidated Balance
Sheets as "Net assets of discontinued operations"; and the net cash flows have
been reported in the Consolidated Statements of Cash Flows as "Net cash (used
for) provided by discontinued operations."
Summarized financial information for the discontinued operations is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997
------- ----------------------------- ------------------------------
HOSPITAL HOSPITAL
IMPACT SERVICES IMPACT TOTAL SERVICES IMPACT TOTAL
------- -------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue............................... $54,916 $100,081 $79,731 $179,812 $97,095 $101,524 $198,619
======= ======== ======= ======== ======= ======== ========
Income (loss) from discontinued
operations before income taxes...... 3,958 5,192 (5,263) (71) 9,508 (10,419) (911)
Income tax expense (benefit).......... 555 2,079 (2,079) -- 3,910 (4,115) (205)
------- -------- ------- -------- ------- -------- --------
Income (loss) from discontinued
operations, net of tax.............. $ 3,403 $ 3,113 $(3,184) $ (71) $ 5,598 $ (6,304) $ (706)
======= ======== ======= ======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------
IMPACT
-----------------------
(IN THOUSANDS)
<S> <C>
Current assets..................................... $16,399
Total assets....................................... 21,829
Current liabilities................................ 9,787
Total liabilities.................................. 9,957
Net assets of discontinued operations.............. 11,872
</TABLE>
On May 28, 1997, Per-Se sold Healthcare Recoveries, Inc. ("HRI") through an
initial public offering of 100% of its stock, which generated net proceeds to
the Company of $126.4 million and an extraordinary gain of $76.4 million, net of
taxes of $46.2 million. Per-Se acquired HRI on August 28, 1995 through a
business
F-9
<PAGE> 37
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
combination accounted for as a pooling-of-interests and therefore, the resultant
gain from the sale has been presented as an extraordinary item. The net proceeds
from the sale were used to pay down borrowings under the then-current debt
facility. At the time of the sale, HRI was not a separate reportable segment.
3. RESTRUCTURING AND OTHER CHARGES
Components of restructuring and other charges are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Restructuring charges....................................... $-- $1,289 $ 2,759
Property and equipment impairment........................... -- 681 4,959
Legal costs................................................. -- 1,999 2,600
Pooling charges............................................. -- -- (17)
Severance costs............................................. -- 1,222 2,524
Other....................................................... -- -- 3,916
-- ------ -------
$-- $5,191 $16,741
== ====== =======
</TABLE>
Restructuring Charges. In early 1995, the Company initiated a
reengineering program focused upon its billing and accounts receivable
management operations (the "Reengineering Project"). There were two components
of the Reengineering Project: (i) workflow, process and operational improvements
along with new technology development; and (ii) office consolidation within
Physician Services (the "Physician Services Restructuring Plan"). The Company
periodically reevaluates the adequacy of the reserves established for the
Physician Services Restructuring Plan and in 1999 and 1997 recorded an
additional charge of $0.3 million and $1.7 million, respectively, for lease
termination costs.
In August 1997, the Company adopted a plan to combine the operations of its
software and consulting companies and recorded charges of $0.5 million for the
costs associated with the termination of certain leases and $0.6 million for
severance costs related to approximately 10 employees who had been notified of
their termination. In 1999, the Company revised its plan to combine the
operations of its software and consulting companies and reduced the reserve for
lease termination costs by $0.3 million.
In 1998, Application Software recorded approximately $1.3 million of
restructuring costs for severance when management decided to restructure its
operations to more appropriately align Application Software's resources with
future operational needs and new product development. The severance costs relate
to approximately 35 employees, primarily in the areas of professional services
and research and development, who had been notified of their termination.
A description of the type and amount of restructuring costs recorded at the
commitment date and subsequently incurred for all of the restructurings
discussed above are as follows:
<TABLE>
<CAPTION>
RESERVE COSTS RESERVE COSTS RESERVE
BALANCE APPLIED BALANCE APPLIED BALANCE
JANUARY 1, RESERVE AGAINST DECEMBER 31, RESERVE AGAINST DECEMBER 31,
1997 ADJUSTMENTS RESERVE 1997 ADJUSTMENTS RESERVE 1998
---------- ----------- ------- ------------ ----------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Lease termination
costs.............. $5,314 $2,176 $(2,035) $5,455 $ -- $(1,163) $4,292
Severance............ -- 583 (425) 158 1,289 (299) 1,148
------ ------ ------- ------ ------ ------- ------
$5,314 $2,759 $(2,460) $5,613 $1,289 $(1,462) $5,440
====== ====== ======= ====== ====== ======= ======
<CAPTION>
COSTS RESERVE
APPLIED BALANCE
AGAINST DECEMBER 31,
RESERVE 1999
------- ------------
(IN THOUSANDS)
<S> <C> <C>
Lease termination
costs.............. $ (764) $3,528
Severance............ (875) 273
------- ------
$(1,639) $3,801
======= ======
</TABLE>
The terminated leases have various expiration dates through 2005 and the
severance will be paid during 2000.
F-10
<PAGE> 38
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment Impairment. In connection with the Company's
assessment of the recoverability of certain of its long-lived assets, the
Company recorded a charge of $5.0 million for impairment losses during 1997.
In 1998, the Company recorded a charge of $0.7 million related to the
write-down of certain properties held for sale to their net realizable value.
Legal Costs. In 1998 and 1997, the Company evaluated the adequacy of its
reserves for the legal and administrative fees, costs and expenses associated
with various legal matters and recorded a net charge of $2.0 million and $2.6
million, respectively.
Severance Costs. In 1995, management of Physician Services formalized an
involuntary severance benefit plan. The Company recorded charges of
approximately $0.5 million in 1997 in accordance with Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits,
to reflect the expense for employees' rights to involuntary severance benefits
that have accumulated to date.
In 1998 and 1997, the Company recorded charges of $1.2 million and $2.0
million, respectively, for severance costs associated with former executive
management.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 1,790 $ 3,861
Buildings................................................... 5,536 7,865
Furniture and fixtures...................................... 25,373 15,201
Equipment................................................... 102,844 95,383
Leasehold improvements...................................... 9,134 8,662
-------- --------
144,677 130,972
Less accumulated depreciation............................... 110,574 83,018
-------- --------
$ 34,103 $ 47,954
======== ========
</TABLE>
5. INTANGIBLE ASSETS AND IMPAIRMENT CHARGE
Intangible assets consists of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.................................................... $12,317 $12,317
Client lists................................................ 39,681 39,681
Software development costs.................................. 44,814 37,316
------- -------
96,812 89,314
Less accumulated amortization............................... 50,366 41,073
------- -------
$46,446 $48,241
======= =======
</TABLE>
At September 30, 1998, the Company recorded an intangible asset impairment
charge of $390.6 million to adjust the intangible assets of the Physician
Services segment to their fair value. Management regularly monitors its results
of operations and other developments within the industry to adjust its cash flow
forecast, as necessary, to determine if an adjustment is necessary to the
carrying value of the Company's intangible assets.
F-11
<PAGE> 39
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Expenditures on capitalized software development costs were approximately
$7.5 million, $4.5 million and $5.2 million in 1999, 1998 and 1997,
respectively. Amortization expense related to the Company's capitalized software
costs totaled $4.5 million, $5.0 million and $4.5 million in 1999, 1998 and
1997, respectively. The unamortized balance of software development costs at
December 31, 1999 and 1998 was $14.8 million and $11.8 million, respectively.
The Company recorded research and development expenses of approximately
$9.2 million, $10.8 million and $4.5 million in 1999, 1998 and 1997,
respectively.
6. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued interest............................................ $ 6,264 $ 6,253
Accrued restructuring and severance costs................... 2,331 3,711
Accrued legal costs......................................... 532 1,222
Accrued taxes............................................... 1,842 2,301
Funds due clients........................................... 3,419 753
Accrued costs of businesses acquired........................ 406 574
Other....................................................... 11,655 7,547
------- -------
$26,449 $22,361
======= =======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
9 1/2% Senior Notes due 2005 (the "Notes").................. $175,000 $175,000
Capital lease obligations, weighted average effective
interest rates of 8.7% and 7.7%........................... 38 135
Other....................................................... 2,100 945
-------- --------
177,138 176,080
Less current portion........................................ 2,138 1,067
-------- --------
$175,000 $175,013
======== ========
</TABLE>
On February 20, 1998, the Company sold the Notes. The Notes bear interest
at the rate of 9 1/2% per annum, payable semi-annually on February 15 and August
15, which commenced on August 15, 1998 and will mature on February 15, 2005. The
Notes will be redeemable at the option of the Company, in whole or in part, at
any time on or after February 15, 2002, at a declining premium to par until 2004
and at par thereafter, plus accrued and unpaid interest. In addition, at any
time on or prior to February 15, 2001, the Company may redeem up to 35% of the
original principal amount of the Notes at a redemption price equal to 109.5% of
the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, with the net cash proceeds of one or
more equity offerings; provided that at least $100 million aggregate principal
amount of the Notes remain outstanding immediately following any such
redemption.
Payment of principal, premium, if any, and interest on the Notes is fully
and unconditionally guaranteed, on a senior unsecured basis, jointly and
severally by all of the Company's present and future domestic restricted
subsidiaries (the "Subsidiary Guarantors"). The financial statements of the
Subsidiary Guarantors have not been presented as all subsidiaries, except for
certain insignificant foreign subsidiaries, have provided guarantees and the
parent company does not have any significant operations or assets, separate from
its
F-12
<PAGE> 40
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
investment in subsidiaries. Any non-guarantor subsidiaries are inconsequential
individually and in the aggregate to the consolidated financial statements.
At December 31, 1999, the estimated fair value of the Notes is
approximately $135.6 million based on the quoted market price for these Notes.
Although the fair value of the Notes is less than the carrying amount,
settlement at the reported fair value may not be possible. The carrying amounts
of the remaining debt reflected in the consolidated balance sheets approximate
fair value of such instruments due to the variable rate nature of substantially
all of this debt.
The Company entered into a $100 million credit facility (the "Credit
Facility") on February 20, 1998. The Company used the proceeds from the offering
of the Notes, together with the initial borrowing under this Credit Facility and
available cash, to repay $210 million under a previous debt facility plus
accrued interest. The Company paid a quarterly commitment fee on the unused
portion of the Credit Facility ranging from 0.25% to 0.75% per annum based on
the Company's leverage ratio. On November 30, 1998, the Company used $71.5
million of the $103.2 million net proceeds received from the sale of Hospital
Services to repay and terminate the Credit Facility. The Company recorded
charges in 1998 of $8.4 million, net of tax of $3.8 million, to write-off the
unamortized costs associated with both the Company's previous debt facility and
the Credit Facility.
It is the Company's policy to amortize debt issuance costs using the
straight-line method over the life of the debt agreement. Amortization expense
related to debt issuance costs for the years ended 1999, 1998 and 1997 were $1.2
million, $2.5 million and $3.0 million, respectively.
The Company's capital leases consist principally of leases for equipment.
As of December 31, 1999 and 1998, the net book value of equipment subject to
capital leases totaled $0.1 million and $0.2 million, respectively.
The aggregate maturities of long-term debt and capital lease obligations
are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 2,138
2001........................................................ --
2002........................................................ --
2003........................................................ --
2004........................................................ --
Thereafter.................................................. 175,000
--------
$177,138
========
</TABLE>
8. LEASE COMMITMENTS
The Company leases office space and equipment under noncancelable operating
leases, which expire at various dates through 2011. Rent expense was $16.7
million, $15.3 million and $17.9 million for the years ended December 31, 1999,
1998 and 1997, respectively.
Future minimum lease payments under noncancelable operating leases are as
follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $16,483
2001........................................................ 12,822
2002........................................................ 11,139
2003........................................................ 8,926
2004........................................................ 7,232
Thereafter.................................................. 6,858
-------
$63,460
=======
</TABLE>
F-13
<PAGE> 41
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LEGAL MATTERS
SETTLED LEGAL MATTERS
In October 1999, the Company and Foundation Health Services, Inc.
("Foundation"), formerly Health Systems International, Inc., settled litigation
arising out of Per-Se's acquisition of Health Data Sciences Corporation ("HDS")
in June of 1996. Pursuant to the settlement, Foundation realized $25.0 million
from its investment in HDS, consisting of $3.6 million from the sale of 325,590
shares of Per-Se Common Stock received by Foundation in the June 1996 HDS
transaction, $4.6 million in cash funded by the Company's insurers, $5.0 million
in cash paid by the Company and $11.8 million from the October 1999 sale by
Foundation of 1,333,333 shares of Per-Se Common Stock issued to Foundation.
On June 24, 1999, the Company entered into a settlement agreement with the
former shareholders of Medical Management Sciences, Inc. ("MMS") related to
claims arising out of Per-Se's acquisition of MMS in December of 1995. The
litigation has been dismissed with prejudice. The settlement agreement provided
for the issuance by the Company to the MMS Shareholders of 166,667 shares of
Common Stock and warrants to purchase an additional 166,667 shares of Common
Stock. In addition, the Company entered into a five-year consulting agreement
with Providence Management Corporation, a company controlled by a former MMS
shareholder, providing for a $300,000 up front payment and $150,000 a year for
the five-year term. The Company also paid the MMS Shareholders $375,000 for the
MMS Shareholders' interest in a malpractice claim.
On June 21, 1999, the Company finalized the settlement with the United
States government concerning its investigation of the Company's wholly-owned
subsidiary, PST Emergency Medicine Services, Inc. (the "Emergency Medicine
division"), formerly Gottlieb's Financial Services, Inc., requiring the Company
to pay to the United States and the various states a total of $15.0 million. The
Company paid $6.8 million to the United States on June 29, 1999, $1.2 million on
September 30, 1999, $2.2 million, in the aggregate, to the participating states
on October 1, 1999 and $1.2 million to the United States on December 31, 1999.
The balance of $3.6 million will be paid in $0.9 million increments to the
United States at the end of each calendar quarter of 2000. The deferred portion
of the settlement payment will bear interest at the one-year Treasury Bill rate.
All pending claims against the Company by the United States and the Relator in
underlying qui tam litigation have been dismissed with prejudice and the United
States has released the Company from all civil and administrative claims arising
out of the emergency room billing of government programs services provided by
the Emergency Medicine division from 1993 through the date of the settlement
agreement with the United States. The settlement agreements with the
participating states provide for the release of the Company by the states of all
civil and administrative claims arising out of the emergency room billing
services provided by the Emergency Medicine division from 1993 through the date
of the settlement agreement with the individual state.
On June 16, 1999, the Company agreed to settle certain contract claims
arising out of a 1996 contract for emergency room billing services to be
provided by the Emergency Medicine division to Spectrum Healthcare, Inc.
("Spectrum") and Emcare, Inc. ("Emcare"), the successor to Spectrum's emergency
business. The Company paid Emcare $1.75 million in cash in exchange for a
release by Spectrum and Emcare of all claims against the Emergency Medicine
division for breach of contract.
On January 28, 1998, SCI Management Corporation ("SCI") filed a complaint
against BSG Alliance/IT, Inc. (later known as Impact Innovations Group, Inc.)
seeking recovery for alleged damages in connection with work performed by the
commercial division of Impact under a consulting contract. The Company sold the
commercial division of Impact effective April 15, 1999 but retained
responsibility for this matter. The Company and SCI reached an agreement to
refund $5.3 million to SCI and on November 4, 1999, the Company paid $3.2
million to SCI and issued a promissory note for $2.1 million bearing interest at
8.25% payable on October 31, 2000.
F-14
<PAGE> 42
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENDING LEGAL MATTERS
On May 10, 1999, a motion to reopen a putative class action complaint filed
by Ernest Hecht and Stephen D. Strandberger was granted. During 1998, this case
had been dismissed with prejudice and without leave to amend. The reinstated
appeal is pending. The Company is unable to estimate the final outcome and any
loss related to this matter.
On January 8, 1997, the Commission notified the Company that it was
conducting a formal, non-public investigation into, among other things, former
officers and Company transactions including the restatements of the Company's
consolidated financial statements for the three months and year ended December
31, 1995 and its unaudited balance sheets as of March 31, 1996 and June 30,
1996. The Company continues to monitor the investigation as it proceeds.
The Company is subject to claims and litigation in the ordinary course of
its business. Within the Company's industry, federal and state civil and
criminal laws govern medical billing and collection activities. These laws
provide for various fines, penalties, multiple damages, assessments and
sanctions for violations, including possible exclusion from Medicare, Medicaid
and certain other federal and state healthcare programs. The Company and its
clients have received, and the Company may continue to receive, official
inquiries concerning billing and collection practices.
The Company believes that it has meritorious defenses to the claims
assessed in legal matters. There can be no assurance that existing or future
claims, government investigations, including the Commission investigation, and
legal matters will not have an adverse effect on the Company. Since the Company
is unable to estimate a range of awards or losses, if any, on pending legal
matters, no amounts have been reflected in the financial statements unless
noted.
10. CAPITAL STOCK
On November 23, 1999, a special meeting of the Company's stockholders was
held at which the stockholders approved a one-for-three reverse split of the
Company's Common Stock (the "Reverse Split"). The Reverse Split reduced the
number of shares of the Company's Common Stock outstanding to approximately 30
million from approximately 90 million. This enabled the Company to bring its
number of outstanding shares down to a level more consistent with companies of
similar size and to maintain compliance with The Nasdaq Stock Market (R)
("Nasdaq") listing requirements. The Reverse Split had no effect on the number
of shares that the Company is authorized to issue and no effect on the $0.01 par
value of the Common Stock. No fractional shares were issued in the Reverse
Split; instead, stockholders will be paid cash for any fractional shares. The
numbers of shares, per share amounts and market prices of the Company's Common
Stock set forth herein have been retroactively adjusted for all periods
presented to reflect the Reverse Split.
On June 17, 1997, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to authorize the
Board of Directors to issue from time to time, without further stockholder
action (unless required in a specific case by applicable Nasdaq rules), 20
million shares of one or more series of preferred stock (the "Preferred Stock"),
with such terms and for such consideration as the Board of Directors may
determine.
The flexibility to issue shares of one or more series of Preferred Stock,
in general, may have the effect of discouraging an attempt to assume control of
a Company by a present or future stockholder or of hindering an attempt to
remove the Company's incumbent management. Stockholders of the Company do not
have preemptive rights to subscribe for or purchase any shares of Preferred
Stock that may be issued in the future. Upon issuance, outstanding Preferred
Stock would rank senior to the Common Stock and non-voting common stock with
respect to dividends and liquidation rights. Depending on the voting rights
applicable to each series of Preferred Stock, the issuance of shares of
Preferred Stock could dilute the voting power of the holders of the Common
Stock.
F-15
<PAGE> 43
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCKHOLDERS' RIGHTS PLAN
On January 21, 1999, the Company's Board of Directors approved a
stockholders' rights plan (the "Rights Plan"). Pursuant to the Rights Plan, the
Company declared a dividend of one right for each outstanding share of Common
Stock to stockholders of record at the close of business on February 16, 1999
(the "Record Date"). Each right entitles the registered holder to purchase from
the Company a unit consisting of one one-hundredth of a share (a "Unit") of
Series A Junior Participating Preferred Stock, without par value (the "Series A
Preferred Stock"), at a purchase price of $75 per Unit, as adjusted for the
Reverse Split.
Initially, the rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate rights certificates will
be distributed. Subject to certain exceptions specified in the Rights Plan, the
rights will separate from the Common Stock and a distribution date will occur
upon the earlier of (i) 10 business days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired beneficial ownership of 15% or more of the outstanding shares of Common
Stock other than as a result of repurchases of stock by the Company or certain
inadvertent actions by institutional or certain other stockholders or the date a
person has entered into an agreement or arrangement with the Company or any
subsidiary of the Company providing for an Acquisition Transaction (the "Stock
Acquisition Date") or (ii) 10 business days following the commencement of a
tender offer.
In the event that a person becomes an Acquiring Person, except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair and not inadequate to and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from
one or more investment banking firms (a "Qualifying Offer"), each holder of a
right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the right.
Until a right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
rights as set forth above.
12. COMMON STOCK OPTIONS AND STOCK AWARDS
The Company has several stock option plans including a Non-Qualified Stock
Option Plan, a Non-Qualified Stock Option Plan for Employees of Acquired
Companies and a Non-Qualified Stock Option Plan for Non-Executive Employees.
Granted options expire 10 to 11 years after the date of grant and generally vest
over a three-to-five-year period. The total number of options available for
future grant under these stock options plans was approximately 1.7 million at
December 31, 1999.
The Company also has a Non-Employee Director Stock Option Plan (the
"Director Plan") for non-employees who serve on the Company's Board of
Directors. The Director Plan provides for an initial grant of 3,333 options at a
strike price corresponding to the average of the fair market values for the five
trading days prior to the date of the grant. Additionally, each non-employee
director receives an annual grant of 666 options at each subsequent annual
meeting in which the non-employee director is a member of the Board of
Directors. All options granted under the Director Plan originally vested over a
five-year period and expired eleven years from the date of grant. On April 1,
1999, the Director Plan was amended so that all options granted under the
Director Plan fully vest as of the date of grant but shall not become
exercisable until one year after the date of grant. As of December 31, 1999, the
Company had 7,211 options available for future grant under this plan.
F-16
<PAGE> 44
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a Senior Executive Non-Qualified Stock Option Plan which
permits certain of the Company's former executive officers to purchase up to an
aggregate of 183,582 shares of the Company's Common Stock at $6 per share. All
remaining options available for grant under this plan have been granted.
Currently, there are 26,667 options exercisable that will expire January 16,
2001.
Activity related to all stock option plans and warrants, is summarized as
follows (shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ ---------------- ------ ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding as of
January 1.............. 3,705 $16.62 3,048 $17.89 3,709 $26.24
Granted.................. 401 10.15 1,997 16.23 3,154 18.63
Exercised................ (53) 4.03 (414) 13.91 (434) 14.28
Canceled................. (933) 16.65 (926) 21.13 (3,381) 28.20
------ ------ -------
Options outstanding as of
December 31............ 3,120 $16.00 3,705 $16.62 3,048 $17.89
====== ====== =======
Options exercisable as of
December 31............ 1,592 $17.23 1,281 $16.85 1,185 $16.92
====== ====== =======
Weighted-average fair
value of options
granted during the
year................... $ 6.31 $ 7.53 $ 9.15
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999 (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- ------------------------
WEIGHTED- NUMBER
NUMBER AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
OUTSTANDING AT REMAINING AVERAGE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 1999 LIFE PRICE 1999 PRICE
- ------------------------ -------------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$0.066 to $6.00......................... 95 2.23 $ 3.81 95 $ 3.81
$7.83 to $13.05......................... 1,013 9.53 9.69 309 9.85
$13.594 to $22.50....................... 1,649 7.66 17.20 946 17.21
$26.10 to $29.625....................... 286 7.61 28.64 180 28.61
$30.00 to $135.00....................... 77 6.09 41.51 62 41.94
----- -----
$0.066 to $135.00....................... 3,120 8.06 16.00 1,592 17.23
===== =====
</TABLE>
On April 25, 1997, the Compensation Committee of the Board of Directors of
the Company approved an adjustment of the exercise price for certain outstanding
employee stock options, which had an exercise price of $16.50 and above. The
revised exercise price of $16.125 was established by reference to the closing
price of the Company's Common Stock on April 25, 1997. The outstanding options
held by then-current executive officers of the Company were adjusted as part of
such option restrike, but no adjustments were made to any options held by
directors or former employees of the Company. In approving the adjustment, the
Compensation Committee relied upon the views of its outside advisors with
respect to the legal, accounting and compensation issues associated with the
action and took into consideration, among other things, the following factors:
(i) the Company historically had paid salaries which were at or below market
levels and had made up for lower salaries through stock option grants to
employees; (ii) the Company historically had used stock options as its principal
long-term incentive program; (iii) the highly skilled employees of the Company
possessed marketable skills; and (iv) senior management of the Company believed
that there was potential for increased
F-17
<PAGE> 45
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
attrition among its key employees and that adjustment of the exercise price of
the outstanding options would significantly help to mitigate such risk.
The Company accounts for its stock-based compensation plans under APB No.
25. As a result, the Company has not recognized compensation expense for stock
options granted to employees with an exercise price equal to the quoted market
price of the Common Stock on the date of grant and which vest based solely on
continuation of employment by the recipient of the option award. The Company
adopted SFAS No. 123 for disclosure purposes in 1996. For SFAS No. 123 purposes,
the fair value of each option grant and stock based award has been estimated as
of the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Expected life (years)....................................... 4.50 3.74 4.33
Risk-free interest rate..................................... 5.78% 5.09% 6.39%
Dividend rate............................................... 0.00% 0.00% 0.00%
Expected volatility......................................... 76.22% 61.66% 54.09%
</TABLE>
In June of 1999, in connection with the settlement with the former
shareholders of MMS, the Company issued warrants to purchase 166,667 shares of
Common Stock. These warrants are currently exercisable at an exercise price of
$15.9375 per share and will expire in 2004.
During 1998, in connection with the settlement of a putative class action
law suit, the Company issued warrants to purchase 1,769,841 shares of Common
Stock. These warrants are currently exercisable at an exercise price of $36.00
per share and will expire in 2003.
Had compensation cost been determined consistent with SFAS No. 123,
utilizing the assumptions detailed above, the Company's pro forma net loss and
pro forma basic loss per share would have increased to the following pro forma
amounts:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Pro forma net loss:
As reported......................................... $(33,702) $(560,214) $(19,303)
Pro forma -- for SFAS No. 123....................... (52,686) (573,791) (34,374)
Pro forma basic net loss per share:
As reported......................................... $ (1.20) $ (21.82) $ (0.80)
Pro forma -- for SFAS No. 123....................... (1.88) (22.35) (1.42)
</TABLE>
Because the method of accounting under SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that expected in future years.
Per-Se has never paid cash dividends on its Common Stock. The Indenture
dated as of February 20, 1998, with respect to the Company's outstanding 9 1/2%
Senior Notes due 2005, contains restrictions on the Company's ability to declare
or pay cash dividends on its Common Stock.
F-18
<PAGE> 46
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. INCOME TAXES
Income tax (benefit) expense is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $ -- $ -- $ 943
State..................................................... (1,165) 1,234 6,092
Deferred:
Federal................................................... (5,806) (127,783) 10,629
State..................................................... (797) (17,524) 1,620
Foreign................................................... -- -- 380
Valuation allowance......................................... 6,603 203,772 8,126
------- --------- --------
Total income tax (benefit) expense................ (1,165) 59,699 27,790
Income tax benefit (expense) on extraordinary item.......... -- 3,779 (46,192)
Cumulative effect of accounting change...................... -- -- 1,629
Income tax benefit (expense) on discontinued operations..... 555 (5,013) 205
------- --------- --------
Income tax (benefit) expense on continuing operations....... $ (610) $ 58,465 $(16,568)
======= ========= ========
</TABLE>
A reconciliation between the amount determined by applying the federal
statutory rate to loss before income taxes and income tax (benefit) expense is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at federal statutory rate................ $(11,582) $(175,172) $(38,182)
State taxes, net of federal benefit......................... (1,588) (24,024) (5,236)
Nondeductible goodwill amortization......................... -- 2,927 3,241
Nondeductible deal costs of business combinations........... -- -- (38)
Nondeductible litigation settlement......................... 6,749 6,900 13,097
Nondeductible write-off of goodwill......................... -- 43,558 --
Valuation allowance......................................... 6,603 203,772 8,126
Foreign..................................................... -- -- 541
Other....................................................... (792) 504 1,883
-------- --------- --------
$ (610) $ 58,465 $(16,568)
======== ========= ========
</TABLE>
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities and available tax credit
carryforwards. The components of deferred taxes at December 31, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current:
Accounts receivable, unbilled............................... $(23,310) $(27,095)
Acquisition accruals........................................ 663 461
Accrued expenses............................................ 20,164 38,978
Valuation allowance......................................... (5,496) (24,279)
Other....................................................... 7,979 11,935
-------- --------
$ -- $ --
======== ========
</TABLE>
F-19
<PAGE> 47
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Noncurrent:
Net operating loss carryforwards............................ $151,266 $126,093
Valuation allowance......................................... (231,339) (205,953)
Depreciation and amortization............................... 78,060 77,847
Other....................................................... 2,013 2,013
-------- --------
$ -- $ --
======== ========
</TABLE>
At December 31, 1999, the Company had projected federal net operating loss
carryforwards ("NOLs") for income tax purposes of approximately $380 million,
which consist of $312 million of consolidated NOLs and $68 million of separate
return limitation year NOLs. The NOLs will expire at various dates between 2004
and 2019.
As of December 31, 1999, the Company has a deferred tax asset of $236.8
million, which is offset by a valuation allowance of $236.8 million. Realization
of the deferred tax asset is dependent upon the Company generating sufficient
taxable income prior to the expiration of the NOLs. If, during future periods,
management believes the Company will generate sufficient taxable income to
realize the deferred tax asset, the Company will adjust this valuation reserve
accordingly.
14. EMPLOYEE BENEFIT PLANS
The Company has various defined contribution plans whereby employees
meeting certain eligibility requirements can make specified contributions to the
plans, a percentage of which are matched by the Company. The Company's
contribution expense was $1.8 million, $1.7 million and $1.9 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
The Company maintains a noncontributory money purchase pension plan that
covers substantially all employees who are retained by the Company primarily to
service specific physician clients. Contributions are determined annually by the
Company not to exceed the maximum amount deductible for federal income tax
purposes. The Company's contribution to the plan were $0.3 million, $0.7 million
and $0.9 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
In July 1999, the Company's Board of Directors approved the termination of
the Company's Employee Stock Purchase Plan ("ESPP") effective as of the close of
business on December 31, 1999.
15. CASH FLOW INFORMATION
Supplemental disclosures of cash flow information and non-cash investing
and financing activities were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Non-cash investing and financing activities:
Additions to capital lease obligations.................. $ -- $ 42 $ --
Common Stock issued upon funding of litigation
settlements.......................................... 30,226 53,557 --
Issuance of promissory note............................. 2,100 -- --
Issuance of stock warrants.............................. 1,495 -- --
Cash paid for:
Interest................................................ 16,956 15,371 19,835
Income taxes............................................ 946 1,484 10,747
</TABLE>
F-20
<PAGE> 48
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT REPORTING
The Company's reportable segments are strategic business units that offer
different services and products. Per-Se provides its services and products
through its three operating segments: Physician Services, Application Software
and e-Health.
Physician Services provides business management services to physicians and
healthcare organizations, including clinical data collection, data input,
medical coding, billing, contract management, cash collections and accounts
receivable management. These services are designed to assist healthcare
providers with the business management functions associated with the delivery of
healthcare services, allowing physicians and hospital staff to focus on
providing quality patient care. These services also assist physicians and
healthcare organizations in improving cash flows and reducing administrative
costs and burdens.
The Application Software segment provides financial and clinical software
including patient scheduling, staff management, clinical information systems and
patient financial management software. These applications enable healthcare
organizations to simultaneously optimize the quality of care delivered and the
profitability of business operations.
The e-Health segment offers Internet-enabled and private network
connectivity to both integrated healthcare delivery networks and physician
practices, including electronic claims processing, referral submissions,
eligibility verification and other electronic and paper transaction processing.
In addition, e-Health offers physician practice management software as
Application Service Provider ("ASP") to physician practices.
Certain expenses previously included in Corporate overhead have been
reclassified to the Physician Services segment and the Application Software
segment for all periods presented.
HRI provided subrogation and related recovery services primarily to
healthcare payers and was sold on May 28, 1997.
Per-Se evaluates each segment's performance based on operating profit or
loss. The Company accounts for intersegment sales as if the sales were to third
parties.
Information concerning the operations in these reportable segments is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Physician Services................................... $240,200 $264,323 $278,475
Application Software................................. 62,145 70,849 85,037
e-Health............................................. 31,343 25,886 25,342
HRI.................................................. -- -- 14,720
Eliminations......................................... (11,559) (11,235) (11,154)
-------- -------- --------
$322,129 $349,823 $392,420
======== ======== ========
</TABLE>
F-21
<PAGE> 49
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating (loss) profit (1):
Physician Services................................... $ (5,541) $(12,608) $(11,402)
Application Software................................. (1,071) (8,932) 19,560
e-Health............................................. (190) (912) 613
HRI.................................................. -- -- 3,685
Corporate............................................ (17,671) (22,727) (28,908)
-------- -------- --------
$(24,473) $(45,179) $(16,452)
======== ======== ========
Interest expense, net.................................. $ 16,102 $ 23,494 $ 23,398
======== ======== ========
Restructuring and other charges
(including intangible asset impairment
and litigation settlements):
Physician Services................................... $ 2,086 $411,139 $ 7,394
Application Software................................. (336) 1,245 1,006
Corporate............................................ 23,061 19,435 60,841
-------- -------- --------
$ 24,811 $431,819 $ 69,241
======== ======== ========
Loss before income taxes............................... $(65,386) $(500,492) $(109,091)
======== ======== ========
Depreciation and amortization:
Physician Services................................... $ 15,674 $ 28,340 $ 34,360
Application Software................................. 6,793 7,342 5,258
e-Health............................................. 2,429 1,912 1,630
HRI.................................................. -- -- 401
Corporate............................................ 4,574 4,331 1,901
-------- -------- --------
$ 29,470 $ 41,925 $ 43,550
======== ======== ========
Capital expenditures:
Physician Services................................... $ 7,422 $ 15,836 $ 5,646
Application Software................................. 1,242 2,863 1,697
e-Health............................................. 882 2,300 1,089
HRI.................................................. -- -- 108
Corporate............................................ 872 2,790 2,455
-------- -------- --------
$ 10,418 $ 23,789 $ 10,995
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Identifiable assets:
Physician Services........................................ $116,423 $134,485
Application Software...................................... 39,265 46,917
e-Health.................................................. 18,904 18,403
Corporate (2)............................................. 90,425 86,916
-------- --------
$265,017 $286,721
======== ========
</TABLE>
- ---------------
(1) Excludes restructuring and other charges, litigation settlements, intangible
asset impairment and interest expense.
(2) 1998 includes net assets of $11,872 related to discontinued operations.
F-22
<PAGE> 50
PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1999 (1)(2):
Revenue....................................... $ 81,374 $ 82,357 $ 81,270 $77,128
Net loss from continuing operations........... (14,570) (39,984) (4,685) (5,537)
Discontinued operations....................... 774 4,374 (4,604) 30,530
Net (loss) income............................. (13,796) (35,610) (9,289) 24,993
Net loss per common share from continuing
operations................................. (0.55) (1.44) (0.16) (0.19)
Discontinued operations per common share...... 0.03 0.16 (0.15) 1.03
Net (loss) income per common share............ $ (0.52) $ (1.28) $ (0.31) $ 0.84
Weighted average shares outstanding........... 26,309 27,775 28,465 29,798
1998 (3)(4):
Revenue....................................... $ 95,347 $ 89,330 $ 81,980 $83,166
Net loss from continuing operations........... (6,645) (31,886) (513,158)(5) (7,268)
Discontinued operations....................... 1,494 2,071 (2,847) 6,425(6)
Extraordinary items........................... (5,557) -- -- (2,843)
Net loss...................................... (10,708) (29,815) (516,005) (3,686)
Net loss per common share from continuing
operations................................. (0.27) (1.24) (19.57) (0.28)
Discontinued operations per common share...... 0.06 0.08 (0.11) 0.24
Extraordinary item per common share........... (0.23) -- -- (0.10)
Net loss per common share..................... $ (0.44) $ (1.16) $ (19.68) $ (0.14)
Weighted average shares outstanding........... 24,493 25,712 26,218 26,242
</TABLE>
- ---------------
(1) The quarterly periods ended June 30, 1999 and September 30, 1999 also
included the impact of $29.2 million and $(4.4) million, respectively, of
charges for litigation settlements.
(2) The quarterly periods ended March 31, 1999, June 30, 1999, September 30,
1999 and December 31, 1999 also included the impact of $0.5 million, $4.0
million, $(6.0) million and $29.2 million, respectively, of gain (loss) on
the sale of discontinued operations.
(3) The quarterly periods ended March 31, 1998, June 30, 1998, September 30,
1998 and December 31, 1998 included the impact of $0.6 million, $1.0
million, $1.8 million and $1.8 million, respectively, of restructuring and
other charges. See Note 3 for a detailed explanation of these charges.
(4) The quarterly periods ended June 30, 1998, September 30, 1998 and December
31, 1998 also included the impact of $21.9 million, $19.5 million and $(5.4)
million, respectively, of charges for litigation settlements.
(5) The quarterly period ended September 30, 1998 also included the impact of a
$390.6 million intangible asset impairment charge.
(6) The quarterly period ended December 31, 1998 also included the gain on the
sale of Hospital Services of $7.2 million, net of tax.
F-23
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Per-Se Technologies, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated February 8, 2000 appearing in the 1999 Annual Report on Form 10-K
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 8, 2000
F-24
<PAGE> 52
PER-SE TECHNOLOGIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
----------- ---------- ---------- -------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999
Allowance for doubtful accounts............ $ 20,723 $ 4,991 -- $(11,213) $ 14,501
Valuation allowance for deferred taxes..... 230,232 -- -- 6,603 236,835
Year Ended December 31, 1998
Allowance for doubtful accounts............ $ 10,746 $ 14,269 -- $ (4,292) $ 20,723
Valuation allowance for deferred taxes..... 26,460 203,772 -- -- 230,232
Year Ended December 31, 1997
Allowance for doubtful accounts............ $ 8,146 $ 6,459 $43 $ (3,902) $ 10,746
Valuation allowance for deferred taxes..... 18,334 8,126 -- -- 26,460
</TABLE>
F-25
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
PER-SE TECHNOLOGIES, INC.
Per-Se Technologies, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The name under which the Corporation originally was
incorporated was MDSC Holding, Inc. The date of filing of the Corporation's
original Certificate of Incorporation with the Secretary of State of Delaware
was November 15, 1985. The Corporation changed its corporate name to Medaphis
Corporation on April 28, 1989, and from Medaphis Corporation to Per-Se
Technologies, Inc. on August 16, 1999.
2. The provisions of the Corporation's Certificate of
Incorporation as heretofore amended, restated and supplemented, which are
currently in effect and operative, are hereby integrated into the Restated
Certificate of Incorporation hereinafter set forth (the "Restated
Certificate").
3. The Restated Certificate was duly adopted by the Board of
Directors of the Corporation without a vote of the Corporation's stockholders
in accordance with Section 245 of the General Corporation Law of the State of
Delaware.
4. The Restated Certificate only restates and integrates and
does not further amend the provisions of the Corporation's Certificate of
Incorporation as heretofore amended, restated and supplemented, and there is no
discrepancy between those provisions and the provisions of the Restated
Certificate.
5. The undersigned officer of the Corporation hereby
acknowledges that this is the act and deed of the Corporation and that the
facts stated herein are true.
6. Effective upon the filing of this instrument with the
Secretary of State of Delaware, the Corporation's Certificate of Incorporation
as heretofore amended, restated and supplemented, shall be superseded by the
Restated Certificate.
7. The Restated Certificate is as follows:
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
PER-SE TECHNOLOGIES, INC.
FIRST: The name of the Corporation is Per-Se Technologies, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: Number of Shares. The aggregate number of shares of all
classes of stock which the Corporation shall have authority to issue is
220,600,000, consisting of 200,000,000 shares of Common Stock, $.01 par value
(herein called "Common Stock"), 600,000 shares of Non-Voting Common Stock, $.01
par value (herein called "Non-Voting Common Stock"), and 20,000,000 shares of
Preferred Stock, no par value (herein called "Preferred Stock"). All
cross-references in each subdivision of this Article Fourth refer to other
paragraphs in such subdivision unless otherwise indicated.
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, of each class of stock of the Corporation:
I.
COMMON STOCK
1. Dividends. The holders of shares of Common Stock shall be
entitled to receive such dividends as from time to time may be declared by the
Board of Directors of the Corporation, subject to the rights of holders of
Non-Voting Common Stock provided for herein.
2. Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Common Stock and the holders of Non-Voting Common Stock shall be entitled to
share ratably based upon the number of shares held by them in all assets of the
Corporation available for distribution to its stockholders.
3. Voting Rights. All shares of Common Stock shall be identical
with each other in every respect. The shares of Common Stock shall entitle the
holders thereof to one vote for each share upon all matters upon which
stockholders have the right to vote.
2
<PAGE> 3
II.
NON-VOTING COMMON STOCK
1. Dividends. The holders of shares of Non-Voting Common Stock
shall be entitled to receive such dividends as from time to time may be
declared by the Board of Directors of the Corporation. No dividend will be
declared or paid on Common Stock unless an equivalent per share dividend is
declared and paid on the Non-Voting Common Stock. In the event that the holders
of Common Stock receive a dividend payable in shares of Common Stock, then
holders of Non-Voting Common Stock shall receive an equivalent dividend,
payable in shares of Non-Voting Common Stock.
2. Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Common Stock and the holders of Non-Voting Common Stock shall be entitled to
share ratably based upon the number of shares held by them in all assets of the
Corporation available for distribution to its stockholders.
3. Voting Rights. Holders of Non-Voting Common Stock shall have
no rights to vote except as provided by law.
4. Conversion.
4A. Right to Convert. Subject to the terms and conditions of this
paragraph 4, the holder of any share or shares of Non-Voting Common Stock shall
have the right, at its option and at any time, to convert any whole number of
such shares of Non-Voting Common Stock (except that upon any liquidation of the
Corporation the right of conversion shall terminate at the close of business on
the last full business day next preceding the date fixed for payment of the
amount distributable on Non-Voting Common Stock) into an equal number of
fully-paid and nonassessable whole shares of Common Stock. Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of whole shares of Non-Voting
Common Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office of the Corporation as the Corporation
may designate by notice in writing to the holder or holders of Non-Voting
Common Stock) at any time during its usual business hours, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
4B. Issuance of Certificates; Time Conversion Effected. Promptly
after the receipt of the written notice referred to in subparagraph 4A and
surrender of the certificate or certificates for the share or shares of
Non-Voting Common Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Non-Voting Common Stock. To the extent permitted by law,
such conversion shall be deemed to have been effected immediately prior to the
3
<PAGE> 4
close of business on the day the certificate or certificates for such share or
shares shall have been surrendered as aforesaid, and at such time the rights of
the holder of such share or shares of Non-Voting Common Stock shall cease, and
the person or persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the share or shares
represented thereby.
4C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Non-Voting Common Stock
into Common Stock and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Stock issued upon
such conversion. At the time of each conversion, the Corporation shall pay in
cash an amount equal to all dividends accrued and unpaid (if any) on the shares
of Non-Voting Common Stock surrendered for conversion to the date upon which
such conversion is deemed to take place as provided in subparagraph 4B. In case
the number of shares of Non-Voting Common Stock represented by the certificate
or certificates surrendered pursuant to subparagraph 4A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder thereof, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Non-Voting Common Stock
represented by the certificate or certificates surrendered which are not to be
converted.
5. Subdivision or Combination of Stock. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, then the Non-Voting Common Stock shall be similarly
subdivided, and conversely, in case the outstanding shares of Common Stock
shall be combined into a smaller number of shares, then the number of shares of
Non-Voting Common Stock outstanding immediately prior to such combination shall
be proportionately reduced.
III.
PREFERRED STOCK
1. Issuance. The Preferred Stock may be issued, from time to
time, in one or more series, each of such series to have such voting powers,
full or limited or no voting powers, and such designations, preferences, and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions with respect thereto as are stated and expressed
herein, in any amendment or amendments to this Restated Certificate of
Incorporation, or in any resolution or resolutions establishing such series as
are adopted by the Board of Directors as hereinafter provided, and as are
acknowledged, filed and recorded in accordance with the laws of the State of
Delaware and as are not inconsistent with this Article Fourth or any other
provision of this Restated Certificate of Incorporation.
2. Rights, Designations and Preferences. Authority is hereby
expressly granted to the Board of Directors, subject to the provisions of this
Article Fourth, to authorize the issuance of one or more series of Preferred
Stock with such voting powers, full or limited, or no voting powers, and
4
<PAGE> 5
such designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof as the
Board of Directors may determine, including without limitation the foregoing,
to fix by resolution or resolutions providing for the issuance of each such
series:
(a) The distinctive designation of such series and the
number of shares which shall constitute such series;
(b) The amount of the consideration to be received for
the shares of such series which shall be capital;
(c) The cumulative or noncumulative nature of the
dividend to be paid;
(d) The dividend rate or rates to which such shares
shall be entitled and the restrictions, limitations, and conditions
upon the payment of such dividends, the date or dates from which such
dividends, if declared, shall be payable;
(e) Whether or not the shares of such series shall be
redeemable; the limitations and restrictions with respect to such
redemptions (including whether or not the shares of such series shall
be redeemable at the option of either the holder or the Corporation or
upon the happening of a specified event); the manner of selecting
shares of such series for redemption if less than all the shares are
to be redeemed; the amount, if any, in addition to any accrued
dividends thereon which the holder of shares of such series shall be
entitled to receive upon the redemption thereof, which amount may vary
at different redemption dates, may be subject to adjustment and may be
different with respect to shares redeemed through the operation of any
purchase, retirement or sinking fund and with respect to shares
otherwise redeemed; and whether or not the shares of such series, if
redeemable, shall be redeemable for cash, property or rights,
including securities of any other corporation;
(f) The amount which the holders of shares of such
series may be entitled to receive in addition to any accumulated
dividends upon the voluntary or involuntary liquidation or dissolution
of the Corporation, which amount may vary depending upon whether such
liquidation or dissolution is voluntary or involuntary and, if
voluntary, may vary at different dates; provided, however, that the
merger or consolidation of the Corporation or a sale, lease or
conveyance of all or part of the assets of the Corporation shall not
be deemed a liquidation or dissolution;
(g) Whether or not the shares of such series shall be
subject to the operation of a purchase, retirement, or sinking fund,
and if so, whether such purchase, retirement or sinking fund shall be
cumulative or noncumulative, and the extent to and the manner in which
such funds shall be applied to the purchase or redemption of the
shares of such series for retirement or to other corporate purposes
and the terms and provisions relative to the operation of said fund or
funds;
5
<PAGE> 6
(h) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or classes, or of any other series of the same class, and if so
convertible or exchangeable, the price or prices or the rate or rates
of conversion or exchange and the method, if any, of adjusting the
same;
(i) The voting rights, if any, of such series, but not
to exceed one vote per share, and whether such voting rights shall be
contingent upon the happening of a specified event and whether such
voting rights shall cease upon the happening of a specified event; and
(j) Any other preferences and relative, participating,
optional, or other special rights, and qualifications, limitations or
restrictions thereof not inconsistent with this Article Fourth or any
other provision of this Restated Certificate of Incorporation.
3. Additional Authority of Board of Directors. The Board of
Directors also shall have authority to change the designation of shares, or the
relative rights, preferences and limitations of the shares, of any theretofore
established series of Preferred Stock, no share of which has been issued, and
further, the Board shall have authority to increase or decrease the number of
shares of any series previously determined by it (provided, however, that the
number of shares of any series shall not be decreased to a number less than
that of the shares of that series then outstanding).
4. Series. All shares of any one series of Preferred Stock shall
be identical with each other in all respects, except that shares of any one
series issued at different times may differ as to the dates from which
dividends thereon shall be cumulative; and all series shall rank equally and be
identical in all respects, except as permitted by the provisions of this
Section III of this Article Fourth.
5. Issued and Reacquired Shares. Shares of Preferred Stock which
have been issued and reacquired in any manner by the Corporation (excluding,
until the Corporation elects to retire them, shares which the Corporation
elects to hold as treasury shares) shall, upon compliance with any applicable
provisions of the General Corporation Law of the State of Delaware, have the
status of authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part (provided the
terms of such series do not prohibit such reissue) or as part of a new series
of Preferred Stock to be established as provided in this Section III of this
Article Fourth or as part of any other series of Preferred Stock the terms of
which do not prohibit such reissue.
6. Voting Rights. (a) So long as any of the Preferred Stock is
outstanding, the holders of the outstanding shares of Preferred Stock, if any,
shall be entitled to vote as a class upon any proposed amendment to this
Restated Certificate of Incorporation, whether or not entitled to vote thereon
by the provisions of this Article Fourth and the resolutions adopted by the
Board of Directors hereunder, if the amendment would increase or decrease the
aggregate number of authorized shares of Preferred Stock, increase or decrease
the par value of such shares, or alter or change the powers, preferences, or
special rights of the shares of Preferred Stock so as to affect them adversely.
If any
6
<PAGE> 7
proposed amendment to this Restated Certificate of Incorporation would alter or
change the powers, preferences or special rights of one or more series of the
Preferred Stock so as to affect them adversely, but shall not so affect the
entire class of Preferred Stock, then only the shares of the one or more series
so affected by the amendment shall be entitled to vote thereon and such voting
shall be accomplished as if such one or more series constituted a separate
class of Preferred Stock.
(b) Any amendment with respect to which the vote required by this
paragraph 6 shall be given may be made effective by the filing of an
appropriate certificate of amendment of the Corporation's Restated Certificate
of Incorporation without obtaining the vote of the holders of the Common Stock
of the Corporation, and the holders of the Common Stock shall have no right to
vote thereon, unless the action to be taken would adversely affect the
preferences, rights, or powers of such class of Common Stock or the holders
thereof; and provided further that any vote required concerning a given series
of the Preferred Stock may be given and made effective by filing an appropriate
amendment of the Corporation's Restated Certificate of Incorporation without
obtaining a vote of the holders of any other series of Preferred Stock or of
the holders of the Common Stock of the Corporation and the holders of such
shares shall have no right to vote thereon, unless the action to be taken would
adversely affect the preferences, rights, or powers of such other series of
Preferred Stock or the Common Stock, as the case may be.
7. Dividends; Rank. For the purpose of this Section III of this
Article Fourth and of any resolution or resolutions adopted by the Board of
Directors establishing any series of Preferred Stock and acknowledged, filed
and recorded in accordance with the laws of the State of Delaware (unless
otherwise provided in any such amendment or certificate):
(a) The amount of dividends "accumulated" on any share
of Preferred Stock or any series as at any dividend date shall be
deemed to be the amount of any unpaid dividends accumulated thereon to
and including such dividend date, whether or not earned or declared,
and the amount of dividends "accumulated" on any share of Preferred
Stock or any series as at any date other than a dividend date shall be
calculated as the amount of any unpaid dividends accumulated thereon
to and including the last preceding dividend date, whether or not
earned or declared, plus any amount equivalent to the pro rata portion
of a dividend at the annual dividend rate fixed for the shares of such
series for the period after such last preceding dividend date to and
including the date as of which the calculation is made.
(b) Any class or classes of stock of the Corporation
shall be deemed to rank:
(i) prior to the Preferred Stock either as to
dividends or upon liquidation if the holders of such class or
classes shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation or dissolution, as the
case may be, in preference or priority to the holders of the
Preferred Stock;
7
<PAGE> 8
(ii) on a parity with the Preferred Stock either
as to dividends or upon liquidation whether or not the
dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those
of the Preferred Stock, if the holders of such class or
classes of stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation or
dissolution, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without
preferences or priority one over the other with respect to
the holders of the Preferred Stock; and
(iii) junior to the Preferred Stock either as to
dividends or upon liquidation if the rights of the holders of
such class or classes shall be subject or subordinate to the
rights of the holders of the Preferred Stock in respect of
the receipt of dividends or of amounts distributable upon
liquidation or dissolution, as the case may be.
8. Priority Over Common Stock. So long as the shares of
Preferred Stock shall be outstanding, the Common Stock shall be deemed to rank
junior to the Preferred Stock as to dividends and upon liquidation.
FIFTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors of the Corporation
is expressly authorized and empowered to make, alter or repeal the Bylaws of
the Corporation, subject to the power of the stockholders of the Corporation to
alter or repeal any Bylaw made by the Board of Directors.
SIXTH: The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provisions contained in this
Restated Certificate of Incorporation in accordance with the provisions hereof
and the laws of the State of Delaware; to add or insert other provisions
authorized by the laws of the State of Delaware at the time in force in the
manner now or hereafter prescribed by law; and to amend, alter, change or
repeal all rights, preferences and privileges of whatsoever nature conferred
upon stockholders, directors or any other person whomsoever by and pursuant to
this Restated Certificate of Incorporation in its present form or as hereafter
amended or granted subject to the right reserved in this Article.
SEVENTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for any acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
8
<PAGE> 9
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed and acknowledged this 20th day of January, 2000.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
---------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
9
<PAGE> 1
EXHIBIT 3.2
- -------------------------------------------------------------------------------
RESTATED BY-LAWS
OF
PER-SE TECHNOLOGIES, INC.
----------------------------
Incorporated under the Laws of the
State of Delaware
----------------------------
Restated as of January 20, 2000
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I OFFICES................................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS...............................................................1
Section 1 Place of Meetings......................................................................1
Section 2 Annual Meeting.........................................................................1
Section 3 Special Meetings.......................................................................1
Section 4 Notice of Meetings.....................................................................1
Section 5 Notice of Nomination of Directors......................................................2
Section 6 Notice of Other Business...............................................................3
Section 7 List of Stockholders...................................................................3
Section 8 Quorum.................................................................................4
Section 9 Voting.................................................................................4
Section 10 Proxies................................................................................4
Section 11 Inspectors of Elections................................................................4
Section 12 Action without a Meeting...............................................................5
ARTICLE III BOARD OF DIRECTORS.....................................................................5
Section 1 Powers.................................................................................5
Section 2 Election and Term......................................................................6
Section 3 Number.................................................................................6
Section 4 Quorum and Manner of Acting............................................................6
Section 5 Organization Meeting...................................................................6
Section 6 Regular Meetings.......................................................................6
Section 7 Special Meetings; Notice...............................................................6
Section 8 Removal of Directors...................................................................7
Section 9 Resignations...........................................................................7
Section 10 Vacancies..............................................................................7
Section 11 Compensation of Directors..............................................................7
Section 12 Action Without a Meeting...............................................................7
Section 13 Telephonic Participation in Meetings...................................................8
Section 14 Committees of the Board of Directors...................................................8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV OFFICERS...............................................................................8
Section 1 Principal Officers.....................................................................8
Section 2 Election and Term of Office............................................................8
Section 3 Other Officers.........................................................................8
Section 4 Removal................................................................................8
Section 5 Resignations...........................................................................9
Section 6 Vacancies..............................................................................9
Section 7 Chairman of the Board..................................................................9
Section 8 Vice Chairmen..........................................................................9
Section 9 President..............................................................................9
Section 10 Vice Presidents........................................................................9
Section 11 Treasurer..............................................................................9
Section 12 Secretary.............................................................................10
Section 13 Salaries..............................................................................10
ARTICLE V SHARES AND THEIR TRANSFER.............................................................10
Section 1 Certificate for Stock.................................................................10
Section 2 Stock Certificate Signature...........................................................10
Section 3 Stock Ledger..........................................................................10
Section 4 Cancellation..........................................................................10
Section 5 Registrations of Transfers of Stock...................................................11
Section 6 Regulations...........................................................................11
Section 7 Lost, Stolen, Destroyed or Mutilated Certificates.....................................11
Section 8 Record Dates..........................................................................11
ARTICLE VI MISCELLANEOUS PROVISIONS..............................................................11
Section 1 Corporate Seal........................................................................11
Section 2 Voting of Stocks Owned by the Corporation.............................................11
Section 3 Dividends.............................................................................12
Section 4 Indemnification and Insurance.........................................................12
ARTICLE VII AMENDMENTS ...........................................................................13
</TABLE>
-ii-
<PAGE> 4
RESTATED BY-LAWS
OF
PER-SE TECHNOLOGIES, INC.
(a Delaware corporation)
----------------------------
ARTICLE I
OFFICES
The registered office of the Corporation in the State of Delaware
shall be located in the City of Wilmington, County of New Castle. The
Corporation may establish or discontinue, from time to time, such other offices
within or without the State of Delaware as may be deemed proper for the conduct
of the Corporation's business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such place or places, within or without the State of Delaware, as may
from time to time be fixed by the Board of Directors, or as shall be specified
in the respective notices, or waivers of notice, thereof.
Section 2. Annual Meeting. The annual meeting of stockholders for the
election of Directors and the transaction of other business shall be held on
such date and at such time and place as may be designated by the Board of
Directors. At each annual meeting, the stockholders entitled to vote shall
elect a Board of Directors and may transact such other proper business as may
come before the meeting.
Section 3. Special Meetings. A special meeting of the stockholders, or
of any class thereof entitled to vote, for any purpose or purposes, may be
called at any time by the Chairman of the Board, if any, or the President or by
order of the Board of Directors and shall be called by the President or the
Secretary upon the written request of stockholders holding of record at least
50% of the outstanding shares of stock of the Corporation entitled to vote at
such meeting. Such written request shall state the purpose or purposes for
which such meeting is to be called.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special,
stating the place, date and hour of the meeting
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shall be given not less than ten days nor more than sixty days before the date
on which the meeting is to be held to each stockholder of record entitled to
vote thereat by delivering a notice thereof to him personally or by mailing
such notice in a postage prepaid envelope directed to him at his address as it
appears on the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices intended for him be
directed to another address, in which case such notice shall be directed to him
at the address designated in such request. Notice shall not be required to be
given to any stockholder who shall waive such notice in writing, whether prior
to or after such meeting, or who shall attend such meeting in person or by
proxy unless such attendance is for the express purpose of objecting, at the
beginning of such meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Every notice of a special meeting
of the stockholders shall also state the purpose or purposes for which it is
called.
Section 5. Notice of Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors of the Corporation. Nominations of persons for election
as Directors of the Corporation may be made at a meeting of stockholders only
(i) by or at the direction of the Board of Directors, (ii) by any nominating
committee or person appointed by the Board or (iii) by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 5. Such
nominations, other than those made by or at the direction of the Board or by
any nominating committee or person appointed by the Board, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation, in the case of an annual
meeting of stockholders, not less than 90 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is not
within 30 days before or after such anniversary date, notice by the stockholder
in order to be timely must be so received not later than the close of business
on the 15th day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the annual
meeting was made, whichever first occurs; and in the case of a special meeting
of stockholders called for the purpose of electing directors, not later than
the close of business on the 15th day following the day on which notice of the
date of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs. Such stockholder's notice to
the Secretary shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a Director, (i) the name,
age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter
amended; and (b) as to the stockholder giving the notice (i) the name and
record address of such stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a Director of the
Corporation.
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No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth
herein. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedures, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 6. Notice of Other Business. To be properly brought before the
meeting, business must be either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the Board, or (c)
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 90 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the 15th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
A stockholder's notice to the Secretary shall set forth with respect to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in the By-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 6, provided, however, that nothing in this
Section 6 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 6, and if
he should so determine, he shall so declare to the meeting, and any such
business not properly brought before the meeting shall not be transacted.
Section 7. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of the stock ledger
to prepare and make, at least ten days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in his name. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days
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prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall be
kept and produced at the time and place of the meeting during the whole time
thereof and subject to the inspection of any stockholder who may be present.
The original or duplicate ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or the books of the Corporation or
to vote in person or by proxy at such meeting.
Section 8. Quorum. At each meeting of the stockholders, the holders of
record of a majority of the issued and outstanding stock of the Corporation
entitled to vote at such meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business, except as otherwise
provided by law, the Certificate of Incorporation or these By-laws. In the
absence of a quorum, any officer entitled to preside at, or act as Secretary
of, such meeting shall have the power to adjourn the meeting from time to time
until a quorum shall be constituted.
Section 9. Voting. Every stockholder of record who is entitled to vote
shall, at every meeting of the stockholders, be entitled to one vote for each
share of stock held by him on the record date; except, however, that shares of
its own stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held by the Corporation, shall neither be entitled to vote
nor counted for quorum purposes. Nothing in this Section shall be construed as
limiting the right of the Corporation to vote its own stock held by it in a
fiduciary capacity. At all meetings of the stockholders, a quorum being
present, all matters shall be decided by majority vote of the shares of stock
entitled to vote held by stockholders present in person or by proxy, except as
otherwise required by law or the Certificate of Incorporation. Unless demanded
by a stockholder of the Corporation present in person or by proxy at any
meeting of the stockholders and entitled to vote thereat or so directed by the
chairman of the meeting or required by law, the vote thereat on any question
need not be by written ballot. On a vote by written ballot, each ballot shall
be signed by the stockholder voting, or in his name by his proxy, if there be
such proxy, and shall state the number of shares voted by him and the number of
votes to which each share is entitled.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy. A
proxy acting for any stockholder shall be duly appointed by an instrument in
writing subscribed by such stockholder. No proxy shall be valid after the
expiration of three years from the date thereof unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation.
Section 11. Inspectors of Elections. The Board of Directors, in
advance of any stockholder meeting, shall appoint an inspector of elections to
act at such meeting, and any adjournment thereof,
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and make a written report thereof. In case any person appointed fails to appear
or act, the vacancy may be filled by an alternate appointed by the Board in
advance of the meeting or at the meeting by the person presiding thereat. The
inspector, before entering upon discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.
Section 12. Action without a Meeting. Any action required to be taken
at any annual or special meeting of stockholders or any action which may be
taken at any annual or special meeting of stockholders may be taken without a
meeting, without a vote, if a consent in writing setting forth the action so
taken shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. In order that the Corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten (10) days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such
a request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of stockholders meetings are recorded, to the attention of the
Secretary of the Corporation. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts the resolution
taking such prior action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. Except as otherwise provided by law or in the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed under the direction of the Board of Directors.
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Section 2. Election and Term. Except as otherwise provided by law,
Directors shall be elected at the annual meeting of stockholders and shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified, or until they sooner die, resign or are removed. At
each annual meeting of stockholders, at which a quorum is present, the persons
receiving a plurality of the votes cast shall be the Directors. Acceptance of
the office of Director may be expressed orally or in writing, and attendance at
the organization meeting shall constitute such acceptance.
Section 3. Number. The number of Directors shall be such number as
shall be determined from time to time by the Board of Directors, but shall not
be less than three nor more than ten.
Section 4. Quorum and Manner of Acting. Unless otherwise provided by
law, the presence of 50% of the whole Board of Directors shall be necessary to
constitute a quorum for the transaction of business. In the absence of a
quorum, a majority of the Directors present may adjourn the meeting from time
to time until a quorum shall be present. Notice of any adjourned meeting need
not be given. At all meetings of Directors, a quorum being present, all matters
shall be decided by the affirmative vote of a majority of the Directors
present, except as otherwise required by law, the Certificate of Incorporation
or these By-laws. The Board of Directors may hold its meetings at such place or
places within or without the State of Delaware as the Board of Directors may
from time to time determine or as shall be specified in the respective notices,
or waivers of notice, thereof.
Section 5. Organization Meeting. Immediately after each annual meeting
of stockholders for the election of Directors, the Board of Directors shall
meet at the place of the annual meeting of stockholders for the purpose of
organization, the election of officers and the transaction of other business.
Notice of such meeting need not be given. If such meeting is held at any other
time or place, notice thereof must be given as hereinafter provided for special
meetings of the Board of Directors, subject to the execution of a waiver of the
notice thereof signed by, or the attendance at such meeting of, all Directors
who may not have received such notice.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may be held at such time and place, within or without the State of
Delaware, as shall from time to time be determined by the Board of Directors.
After there has been such determination, and notice thereof has been once given
to each member of the Board of Directors as hereinafter provided for special
meetings, regular meetings may be held without further notice being given.
Section 7. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, if any,
the President or by a majority of the Directors. Notice of each such meeting
shall be mailed to each Director, addressed to him at his residence or usual
place of business, at least five days before the date on which the meeting is
to be held, or shall be sent to him at such place by facsimile, telegraph or
cable, or be delivered personally or by telephone, not later than the day
before the day on which such meeting is to be held. Each such notice shall
state the time and place of the meeting and, as may be required, the purposes
thereof.
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Section 8. Notice of any meeting of the Board of Directors need not be
given to any Director if he shall sign a written waiver thereof either before
or after the time stated therein for such meeting, or if he shall be present at
the meeting. Unless limited by law, the Certificate of Incorporation, these
By-laws or the terms of the notice thereof, any and all business may be
transacted at any meeting without the notice thereof having specifically
identified the matters to be acted upon.
Section 9. Removal of Directors. Any Director or the entire Board of
Directors may be removed, with or without cause, at any time, by action of the
holders of record of a majority of the issued and outstanding stock of the
Corporation entitled to vote thereon (i) present in person or by proxy at a
meeting of such stockholders or (ii) by a consent in writing in the manner
contemplated in Section 12 of Article II, and the vacancy or vacancies in the
Board of Directors caused by any such removal may be filled by action of such a
majority at such meeting or at any subsequent meeting or by consent.
Section 10. Resignations. Any Director of the Corporation may resign
at any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. The resignation of any Director
shall take effect upon receipt of notice thereof or at such later time as shall
be specified in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors, or by the sole remaining
Director, as the case may be, or if the vacancy is not so filled, or if no
Director remains, by the affirmative vote of a majority of the stockholders
entitled to vote thereon. A Director elected to fill a vacancy shall serve the
unexpired term of his predecessor in office, or, if such vacancy occurs by
reason of an amendment to these By-laws increasing the number of Directors,
until the next election of Directors by the stockholders, and until his
successor has been elected and qualified, or until he sooner dies, resigns or
is removed.
Section 12. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board,
a specific sum fixed by the Board plus expenses may be allowed for attendance
at each regular or special meeting of the Board; provided, however, that
nothing herein contained shall be construed to preclude any Director from
serving the Corporation or any parent or subsidiary corporation thereof in any
other capacity and receiving compensation therefore.
Section 13. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if a written consent thereto is signed by all members of the Board, and
such written consent is filed with the minutes or proceedings of the Board.
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Section 14. Telephonic Participation in Meetings. Members of the Board
of Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 15. Committees of the Board of Directors. The Board of
Directors, by resolution adopted by a majority of the full Board of Directors,
may designate from among its members an executive committee and one or more
other committees, each consisting of one or more directors. Except as
prohibited by law, each committee shall have the authority set forth in the
resolution of the Board of Directors establishing such committee. Unless the
Board of Directors otherwise provides, each committee designated by the Board
of Directors may make, alter and repeal rules for the conduct of its business.
In the absence of such rules each committee shall conduct its business in the
same manner as the Board of Directors conducts its business pursuant to Article
III of these By-laws.
ARTICLE IV
OFFICERS
Section 1. Principal Officers. The Board of Directors shall elect a
President, a Secretary and a Treasurer, and may in addition elect a Chairman of
the Board, one or more Vice Chairmen of the Board, one or more Vice-Presidents
and such other officers as it deems fit; the President, the Secretary, the
Treasurer, the Chairman of the Board, if any, the Vice Chairmen of the Board,
if any, and the Vice Presidents, if any, being the principal officers of the
Corporation. One person may hold, and perform the duties of, any two or more of
said offices; provided, however, that the offices of President and Secretary
shall not be held by one person coincidentally.
Section 2. Election and Term of Office. The principal officers of the
Corporation shall be elected annually by the Board of Directors at the
organization meeting thereof. Each such officer shall hold office until his
successor is elected and qualified, or until his earlier death, resignation or
removal.
Section 3. Other Officers. In addition, the Board may elect, or the
Chairman of the Board, if any, or the President may appoint, such other
officers as they deem fit. Any such other officers chosen by the Board of
Directors shall be subordinate officers and shall hold office for such period,
have such authority and perform such duties as the Board of Directors, the
Chairman of the Board, if any, or the President may from time to time
determine.
Section 4. Removal. Any officer may be removed, either with or without
cause, at any time, by resolution adopted by the Board of Directors at any
regular meeting of the Board, or at any special meeting of the Board called for
that purpose, at which a quorum is present.
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Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors. Any such resignation shall take effect
upon receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term in the manner prescribed in these By-laws for
election or appointment to such office for such term.
Section 7. Chairman of the Board. The Chairman of the Board of
Directors, if elected, shall preside, if present, at all meetings of the Board
of Directors and meetings of the stockholders, if present thereat, and shall
have and perform such other duties as from time to time may be assigned by the
Board of Directors.
Section 8. Vice Chairmen. Each Vice Chairman shall have the general
powers and duties as shall be delegated to him by the Chairman of the Board of
Directors or as shall be established by resolution of the Board of Directors.
Section 9. President. The President shall be the chief executive
officer of the Corporation, and shall have the general powers and duties of
supervision and management usually vested in the office of the President and
Chief Executive Officer of a corporation. He shall preside, in the absence or
non-election of the Chairman of the Board of Directors, at all meetings of the
stockholders and the Board of Directors, and shall have general supervision,
direction and control of the business of the Corporation. Except as the Board
of Directors shall authorize the execution thereof in some other manner, he
shall execute bonds, mortgages, and other contracts on behalf of the
Corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer.
Section 10. Vice Presidents. Each Vice President shall have such
powers and shall perform such duties as shall be assigned to him by the Board
of Directors or the President.
Section 11. Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the Corporation. He shall
exhibit at all reasonable times his books of account and records to any of the
Directors of the Corporation upon application during business hours at the
office of the Corporation where such books and records shall be kept; when
requested by the Board of Directors, he shall render a statement of the
condition of the finances of the Corporation at any meeting of the Board or at
the annual meeting of stockholders; he shall receive, and give receipt for,
moneys due and payable to the Corporation from any source whatsoever; in
general, he shall perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
of Directors or the President. The Treasurer shall give such bond, if any, for
the faithful discharge of his duties as the Board may require.
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Section 12. Secretary. The Secretary, if present, shall act as
secretary at all meetings of the Board of Directors and of the stockholders and
keep the minutes thereof in a book or books to be provided for that purpose; he
shall see that all notices required to be given by the Corporation are duly
given and served; he shall have charge of the stock records of the Corporation;
he shall see that all reports, statements and other documents required by law
are properly kept and filed; and in general he shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Board of Directors or the President.
Section 13. Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or an authorized committee
thereof, and the salaries of any other officers may be fixed by the President.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 1. Certificate for Stock. Every stockholder of the Corporation
shall be entitled to a certificate or certificates, to be in such form as the
Board of Directors shall prescribe, certifying the number of shares of the
capital stock of the Corporation owned by him. No certificate shall be issued
for partly paid shares.
Section 2. Stock Certificate Signature. The certificates for such
stock shall be numbered in the order in which they shall be issued and shall be
signed by the Chairman of the Board, if any, or the President and the Secretary
or Treasurer of the Corporation and its seal shall be affixed thereto. If such
certificate is countersigned (i) by a transfer agent other than the Corporation
or its employee, or (ii) by a registrar other than the Corporation or its
employee, the signatures of such officers of the Corporation may be facsimiles.
In case any officer of the Corporation who has signed, or whose facsimile
signature has been placed upon, any such certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Section 3. Stock Ledger. A record shall be kept by the Secretary or by
any other officer, employee or agent designated by the Board of Directors, of
the name of each person, firm or corporation holding capital stock of the
Corporation, the number of shares represented by, and the respective dates of,
each certificate for such capital stock, and in case of cancellation of any
such certificate, the respective dates of cancellation.
Section 4. Cancellation. Every certificate surrendered to the
Corporation for exchange or registration of transfer shall be cancelled, and no
new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled,
except, subject to Section 7 of this Article V, in cases provided for by
applicable law.
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Section 5. Registrations of Transfers of Stock. Registrations of
transfers of shares of the capital stock of the Corporation shall be made on
the books of the Corporation on surrender of the certificate or certificates
for such shares properly endorsed and the payment of all taxes thereon. The
person in whose name shares of stock stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the Corporation;
provided, however, that whenever any transfer of shares shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to do
so.
Section 6. Regulations. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with the Certificate of
Incorporation or these By-laws, concerning the issue, transfer and registration
of certificates for shares of the stock of the Corporation. It may appoint, or
authorize any principal officer or officers to appoint, one or more transfer
clerks or one or more transfer agents and one or more registrars, and may
require all certificates of stock to bear the signature or signatures of any of
them.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. Before
any certificates for stock of the Corporation shall be issued in exchange for
certificates which shall become mutilated or shall be lost, stolen or
destroyed, proper evidence of such loss, theft, mutilation or destruction shall
be procured for the Board of Directors, if it so requires.
Section 8. Record Dates. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a date as a record date for any such determination of stockholders. Such record
date shall not more than sixty (60) days and, in the case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of stockholders, is to be
taken.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 1. Corporate Seal. The Board of Directors shall provide a
corporate seal, which shall be in the form of a circle and shall bear the name
of the Corporation and words and figures showing that it was incorporated in
the State of Delaware in the year 1985. The Secretary shall be the custodian of
the seal. The Board of Directors may authorize a duplicate seal to be kept and
used by any other officer.
Section 2. Voting of Stocks Owned by the Corporation. The Board of
Directors may authorize any person on behalf of the Corporation to attend, vote
and grant proxies to be used at any meeting of stockholders of any corporation
(except the Corporation) in which the Corporation may
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<PAGE> 15
hold stock. Nothing in this Section shall be construed as limiting the right of
the Corporation to vote its own stock held by it in a fiduciary capacity.
Section 3. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends such sum or sums as the Directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation.
Section 4. Indemnification and Insurance.
(a) Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by the Delaware General
Corporation Law as it presently exists or may hereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The Corporation shall
be required to indemnify a person in connection with a proceeding initiated by
such person only if the proceeding was authorized by the Board of Directors of
the Corporation. The right provided in this Section 4(a) is a contract right.
(b) Prepayment of Expenses. The Corporation shall pay the
expenses incurred by an officer or director in defending or investigating any
proceeding in advance of its final disposition; provided, however, that, if
required by the Delaware General Corporation Law, the payment of expenses
incurred by a director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the director or
officer to repay all amounts advanced if it should ultimately be determined
that the director or officer is not entitled to be indemnified under this
Section or otherwise. The right provided in this Section 4(b) is a contract
right.
(c) Claims. If a claim for indemnification or payment of expenses
under this Section is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action, the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
-12-
<PAGE> 16
(d) Non-Exclusivity of Rights. The rights conferred on any person
by this Section shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
(e) Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.
(f) Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the Delaware General Corporation
Law.
(g) Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Section shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VII
AMENDMENTS
These By-laws of the Corporation may be altered, amended or repealed
by the Board of Directors at any regular or special meeting of the Board of
Directors or by the affirmative vote of the holders of record of a majority of
the issued and outstanding stock of the Corporation entitled to vote thereon
(i) present in person or by proxy at a meeting of holders of such stock or (ii)
by a consent in writing in the manner contemplated in Section 12 of Article II,
provided, however, that notice of the proposed alteration, amendment or repeal
is contained in the notice of such meeting. By-laws, whether made or altered by
the stockholders or by the Board of Directors, shall be subject to alteration
or repeal by the stockholders as in this Article VII above provided.
-13-
<PAGE> 1
EXHIBIT 4.1
[LOGO] PER-SE TECHNOLOGIES(TM) [LOGO]
<TABLE>
<S> <C> <C>
COMMON STOCK PER-SE TECHNOLOGIES, INC. CUSIP 713569 30 9
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE $.01 EACH, OF THE COMMON STOCK OF
PER-SE TECHNOLOGIES, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, New York)
Transfer Agent
and Registrar
By:
-------------------------------------
Authorized Signature
Dated:
By: /s/ By: /s/
----------------------------- -------------------------------------
Executive Vice President, President and Chief Executive Officer
General Counsel and Secretary
[CORPORATE SEAL]
</TABLE>
<PAGE> 2
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between the Corporation and
the Rights Agent thereunder dated as of February 12, 1999 (the "Rights
Agreement"), the terms of which are hereby incorporated by reference and a copy
of which is on file at the principal office of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Corporation will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, rights issued to, or
beneficially owned by, any Person who is, was or becomes an Acquiring Person
of any Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
PER-SE TECHNOLOGIES, INC.
The Corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-____________ CUSTODIAN ___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with rights of under Uniform Gifts to Minors
survivorship and not as tenants Act ___________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________________ HEREBY SELL, ASSIGN AND TRANSFER INTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
- ---------------------------------------------------------------------- ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
----------------------
-------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
-------------------------------------------------
SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the date of grant specified
on the foregoing Notice of Grant (the "Notice of Grant") by and between PER-SE
TECHNOLOGIES, INC., a Delaware corporation formerly known as Medaphis
Corporation (the "Company"), and the Optionee as identified on the Notice of
Grant.
W I T N E S S E T H
WHEREAS, the Committee (the "Committee") appointed by the Board of
Directors to administer the Second Amended and Restated Per-Se Technologies,
Inc. Non-Qualified Stock Option Plan, as amended (the "Plan"), has authorized
the grant to the Optionee of a stock option, which shall not be an incentive
stock option described in Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), authorizing the Optionee to purchase the number of shares
of Common Stock, par value $.01 per share ("Common Stock"), of the Company
allocated to him by the Committee; and
WHEREAS, the Company and the Optionee wish to confirm the terms and
conditions of the option;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is hereby agreed between the parties hereto as follows:
1. Grant of Option. Upon and subject to the terms, restrictions, limitations
and conditions stated herein, the Company hereby grants to the Optionee an
option (the "Option") to purchase all or any part of the shares of Common Stock
enumerated on the Notice of Grant (hereinafter the "Option Shares").
2. Terms and Exercise of Option. Subject to the provisions of Section 6 of this
Agreement:
(a) Beginning six (6) months after the date of grant of the Option, at
any time, and from time to time, the Optionee shall have the right to
exercise the Option with respect to that portion of the Option Shares
determined by the application of the following vesting schedule (after
subtracting the number of Option Shares which previously have been
exercised pursuant to the Option) set forth on the Notice of Grant.
(b) The Option shall expire, terminate and no longer be exercisable
upon the earlier to occur of:
(1) the date which is eleven (11) years from the date of
grant; or
(2) the date set forth in Section 4 hereof.
(c) Beginning six (6) months after the date of grant of the Option, at
any time, and from time to time, the Option may be exercised with
respect to all or any portion of the Option Shares to the extent
determined under Section 2(a) hereof and until the expiration of the
period set forth in Section 2(b) hereof, by delivery to the Company,
at its principal place of business in Atlanta, Georgia, of (i) the
written Notice of Exercise in the form attached hereto as Exhibit A,
which is incorporated herein by reference, specifying the number of
shares of Common Stock with respect to which the Option is being
exercised and signed by the person exercising the Option as provided
herein and (ii) payment of the purchase price. Upon acceptance of such
notice and receipt of payment in full, the Company shall cause to be
issued a certificate representing the shares of Common Stock
purchased.
(d) The Optionee, or the personal representative of the Optionee
pursuant to Section 4(b) below, shall have no rights as a stockholder
with respect to any shares covered by the Option until the issuance of
a stock certificate to him or her for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights in or
with respect to shares of Common Stock purchased pursuant to the
Option for which the record date for such dividend, distribution or
other right is prior to the date of exercise of the Option, except as
provided in Section 5 below.
Page 2 of 5
<PAGE> 2
3. Exercise Price. The Optionee must pay to the Company the option price per
share reflected on the Notice of Grant, subject to adjustment as set forth in
Section 5, for each share of Common Stock acquired pursuant to the exercise of
the Option.
4. Termination of Option.
(a) If the Optionee ceases to be an employee of the Company or of any
parent or subsidiary corporation of the Company for any reason other
than death or disability (within the meaning of Section 22(e)(3) of
the Code and as determined in the sole and absolute judgment of the
Company) or a Change of Control Event (as hereinafter defined) before
this Option is fully vested, any portion of this Option which is not
vested on the date of such termination of Optionee's employment shall
be automatically forfeited as of his employment termination date. The
vested portion of this Option which is unexercised shall expire,
terminate and become unexercisable after the expiration of three (3)
months after the effective date of the Optionee's termination of
employment. The Option evidenced hereby is nontransferable and, except
as provided in Section 4(b) below with respect to the death of the
Optionee, shall be exercisable during the lifetime of the Optionee
only by the Optionee.
(b) Notwithstanding any other provision hereof to the contrary, if the
Optionee ceases to be an employee of the Company or of any parent or
subsidiary corporation of the Company by reason of death or disability
(within the meaning of Section 22(e)(3) of the Code and as determined
in the sole and absolute judgment of the Company), the Option or any
portion thereof which is unexercised shall immediately be and become
fully exercisable without regard to the vesting schedule set forth in
Section 2 hereof and shall expire, terminate and become unexercisable
after the expiration of six (6) months following the Optionee's death
or termination of employment due to disability.
5. Corporate Reorganizations and Change in Control.
(a) Adjustments. The Committee will adjust the total number of Option
Shares, both as to the number of Option Shares and the exercise price,
for any increase or decrease in the number of outstanding shares of
Common Stock resulting from a stock split or a payment of a stock
dividend on the shares of Common Stock, a subdivision or combination
of the shares of Common Stock, a reclassification of the shares of
Common Stock, a merger or consolidation of the Company or any other
like changes in the Option Shares or in their value. No fractional
shares will be issued as a result of any of these changes, and any
fractional shares that result from a change will be eliminated from
the Option. Any such adjustments will be made by or under authority of
the Committee, and the determination by the Committee as to what
adjustments are to be made will be final, binding and conclusive.
(b) Change in Control.
(1) The following occurrences constitute "Change of
Control" events:
(i) the adoption of a plan of merger or the
consolidation of the Company with any other
corporation as a result of which the holders of the
outstanding voting stock of the Company as a group
would receive less than 50% of the voting stock of
the surviving or resulting corporation;
(ii) the adoption of a plan of liquidation or
the approval of the dissolution of the Company;
(iii) the sale or transfer of substantially all of
the assets of the Company;
(iv) the sale or transfer of substantially all of
the assets or stock of an operating subsidiary of
the Company, other than as security for obligations
of the Company; or
(v) the sale or transfer of substantially all of the
assets of an operating division of the Company or
its subsidiaries, other than as security for
obligations of the Company.
Page 3 of 5
<PAGE> 3
(2) In the event of an occurrence described in Section
5(b)(1)(i), (ii), or (iii), the unexercised portion of this
Option will be fully vested and immediately exercisable, and
will remain exercisable until the occurrence of such event,
after which time the Option will terminate immediately as to
any portion thereof not exercised.
(3) In the event of an occurrence of an event described in
Section 5(b)(1)(iv) or (v), which results in optionees
employed by the affected operating subsidiary or division
being terminated from their employment with the Company, then
the unexercised portion of all outstanding options under the
Plan held by those affected optionees will be fully vested
and immediately exercisable. Such options will remain
exercisable until the earlier of (i) the expiration of the
respective terms of such options, or (ii) six (6) months
following termination of employment.
(4) The Optionee will be mailed notice of any anticipated
occurrence described in Section 5(b)(1) at least twenty (20)
days prior to the occurrence of such event.
(c) Liquidation of Shares After Change in Control.
(1) In the event of any occurrence described in Section
5(b)(1)(i), (ii) or (iii) and if the Optionee elects to
exercise the Option, the Optionee will have the right in
connection with the closing of such event to either (i) sell
to the Company, or the surviving or resulting corporation,
the shares of Common Stock which the Optionee received upon
the exercise of the Option at a cash price per share
equivalent to the fair market value of the Common Stock as
determined by the Committee, as of the date of such event, or
(ii) receive the number and class of shares of stock or other
securities or any other property to which the terms of the
agreement of merger, consolidation, or other reorganization
would entitle the Optionee to receive, if, at the time of the
merger, consolidation, or other reorganization, the Optionee
had been a holder of record of the number of shares which the
Optionee received upon the exercise of the Option; provided,
however, that in the event the transaction contemplated by
this Section 5(c)(1) involves a merger to be accounted for
under the "pooling of interests" accounting method, then the
Committee shall have the authority hereunder to modify the
rights of the Optionee hereunder to the extent necessary in
order to preserve the "pooling of interests" accounting
treatment for such merger.
(2) In the event of any occurrence described in Section
5(b)(1)(iv) or (v) and if the Optionee elects to exercise the
Option, the Optionee will have the right to sell to the
Company the shares of Common Stock which the Optionee
received upon the exercise of the Option at a price per share
equivalent to the fair market value of the Common Stock as
determined by the Committee, such payment to be made in the
form of cash and/or notes, as determined by the Committee.
The Committee will make reasonable efforts to assure that an
Optionee electing to sell shares pursuant to this Section
5(c)(2) receives cash consideration in an amount at least
sufficient to offset the exercise price paid to the Company
by the Optionee in connection with the exercise of the
Option.
6. General Restrictions. Notwithstanding anything contained herein to the
contrary, no purported exercise of the Option shall be effective without the
written approval of the Company, which may be withheld to the extent that the
exercise of the Option, either individually or in the aggregate together with
the exercise of other previously exercised stock options and/or offers and
sales pursuant to any prior or contemplated offering of securities, would, in
the sole and absolute judgment of the Company, require the filing of a
registration statement with the United States Securities and Exchange
Commission or with the securities commission of any state. The Company shall
avail itself of any exemptions from registration contained in applicable
federal and state securities laws which are reasonably available to the Company
on terms which, in its sole and absolute discretion, it deems reasonable and
not unduly burdensome or costly. If the Option cannot be exercised at the time
it would otherwise expire due to the restrictions contained in this Section,
the exercise period of the Option shall be extended for successive one-year
periods until it can be exercised in accordance with this Section. The Optionee
shall deliver to the Company, prior to the exercise of the Option, such
information, representations and warranties as the Company may reasonably
request in order for the Company to be able to satisfy itself that the Common
Stock to be acquired pursuant to the exercise of the Option is being acquired
in accordance with the terms of an applicable exemption from the securities
registration requirements of applicable federal and state securities laws.
Page 4 of 5
<PAGE> 4
7. Tax Withholding. The Company shall have the right to withhold or retain from
any payment to an optionee (whether or not such payment is made pursuant to
this Option) or take such other action as is permissible under the Plan which
the Company deems necessary or appropriate to satisfy any income or other tax
withholding requirements as a result of the exercise of this Option.
8. Governing Laws. This Agreement shall be construed, administered and enforced
according to the laws of the State of Delaware; provided, however, that no
option may be exercised except, in the reasonable judgment of the Committee, in
compliance with exemptions under applicable state securities laws of the state
in which the Optionee resides, and/or any other applicable securities laws.
9. Successors. This Agreement shall be binding upon and inure to the benefit of
the heirs, legal representatives, successors and permitted assigns of the
parties.
10. Notice. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of such recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
11. Severability. In the event that any one or more of the provisions or
portions thereof contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
12. Entire Agreement. Subject to the terms and conditions of the Plan, this
Agreement expresses the entire understanding and agreement of the parties and
specifically supersedes all previous agreements between the Company and the
Optionee pertaining to the stock option granted to the Optionee on the date of
grant.
13. Transferability. The Option shall not be assignable or transferable by the
Optionee other than (i) to the spouse, children or grandchildren of the
Optionee ("Immediate Family Members"), (ii) to a trust or trusts for the
exclusive benefit of such Immediate Family Members, (iii) to a partnership in
which such Immediate Family Members are the only partners, (iv) to an entity
exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any
successor provision, or (v) to a split interest trust or pooled income fund
described in Section 2522(c)(2) of the Code or any successor provision;
provided, however, that (x) there shall be no consideration for any such
transfer, and (y) other transfers by the Optionee, or any subsequent transfer
of transferred Options by a transferee, shall be prohibited, except those by
will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended; and provided, further, that
following transfer, for purpose of elections to exercise the Option and the
general restrictions applicable under the Plan and under this Agreement to
Option exercises, the term "Optionee" shall be deemed to include the
transferee, but the Option otherwise shall continue to be subject to the same
terms and conditions that were applicable immediately prior to transfer,
including without limitation the provisions of Section 5(f) of the Plan and
Section 4 of this Agreement, which shall apply so that in the event the
original grantee of the Option ceases to be an employee of the Company or any
parent or subsidiary of the Company, then the Option shall be exercisable by
the transferee only to the extent and for the periods specified in this
Agreement.
14. Headings. Section headings used herein are for convenience of reference
only and shall not be considered in construing this Agreement.
15. Specific Performance. In the event of any actual or threatened default in,
or breach of, any of the terms, conditions or provisions of this Agreement, the
party or parties who are thereby aggrieved shall have the right to specific
performance and injunction in addition to any and all other rights and remedies
at law or in equity, and all such rights and remedies shall be cumulative.
Page 5 of 5
<PAGE> 5
EXHIBIT A
NOTICE OF EXERCISE OF AMENDED AND RESTATED PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION TO PURCHASE
COMMON STOCK OF PER-SE TECHNOLOGIES, INC.
Name: __________________________
Address: ________________________
_________________________________
Date:___________________________
SS No.:__________________________
Per-Se Technologies, Inc.
2840 Mt. Wilkinson Parkway
Atlanta, Georgia 30339
Attn: Treasurer
Re: Exercise of Amended and Restated Per-Se Technologies, Inc.
Non-Qualified Stock Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Per-Se Technologies, Inc.
(the "Company") pursuant to the provisions of the Second Amended and Restated
Per-Se Technologies, Inc. Non-Qualified Stock Option Plan, as amended, I hereby
elect to exercise options granted to me to purchase ______________ shares of
Common Stock, par value $.01 per share, of the Company under the Amended and
Restated Per-Se Technologies, Inc. Non-Qualified Stock Option Agreement dated
________, at a price of $_________ per share.
Enclosed is a certified check (or bank cashier's check) for
$___________ for the full purchase price, payable to the order of Per-Se
Technologies, Inc.
As soon as the Stock Certificate is registered in my name, please
deliver it to me at the above address.
I hereby represent, warrant, covenant and agree with the Company as
follows:
I am able to bear the economic risks of the investment in the Common
Stock, including the risk of a complete loss of my investment therein;
I understand and agree that the Company shall withhold from payments
made to me, or I shall remit to the Company, all amounts required to be
withheld by the Company to satisfy federal and state tax withholding
obligations with respect to the exercise of the Option;
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
shares hereunder and I am able to bear the economic risk of such purchase; and
A-1 of 2
<PAGE> 6
The agreements, representations, warranties and covenants made by me
herein extend to and apply to all of the Common Stock of the Company issued to
me pursuant to the Option. Acceptance by me of the certificate representing
such Common Stock shall constitute a confirmation that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at such time.
Very truly yours,
-----------------------------------
(Name of Optionee)
-----------------------------------
AGREED TO AND ACCEPTED:
PER-SE TECHNOLOGIES, INC.
By: _________________________
Title: ______________________
Number of Shares
Exercised: ___________________
Number of Shares
Remaining: ___________________
A-2 of 2
<PAGE> 1
EXHIBIT 4.5
PER-SE TECHNOLOGIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the ____ day of __________,
______, by and between PER-SE TECHNOLOGIES, INC., a corporation organized and
doing business under the laws of the State of Delaware (the "Company"), and
__________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee has been granted an option to purchase the
number of shares of voting common stock, par value $.01 per share ("Common
Stock"), of the Company allocated to such Optionee under the formula contained
in the Per-Se Technologies, Inc. Non-Employee Director Stock Option Plan, as
amended (the "Plan"), and the Board of Directors of the Company (the "Board"),
as administrator of the Plan, wishes for the Optionee and the Company to enter
into this Agreement to provide for certain matters relating to such option;
WHEREAS, Optionee is a director of the Company and is not an employee
of the Company (a "Non-Employee Director");
WHEREAS, the Company and the Optionee wish to confirm the terms and
conditions of the option; and
WHEREAS, capitalized terms used and not otherwise defined herein shall
have the meaning provided to such terms in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is hereby agreed between the parties hereto as follows:
1. Grant of Option. Upon and subject to the terms, restrictions,
limitations and conditions stated herein and in the Plan, the Company hereby
grants to the Optionee an option (the "Option") to purchase all or any part of
____ Thousand (_______) shares of Common Stock (hereinafter, the "Option
Shares"), effective as of the date first written above.
2. Terms and Exercise of Option. Subject to the provisions of Section
5 of this Agreement:
(a) The Option shall be fully vested as of the date of this
Agreement (the "Date of Grant"), but the Optionee shall not have the
right to exercise the Option until one (1) year after the Date of
Grant ; provided, however, that in the event the Optionee ceases to be
a Non-Employee Director of the Company by reason of retirement, total
and permanent disability (within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the "Code")), or death,
the Option shall become immediately exercisable. For purposes of this
Agreement, the term "by reason of retirement" means mandatory
retirement pursuant to established Board policy.
<PAGE> 2
(b) The Option shall expire, terminate and no longer be exercisable
upon the date which is eleven (11) years from the Date of Grant.
(c) After the Option has become exercisable, the Optionee shall have
the right to exercise the Option at any time and from time to time,
subject to Section 2(b), with respect to any unexercised portion of
the Option Shares. The Option may be exercised by delivery to the
Company, at its principal place of business in Atlanta, Georgia, of
the written Notice of Exercise in the form attached hereto as Exhibit
A, which is incorporated herein by reference, specifying the number of
shares of Common Stock with respect to which the Option is being
exercised and signed by the Optionee or the personal representative of
the Optionee pursuant to Section 2(a) hereof, and payment of the
exercise price. Upon acceptance of such notice and receipt of payment
in full, the Company shall cause to be issued a certificate
representing the shares of Common Stock purchased.
(d) The Optionee, or the personal representative of the Optionee
pursuant to Section 2(a) hereof, shall have no rights as a stockholder
with respect to any shares covered by the Option until the issuance of
a stock certificate to the Optionee for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights on
or with respect to shares of Common Stock purchased pursuant to the
Option for which the record date for such dividend, distribution or
other right is prior to the date of exercise of the Option, except as
provided in Section 4 hereof.
3. Exercise Price. The Optionee must pay to the Company $______ per
share for the Common Stock acquired pursuant to the exercise of the Option. The
Option exercise price shall be paid in full at the time of exercise (a) in
cash, (b) by tendering Common Stock then owned (which has been held for the
preceding six (6) months) and properly endorsed to the Company having a Fair
Market Value equal to the Option exercise price, or (c) partly in cash and
partly in Common Stock (which has been held for the preceding six (6) months)
valued at Fair Market Value, at the election of the Recipient. The Fair Market
Value of any such tendered Shares shall be determined as of the close of the
business day immediately preceding the day on which the certificate is received
by the office of the Secretary of the Company.
4. Change in Control. If the Company agrees to sell all or
substantially all of its assets for cash or property or for a combination of
cash and property or agrees to any merger, consolidation, reorganization or
other corporate transaction in which Common Stock is converted into another
security or into the right to receive securities or property, or in the event
of a Change in Control of the Company or a tender or exchange offer is made for
Common Stock other than by the Company, the Option shall, on the date
immediately preceding the effective date of a transaction contemplated by this
Section 4, become immediately exercisable and the Optionee shall be entitled to
receive (at Optionee's election) upon exercise of such Option and payment of
the applicable Option exercise price, either (1) the number of Shares subject
to such Option, or (2) a cash payment,
- 2 -
<PAGE> 3
the amount of which shall be determined by the Board by multiplying the number
of shares subject to such Option by the Fair Market Value of the Common Stock;
provided, however, that in the event the transaction contemplated by this
Section 4 involves a merger to be accounted for under the "pooling of
interests" accounting method, then the Board shall have the authority hereunder
to modify the rights of the Optionee under this Section 4 to the extent
necessary in order to preserve the "pooling of interests" accounting treatment
for such merger.
5. General Restrictions. If there is no registration statement
covering the Shares in effect under the Securities Act of 1933, as amended,
then notwithstanding anything contained herein to the contrary, no purported
transfer or exercise of the Option shall be effective without the written
opinion of counsel to the Company that the Common Stock to be acquired pursuant
to the exercise of the Option is being acquired in accordance with the terms of
an applicable exemption from the registration requirements of applicable
federal and state securities laws.
6. Limitation of Rights.
(a) No Stockholder Rights. Neither the Optionee nor the Optionee's
successor or successors in interest shall have any rights as a
stockholder of the Company with respect to the Shares subject to the
Option until the date of issuance of a certificate for such Shares. No
adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or
other rights for which the record date is prior to the date the
certificate is issued, except as otherwise provided in this Agreement.
(b) Limitation as to Directorship. Neither this Agreement, nor the
granting of the Option evidenced hereunder, nor any other action taken
pursuant hereto shall constitute or be evidence of any agreement or
understanding, express or implied, that the Optionee has a right to
continue as a director for any period of time.
7. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise the Option.
8. Governing Laws. This Agreement shall be construed, administered and
enforced according to the laws of the State of Delaware; provided, however,
that no Option may be exercised except, in the reasonable judgment of the
Board, in compliance with exemptions under applicable state securities laws of
the state in which the Optionee resides, and/or any other applicable securities
laws.
9. Transferability. The Option shall not be assignable or transferable
by the Optionee other than (i) to the spouse, children or grandchildren of the
Optionee ("Immediate Family Members"), (ii) to a trust or trusts for the
exclusive benefit of such Immediate Family Members, (iii) to a partnership in
which such Immediate Family Members are the only partners, (iv) to an entity
exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any
successor provision, or (v) to a split interest trust or pooled income fund
described in Section 2522(c)(2) of the
- 3 -
<PAGE> 4
Code or any successor provision; provided, however, that (x) there shall be no
consideration for any such transfer, and (y) other transfers by the Optionee,
or any subsequent transfer of transferred Options by a transferee, shall be
prohibited, except those by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended; and
provided, further, that following transfer, for purpose of elections to
exercise the Option and the sale or merger and change in control provisions of
the Plan and of Section 4 of this Agreement, the terms "Non-Employee Director,"
as used in the Plan, and "Optionee," as used in this Agreement, shall be deemed
to include the transferee, but the Option otherwise shall continue to be
subject to the same terms and conditions that were applicable immediately prior
to transfer. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under the Option in the event that the Option has been transferred by the
Optionee under Section 5(h) of the Plan or under this Section 9.
10. Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors and permitted assigns
of the parties.
IN WITNESS WHEREOF, the parties have executed and sealed this
Agreement on the day and year first written above.
PER-SE TECHNOLOGIES, INC.
By: ___________________________________
Name:
[CORPORATE SEAL] Title:
ATTEST:
___________________________________
Name:
Title:
OPTIONEE
_____________________________________(Seal)
Name:
- 4 -
<PAGE> 5
EXHIBIT A
NOTICE OF EXERCISE OF PER-SE TECHNOLOGIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION TO PURCHASE
COMMON STOCK OF PER-SE TECHNOLOGIES, INC.
Name: _____________________________
Address: _____________________________
_____________________________
Date: _____________________________
Per-Se Technologies, Inc.
2840 Mt. Wilkinson Parkway
Atlanta, Georgia 30339
Attn: President
Re: Exercise of Per-Se Technologies, Inc. Non-Employee Director Stock
Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Per-Se Technologies, Inc.
(the "Company") pursuant to the provisions of the Per-Se Technologies, Inc.
Non-Employee Director Stock Option Plan, I hereby elect to exercise options
granted to me to purchase __________ shares of Common Stock, par value $.01 per
share, of the Company under the Per-Se Technologies, Inc. Non-Employee Director
Stock Option Agreement dated the ____ day of ____________, _____, at a price of
$_______ per share.
Enclosed is $__________________ for the full purchase price in the
form of _____________________.
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<PAGE> 6
As soon as the Stock Certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
-----------------------------------
Name:
----------------------------------
AGREED TO AND ACCEPTED:
PER-SE TECHNOLOGIES, INC.
By: __________________________________
Title: _______________________________
Number of Shares
Exercised: ___________________________
Number of Shares
Remaining: ___________________________
- 2 -
<PAGE> 1
EXHIBIT 4.6
PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR NON-EXECUTIVE EMPLOYEES
Per-Se Technologies, Inc., a Delaware corporation formerly known as
Medaphis Corporation (the "Company"), pursuant to action of its Board of
Directors and in accordance with the Per-Se Technologies, Inc. Non-Qualified
Stock Option Plan for Non-Executive Employees, as amended (the "Plan"), hereby
grants a Stock Option ("Option") to the Optionee named on the foregoing Notice
of Grant of Stock Options (the "Notice of Grant") to purchase from the Company
the number of shares of Stock enumerated on the Notice of Grant, at an Option
Price per share reflected on the Notice of Grant, which Option is subject to
all of the terms and conditions set forth on the Notice of Grant, in this
Option Agreement and in the Plan. This Option is granted effective as of the
date of grant specified on the Notice of Grant (the "Date of Grant").
Capitalized terms used herein and not otherwise defined shall have the same
meanings ascribed thereto in the Plan.
Section 1. Plan. As stated in the Plan, this Option is not intended to
satisfy and will not be treated as an "Incentive Stock Option" as defined in
Section 422 of the Code. This Option is subject to all the terms and conditions
set forth in the Plan, in this Option Agreement and on the Notice of Grant. A
copy of the Plan will be made available to Optionee upon written request to the
corporate Secretary of the Company.
Section 2. Vesting.
a. Except as provided in Section 14 of the Plan or in this
Section 2, Optionee shall vest in this Option in accordance
with the vesting schedule set forth on the Notice of Grant.
b. If Optionee's employment with the Company or any parent or
subsidiary corporation of the Company terminates for any
reason other than death or disability (within the meaning of
Section 22(e)(3) of the Code) before this Option is fully
vested, any portion of this Option which is not vested on the
date of such termination of Optionee's employment shall be
automatically forfeited as of the employment termination
date. In the event of termination of Optionee's employment
with the Company or any parent or subsidiary corporation of
the Company for any reason other than death or disability
(within the meaning of Section 22(e)(3) of the Code), after
any portion of this Option is vested as set forth in this
Section 2, this Option shall be exercisable to the extent
vested in accordance with the limitations set forth in
Section 4. In the event of termination of employment as a
result of the death or disability (within the meaning of
Section 22(e)(3) of the Code) of Optionee, this Option shall
be and become fully exercisable without regard to the vesting
schedule set forth on the Notice of Grant, and the personal
representative of Optionee's estate shall be entitled to
exercise this Option subject to the limitations in Section 4.
Page 2 of 5
<PAGE> 2
Section 3. Date Exercisable. This Option shall be exercisable (to the
extent vested under Section 2) on any normal business day of the Company that
comes before the date this Option expires under Section 4. The maximum number
of shares of Stock that may be purchased by exercise of this Option on any such
day shall equal the excess, if any, of (a) the product of the vested percentage
on such date and the total number of shares of Stock subject to this Option on
the Date of Grant, as adjusted in accordance with Section 13 of the Plan, over
(b) the number of shares of Stock which have previously been purchased by
exercise of this Option, as adjusted in a manner consistent with Section 13 of
the Plan.
Section 4. Life of Option. This Option shall expire when exercised in
full; provided, however, the Option also shall expire immediately and
automatically on the earlier of (a) the date which is the eleventh (11th)
anniversary of the Date of Grant, (b) the end of the three (3) month period
which begins on the date Optionee's employment by the Company or any parent or
subsidiary corporation of the Company terminates for any reason, other than as
a result of the death or disability (within the meaning of Section 22(e)(3) of
the Code) of Optionee or as a result of a Change of Control event described in
Section 14.1 of the Plan, (c) the end of the six (6) month period which begins
on the date Optionee's employment by the Company or any parent or subsidiary
corporation of the Company terminates for reasons of death or disability
(within the meaning of Section 22(e)(3) of the Code) of Optionee, (d) upon the
consummation of a Change of Control event described in Section 14.1(1), (2) or
(3) of the Plan, or (e) the end of the six (6) month period which begins on the
date Optionee's employment by the Company or any parent or subsidiary
corporation of the Company terminates as a result of a Change of Control event
described in Section 14.1(4) or (5) of the Plan.
Section 5. Method of Exercise of Option. Optionee may (subject to
Sections 2, 3, 4, 11, 12 and 13) exercise this Option in whole or in part
(before the date this Option expires) for a whole number of shares of Stock on
any normal business day of the Company by (a) delivering the Option Agreement
to the Company at its principal place of business together with written notice
of the exercise of this Option and (b) simultaneously paying to the Company the
Option Price.
Section 6. Delivery. The Company's delivery of Stock pursuant to the
exercise of this Option (as described in Section 5) shall discharge the Company
of all of its duties and responsibilities with respect to this Option.
Section 7. Adjustment. The Committee shall have the right to make such
adjustments to this Option as described under Section 13 of the Plan.
Page 3 of 5
<PAGE> 3
Section 8. Nontransferable. Except in the case of death or disability
(within the meaning of Section 22(e)(3) of the Code) of Optionee, the rights
granted under this Option shall be exercisable during Optionee's lifetime only
by Optionee. No rights granted under this Option shall be transferable by
Optionee except, in the event of termination of employment of Optionee as a
result of death or disability (within the meaning of Section 22(e)(3) of the
Code), the personal representative of Optionee's estate shall be entitled to
exercise this Option subject to the limitations set forth in Section 4.
Section 9. Employment and Termination. Neither the Plan, this Option
nor any related material shall give Optionee the right to continue in
employment by the Company or shall adversely affect the right of the Company or
a subsidiary to terminate Optionee's employment with or without cause at any
time.
Section 10. Stockholder Status. Optionee shall have no rights as a
stockholder with respect to any shares of Stock under this Option until such
shares have been duly issued and delivered to Optionee, and no adjustment shall
be made for dividends of any kind or description whatsoever or for
distributions of other rights of any kind or description whatsoever respecting
such Stock except as expressly set forth in the Plan.
Section 11. Other Laws. The Company shall have the right to refuse to
issue or transfer any Stock under this Option if the Company acting in its
absolute discretion determines that the issuance or transfer of such Stock
might violate any applicable law or regulation, and any payment tendered in
such event to exercise this Option shall be promptly refunded to Optionee.
Section 12. Securities Registration. Optionee may be requested by the
Company to hold any shares of Stock received upon the exercise of this Option
for personal investment and not for purposes of resale or distribution to the
public and Optionee shall, if so requested by the Company, deliver a certified
statement to that effect to the Company as a condition to the issuance of such
Stock to Optionee.
Section 13. Other Conditions. Optionee shall (as a condition to the
exercise of this Option) enter into any agreement or make any representations
required by the Company related to the Stock to be acquired pursuant to the
exercise of this Option, including any agreement which restricts the transfer
of Stock acquired pursuant to the exercise of this Option and provides for the
repurchase of such Stock by the Company under certain circumstances.
Section 14. Tax Withholding. The Company shall have the right to
withhold or retain from any payment to Optionee (whether or not such payment is
made pursuant to this Option) or take such other action as is permissible under
the Plan which the Company deems necessary or appropriate to satisfy any income
or other tax withholding requirements as a result of the grant or exercise of
this Option.
Page 4 of 5
<PAGE> 4
Section 15. Governing Law. The Plan and this Option shall be governed
by the laws of the State of Delaware.
Section 16. Modification, Amendment, and Cancellation. The Company
shall have the right unilaterally to modify, amend, or cancel this Option in
accordance with Section 15 of the Plan.
Section 17. Severability. In the event that any one or more of the
provisions or portions thereof contained in this Option Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, the same
shall not invalidate or otherwise affect any other provisions of this Option
Agreement, and this Option Agreement shall be construed as if the invalid,
illegal or unenforceable provision or portion thereof had never been contained
herein.
Section 18. Entire Agreement. Subject to the terms and conditions of
the Plan, this Option Agreement expresses the entire understanding and
agreement of the parties and specifically supersedes all previous agreements
between the Company and the Optionee pertaining to this Option.
Section 19. Binding Effect. This Option shall be binding upon the
Company and Optionee and their respective heirs, executors, administrators and
successors.
Page 5 of 5
<PAGE> 5
NOTICE OF EXERCISE OF STOCK OPTION
UNDER PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EXECUTIVE EMPLOYEES
Name: ____________________
Address: _________________
__________________________
Date: ____________________
SS No.____________________
Per-Se Technologies, Inc.
2840 Mt. Wilkinson Parkway
Suite 300
Atlanta, Georgia 30339
Attn: Treasurer
Re: Exercise of Stock Option under the Per-Se Technologies, Inc.
Non-Qualified Stock Option Plan for Non-Executive Employees, as amended
(the "Plan")
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Per-Se Technologies, Inc.
(the "Company") pursuant to the provisions of the Plan, I hereby elect to
exercise the option (the "Option") granted to me under the Option Agreement
dated as of ________________, to purchase ________ shares of the Common Stock,
par value $.01 per share, of the Company at a price of $_________ per share
(the "Shares").
Enclosed is a certified check (or bank cashier's check) in the amount
of $_________ payable to the order of Per-Se Technologies, Inc. in payment of
the full Option Price.
As soon as a certificate representing the Shares is registered in my
name, please deliver it to me at the above address.
A-1 of 2
<PAGE> 6
In connection with the exercise of the Option, I hereby represent,
warrant, covenant and agree with the Company as follows:
(a) I am able to bear the economic risks of the investment in the
Shares, including the risk of a complete loss of my
investment therein;
(b) I understand and agree that the Company shall withhold from
payments made to me, or I shall remit to the Company, all
amounts required to be withheld by the Company to satisfy
federal and state tax withholding obligations with respect to
the exercise of the Option;
(c) I have such knowledge and experience in financial and
business matters that I am capable of evaluating the merits
and risks of the purchase of the Shares hereunder and I am
able to bear the economic risk of such purchase; and
(d) The agreements, representations, warranties and covenants
made by me herein extend to and apply to all of the Shares
issued to me pursuant to the exercise of the Option;
acceptance by me of a certificate representing the Shares
shall constitute confirmation by me that all such agreements,
representations, warranties and covenants made herein shall
be true and correct at such time.
Very truly yours,
-----------------------------------
Optionee
AGREED TO AND ACCEPTED:
PER-SE TECHNOLOGIES, INC. Number of Shares
Exercised: ______________
By: _____________________
Number of Shares
Title: ___________________ Remaining: ______________
A-2 of 2
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDED AND RESTATED PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION PLAN
THIS SECOND AMENDED AND RESTATED PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION PLAN is made as of January 20, 2000, by Per-Se
Technologies, Inc., a Delaware corporation formerly known as Medaphis
Corporation (the "Company").
STATEMENT OF BACKGROUND
1. On June 2, 1991, the Company adopted the Amended and Restated
Medaphis Corporation Non-Qualified Stock Option Plan (the "Plan"). The Company
has subsequently adopted twelve amendments to the Plan.
2. The Company desires to amend and restate the Plan to reflect
the Company's recent name change, to increase the number of shares authorized
under the Plan, and to integrate the existing Plan and all previous amendments
thereto into a single document; provided, however, that such increase in shares
authorized under the Plan shall be subject to approval by the stockholders of
the Company at the 2000 Annual Meeting of Stockholders, or any adjournment
thereof.
STATEMENT OF AGREEMENT
NOW, THEREFORE, as a result of the Company's desire to amend and
restate the Plan, the Plan is amended and restated as follows:
SECOND AMENDED AND RESTATED PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION PLAN
1. Purpose. This Second Amended and Restated Per-Se Technologies,
Inc. Non-Qualified Stock Option Plan (the "Plan") is intended to serve as an
incentive to encourage stock ownership by employees of Per-Se Technologies,
Inc., a corporation organized and doing business under the laws of the State of
Delaware (the "Company"), and its subsidiaries so that they may acquire or
increase their proprietary interest in the Company and share in the success of
the Company, and to encourage them to remain in the employ of the Company.
2. Administration. The Plan shall be administered by the
Compensation Committee of the Company (the "Committee"). The Committee shall
consist of not less than two members of the Company's Board of Directors (the
"Board of Directors"), each of whom shall be a "disinterested
<PAGE> 2
person" within the meaning of Rule 16b-3 of the Securities and Exchange Act of
1934, as amended ("Rule 16b-3"), and an "outside director" as provided for in
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder. The Board of Directors may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee shall be filled by the Board of Directors. The Committee shall select
one of its members as Chairman, and shall hold meetings at such times and
places as it may determine. Acts approved by a majority of the Committee in a
meeting at which a quorum is present, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be the valid acts of the
Committee.
The Committee acting in its absolute discretion shall exercise such
power and take such action as expressly called for under the Plan and, further,
the Committee shall have the power to interpret the Plan and (subject to Rule
16b-3) to take such other action (except to the extent the right to take such
action is expressly and exclusively reserved for the Board of Directors or the
Company's stockholders) in the administration and operation of the Plan as the
Committee deems equitable under the circumstances, which action shall be
binding on the Company, on each affected participant and on each other person
directly or indirectly affected by such action. No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.
3. Eligibility. The persons who shall be eligible to receive options
shall be the key employees of the Company or of any parent or subsidiary
corporation of the Company on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to receive an option for a
larger number of shares than is recommended for him by the Committee.
4. Stock Subject to Plan.
(a) Authorized Shares. The Company has authorized and reserved
for issuance upon the exercise of options pursuant to the Plan an
aggregate of Five Million Six Hundred Fifty-Two Thousand One Hundred
Fifty-Two (5,652,152) shares (the "Shares") of $.01 par value Common
Stock of the
2
<PAGE> 3
Company (the "Common Stock"). If any option expires or terminates
without the respective optionee exercising it in full, the Committee
may grant options to other individuals with respect to the unpurchased
Shares. No individual shall be granted options under the Plan that
would cause the aggregate number of options granted under the Plan to
such individual during the period that options are granted under the
Plan (taking into account all Shares with respect to which options
have been granted under the Plan to such individual, including options
that have been canceled or otherwise have expired or terminated) to
exceed 20% of the aggregate number of Shares authorized for issuance
under the Plan.
(b) Adjustments and Corporate Reorganizations. The Committee
will adjust the total number of Shares and any outstanding options,
both as to the number of Shares and the option price, for any increase
or decrease in the number of outstanding shares of Common Stock
resulting from a stock split or a payment of a stock dividend on the
shares of Common Stock, a subdivision or combination of the shares of
Common Stock, a reclassification of the shares of Common Stock, a
merger or consolidation of the Company or any other like changes in
the Shares or in their value. No fractional shares will be issued as a
result of any of these changes, and any fractional shares that result
from a change will be eliminated from the outstanding options. All
adjustments made by the Committee under this paragraph shall be final,
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the aggregate number of shares which may be
issued under options pursuant to Section 4 of the Plan, or constitute
a "material modification" within the meaning of Section 8 of the Plan.
(c) Change in Control.
(1) The following occurrences constitute "Change of
Control" events:
(i) the adoption of a plan of merger or
consolidation of the Company with any other corporation
as a result of which holders of the outstanding voting
stock of the Company as a group would receive less than
3
<PAGE> 4
50% of the voting stock of the surviving or resulting
corporation;
(ii) the adoption of a plan of
liquidation or the approval of the dissolution of the
Company;
(iii) the sale or transfer of
substantially all of the assets of the Company;
(iv) the sale or transfer of
substantially all of the assets or stock of an
operating subsidiary of the Company, other than as
security for obligations of the Company; or
(v) the sale or transfer of
substantially all of the assets of an operating
division of the Company or its subsidiaries, other
than as security for obligations of the Company.
(2) In the event of an occurrence described in
Section 4(c)(1)(i), (ii) or (iii), the unexercised portion of
all outstanding options under the Plan will be fully vested
and immediately exercisable, and will remain exercisable
until the occurrence of such event, after which time all
outstanding options will immediately terminate as to any
portion thereof not exercised.
(3) In the event of the occurrence of an event
described in Section 4(c)(1)(iv) or (v) which results in
optionees employed by the affected operating subsidiary or
division being terminated from their employment with the
Company, then the unexercised portion of all outstanding
options under the Plan held by those affected optionees will
be fully vested and immediately exercisable. Such options
will remain exercisable until the earlier of (i) the
expiration of the respective terms of such options, or (ii)
six (6) months following termination of employment.
4
<PAGE> 5
(4) Applicable optionees will be mailed notice of
any anticipated occurrence described in Section 4 (c)(1) at
least twenty (20) days prior to the occurrence of such event.
(d) Liquidation of Shares After Change in Control.
(1) In the event of an occurrence described in the
Section 4 (c)(1)(i), (ii) or (iii), each optionee electing to
exercise outstanding option(s) will have the right in
connection with the closing of such event to either (i) sell
to the Company or the surviving or resulting corporation, the
Shares which the optionee received upon the exercise of such
option(s) at a cash price per Share equivalent to the fair
market value of the Common Stock as determined by the
Committee, as of the date of such event, or (ii) receive the
number and class of shares of stock or other securities or
any other property to which the terms of the agreement of
merger, consolidation, or other reorganization would entitle
the optionee to receive as the holder of record of the number
of Shares which the optionee received upon the exercise of
such option(s), provided, however, that in the event the
transaction contemplated by this Section 4(d)(1) involves a
merger to be accounted for under the "pooling of interests"
accounting method, then the Committee shall have the
authority hereunder to modify the rights of an optionee under
this Section 4(d)(1) to the extent necessary in order to
preserve the "pooling of interests" accounting treatment for
such merger.
(2) In the event of any occurrence described in
Section 4(c)(1)(iv) or (v), each affected optionee electing
to exercise outstanding option(s) will have the right to sell
to the Company the Shares which the optionee received upon
the exercise of such option(s) at a price per share
equivalent to the fair market value of the Common Stock as
determined by the Committee, such payment to be made in the
form of cash and/or notes, as determined by the Committee.
The Committee will make reasonable efforts to assure that an
optionee electing to sell Shares pursuant to this Section
4(d)(2) receives cash consideration in an amount at least
sufficient to offset the
5
<PAGE> 6
exercise price paid to the Company by the optionee in
connection with exercising his option(s).
5. Terms and Conditions of Options. Each option granted pursuant
to the Plan shall be authorized by the Committee and shall be evidenced by a
Per-Se Technologies, Inc. Non-Qualified Stock Option Agreement (the
"Agreement"), in such form and containing such terms and conditions as the
Committee from time to time may determine, provided that each Agreement shall:
(a) state the number of shares of Common Stock
to which it pertains;
(b) state the exercise price, which shall not be
less than the fair market value of the Common Stock as of the date of
grant, as determined by the Committee;
(c) provide in all events (except as provided in Section 11 of
the Plan) that the option is not exercisable after the expiration of
eleven (11) years from the date the option is granted;
(d) provide that the option is exercisable at any time,
following the date, which is six months after the date of grant of
such option, only and to the extent of the number of shares of Common
Stock subject to the option determined by application of the following
vesting schedule:
<TABLE>
<CAPTION>
Years from Date Percent
of Grant Vested
--------------- --------
<S> <C>
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
The Committee may, however, provide for different vesting schedules in
any Agreements granted hereunder. In the event of the death or disability
(within the meaning
6
<PAGE> 7
of Section 22(e)(3) of the Internal Revenue Code (the "Code")) of the optionee,
the option shall be and become fully exercisable without regard to any vesting
schedule;
(e) provide that the option is not transferable by the
optionee other than (i) to the spouse, children or grandchildren of
the optionee ("Immediate Family Members"), (ii) to a trust or trusts
for the exclusive benefit of such Immediate Family Members, (iii) to a
partnership in which such Immediate Family Members are the only
partners, (iv) to an entity exempt from federal income tax pursuant to
Section 501(c)(3) of the Code or any successor provision, or (v) to a
split interest trust or pooled income fund described in Section
2522(c)(2) of the Code or any successor provision; provided, however,
that (x) there shall be no consideration for any such transfer, and
(y) other transfers by the optionee, or any subsequent transfer of
transferred options by a transferee, shall be prohibited, except those
by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I
of the Employee Retirement Income Security Act of 1974, as amended;
and provided, further, that following transfer, for purpose of
elections to exercise the option and the general restrictions
applicable under the Plan to option exercises, the term "optionee"
shall be deemed to include the transferee, but the option otherwise
shall continue to be subject to the same terms and conditions that
were applicable immediately prior to transfer, including without
limitation the provisions of Section 5(f) of the Plan, which shall
apply so that in the event the original grantee of the option ceases
to be an employee of the Company or any parent or subsidiary of the
Company, then the option shall be exercisable by the transferee only
to the extent and for the periods specified in the Agreement; and
(f) provide that if the optionee ceases to be an employee of
the Company or any parent or subsidiary corporation of the Company
(other than as a result of a Change of Control event or death or
disability within the meaning of Code Section 22(e)(3)), before the
option is fully vested, any portion of the option which is not fully
vested on the date of such termination of employment shall be
automatically forfeited as of such employment termination date, and
the vested portion of the option which is unexercised shall expire,
7
<PAGE> 8
terminate and become unexercisable upon the expiration of three (3)
months from the date on which the optionee ceases to be an employee of
the Company or of any parent or subsidiary corporation of the Company;
provided, however, that the Committee, in its sole and absolute
discretion, may permit an optionee who is not subject to Rule 16b-3 of
the Securities Exchange Act of 1934, as amended, to continue vesting
in all or any portion of such option subsequent to termination of
employment with the Company or any parent or subsidiary corporation of
the Company; and
(g) provide that if the optionee ceases to be an employee of
the Company or any parent or subsidiary corporation of the Company by
reason of death or disability (within the meaning of Code Section
22(e)(3)), as determined in the sole and absolute judgment of the
Company, before the option is fully vested, the option or any portion
thereof which is unexercised shall immediately be and become fully
exercisable without regard to the vesting schedule set forth herein
and shall expire, terminate and become unexercisable after the
expiration of six (6) months from the date the optionee ceases to be
employed by the Company or any parent or subsidiary corporation of the
Company.
6. Term of Plan. Options may be granted pursuant to the Plan
from time to time within a period often (10) years from the date of this Plan.
7. Indemnification of Committee. In addition to such other rights
of indemnification that they may have as directors of the Company or as members
of the Committee, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided the settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in the action, suit or
proceeding that the Committee member is liable for
8
<PAGE> 9
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of the action, suit or proceeding a
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend it.
8. Amendment of the Plan. The Plan may be amended by the
Committee from time to time to the extent that the Committee deems necessary or
appropriate except that the Committee shall not amend the Plan, absent the
approval of the stockholders of the Company (a) to materially increase (within
the meaning of Rule 16b-3) the benefits accruing to participants under the
Plan, (b) to materially increase (within the meaning of Rule 16b-3) the number
of securities which may be issued under the Plan, or (c) to materially modify
(within the meaning of Rule 16b-3) the requirements as to eligibility for
participation in the Plan; provided, however, that if the amendment would not
alter the rights of any participant under the Plan who is subject to Rule
16b-3, then the Committee may approve such amendment without obtaining the
approval of the stockholders of the Company; and provided, further however, the
Committee shall have the authority, for any employee who is not subject to Rule
16b-3, to modify the three (3) and six (6) month time periods set forth in
Section 5(f) of the Plan without obtaining the approval of the stockholders of
the Company.
9. Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to options will be used for general
purposes.
10. No Obligation to Exercise Option. The granting of an option
shall impose no obligation upon the optionee to exercise the option.
11. General Restriction. Notwithstanding anything contained herein
or in any of the Agreements to the contrary, no purported exercise of any
option granted pursuant to the Plan shall be effective without the written
approval of the Company, which may be withheld to the extent that the exercise,
either individually or in the aggregate together with the exercise of other
previously exercised stock options and/or offers and sales pursuant to any
prior or contemplated offering of securities, would, in the sold and absolute
judgment of the Company, require the filing of a registration statement with
the United Sates Securities and Exchange Commission or with the
9
<PAGE> 10
securities commission of any state. The Company shall avail itself of any
exemptions from registration contained in applicable federal and state
securities laws which are reasonably available to the Company on terms which,
in its sole and absolute discretion, it deems reasonable and not unduly
burdensome or costly. If an option cannot be exercised at the time it would
otherwise expire due to the restrictions contained in this Section, the
exercise period for that option shall be extended for successive one-year
periods until that option can be exercised in accordance with this Section.
Each optionee shall, prior to the exercise of an option, deliver to the Company
such information, representations and warranties as the Company may reasonably
request in order for the Company to be able to satisfy itself that the Common
Stock to be acquired pursuant to the exercise of an option is being acquired in
accordance with the terms of an applicable exemption from the securities
registration requirements of applicable federal and sate securities laws.
12. Rights as a Stockholder. An optionee or a transferee of an
option shall not have rights as a stockholder with respect to any shares
covered by his option until the date of the issuance of a stock certificate to
him for the shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date the stock
certificate is issued, except as otherwise provided in the Plan.
13. Withholding. The exercise of any option granted under this
Plan shall constitute an optionee's full and complete consent to whatever
action the Committee deems necessary to satisfy any federal and state tax
withholding requirements which the Committee, acting in its discretion, deems
applicable to such exercise.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Plan to be executed as
of the 20th day of January, 2000.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
-------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
/s/ RANDOLPH L. M. HUTTO
- -------------------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
EXHIBIT 10.12
EIGHTH AMENDMENT TO
NON-QUALIFIED STOCK OPTION PLAN
FOR EMPLOYEES OF ACQUIRED COMPANIES
THIS EIGHTH AMENDMENT (the "Eighth Amendment") is made effective as of
the 20th day of January, 2000, by PER-SE TECHNOLOGIES, INC., a Delaware
corporation formerly known as Medaphis Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Medaphis Corporation
Non-Qualified Stock Option Plan for Employees of Acquired Companies, as amended
(the "Plan"); and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has duly authorized an amendment of the Plan to reflect the recent name
change of the Company, and to decrease the number of shares available for grant
pursuant to the Plan from 1,505,000 shares (as adjusted to reflect a
one-for-three reverse stock split effective November 23, 1999) to 1,320,000
shares.
NOW, THEREFORE, the Plan is hereby amended by deleting the name
"Medaphis Corporation" from the Plan and replacing such name with the name
"Per-Se Technologies, Inc."
FURTHER, Section 3 of the Plan is hereby amended by deleting Section 3
of the Plan in its entirety and replacing it with the following:
"ss. 3
SHARES RESERVED UNDER THE PLAN
There shall be 1,320,000 shares of Stock reserved for issuance under
this Plan, and such shares of Stock shall be reserved to the extent
that the Company deems appropriate from authorized but unissued shares
of Stock and from shares of Stock which have been repurchased by the
Company. Furthermore, any shares of Stock subject to an Option that
remain unissued after the cancellation or expiration of such Option
thereafter shall again become available for use under this Plan."
FURTHER, except as specifically amended by this Eighth Amendment, the
Plan shall remain in full force and effect as prior to this Eighth Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this Eighth Amendment to be
executed on the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
-----------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
ATTEST:
By:/s/ RANDOLPH L. M. HUTTO
----------------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
THIRD AMENDMENT
TO
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
THIS THIRD AMENDMENT (the "Third Amendment") is made effective as of
January 20, 2000, by PER-SE TECHNOLOGIES, INC., a Delaware corporation formerly
known as Medaphis Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Medaphis Corporation
Non-Employee Director Stock Option Plan, as amended (the "Plan"); and
WHEREAS, the Board of Directors of the Company has duly authorized an
amendment of the Plan to reflect the recent name change of the Company and to
increase the number of shares available for grant pursuant to the Plan from
33,333 shares (as adjusted to reflect previous stock splits) to 283,333 shares.
NOW, THEREFORE, the Plan is hereby amended by deleting the name
"Medaphis Corporation" from the Plan and replacing such name with the name
"Per-Se Technologies, Inc."
FURTHER, Section 4(a) of the Plan is hereby amended by deleting the
first sentence thereof in its entirety and replacing it with the following:
"The Company has authorized and reserved for issuance upon the
exercise of Options pursuant to this Plan an aggregate of 283,333 shares (the
"Shares") of Common Stock."
; provided, however, that the increase in shares available for grant
reflected in the foregoing amendment shall be subject to approval by the
stockholders of the Company at the 2000 Annual Meeting of Stockholders, or any
adjournment thereof.
FURTHER, except as specifically amended by this Third Amendment, the
Plan shall remain in full force and effect as prior to this Third Amendment.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to be
executed as of the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By:/s/ ALLEN W. RITCHIE
------------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
ATTEST:
By:/s/ RANDOLPH L. M. HUTTO
------------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
EXHIBIT 10.24
SEVENTH AMENDMENT TO
NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EXECUTIVE EMPLOYEES
THIS SEVENTH AMENDMENT (the "Seventh Amendment") is made effective as
of the 20th day of January, 2000, by PER-SE TECHNOLOGIES, INC., a Delaware
corporation formerly known as Medaphis Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Medaphis Corporation
Non-Qualified Stock Option Plan for Non-Executive Employees, as amended (the
"Plan"); and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has duly authorized an amendment of the Plan to reflect the recent name
change of the Company, and to increase the number of shares available for grant
pursuant to the Plan from 2,333,333 shares (as adjusted to reflect a
one-for-three reverse stock split effective November 23, 1999) to 2,518,333
shares.
NOW, THEREFORE, the Plan is hereby amended by deleting the name
"Medaphis Corporation" from the Plan and replacing such name with the name
"Per-Se Technologies, Inc."
FURTHER, Section 3 of the Plan is hereby amended by deleting Section 3
of the Plan in its entirety and replacing it with the following:
SECTION 3.
SHARES RESERVED UNDER THE PLAN
"There shall be 2,518,333 shares of Stock reserved
for issuance under this Plan, and such shares of Stock shall
be reserved to the extent that the Company deems appropriate
from authorized but unissued shares of Stock and from shares
of Stock which have been repurchased by the Company.
Furthermore, any shares of Stock subject to an Option that
remain unissued after the cancellation or expiration of such
Option thereafter shall again become available for use under
this Plan."
FURTHER, except as specifically amended by this Seventh Amendment, the
Plan shall remain in full force and effect as prior to this Seventh Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this Seventh Amendment to
be effective as of the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By:/s/ ALLEN W. RITCHIE
-----------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
ATTEST:
By:/s/ RANDOLPH L. M. HUTTO
-----------------------------
Randolph L. M. Hutto
Secretary
2
<PAGE> 1
THE PER-SE TECHNOLOGIES
EMPLOYEES' RETIREMENT SAVINGS
PLAN
<PAGE> 2
THE PER-SE TECHNOLOGIES EMPLOYEES' RETIREMENT SAVINGS PLAN
THIS INDENTURE made on the 20th day of January, 2000, by PER-SE
TECHNOLOGIES, INC. (formerly Medaphis Corporation), a corporation duly
organized and existing under the laws of the State of Delaware (hereinafter
called the "Primary Sponsor");
W I T N E S S E T H:
WHEREAS, the Primary Sponsor established by indenture dated June 30,
1991, the Medaphis Corporation Employees' Retirement Savings Plan which was
last amended and restated by indenture dated June 30, 1995 (the "Plan"); and
WHEREAS, the Primary Sponsor wishes to amend and restate the Plan to
change the name of the Plan to the Per-Se Technologies Employees' Retirement
Savings Plan to reflect changes required or permitted by the Small Business Job
Protection Act of 1996 and the Taxpayer Relief Act of 1997; and
WHEREAS, the Board of Directors of the Primary Sponsor has approved
and authorized the amendment and restatement of the Plan; and
WHEREAS, the Plan is intended to be a profit sharing plan within the
meaning of Treasury Regulations Section 1.401-1(b)(1)(ii) and also contains a
cash or deferred arrangement as described in Section 401(k) of the Internal
Revenue Code of 1986.
NOW, THEREFORE, the Primary Sponsor does hereby amend and restate the
Plan, in its entirety, generally effective January 1, 1997, except as otherwise
provided herein, to read as follows:
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 DEFINITIONS.....................................................................................1
SECTION 2 ELIGIBILITY....................................................................................11
SECTION 3 CONTRIBUTIONS..................................................................................11
SECTION 4 ALLOCATIONS....................................................................................13
SECTION 5 INDIVIDUAL FUNDS AND INVESTMENTS OF TRUST ASSETS...............................................14
SECTION 6 PLAN LOANS.....................................................................................15
SECTION 7 WITHDRAWALS DURING EMPLOYMENT..................................................................17
SECTION 8 DEATH BENEFITS.................................................................................19
SECTION 9 PAYMENT OF BENEFITS ON RETIREMENT OR DEATH.....................................................20
SECTION 10 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT...............................................26
SECTION 11 ADMINISTRATION OF THE PLAN.....................................................................28
SECTION 12 CLAIM REVIEW PROCEDURE.........................................................................30
SECTION 13 LIMITATION OF ASSIGNMENT, ETC..................................................................31
SECTION 14 PROHIBITION AGAINST DIVERSION..................................................................32
SECTION 15 LIMITATION OF RIGHTS...........................................................................32
SECTION 16 AMENDMENT TO OR TERMINATION....................................................................32
SECTION 17 ADOPTION OF PLAN BY AFFILIATES.................................................................34
SECTION 18 QUALIFICATION AND RETURN OF CONTRIBUTIONS......................................................34
SECTION 19 INCORPORATION OF SPECIAL LIMITATIONS...........................................................35
APPENDIX A SPECIAL NONDISCRIMINATION RULES...............................................................A-1
APPENDIX B LIMITATION ON ALLOCATIONS.....................................................................B-1
APPENDIX C TOP-HEAVY PROVISIONS..........................................................................C-1
APPENDIX D SPECIAL RULES.................................................................................D-1
</TABLE>
<PAGE> 4
SECTION 1
DEFINITIONS
Wherever used herein, the masculine pronoun shall be deemed to include
the feminine, and the singular to include the plural, unless the context
clearly indicates otherwise and the following words and phrases shall, when
used herein, have the meanings set forth below:
1.1 "Account" means the account established and maintained by the
Plan Administrator to reflect the interest of a Member in the Fund. In addition
to any other accounts as the Plan Administrator may establish and maintain, the
Plan Administrator shall establish and maintain separate accounts (each of
which shall be adjusted pursuant to the Plan to reflect income, gains, losses
and other credits or charges attributable thereto) for each Member to be
designated as follows:
(a) "Employee Deferral Account" which shall reflect a
Member's interest in contributions made by a Plan Sponsor under Plan
Section 3.1 and as Qualified Nonelective Contributions (as defined in
Appendix A).
(b) "Matching Account" which shall reflect a Member's
interest in matching contributions made by a Plan Sponsor under Plan
Section 3.2.
(c) "Company Account" which shall reflect a Member's
interest in contributions made by a Plan Sponsor under Plan Section
3.3.
(d) "Rollover Account" which shall reflect a Member's
interest in Rollover Amounts.
(e) "Prior Company Account" which shall reflect a
Member's interest in contributions (other than Elective Deferrals)
that are made by a Member's prior employer and which are 100% vested.
In addition, the Plan Administrator shall allocate the interest of a Member in
any funds transferred to the Plan in a trust-to-trust transfer (other than
Rollover Amounts) or pursuant to the merger of another tax-qualified retirement
plan with the Plan among the Member's Accounts as the Plan Administrator
determines best reflects the interest of the Member.
1.2 "Accrued Benefit" means the balance of a Member's Account.
1.3 "Affiliate" means (a) any corporation which is a member of
the same controlled group of corporations (within the meaning of Code Section
414(b)) as is a Plan Sponsor, (b) any other trade or business (whether or not
incorporated) under common control (within the meaning of Code Section 414(c))
with a Plan Sponsor, (c) any other corporation, partnership or other
organization which is a member of an affiliated service group (within the
meaning of Code Section 414(m)) with a Plan Sponsor, and (d) any other entity
required to be aggregated with a Plan Sponsor pursuant to regulations under
Code Section 414(o).
<PAGE> 5
1.4 "Anniversary Date" means the first day of each Plan Year.
1.5 "Annual Compensation" means the amount paid to an Employee by
a Plan Sponsor and Affiliates during a Plan Year as compensation that would be
subject to income tax withholding under Code Section 3401(a), (but without
regard to any rules that limit the remuneration included in wages based on the
nature or location of the employment or the services performed, such as the
exception for agricultural labor in Code Section 3401(a)(2), to the extent not
in excess of $160,000 (for the Plan Year beginning in 1997), which amount shall
be adjusted for changes in the cost of living as provided in regulations issued
by the Secretary of the Treasury, except for purposes of determining Highly
Compensated Employees. Notwithstanding the above, Annual Compensation shall be
determined as follows:
(a) in determining the amount of contributions under
Plan Section 3 and allocations under Plan Section 4 made by or on
behalf of an Employee and for purposes of applying the provisions of
Appendix A hereto for such Plan Years as the Secretary of the Treasury
may allow, Annual Compensation shall only include amounts received for
the portion of the Plan Year during which the Employee was a Member
and shall exclude income from sources outside the United States
whether or not excludable under Code Section 911;
(b) in determining the amount of contributions under
Plan Section 3 and allocations under Plan Section 4 made by or on
behalf of an Employee, Annual Compensation shall not include
reimbursements or other expense allowances, taxable fringe benefits,
short-term disability pay, amounts realized from the exercise of
non-qualified stock options or when restricted stock (or property)
held by an employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture, moving expense
allowances, deferred compensation, and welfare benefits.
Notwithstanding anything contained herein to the contrary, if using
the definition of Annual Compensation as described in this Subsection
(b) for purposes of Plan Section 3.3 results in a "compensation
percentage" for Employees who are Highly Compensated Employees which
is greater than the "compensation percentage" for Employees who are
not Highly Compensated Employees by more than a de minimis amount,
then short-term disability pay and amounts realized from the exercise
of non-qualified stock options or when restricted stock (or property)
held by an employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture shall be included in
Annual Compensation for purposes of Plan Section 3.3. The
"compensation percentage" for a group of Employees is the average of
the "compensation ratio" for each Employee in the group. An Employee's
"compensation ratio" is the Employee's Annual Compensation determined
pursuant to the first sentence of this Subsection (b) divided by the
Employee's Annual Compensation determined pursuant to the second
sentence of this Subsection (b).
(c) in determining the amount of contributions under
Plan Sections 3.1 and 3.2 made by or on behalf of an Employee, Annual
Compensation shall include amounts accrued with respect to services
performed in the Plan Year and, but for the Employee's election to
defer such amounts (under this Plan or any other plan of deferred
2
<PAGE> 6
compensation maintained by the Primary Sponsor or an Affiliate), would
have been received by the Employee in the Plan Year;
(d) for all purposes under the Plan, except as provided
in Subsection (e), Annual Compensation shall include any amount
contributed by a Plan Sponsor on behalf of an Employee pursuant to a
salary reduction agreement which is not includable in the gross income
of the Employee under Sections 125, 402(g)(3), and 402(h) of the Code.
(e) for purposes of applying the annual addition limits
set forth in Appendix B, the provisions of Subsection (d) shall not
apply until January 1, 1998;
(f) for purposes of applying the annual addition limits
set forth in Appendix B, the term Plan Sponsor as used in Plan Section
1.5 shall mean Plan Sponsor as that term is defined in Section 4 of
Appendix B.
1.6 "Beneficiary" means the person or trust that a Member
designated most recently in writing to the Plan Administrator; provided,
however, that if the Member has failed to make a designation, no person
designated is alive, no trust has been established, or no successor Beneficiary
has been designated who is alive, the term "Beneficiary" means (a) the Member's
spouse or (b) if no spouse is alive, the Member's surviving children, or (c) if
no children are alive, the Member's parent or parents, or (d) if no parent is
alive, the legal representative of the deceased Member's estate.
Notwithstanding the preceding sentence, the spouse of a married Member shall be
his Beneficiary unless that spouse has consented in writing to the designation
by the Member of some other person or trust and the spouse's consent
acknowledges the effect of the designation and is witnessed by a notary public
or a Plan representative. A Member may change his designation at any time.
However, a Member may not change his designation without further consent of his
spouse under the terms of the preceding sentence unless the spouse's consent
permits designation of another person or trust without further spousal consent
and acknowledges that the spouse has the right to limit consent to a specific
beneficiary and that the spouse voluntarily relinquishes this right.
Notwithstanding the above, the spouse's consent shall not be required if the
Member establishes to the satisfaction of the Plan Administrator that the
spouse cannot be located, if the Member has a court order indicating that he is
legally separated or has been abandoned (within the meaning of local law)
unless a "qualified domestic relations order" (as defined in Code Section
414(p)) provides otherwise, or if there are other circumstances as the
Secretary of the Treasury prescribes. If the spouse is legally incompetent to
give consent, consent by the spouse's legal guardian shall be deemed to be
consent by the spouse.
1.7 "Board of Directors" means the Board of Directors of the
Primary Sponsor.
1.8 "Break in Service" means the failure of an Employee to
perform an Hour of Service during the twelve consecutive month period
commencing on a Severance Date.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
3
<PAGE> 7
1.10 "Company Stock" means a share or shares of any class of stock
issued by the Primary Sponsor (or any of its Affiliates) which constitutes
employer securities within the meaning of Code Section 4978(e)(5).
1.11 "Company Stock Fund" means an Individual Fund that is
primarily invested in Company Stock.
1.12 "Deferral Amount" means a contribution of a Plan Sponsor on
behalf of a Member pursuant to Plan Section 3.1.
1.13 "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.14 "Disability" means a disability of a Member within the
meaning of Code Section 72(m)(7), to the extent that the Member is, or would
be, entitled to disability retirement benefits under the federal Social
Security Act or to the extent that the Member is entitled to recover benefits
under any long term disability plan or policy maintained by the Plan Sponsor.
The determination of whether or not a Disability exists shall be determined by
the Plan Administrator and shall be substantiated by competent medical
evidence.
1.15 "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are Distributees with regard to the interest of the spouse or former
spouse.
1.16 "Effective Date" means January 1, 1997.
1.17 "Elective Deferrals" means, with respect to any taxable year
of the Member, the sum of:
(a) any Deferral Amounts;
(b) any contributions made by or on behalf of a Member
under any other qualified cash or deferred arrangement as defined in
Code Section 401(k), whether or not maintained by a Plan Sponsor, to
the extent such contributions are not or would not, but for Code
Section 402(g)(1) be included in the Member's gross income for the
taxable year; and
(c) any other contributions made by or on behalf of a
Member pursuant to Code Section 402(g)(3).
1.18 "Eligibility Service" means the completion by an Employee of
a twelve-consecutive-month period beginning on the date on which the Employee
first performs or performed an Hour of Service upon his employment or
reemployment or any anniversary thereof, without reaching a Severance Date;
provided, however:
4
<PAGE> 8
(a) if an Employee quits, retires or is discharged and
then performs an Hour of Service within twelve months of his Severance
Date, then such period of severance shall be taken into account in
calculating Eligibility Service;
(b) if an Employee quits, is discharged, or retires
during an absence from service of twelve months or less for any reason
other than quit, discharge or attainment of a Retirement Date and the
Employee then performs an Hour of Service within twelve months of the
date the Employee was first absent from service, then such period of
absence shall be taken into account in calculating Eligibility
Service;
(c) in the case of an Employee who remains absent from
service beyond the first anniversary of the commencement of a period
of absence (1) by reason of the pregnancy of the Employee, (2) by
reason of the birth of a child of the Employee, (3) by reason of the
placement of a child with the Employee in connection with the adoption
of the child by the Employee, or (4) for purposes of caring for such
child for a period immediately following its birth or placement, the
period between the first and second anniversaries of such period of
absence shall not be counted as Eligibility Service.
Eligibility Service shall not include, in the case of a rehired
Employee who did not have any vested right at his Severance Date and then
incurs five consecutive Breaks in Service, all periods which would otherwise
constitute Eligibility Service before the first of the five consecutive Breaks
in Service commenced.
1.19 "Eligible Employee" means any Employee of a Plan Sponsor
other than an Employee who is (a) covered by a collective bargaining agreement
between a union and a Plan Sponsor, provided that retirement benefits were the
subject of good faith bargaining, unless the collective bargaining agreement
provides for participation in the Plan, (b) a leased employee within the
meaning of Code Section 414(n)(2), (c) considered a "leased employee" within
the meaning of Code Section 414(n)(2) with respect to a client of a Plan
Sponsor and is an active participant in the tax-qualified retirement plan of
the client during any part of the Plan Year, (d) a participant in another
tax-qualified retirement plan maintained by the Plan Sponsor or Affiliate
thereof and who is eligible to receive benefits under such plan during any part
of the Plan Year if he otherwise satisfies the requirement to either perform a
requisite number of Hours of Service or be employed as of a particular date, or
(e) deemed to be an Employee of a Plan Sponsor pursuant to regulations under
Code Section 414(o). In addition, no person who is initially classified by a
Plan Sponsor as an independent contractor for federal income tax purposes shall
be regarded as an Eligible Employee for that period, regardless of any
subsequent determination that any such person should have been characterized as
a common law employee of the Plan Sponsor for the period in question.
1.20 "Eligible Retirement Plan" means an individual retirement
account described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code Section
403(a) or a qualified trust described in Code Section 401(a) that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of an
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<PAGE> 9
Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual retirement annuity.
1.21 "Eligible Rollover Distribution" means any distribution of
all or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the Distributee or the
joint lives (or joint life expectancies) of the Distributee and the
Distributee's designated Beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution is required under Code
Section 401(a)(9); the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); and effective for
distributions made after December 31, 1999, any distribution made under Section
7.2 of the Plan.
1.22 "Employee" means any person who is employed by a Plan Sponsor
or an Affiliate for purposes of the Federal Insurance Contributions Act, who is
a leased employee within the meaning of Code Section 414(n)(2) with respect to
a Plan Sponsor, or who is deemed to be an employee of a Plan Sponsor pursuant
to regulations under Code Section 414(o).
1.23 "Employment Date" means that date on which an Employee first
performs an Hour of Service with a Plan Sponsor or, in the alternative, on
which an Employee again performs an Hour of Service following any period of
severance which is not required to be taken into account in determining the
Employee's period of Service.
1.24 "Entry Date" means the first day of each calendar month.
1.25 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.26 "Fiduciary" means each Named Fiduciary and any other person
who exercises or has any discretionary authority or control regarding
management or administration of the Plan, any other person who renders
investment advice for a fee or has any authority or responsibility to do so
with respect to any assets of the Plan or any other person who exercises, or
has any authority or control respecting management or disposition of assets of
the Plan.
1.27 "Fund" means the amount at any given time of cash and other
property held by the Trustee pursuant to the Plan.
1.28 "Highly Compensated Employees" shall mean, with respect to a
Plan Year, each Employee who:
(a) was at any time during the Plan Year or the
immediately preceding Plan Year an owner of more than five percent
(5%) of the outstanding stock of a Plan Sponsor or Affiliate or more
than five percent (5%) of the total combined voting power of all stock
of a Plan Sponsor or Affiliate; or
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<PAGE> 10
(b) received Annual Compensation in excess of $80,000
(as adjusted for changes in the cost of living from time to time by
the Secretary of the Treasury).
1.29 "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for a Plan Sponsor or any
Affiliate during the applicable computation period, and such hours
shall be credited to the computation period in which the duties are
performed;
(b) Each hour for which an Employee is paid, or entitled
to payment, by a Plan Sponsor or any Affiliate on account of a period
of time during which no duties are performed (irrespective of whether
the employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence;
(c) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by a Plan
Sponsor or any Affiliate, and such hours shall be credited to the
computation period or periods to which the award or agreement for back
pay pertains rather than to the computation period in which the award,
agreement or payment is made; provided, that the crediting of Hours of
Service for back pay awarded or agreed to with respect to periods
described in Subsection (b) of this Section shall be subject to the
limitations set forth in Subsection (e);
(d) Effective August 5, 1993, and without duplication of
the Hours of Service counted pursuant to Subsection (d) hereof and
solely for such purposes as required pursuant to the Family and
Medical Leave Act of 1993 and the regulations thereunder (the "FMLA"),
each hour (as determined pursuant to the FMLA) for which an Employee
is granted leave under the FMLA (1) for the birth of a child, (2) for
placement with the Employee of a child for adoption or fostercare, (3)
to care for the Employee's spouse, child or parent with a serious
health condition, or (4) for a serious health condition that makes the
Employee unable to perform the functions of the Employee's job;
(e) Solely for purposes of determining whether a Break
in Service has occurred, each hour during any period that the Employee
is absent from work (1) by reason of the pregnancy of the Employee,
(2) by reason of the birth of a child of the Employee, (3) by reason
of the placement of a child with the Employee in connection with the
adoption of the child by the Employee, or (4) for purposes of caring
for such child for a period immediately following its birth or
placement. The hours described in this Subsection (d) shall be
credited (A) only in the computation period in which the absence from
work begins, if the Employee would be prevented from incurring a Break
in Service in that year solely because of that credit, or (B), in any
other case, in the next following computation period; and
(f) The Plan Administrator shall credit Hours of Service
in accordance with the provisions of Section 2530.200b-2(b) and (c) of
the U.S. Department of Labor
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Regulations or such other federal regulations as may from time to time
be applicable and determine Hours of Service from the employment
records of a Plan Sponsor or in any other manner consistent with
regulations promulgated by the Secretary of Labor, and shall construe
any ambiguities in favor of crediting Employees with Hours of Service.
Notwithstanding any other provision of this Section, in no event shall
an Employee be credited with more than 501 Hours of Service during any
single continuous period during which he performs no duties for the
Plan Sponsor or Affiliate.
(g) In the event that a Plan Sponsor or an Affiliate
acquires substantially all of the assets of another corporation or
entity or a controlling interest of the stock of another corporation
or merges with another corporation or entity and is the surviving
entity, then service of an Employee who was employed by the prior
corporation or entity and who is employed by the Plan Sponsor or an
Affiliate at the time of the acquisition or merger shall be counted in
the manner provided, with the consent of the Primary Sponsor, in
resolutions adopted by the Plan Sponsor authorizing the counting of
such service.
1.30 "Individual Funds" means two or more individual subfunds of
the Fund (other than the Loan Fund) as may be established by the Plan
Administrator from time to time for the investment of the Fund.
1.31 "Investment Committee" means a committee which may be
established to direct the Trustee with respect to investments of the Fund.
1.32 "Investment Manager" means a Fiduciary, other than the
Trustee, the Plan Administrator, or a Plan Sponsor, who may be appointed by the
Primary Sponsor:
(a) who has the power to manage, acquire, or dispose of
any assets of the Fund or a portion thereof; and
(b) who (1) is registered as an investment adviser under
the Investment Advisers Act of 1940; (2) is a bank as defined in the
Investment Advisers Act of 1940; or (3) is an insurance company
qualified to perform services described in Subsection (a) above under
the laws of more than one state; and
(c) who has acknowledged in writing that he is a
Fiduciary with respect to the Plan.
1.33 "Loan Fund" means the separate subfund of the Fund for the
investment of a Member's Account in a note made by the Member evidencing a loan
to the Member from the Fund.
1.34 "Member" means any Employee or former Employee who has become
a participant in the Plan for so long as his vested Accrued Benefit has not
been fully distributed pursuant to the Plan.
1.35 "Named Fiduciary" means only the following:
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(a) The Plan Administrator;
(b) The Trustee;
(c) The Board of Directors;
(d) The Investment Committee; and
(e) The Investment Manager.
1.36 "Normal Retirement Age" means age 65.
1.37 "Plan Administrator" means the organization or person
designated to administer the Plan.
1.38 "Plan Sponsor" means individually the Primary Sponsor and any
Affiliate or other entity which has adopted the Plan and Trust.
1.39 "Plan Year" means the calendar year.
1.40 "Retirement Date" means the date on which the Member retires
on or after attaining Normal Retirement Age or becoming subject to a
Disability.
1.41 "Rollover Amount" means any amount transferred to the Fund by
a Member, which amount qualifies as an Eligible Rollover Distribution under
Code Section 402(c)(4), 403(a)(4), or 408(d)(3)(A)(ii) and any regulations
issued thereunder.
1.42 "Service" means a period commencing on an Employee's
Employment Date and ending on his Severance Date thereafter. The following
rules shall apply:
(a) Notwithstanding the foregoing, if an Employee
performs one Hour of Service within twelve (12) months of (a) a
Severance Date described in Subsection (a) of Plan Section 1.44, or
(b) the date the Employee was first absent from service for any other
reason, any period of severance which would otherwise occur shall be
ignored and be required to be taken into account in computing the
Employee's period of Service.
(b) The period between the first anniversary and second
anniversary of an absence from service for the reasons specified in
Plan Section 1.44(b)(2) shall be neither a period of severance or a
period of Service.
(c) In the event that a Plan Sponsor or an Affiliate
acquires a substantial part of the assets of another corporation, or
merges with another corporation and is the surviving entity, then the
Service performed for such prior corporation or entity by an Employee
who becomes employed by the Plan Sponsor or an Affiliate as a result
of the
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<PAGE> 13
acquisition or merger shall be credited as service in the manner
provided, with the consent of the Primary Sponsor, in resolutions
adopted by the Plan Sponsor.
1.43 "Severance Date" means the earlier of:
(a) the date on which an Employee quits, is discharged,
retires or dies; or
(b) (1) the first anniversary of the first date of a
period in which an Employee remains absent from service (with or
without pay) with the Plan Sponsor for any other reason, such as
vacation, layoff, or leave of absence; or (2) in the case of an
Employee who remains absent from service beyond the first anniversary
of the first day of absence by reason of the Employee's pregnancy, the
birth of the Employee's child, the placement of a child in the
Employee's home or adoption by the Employee, or the caring for the
child for the period immediately following its birth or adoption, the
second anniversary of the first day of absence from service.
1.44 "Termination Completion Date" means the last day of the fifth
consecutive Break in Service computation period, determined under the Plan
Section which defines Break in Service, in which a Member completes a Break in
Service.
1.45 "Trust" means the trust established under an agreement
between the Primary Sponsor and the Trustee to hold the Fund or any successor
agreement.
1.46 "Trustee" means the trustee under the Trust.
1.47 "Valuation Date" means the last day of March, June,
September, and December or any other date which the Plan Administrator declares
to be a Valuation Date; provided, however, that the Plan Administrator may in
its sole discretion provide for more frequent Valuation Dates with respect to
the Individual Funds.
1.48 "Years of Service" means, with respect to each Employee, the
number of years and fractions of a year of Service credited to that Employee.
The following rules shall apply:
(a) In the case of an Employee who incurs a Break in
Service, Years of Service completed prior to the Break in Service
shall not be considered in calculating the Employee's nonforfeitable
percentage of his Accrued Benefit under Plan Section 10.3 until the
Employee has completed a one-year period of Service after such Break
in Service.
(b) In the case of an Employee who completes five
consecutive Breaks in Service, all Years of Service in Plan Years
after his Termination Completion Date shall be disregarded in
determining the vested portion of his Accrued Benefit derived from
Plan Sponsor contributions which accrued before his Termination
Completion Date.
(c) In the case of an Employee who incurs a Break in
Service and at that time does not have any vested right in Plan
Sponsor contributions, any Years of Service
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<PAGE> 14
completed by him prior to such Break in Service shall be disregarded
for purposes of determining the vested percentage of his right to such
contributions if the consecutive period of severance equals or exceeds
his prior Years of Service, whether or not consecutive, completed
before such Break in Service.
SECTION 2
ELIGIBILITY
2.1 Each individual who was a member of the Plan as of the date
immediately preceding the Effective Date shall become a Member of the Plan as
of the Effective Date.
2.2 Each Eligible Employee shall become a Member as of the Entry
Date coinciding with or next following the date he completes his Eligibility
Service.
2.3 Each former Member who is reemployed by a Plan Sponsor shall
become a Member as of the date of his reemployment as an Eligible Employee.
2.4 Each former Employee who completes his Eligibility Service
but terminates employment with a Plan Sponsor before becoming a Member shall
become a Member as of the latest of the date he (a) is reemployed, (b) would
have become a Member if he had not terminated employment, or (c) becomes an
Eligible Employee.
2.5 Solely for the purpose of contributing a Rollover Amount to
the Plan, an Eligible Employee who has not yet become a Member pursuant to any
other provision of this Section 2 shall become a Member as of the date on which
the Rollover Amount is contributed to the Plan.
2.6 Notwithstanding anything contained in this Section 2 to the
contrary, in the event that an individual becomes an Eligible Employee of a
Plan Sponsor by reason of an acquisition by the Plan Sponsor of a controlling
interest in or a substantial part of all the assets of the individual's prior
employer with a Plan Sponsor, if the Eligible Employee was covered under a plan
of the prior employer meeting the requirements of Code Section 401(a), such
Eligible Employee shall become a Member as of the date of his employment with
the Plan Sponsor as an Eligible Employee.
SECTION 3
CONTRIBUTIONS
3.1 (a) The Plan Sponsor shall make a contribution to the
Fund on behalf of each Eligible Employee who is a Member and who has
elected to defer a portion of Annual Compensation otherwise payable to
him for the Plan Year and to have such portion contributed to the
Fund. The election must be made before the Annual Compensation is
payable and may only be made pursuant to an agreement between the
Member and the Plan Sponsor which shall be in such form and subject to
such rules and limitations as the Plan Administrator may prescribe and
shall specify the percentage of Annual Compensation that the Member
desires to defer and to have contributed to the Fund. Once a Member
has made an election for a Plan Year, the Member may revoke his
11
<PAGE> 15
election at any time, effective as of the beginning of the payroll
period immediately following the date timely notice is received and
processed by the Plan Administrator. A Member may modify his election
by notifying the Plan Administrator in the manner and pursuant to
rules established by the Plan Administrator. The contribution made by
a Plan Sponsor on behalf of an Eligible Employee who is a Member under
this Section 3.1 shall be in an amount equal to the amount specified
in the Member's deferral election, but not greater than sixteen
percent (16%) of the Member's Annual Compensation. Notwithstanding the
foregoing, the Plan Administrator may reduce the amount that certain
Highly Compensated Employees may elect to defer in their deferral
elections to a uniform percentage less than sixteen percent (16%) of
Annual Compensation, in the event the Plan Administrator deems such
reduction necessary for the Plan to comply with one or more of the
following limitations: (a) Section 3.1(b) (relating to the annual
limit on salary deferrals set forth in Code Section 402(g)), (b)
Section 3.1(a) and Section 4 of Appendix A (relating to the
nondiscrimination testing limitations under Code Sections 401(k)(3) or
401(m)), and (c) Appendix B (relating to the limit on "annual
additions," within the meaning of Code Section 415).
(b) Elective Deferrals shall in no event exceed $9,500
(for 1997), as adjusted, in any one taxable year of the Member, which
amount shall be adjusted for changes in the cost of living as provided
by the Secretary of the Treasury. In the event the amount of Elective
Deferrals exceeds $9,500 (for 1997), as adjusted, in any one taxable
year then, (1) not later than the immediately following March 1, the
Member may designate to the Plan the portion of the Member's Deferral
Amount which consists of excess Elective Deferrals, and (2) not later
than the immediately following April 15, the Plan may distribute the
amount of excess Elective Deferrals designated by the Member, as
adjusted to reflect income, gain, or loss attributable to it through
the date of the distribution, and reduced by any "Excess Deferral
Amounts," as defined in Appendix A hereto, previously distributed or
recharacterized with respect to the Member for the Plan Year beginning
with or within that taxable year. The payment of the excess Elective
Deferrals, as adjusted and reduced, from the Plan shall be made to the
Member without regard to any other provision in the Plan. In the event
that a Member's Elective Deferrals exceed $9,500, as adjusted, in any
one taxable year under the Plan and other plans of the Plan Sponsor
and its Affiliates, the Member shall be deemed to have designated for
distribution under the Plan the amount of excess Elective Deferrals,
as adjusted and reduced, by taking into account only Elective Deferral
amounts under the Plan and other plans of the Plan Sponsor and its
Affiliates.
3.2 The Plan Sponsor proposes to make contributions to the Fund
with respect to each Plan Year on behalf of each Member in an amount equal to
fifty percent (50%) of the amount deferred by the Member pursuant to Plan
Section 3.1, not in excess of six percent (6%) of the Member's Annual
Compensation. The Board of Directors may, at its discretion, increase the
percentage contribution under this Section 3.2 for all members, or for any
specified unit, division, subdivision, or location, or for any Members who
participated in a specified prior plan that was merged into the Plan.
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3.3 Effective upon resolution by the Board of Directors, a Plan
Sponsor proposes to make contributions to the Fund with respect to each Plan
Year in an amount determined by the Plan Sponsor.
3.4 Forfeitures shall be used to reduce Plan Sponsor
contributions and not to increase benefits.
3.5 Any Eligible Employee who is a Member may, with the consent
of the Plan Administrator and subject to such rules and conditions as the Plan
Administrator may prescribe, transfer a Rollover Amount to the Fund; provided,
however, that the Plan Administrator shall not administer this provision in a
manner which is discriminatory in favor of Highly Compensated Employees.
3.6 Contributions may be made only in cash or other property
which is acceptable to the Trustee. In no event will the sum of contributions
under Plan Sections 3.1, 3.2 and 3.3 exceed the deductible limits under Code
Section 404.
3.7 Notwithstanding any other provision of the Plan, effective
December 12, 1994, contributions, benefits, and service credit with respect to
qualified military service will be provided in accordance with Code Section
414(u).
SECTION 4
ALLOCATIONS
4.1 (a) As soon as reasonably practicable following the date
of withholding by the Plan Sponsor, if applicable, and receipt by the
Trustee, Plan Sponsor contributions made on behalf of each Member
under Plan Sections 3.1 and 3.2 (including forfeitures during the Plan
Year used to reduce such contributions) and Rollover Amounts
contributed by the Member, shall be allocated to the Employee Deferral
Account, Matching Account, and Rollover Account, respectively, of the
Member on behalf of whom the contributions were made.
(b) As of the last day of each Plan Year, Plan Sponsor
contributions made under Plan Section 3.3 shall be allocated to the
Company Account of each Eligible Employee who is a Member who is
employed by a Plan Sponsor on the last day of the Plan Year, or whose
death or Retirement Date occurred during the Plan Year, in the
proportion that the Member's Annual Compensation bears to the Annual
Compensation of all Members entitled to an allocation under this
Subsection (b).
4.2 Except as otherwise provided in the Plan and the Trust, as of
each Valuation Date, the Trustee shall determine the net income or net loss of
the Fund and shall allocate such amounts to the Accounts of Members as
hereinafter set forth.
(a) The net income or net loss of the Individual Funds
shall be allocated as of each Valuation Date to the Account of each
Member in the proportion that the value of the Account invested in the
Individual Fund or Loan Fund as of the preceding Valuation
13
<PAGE> 17
Date, increased by one-half of the total contributions allocated to
that Member's Account since the preceding Valuation Date and reduced
by the full amount of any withdrawals from that Member's Account since
that Valuation Date, bears to the total value of all Accounts invested
in the Individual Fund or Loan Fund, respectively, as of the preceding
Valuation Date.
(b) Notwithstanding the foregoing, in the event
Valuation Dates are changed to a daily basis, the net income or net
loss of the Individual Funds shall be allocated as of each Valuation
Date to each Account in the proportion that the value of the Account
invested in that Individual Fund as of that Valuation Date bears to
the value of all Accounts invested in that Individual Fund as of that
Valuation Date.
SECTION 5
INDIVIDUAL FUNDS AND INVESTMENTS OF TRUST ASSETS
5.1 Until such time as the Plan Administrator may direct
otherwise, each Member may direct the Plan Administrator to invest
contributions to his Account in two or more Individual Funds as the Member
shall designate by providing notice to the Plan Administrator according to the
procedures established by the Plan Administrator for that purpose.
Notwithstanding the foregoing, Members shall not be able to direct the
investment of any Account other than their Matching Accounts into the Company
Stock Fund subject to such rules as the Plan Administrator shall develop,
including the Primary Sponsor's "stock trading policy."
(a) All investment directions shall be in multiples of
1% of contributions being made at any time. Members may change the
investment of contributions to their accounts in accordance with the
procedures established by the Plan Administrator. New investment
directions shall be effective as of the date that such directions are
process by the Plan Administrator in accordance with the procedures
established for such purpose.
(b) An investment direction, once given, shall be deemed
to be a continuing direction until changed as otherwise provided
herein. If no direction is effective for the date a contribution is to
be made, all contributions which are to be made for such date shall be
invested in such Individual Fund as the Plan Administrator, the
Investment Manager, the Investment Committee, or the Trustee, as
applicable, may determine. To the extent permissible by law, no
Fiduciary shall be liable for any loss, which results from a Member's
exercise or failure to exercise his investment election.
5.2 A Member may elect according to the procedures established by
the Plan Administrator, to transfer, in multiples of 1% his Account between
Individual Funds. An election under this Section 5.2 shall be effective as of
the date that such directions are processed by the Plan Administrator in
accordance with the procedures established for such purpose.
5.3 A Member who makes an election pursuant to Plan Section 5.1
or Plan Section 5.2 may apply the new investment direction to his current
Account, all future contributions, or both his current Account and all future
contributions.
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5.4 A Loan Fund shall be established by the Trustee on behalf of
each Member for whom a loan is made pursuant to Plan Section 6. The Loan Fund
shall be credited with the amount of any loan made by the Plan to the Member
and shall be debited with all principal and interest repayments of any such
loans. Under rules established by the Plan Administrator, a Member's interest
in the Individual Funds shall be debited by the amount credited to the Member's
Loan Fund. All principal and interest repayments debited to the Loan Fund shall
be invested as contributions to the Member's Account pursuant to Plan Section
5.1. Each Loan Fund shall be invested in a note or notes made by the Member
evidencing the promised repayment of monies loaned to the Member from the Fund.
SECTION 6
PLAN LOANS
6.1 All loans under the Plan will be subject to the requirements
of this Section and such other rules as the Plan Administrator may from time to
time prescribe, including, without limitation, any rules restricting the
purpose for which loans will be approved (the "Loan Procedures"). The Loan
Procedures shall be set forth in a separate written document, which shall form
a part of the Plan and is incorporated herein by reference.
6.2 Subject to the provisions of the Plan and the Trust, each
Member who is an Employee shall have the right, subject to prior approval by
the Plan Administrator, to borrow from the Fund. In addition, each "party in
interest," as defined in ERISA Section 3(14), who is (a) a Member but no longer
an Employee, (b) the Beneficiary of a deceased Member, or (c) an alternate
payee of a Member pursuant to the provisions of a "qualified domestic relations
order," as defined in Code Section 414(p), shall also have the right, subject
to prior approval by the Plan Administrator, to borrow from the Fund; provided,
however, that loans to such parties in interest may not discriminate in favor
of Highly Compensated Employees.
6.3 In order to apply for a loan, a borrower must complete and
submit an application to the Plan Administrator in such form and subject to
such rules as the Plan Administrator may prescribe for this purpose.
6.4 Loans shall be available to all eligible borrowers on a
reasonably equivalent basis which shall take into account the borrower's credit
worthiness, ability to repay, and ability to provide adequate security. Loans
shall not be made available to Highly Compensated Employees, officers or
shareholders of a Plan Sponsor in an amount greater than the amount made
available to other borrowers. This provision shall be deemed to be satisfied if
all borrowers have the right to borrow the same percentage of their interest in
the Member's vested Accrued Benefit, notwithstanding that the dollar amount of
such loans may differ as a result of differing values of Members' vested
Accrued Benefit.
6.5 Each loan shall bear a "reasonable rate of interest" and
provide that the loan be amortized in substantially level payments, made no
less frequently than quarterly, over a specified period of time. A "reasonable
rate of interest" shall be that rate that provides the Plan
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<PAGE> 19
with a return commensurate with the interest rates charged by persons in the
business of lending money for loans which would be made under similar
circumstances.
6.6 Each loan shall be adequately secured, with the security for
the outstanding balance of all loans to the borrower to consist of one-half
(1/2) of the borrower's interest in the Member's vested Accrued Benefit, or
such other security as the Plan Administrator deems acceptable.
6.7 Each loan, when added to the outstanding balance of all other
loans to the borrower from all retirement plans of the Plan Sponsor and its
Affiliates which are qualified under Section 401 of the Code, shall not exceed
the lesser of:
(a) $50,000, reduced by the excess, if any, of
(1) the highest outstanding balance of loans
made to the borrower from all retirement plans qualified
under Code Section 401 of the Plan Sponsor and its Affiliates
during the one (1) year period immediately preceding the day
prior to the date on which such loan was made, over
(2) the outstanding balance of loans made to
the borrower from all retirement plans qualified under Code
Section 401 of the Plan Sponsor and its Affiliates on the
date on which such loan was made, or
(b) one-half (1/2) of the value of the borrower's
interest in the vested Accrued Benefit attributable to the Member's
Account.
For purposes of this Section, the value of the vested Accrued Benefit
attributable to a Member's Account shall be established as of the latest
preceding Valuation Date, or any later date on which an available valuation was
made, and shall be adjusted for any distributions or contributions made through
the date of the origination of the loan.
6.8 The entire unpaid principal sum and accrued interest shall,
at the option of the Plan Administrator, become due and payable if (a) a
borrower fails to make any loan payment when due, (b) a borrower ceases to be a
"party in interest", as defined in ERISA Section 3(14), (c) the vested Accrued
Benefit held as security under the Plan for the borrower will, as a result of
an impending distribution or withdrawal, be reduced to an amount less than the
amount of all unpaid principal and accrued interest then outstanding under the
loan, or (d) a borrower makes any untrue representations or warranties in
connection with the obtaining of the loan. In that event, the Plan
Administrator may take such steps as it deems necessary to preserve the assets
of the Plan, including, but not limited to, the following: (1) direct the
Trustee to deduct the unpaid principal sum, accrued interest, and any other
applicable charge under the note evidencing the loan from any benefits that may
become payable out of the Plan to the borrower, (2) direct the Plan Sponsor to
deduct and transfer to the Trustee the unpaid principal balance, accrued
interest, and any other applicable charge under the note evidencing the loan
from any amounts owed by the Plan Sponsor to the borrower, or (3) liquidate the
security given by the borrower, other than amounts attributable to a Member's
Employee Deferral Account, and deduct from the proceeds
16
<PAGE> 20
the unpaid principal balance, accrued interest, and any other applicable charge
under the note evidencing the loan. If any part of the indebtedness under the
note evidencing the loan is collected by law or through an attorney, the
borrower shall be liable for attorneys' fees in an amount equal to ten percent
(10%) of the amount then due and all costs of collection.
6.9 Each loan shall be made only in accordance with regulations
and rulings of the Internal Revenue Service or the Department of Labor. The
Plan Administrator shall be authorized to administer the loan program of this
Section and shall act in his sole discretion to ascertain whether the
requirements of such regulations and rulings and this Section have been met.
6.10 Loans will be made last from amounts invested in the Company
Stock Fund.
6.11 Prior to making any loan to a Member pursuant to this
Section, the consent of the requesting Member's spouse as to the use of the
Member's Account as security for any requested loan and the offset against the
Member's Account in the event of a default on any requested loan must be
obtained in accordance with the notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations promulgated thereunder.
SECTION 7
WITHDRAWALS DURING EMPLOYMENT
7.1 A Member who has attained age 59 1/2 may withdraw, in a lump
sum in cash, all or any portion of the balance of his Employee Deferral
Account, his Rollover Account, his Prior Company account, and the vested
portion of his Matching Account. A Member who makes a withdrawal under this
Plan Section 7.1 will not be eligible to receive contributions pursuant to Plan
Section 3.2 or any contributions on behalf of the Member to his Employee
Deferral Account with respect to the three month period following the date of
the withdrawal. Any withdrawal under this Plan Section 7.1 shall be made last
from amounts invested in the Company Stock Fund.
7.2 A withdrawal pursuant to this Section 7.2 is designated a
"Hardship Withdrawal" and is subject to the following rules: The Trustee shall,
upon the direction of the Plan Administrator, distribute, in a lump sum in
cash, all or a portion of a Member's Rollover Account, Employee Deferral
Account consisting of Deferral Amounts (but not earnings thereon), Prior
Company Account and Matching Account (to the extend vested) prior to the time
such account is otherwise distributable in accordance with the other provisions
of the Plan; provided, however, that any such distribution shall be made only
if the member is an Employee and demonstrates that he is suffering from
"hardship" as determined herein. For purposes of this Section, a distribution
will be deemed to be an account of hardship if the distribution is on account
of:
(a) medical expenses described in Section 213(d) of the
Code incurred by the Member, his spouse, or any dependents of the
Member (as defined in
17
<PAGE> 21
Section 152 of the Code) or necessary for these persons to obtain
medical care described in Section 213(d) of the Code;
(b) costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the Member;
(c) payment of tuition, related educational fees, and
room and board expenses for the next 12 months of post-secondary
education for the Member, his spouse, children, or dependents;
(d) the need to prevent the eviction of the Member from
his principal residence or foreclosure on the mortgage of the Member's
principal residence; or
(e) any other contingency determined by the Internal
Revenue Service to constitute an "immediate and heavy financial need"
within the meaning of Regulations Section 1.401(k)-1(d).
7.3 In addition to the requirements set forth in Plan Section
7.2, any distribution pursuant to Plan Section 7.2 shall not be in excess of
the amount necessary to satisfy the need determined under Section 7.2 and shall
also be subject to the requirements of Subsection (a) or (b) of this Section.
(a) (1) the Member shall first obtain all
distributions, other than hardship distributions, and all
nontaxable loans currently available under all plans
maintained by the Plan Sponsor;
(2) the Plan Sponsor shall not permit Elective
Deferrals or after-tax employee contributions to be made to
the Plan or any other plan maintained by the Plan Sponsor,
for a period of twelve (12) months after the Member receives
the distribution pursuant to this Section; and
(3) the Plan Sponsor shall not permit Elective
Deferrals to be made to the Plan or any other plan maintained
by the Plan Sponsor for the Member's taxable year immediately
following the taxable year of the hardship distribution in
excess of the limit under Plan Section 3.1(b) for the taxable
year, less the amount of the Elective Deferrals made to the
Plan or any other plan maintained by the Plan Sponsor for the
taxable year in which the distribution under this Section
occurs.
(b) The Plan Administrator determines that it can rely
on the Member's written representation, unless the Plan Administrator
has actual knowledge to the contrary, that the need determined under
Plan Section 7.2 cannot reasonably be relieved --
(1) through reimbursement or compensation by
insurance or otherwise,
18
<PAGE> 22
(2) by reasonable liquidation of the assets of
the Member, his spouse and minor children, to the extent that
the liquidation would not itself cause an immediate and heavy
financial need and to the extent that the assets of the
spouse and minor children are reasonably available to the
Member,
(3) by cessation of Elective Deferrals, or
(4) by other distributions or nontaxable (at
the time of the distribution) loans from plans maintained by
the Plan Sponsor or any other employer, or by borrowing from
commercial sources on reasonable commercial terms.
Such distribution shall be made only in accordance with such rules,
policies, procedures, restrictions, and conditions as the Plan Administrator
may from time to time adopt. Any determination of the existence of hardship and
the amount to be distributed on account thereof shall be made by the Plan
Administrator (or such other person as may be required to make such decisions)
in accordance with the foregoing rules as applied in a uniform and
nondiscriminatory manner, provided that, unless the Member requests otherwise,
any such withdrawal shall include the amount necessary to pay any federal,
state or local income taxes and penalties reasonably anticipated to result from
such withdrawal. A distribution under this Section shall be made in a lump sum
to the Member, and shall be subject to the Eligible Rollover Distribution
requirements of Section 9.6.
7.4 Prior to making any distribution pursuant to this Section,
the spouse of any Member requesting a distribution from his Account must
consent to the making of such distribution to the Member in accordance with all
notice and consent requirements of Code Sections 417 and 411(a)(11) and the
Regulations promulgated thereunder.
SECTION 8
DEATH BENEFITS
8.1 Upon the death of a Member who is an Employee at the time of
his death, his Beneficiary shall be entitled to the full value of his Accrued
Benefit.
8.2 Upon the death of a Member who is not an Employee at the time
of his death, prior to the distribution of his vested Accrued Benefit, his
Beneficiary shall be entitled to his vested Accrued Benefit.
8.3 If, subsequent to the death of a Member, the Member's
Beneficiary dies while entitled to receive benefits under the Plan, the
successor Beneficiary, if any, or the Beneficiary listed under Subsection (a),
(b) or (c) of the Plan Section containing the definition of the term
"Beneficiary" shall generally be entitled to receive benefits under the Plan.
However, if the deceased Beneficiary was the Member's spouse at the time of the
Member's death, or if no successor Beneficiary shall have been designated by
the Member and be alive and no Beneficiary listed under Subsection (a), (b) or
(c) of the Plan Section containing the definition of the term
19
<PAGE> 23
"Beneficiary" shall be alive, the Member's unpaid vested Accrued Benefit shall
be paid to the personal representative of the deceased Beneficiary's estate.
8.4 Any benefit payable under this Section 8 shall be paid in
accordance with and subject to the provisions of Plan Section 9 or Section 10,
whichever is applicable, after receipt by the Trustee from the Plan
Administrator of due notice of the death of the Member.
SECTION 9
PAYMENT OF BENEFITS ON RETIREMENT OR DEATH
9.1 The Accrued Benefit of a Member who has attained a Retirement
Date or has attained Normal Retirement Age or died while an Employee shall be
fully vested and nonforfeitable. As of a Member's Retirement Date or death
while an Employee, he or his Beneficiary shall be entitled to his Accrued
Benefit to be paid in accordance with this Section 9. A Member may elect to
delay distribution until he reaches age 70 1/2. The Accrued Benefit of a Member
which is to be paid under this Section 9 shall be determined as of the
Valuation Date coinciding with or next following the Member's Retirement Date
or death, or, if the Member elects to delay distribution until age 70 1/2, as
of the Valuation Date coinciding with or next following the date the Member
reaches age 70 1/2. Such amount shall be decreased by the amount necessary to
satisfy the unpaid principal, accrued interest and penalties on any loan made
to the Member from the Plan (which loan shall be deemed to be satisfied as a
result of such reduction) and adjusted for a pro rata share of any income,
gains, and losses attributable thereto through the Valuation Date coinciding
with or immediately preceding the date the Accrued Benefit is paid. Payment
shall be made as soon as administratively feasible after the Valuation Date. If
the amount of the payment required to commence on a date cannot be ascertained
by that date, payment shall commence retroactively to that date and shall
commence no later than sixty (60) days after the earliest date on which the
amount of payment can be ascertained.
9.2 Payment to a Member shall be in the form of one lump sum
payment in cash unless the Accrued Benefit of the Member exceeds $3,500 ($5,000
effective January 1, 1998), in which event the Member or the Beneficiary, by
written instrument delivered to the Plan Administrator, may elect to have his
or her Account distributed in one of the form of distribution listed below, as
chosen by the Member or Beneficiary:
(a) one lump sum payment in cash;
(b) a combination of one lump sum payment in cash for a
portion of his Account designated by the member in annual, semiannual,
quarterly, or monthly installments in cash for the remaining portion
of the Member's Account;
(c) annual, semiannual, quarterly or monthly
installments in cash (If the Member elects annual, semiannual,
quarterly, or monthly installments for some or all of his Account,
such distributions shall be made over a period specified by the Member
not exceeding the life expectancy of the Member or the joint life
expectancies of the Member and his Beneficiary);
20
<PAGE> 24
(d) a single life annuity. (If the Member elects to
receive his benefits in the form of a single life annuity and is
married on the date of his death or the date distributions are to
commence, if applicable, the benefit shall automatically be payable
pursuant to Subsection (e) of this Section unless the Member makes an
election pursuant to Section 9.3 not to receive the applicable annuity
under Subsection (e) during the applicable election period);
(e) an immediate annuity for the life of the Member with
a survivor annuity for the life of his or her spouse which is fifty
percent (50%) of the annuity payable during the joint lives of the
Member and his spouse (hereinafter referred to as a "Qualified Joint
and Survivor Annuity"). (If the Member's Accrued Benefit is payable in
the form of a life annuity and the Member dies before he begins to
receive payments from the fund, the Member's spouse shall receive an
immediate annuity for her life (hereinafter referred to as a
"Qualified Preretirement Survivor Annuity"). Notwithstanding the
foregoing, the surviving spouse of a Member who is entitled to receive
a Qualified Preretirement Survivor Annuity may elect a lump sum
payment prior to the date the annuity is purchased or distributions
begin;
(f) a single life annuity with certain periods of five,
ten or fifteen years as selected by the Member. (If the Member elects
to receive his benefits in the form provided in this Subsection and is
married on the date of his death or the date distributions are to
commence, if applicable, the benefit shall automatically be payable
pursuant to Subsection (e) of this Section unless the Member makes an
election pursuant to Section 9.3 not to receive the applicable annuity
under Subsection (e) during the applicable election period); and
(g) a single life annuity with installment refund and
survival percentages for the contingent annuitant designated by the
Member of 50% or 100% (If the Member elects to receive his benefits in
the form provided in this Subsection and is married on the date of his
death or the date distributions are to commence, if applicable, the
benefit shall automatically be payable pursuant to Subsection (e) of
this Section unless the Member makes an election pursuant to Section
9.3 not to receive the applicable annuity under Subsection (e) during
the applicable election period).
If an annuity is to be paid from the Plan, such annuity may be
purchased with the Member's Account from an insurance company designated by the
Plan Administrator or its designee in writing to the insurance company and may
be distributed to the Member or his Beneficiary in full satisfaction of the
benefits to which the Member or his Beneficiary is entitled under the Plan. The
amount of the annuity shall be the actuarial equivalent of the Member's Account
(reduced by any commissions or other costs charged by the insurance company)
based on factors used by the insurance company from which the annuity is
purchased.
21
<PAGE> 25
9.3 (a) The Plan Administrator shall furnish to the Member a written
explanation of:
(1) the terms and conditions of the Qualified Joint and
Survivor Annuity and the Qualified Preretirement Survivor Annuity;
(2) the Member's right to make, and the effect of, an
election not to receive the Qualified Joint and Survivor Annuity or
the Qualified Preretirement Survivor Annuity;
(3) the rights of the Member's spouse as described
below; and
(4) the right to make and the effect of an election
pursuant to this paragraph.
In the case of a Qualified Joint and Survivor Annuity, the
written explanation shall be provided to the Member no less than
thirty (30) days and no more than ninety (90) days prior to the first
date on which he is entitled to commencement of payments from the
Fund. Notwithstanding the foregoing, a Member may elect to waive the
requirement that the written explanation be provided at least thirty
(30) days prior to commencement of payments, provided that the first
payment from the Fund occurs more than seven (7) days from the date
the explanation is received by the Member. In the case of the
Qualified Preretirement Survivor Annuity, the written explanation
shall be provided to the Member in whichever of the following periods
ends last:
(A) the period beginning with the first day of
the Plan Year in which the Member attains age 32 and ending
with the close of the Plan Year preceding the Plan Year in
which the Member attains age 35;
(B) the period beginning one year before and
ending one year after the Employee first becomes a Member;
(C) the period beginning one year before and
ending one year after the provisions of this Subsection apply
to the Member; or
(D) a reasonable period of time after
separation from service in the case of a Member who separates
from service before attaining age 35.
The Member may elect during the "applicable election period"
not to receive the Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity by execution and delivery to the
Committee of a form provided for that purpose by the Committee. The
term "applicable election period" shall mean, with respect to a
Qualified Joint and Survivor Annuity, the 90-day period ending on the
first date on which the Member is entitled to commencement of payment
from the Fund. In the event the Member waives the minimum 30-day
requirement for the
22
<PAGE> 26
written explanation, the "applicable election period" shall not end
before the period ending thirty (30) days after the Member receives
the written explanation. Notwithstanding the foregoing, if the Member
receives the written explanation of the Qualified Joint and Survivor
Annuity and affirmatively elects a form of distribution, the payments
from the Fund may commence less than thirty (30) days after the Member
receives the written explanation provided that the Member may revoke
the affirmative distribution election until the later of the time
payments from the Fund are to begin or the expiration of the 7-day
period which begins on the day after the Member receives the written
explanation. With respect to a Qualified Preretirement Survivor
Annuity, the "applicable election period" shall mean the period which
begins on the first day of the Plan Year in which the Member attains
age 35 and ends on the date of the Member's death.
(b) In the case of a married Member, no election shall be
effective unless:
(1) the spouse of the Member consents in writing to the
election and the consent acknowledges the effect of the election
(including, if applicable, the identity of any Beneficiary other than
the Member's spouse and the alternate form of payment) and is
witnessed by a notary public, or
(2) it is established to the satisfaction of the
Committee that the consent required pursuant to Subsection (1) of this
Section (b) may not be obtained because there is no spouse, the spouse
cannot be located, the Member has a court order indicating that he is
legally separated or has been abandoned (within the meaning of local
law) unless a qualified domestic relations order provides otherwise,
or of any other circumstances as permitted by regulations promulgated
by the Department of the Treasury. If the spouse is legally
incompetent to give consent, consent by the spouse's legal guardian
shall be deemed to be consent by the spouse.
(c) Any consent by a spouse (or establishment that the consent
of a spouse may not be obtained) shall be effective only with
respect to that spouse. If an election is made, the Member's vested
Accrued Benefit shall be paid in the alternate form of payment set
forth in Section 9.2 chosen by the Member by written instrument
delivered to the Committee. Any waiver of a Qualified Preretirement
Survivor Annuity made prior to the first day of the Plan Year in which
the Member attains age 35 shall become invalid as of the first day of
the Plan Year in which the member attains age 35 and a Qualified
Preretirement Annuity shall be provided, unless a new waiver is
obtained. The Member may revoke any election not to receive payment in
the form of a Qualified Joint and Survivor Annuity at any time prior
to commencement of payments from the Fund, and may make a new election
at any time prior to the commencement of payments from the Fund
9.4 Notwithstanding any provision of the Plan to the contrary,
(a) if a Member's vested Accrued Benefit exceeds $3,500 ($5,000
effective January 1, 1998), it shall not be distributed before the Member's
Normal Retirement Age or death without the consent of the Member, and if the
Member is married and elects a
23
<PAGE> 27
form of payment other than a Qualified Joint and Survivor annuity, with the
consent of his spouse (or if the Member is deceased, his surviving spouse).
(b) the payments to be made to a Member, shall satisfy the
incidental death benefit requirements under Code Section 401(a)(9)(G) and the
regulations thereunder.
9.5 Notwithstanding any other provisions of the Plan,
(a) Prior to the death of a Member, all retirement payments
hereunder shall --
(1) be distributed to the Member not later than the
required beginning date (as defined below) or,
(2) be distributed, commencing not later than the
required beginning date (as defined below)--
(A) in accordance with regulations prescribed
by the Secretary of the Treasury, over the life of the Member
or over the lives of the Member and his designated individual
Beneficiary, if any, or
(B) in accordance with regulations prescribed
by the Secretary of the Treasury, over a period not extending
beyond the life expectancy of the Member or the joint life
and last survivor expectancy of the Member and his designated
individual Beneficiary, if any.
(b) (1) If --
(A) the distribution of a Member's retirement
payments have begun in accordance with Subsection (a)(2) of
this Section, and
(B) the Member dies before his entire vested
Accrued Benefit has been distributed to him,
then the remaining portion of his vested Accrued Benefit shall be
distributed at least as rapidly as under the method of distribution
being used under Subsection (a)(2) of this Section as of the date of
his death.
(2) If a Member dies before the commencement of
retirement payments hereunder, the entire interest of the Member shall
be distributed within five (5) years after his death.
(3) If --
(A) any portion of a Member's vested Accrued
Benefit is payable to or for the benefit of the Member's
designated individual Beneficiary, if any,
24
<PAGE> 28
(B) that portion is to be distributed, in
accordance with regulations prescribed by the Secretary of
the Treasury, over the life of the designated individual
Beneficiary or over a period not extending beyond the life
expectancy of the designated individual Beneficiary, and
(C) the distributions begin not later than one
(1) year after the date of the Member's death or such later
date as the Secretary of the Treasury may by regulations
prescribe,
then, for purposes of Paragraph (2) of this Subsection (b), the portion
referred to in Subparagraph (A) of this Paragraph (3) shall be treated
as distributed on the date on which the distributions to the designated
individual Beneficiary begin.
(4) If the designated individual Beneficiary referred to
in Paragraph (3)(A) of this Subsection (b) is the surviving spouse of
the Member, then --
(A) the date on which the distributions are
required to begin under Paragraph (3)(C) of this Subsection
(b) shall not be earlier than the date on which the Member
would have attained age 70 1/2, and
(B) if the surviving spouse dies before the
distributions to such spouse begin, this Subsection (b) shall
be applied as if the surviving spouse were the Member.
(c) For purposes of this Section, the term "required
beginning date" means April 1 of the calendar year following the later
of the calendar year in which the member attains age 70 1/2 or the
calendar year in which the Member retires, except with respect to a
Member who is a five percent (5%) owner (as described in Code Section
416(i)(1)(B)(i)), the "required beginning date" means April 1 of the
calendar year following the calendar year in which the Member attains
age 70 1/2. Notwithstanding the foregoing, with respect to a Member
who attains age 70 1/2 prior to January 1, 2000, other than a Member
who is a five percent (5%) owner, such Member may elect to receive
distributions in accordance with Section 401(a)(9) as in effect prior
to January 1, 1997, or in the alternative, such Member may elect to
defer distribution in which event benefits will be paid in accordance
with the remaining provisions of the Plan.
9.6 Notwithstanding any provisions of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section 9, a
Distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
direct rollover. If the Eligible Rollover Distribution is one to which Code
Sections 401(a)(11) and 417 do not apply, such Eligible Rollover Distribution
may commence less than 30 days after the notice required under section
1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
25
<PAGE> 29
(a) The Plan Administrator clearly informs the Distributee
that the Distributee has a right to a period of at least 30 days after
receiving the notice to consider the decisions of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(b) the Distributee, after receiving the notice,
affirmatively elects a distribution.
SECTION 10
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
10.1 Transfer of a Member from one Plan Sponsor to another Plan
Sponsor or to an Affiliate shall not be deemed for any purpose under the Plan
to be a termination of employment of the Member.
10.2 In the event of the termination of employment of a Member for
reasons other than death or attainment of a Retirement Date, the Member's
Accrued Benefit shall be determined as of the Valuation Date coinciding with or
immediately preceding the Member's termination of employment, increased by any
amounts allocated to the Account of the Member since that Valuation Date,
decreased by any distributions made since that Valuation Date from the Member's
Account, decreased by the amount necessary to satisfy, as of the Member's
termination of employment, the unpaid principal, accrued interest and penalties
on any loan made to the Member from the Plan (which loan shall be deemed to be
satisfied as a result of such reduction) and adjusted for a pro rata share of
any income, gains, and losses attributable thereto through the Valuation Date
coinciding with or immediately preceding the date the Accrued Benefit is paid.
10.3 That portion of a Member's Accrued Benefit in which he is
vested as of a Valuation Date shall be:
(a) his Employee Deferral Account, Rollover Account, and
Prior Company Account, which shall be fully vested and nonforfeitable
at all times; and
(b) that portion of the value of his Matching Account and
Company Account computed according to the following vesting schedule
taking into account any Years of Service subsequent to such Valuation
Date until the date of his termination of employment:
<TABLE>
<CAPTION>
Full Years of Percentage
Service Vested
-------------- ----------
<S> <C>
1 33 1/3%
2 66 2/3%
3 100%
</TABLE>
10.4 The Member shall be entitled to payment in the form specified
in Plan Section 9.2. Payment shall be made as soon as administratively feasible
after the Valuation Date
26
<PAGE> 30
coinciding with or immediately following the Member's termination of
employment; provided, however, if the Member's vested Accrued Benefit exceeds
$3,500 ($5,000 effective January 1, 1998), it will not be distributed before
the Member's Normal Retirement Age or death without the Member's consent. A
Member may, however, elect to have payment of his Accrued Benefit delayed until
he attains age 70 1/2. Unless a Member elects to delay commencement of payment
of his Accrued Benefit, in no event shall payment be made later than sixty (60)
days after the end of the Plan Year in which the Normal Retirement Age of the
Member occurs. Payment shall be subject to the minimum distribution
requirements set forth in Plan Section 9. Any distribution under this Section
shall be subject to the Eligible Rollover Distribution requirements of Section
9.6.
10.5 (a) If any portion of a Member's vested Accrued Benefit
derived from Plan Sponsor contributions is paid prior to his
Termination Completion Date, a portion of his Accrued Benefit equal to
his total non-vested Accrued Benefit derived from Plan Sponsor
contributions multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Plan Sponsor contributions
and the denominator of which is the total vested Accrued Benefit
attributable to Plan Sponsor contributions, shall be immediately
forfeited. The amount forfeited shall not exceed the Members
non-vested Accrued Benefit. Upon the termination of employment of a
Member who is not vested in any part of his Accrued Benefit, the
Member shall be deemed to have received a distribution and his Accrued
Benefit shall be immediately forfeited.
(b) If the Member is reemployed by a Plan Sponsor or an
Affiliate prior to his Termination Completion Date and (1) if the
Member's Accrued Benefit was partially vested and the Member repays to
the Fund no later than the earlier of his Termination Completion Date
or the fifth anniversary of the Member's reemployment all of that
portion of his vested Accrued Benefit which was paid to him or (2) if
the Member's Accrued Benefit was not vested upon his termination of
employment, then any portion of his Accrued Benefit which was
forfeited shall be restored effective on the Valuation Date coinciding
with or next following the repayment or the Member's reemployment,
respectively. The restoration on any Valuation Date of the forfeited
portion of the Accrued Benefit of a Member pursuant to the preceding
sentence shall be made first from forfeitures available for allocation
on that Valuation Date, to the extent available, and secondly from
additional employer contributions. Only after restorations have been
made shall the remaining net income be available for allocation under
Plan Section 4.
(c) If a Member who is partially vested in his Accrued
Benefit does not receive, prior to his Termination Completion Date, a
distribution of any portion of his vested Accrued Benefit, then no
forfeiture of that Member's non-vested portion of his Accrued Benefit
shall occur until that Member's Termination Completion Date.
10.6 In the event that a Plan amendment directly or indirectly
changes the vesting schedule, the vesting percentage for each Member in his
Accrued Benefit accumulated to the date when the amendment is adopted shall not
be reduced as a result of the amendment. In addition, any Member with at least
three (3) Years of Service may irrevocably elect to remain
27
<PAGE> 31
under the pre-amendment vesting schedule with respect to all of his benefits
accrued both before and after the amendment.
SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Trust Agreement. The Primary Sponsor shall establish a Trust
with the Trustee designated by the Board of Directors for the management of the
Fund, which Trust shall form a part of the Plan and is incorporated herein by
reference.
11.2 Operation of the Plan Administrator. The Primary Sponsor
shall appoint a Plan Administrator. If an organization is appointed to serve as
the Plan Administrator, then the Plan Administrator may designate in writing a
person who may act on behalf of the Plan Administrator. The Primary Sponsor
shall have the right to remove the Plan Administrator at any time by notice in
writing. The Plan Administrator may resign at any time by written notice of
resignation to the Trustee and the Primary Sponsor. Upon removal or
resignation, or in the event of the dissolution of the Plan Administrator, the
Primary Sponsor shall appoint a successor.
11.3 Fiduciary Responsibility.
(a) The Plan Administrator, as a Named Fiduciary, may
allocate its fiduciary responsibilities among Fiduciaries other than
the Trustee, designated in writing by the Plan Administrator and may
designate in writing other persons (other than the Trustee) to carry
out its fiduciary responsibilities under the Plan. The Plan
Administrator may at any time and from time to time remove any such
person designated to carry out its fiduciary responsibilities under
the Plan by notice in writing to such person.
(b) The Plan Administrator and each other Fiduciary may
employ persons to perform services and to render advice with regard to
any of the Fiduciary's responsibilities under the Plan. Charges for
all such services performed and advice rendered may be directly paid
by each Plan Sponsor but until paid shall constitute a charge against
the Fund.
(c) Each Plan Sponsor shall indemnify and hold harmless
each person constituting the Plan Administrator or the Investment
Committee, if any, from and against any and all claims, losses, costs,
expenses (including, without limitation, attorney's fees and court
costs), damages, actions or causes of action arising from, on account
of or in connection with the performance by such person of his duties
in such capacity, other than such of the foregoing arising from, on
account of or in connection with the willful neglect or willful
misconduct of such person so acting.
11.4 Duties of the Plan Administrator.
(a) The Plan Administrator shall advise the Trustee with
respect to all payments under the terms of the Plan and shall direct
the Trustee in writing to make such payments from the Fund; provided,
however, in no event shall the Trustee be required to
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make such payments if the Trustee has actual knowledge that such
payments are contrary to the terms of the Plan and the Trust.
(b) The Plan Administrator shall from time to time
establish rules, not contrary to the provisions of the Plan and the
Trust, for the administration of the Plan and the transaction of its
business. All elections and designations under the Plan by a
Participant or Beneficiary shall be made on forms prescribed by the
Plan Administrator. The Plan Administrator shall have discretionary
authority to construe the terms of the Plan and shall determine all
questions arising in the administration, interpretation and
application of the Plan, including, but not limited to, those
concerning eligibility for benefits and it shall not act so as to
discriminate in favor of any person. All determinations of the Plan
Administrator shall be conclusive and binding on all Employees,
Members, Beneficiaries and Fiduciaries, subject to the provisions of
the Plan and the Trust and subject to applicable law.
(c) The Plan Administrator shall furnish Members and
Beneficiaries with all disclosures now or hereafter required by ERISA
or the Code. The Plan Administrator shall file, as required, the
various reports and disclosures concerning the Plan and its operations
as required by ERISA and by the Code, and shall be solely responsible
for establishing and maintaining all records of the Plan and the
Trust.
(d) The statement of specific duties for a Plan
Administrator in this Section is not in derogation of any other duties
which a Plan Administrator has under the provisions of the Plan or the
Trust or under applicable law.
11.5 Investment Manager. The Primary Sponsor may, by action in
writing certified by notice to the Trustee, appoint an Investment Manager. Any
Investment Manager may be removed in the same manner in which appointed, and in
the event of any removal, the Investment Manager shall, as soon as possible,
but in no event more than thirty (30) days after notice of removal, turn over
all assets managed by it to the Trustee or to any successor Investment Manager
appointed, and shall make a full accounting to the Primary Sponsor with respect
to all assets managed by it since its appointment as an Investment Manager.
11.6 Investment Committee. The Primary Sponsor may, by action in
writing certified by notice to the Trustee, appoint an Investment Committee.
The Primary Sponsor shall have the right to remove any person on the Investment
Committee at any time by notice in writing to such person. A person on the
Investment Committee may resign at any time by written notice of resignation to
the Primary Sponsor. Upon such removal or resignation, or in the event of the
death of a person on the Investment Committee, the Primary Sponsor may appoint
a successor. Until a successor has been appointed, the remaining persons on the
Investment Committee may continue to act as the Investment Committee.
11.7 Action by the Primary Sponsor or a Plan Sponsor. Any action
to be taken by the Primary Sponsor or a Plan Sponsor shall be taken by
resolution or written direction duly adopted by its board of directors or
appropriate governing body,
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as the case may be; provided, however, that by such resolution or written
direction, the board of directors or appropriate governing body, as the case
may be, may delegate to any officer or other appropriate person of a Plan
Sponsor the authority to take any such actions as may be specified in such
resolution or written direction, other than the power to amend, modify or
terminate the Plan or the Trust or to determine the basis of any Plan Sponsor
contributions.
SECTION 12
CLAIM REVIEW PROCEDURE
12.1 If a Member or Beneficiary is denied a claim for benefits
under a Plan, the Plan Administrator shall provide to the claimant written
notice of the denial within ninety (90) days after the Plan Administrator
receives the claim, unless special circumstances require an extension of time
for processing the claim. If such an extension of time for processing is
required, written notice of the extension shall be furnished to the claimant
prior to the termination of the initial 90-day period. In no event shall the
extension exceed a period of ninety (90) days from the end of such initial
period. The extension notice shall indicate the special circumstances requiring
an extension of time and the date by which the Plan Administrator expects to
render the final decision.
12.2 If the claimant is denied a claim for benefits, the Plan
Administrator shall provide, within the time frame set forth in Plan Section
12.1, written notice of the denial which shall set forth:
(a) the specific reasons for the denial;
(b) specific references to the pertinent provisions of
the Plan on which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
12.3 After receiving written notice of the denial of a claim, a
claimant or his representative may:
(a) request a full and fair review of the denial by
written application to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan
Administrator.
12.4 If the claimant wishes a review of the decision denying his
claim to benefits under the Plan, he must submit the written application to the
Plan Administrator within sixty (60) days after receiving written notice of the
denial.
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12.5 Upon receiving the written application for review, the Plan
Administrator may schedule a hearing for purposes of reviewing the claimant's
claim, which hearing shall take place not more than thirty (30) days from the
date on which the Plan Administrator received the written application for
review.
12.6 At least ten (10) days prior to the scheduled hearing, the
claimant and his representative designated in writing by him, if any, shall
receive written notice of the date, time, and place of the scheduled hearing.
The claimant or his representative may request that the hearing be rescheduled
for his convenience on another reasonable date or at another reasonable time or
place.
12.7 All claimants requesting a review of the decision denying
their claim for benefits may employ counsel for purposes of the hearing.
12.8 No later than sixty (60) days following the receipt of the
written application for review, the Plan Administrator shall submit its
decision on the review in writing to the claimant involved and to his
representative, if any; provided, however, a decision on the written
application for review may be extended, in the event special circumstances such
as the need to hold a hearing require an extension of time, to a day no later
than one hundred twenty (120) days after the date of receipt of the written
application for review. The decision shall include specific reasons for the
decision and specific references to the pertinent provisions of the Plan on
which the decision is based.
SECTION 13
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
13.1 No benefit which shall be payable under the Plan to any
person shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be void; and no such benefit shall in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements or torts of any
person, nor shall it be subject to attachment or legal process for, or against,
such person, and the same shall not be recognized under the Plan, except to
such extent as may be required by law. Notwithstanding the above, this Section
shall not apply to a "qualified domestic relations order" (as defined in Code
Section 414(p)), and benefits may be paid pursuant to the provisions of such an
order. The Plan Administrator shall develop procedures (in accordance with
applicable federal regulations) to determine whether a domestic relations order
is qualified, and, if so, the method and the procedures for complying
therewith.
13.2 If any person who shall be entitled to any benefit under the
Plan shall become bankrupt or shall attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge such benefit under the Plan, then
the payment of any such benefit in the event a Member or Beneficiary is
entitled to payment shall, in the discretion of the Plan Administrator, cease
and terminate and in that event the Trustee shall hold or apply the same for
the benefit of such
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person, his spouse, children, other dependents or any of them in such manner
and in such proportion as the Plan Administrator shall determine.
13.3 Whenever any benefit which shall be payable under the Plan is
to be paid to or for the benefit of any person who is then a minor or
determined to be incompetent by qualified medical advice, the Plan
Administrator need not require the appointment of a guardian or custodian, but
shall be authorized to cause the same to be paid over to the person having
custody of such minor or incompetent, or to cause the same to be paid to such
minor or incompetent without the intervention of a guardian or custodian, or to
cause the same to be paid to a legal guardian or custodian of such minor or
incompetent if one has been appointed or to cause the same to be used for the
benefit of such minor or incompetent.
13.4 If the Plan Administrator cannot ascertain the whereabouts of
any Member to whom a payment is due under the Plan, the Plan administrator may
direct that the payment and all remaining payments otherwise due to the Member
be cancelled on the records of the Plan and the amount thereof applied as a
forfeiture in accordance with Plan Section 3.4, except that, in the event the
Member later notifies the Plan Administrator of his whereabouts and requests
the payments due to him under the Plan, the Plan Sponsor shall contribute to
the Plan an amount equal to the payment to be paid to him as soon as
administratively feasible.
SECTION 14
PROHIBITION AGAINST DIVERSION
At no time shall any part of the Fund be used for or diverted to
purposes other than the exclusive benefit of the Members or their
Beneficiaries, subject, however, to the payment of all taxes and administrative
expenses and subject to the provisions of the Plan with respect to returns of
contributions.
SECTION 15
LIMITATION OF RIGHTS
Membership in the Plan shall not give any Employee any right or claim
except to the extent that such right is specifically fixed under the terms of
the Plan. The adoption of the Plan and the Trust by any Plan Sponsor shall not
be construed to give any Employee a right to be continued in the employ of a
Plan Sponsor or as interfering with the right of a Plan Sponsor to terminate
the employment of any Employee at any time.
SECTION 16
AMENDMENT TO OR TERMINATION OF THE
PLAN AND THE TRUST
16.1 The Primary Sponsor reserves the right at any time to modify
or amend or terminate the Plan or the Trust in whole or in part by notice
thereof in writing delivered to the Trustee; provided, however, that the
Primary Sponsor shall have no power to modify or amend the Plan in such manner
as would cause or permit any portion of the funds held under a Plan to be used
for, or diverted to, purposes other than for the exclusive benefit of Members
or their
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Beneficiaries, or as would cause or permit any portion of a fund held under the
Plan to become the property of a Plan Sponsor; and provided further, that the
duties or liabilities of the Trustee shall not be increased without its written
consent; and provided further, that the Plan Administrator may amend the Loan
Procedures from time to time without the need for further consent of the
Primary Sponsor. No such modifications or amendments shall have the effect of
retroactively changing or depriving Members or Beneficiaries of rights already
accrued under the Plan. No Plan Sponsor other than the Primary Sponsor shall
have the right to so modify, amend or terminate the Plan or the Trust.
Notwithstanding the foregoing, each Plan Sponsor may terminate its own
participation in the Plan and Trust pursuant to the Plan.
16.2 Each Plan Sponsor other than the Primary Sponsor shall have
the right to terminate its participation in the Plan and Trust by resolution of
its board of directors or other appropriate governing body and notice in
writing to the Primary Sponsor and the Trustee unless such termination would
result in the disqualification of the Plan or the Trust or would adversely
affect the exempt status of the Plan or the Trust as to any other Plan Sponsor.
If contributions by or on behalf of a Plan Sponsor are completely terminated,
the Plan and Trust shall be deemed terminated as to such Plan Sponsor. Any
termination by a Plan Sponsor, shall not be a termination as to any other Plan
Sponsor.
16.3 (a) If the Plan is terminated by the Primary Sponsor or
if contributions to the Trust should be permanently discontinued, it
shall terminate as to all Plan Sponsors and the Fund shall be used,
subject to the payment of expenses and taxes, for the benefit of
Members and Beneficiaries, and for no other purposes, and the Account
of each affected Member shall be fully vested and nonforfeitable,
notwithstanding the provisions of the Section of the Plan which sets
forth the vesting schedule.
(b) In the event of the partial termination of the Plan,
each affected Member's Account shall be fully vested and
nonforfeitable, notwithstanding the provisions of the Section of the
Plan which sets forth the vesting schedule.
16.4 In the event of the termination of the Plan or the Trust with
respect to a Plan Sponsor, the Accounts of the Members with respect to the Plan
as adopted by such Plan Sponsor shall be held subject to the instructions of
the Plan Administrator; provided that the Trustee shall not be required to make
any distribution until it receives a copy of an Internal Revenue Service
determination letter to the effect that the termination does not affect the
qualified status of the Plan or the exempt status of the Trust or, in the event
that such letter is applied for and is not issued, until the Trustee is
reasonably satisfied that adequate provision has been made for the payment of
all taxes which may be due and owing by the Trust.
16.5 In the case of any merger or consolidation of the Plan with,
or any transfer of the assets or liabilities of the Plan to, any other plan
qualified under Code Section 401, the terms of the merger, consolidation or
transfer shall be such that each Member would receive (in the event of
termination of the Plan or its successor immediately thereafter) a benefit
which is no less than the benefit which the Member would have received in the
event of termination of the Plan immediately before the merger, consolidation
or transfer.
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16.6 Notwithstanding any other provision of the Plan, an amendment
to the Plan --
(a) which eliminates or reduces an early retirement
benefit, if any, or which eliminates or reduces a retirement-type
subsidy (as defined in regulations issued by the Department of the
Treasury), if any, or
(b) which eliminates an optional form of benefit
shall not be effective with respect to benefits attributable to service before
the amendment is adopted. In the case of a retirement-type subsidy described in
Subsection (a) above, this Section shall be applicable only to a Member who
satisfies, either before or after the amendment, the pre-amendment conditions
for the subsidy.
SECTION 17
ADOPTION OF PLAN BY AFFILIATES
Any corporation or other business entity related to the Primary
Sponsor by function or operation and any Affiliate, if the corporation,
business entity or Affiliate is authorized to do so by written direction
adopted by the Board of Directors, may adopt the Plan and the related Trust by
action of the board of directors or other appropriate governing body of such
corporation, business entity or Affiliate. Any adoption shall be evidenced by
certified copies of the resolutions of the foregoing board of directors or
governing body indicating the adoption and by the execution of the Trust by the
adopting corporation, or business entity or Affiliate. The resolution shall
state and define the effective date of the adoption of the Plan by the Plan
Sponsor and, for the purpose of Code Section 415, the "limitation year" as to
such Plan Sponsor. Notwithstanding the foregoing, however, if the Plan and
Trust as adopted by an Affiliate or other corporation or business entity under
the foregoing provisions shall fail to receive the initial approval of the
Internal Revenue Service as a qualified Plan and Trust under Code Sections
401(a) and 501(a), any contributions by the Affiliate or other corporation or
business entity after payment of all expenses will be returned to such Plan
Sponsor free of any trust, and the Plan and Trust shall terminate, as to the
adopting Affiliate or other corporation or business entity.
SECTION 18
QUALIFICATION AND RETURN OF CONTRIBUTIONS
18.1 If the Plan and the related Trust fail to receive the initial
approval of the Internal Revenue Service as a qualified plan and trust within
one (1) year after the date of denial of qualification (a) the contribution of
a Plan Sponsor after payment of all expenses will be returned to a Plan Sponsor
free of the Plan and Trust, (b) contributions made by a Member shall be
returned to the Member who made the contributions, and (c) the Plan and Trust
shall thereupon terminate.
18.2 If and to the extent permitted by the Code and other
applicable laws and regulations thereunder, upon a Plan Sponsor's request, a
contribution which was made by reason of a mistake of fact or upon the
deductibility of the contribution under Code Section 404, shall be returned to
a Plan Sponsor within one (1) year after the payment of the contribution, or
the disallowance of the deduction (to the extent disallowed), whichever is
applicable.
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In the event of a contribution which was made by reason of a mistake
of fact or which was conditioned upon the deductibility of the contribution,
the amount to be returned to the Plan Sponsor shall be the excess of the
contribution above the amount that would have been contributed had the mistake
of fact or the mistake in determining the deduction not occurred, less any net
loss attributable to the excess. Any net income attributable to the excess
shall not be returned to the Plan Sponsor. No return of any portion of the
excess shall be made to the Plan Sponsor if the return would cause the balance
in a Member's Account to be less than the balance would have been had the
mistaken contribution not been made.
SECTION 19
INCORPORATION OF SPECIAL LIMITATIONS
Appendices A, B, C, and D to the Plan, attached hereto, are
incorporated by reference and the provisions of the same shall apply
notwithstanding anything to the contrary contained herein.
IN WITNESS WHEREOF, the Primary Sponsor has caused this indenture to
be executed as of the date first above written.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
-------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
By: /s/ RANDOLPH L. M. HUTTO
--------------------------
Randolph L. M. Hutto
Secretary
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<PAGE> 39
APPENDIX A
SPECIAL NONDISCRIMINATION RULES
SECTION 1
As used in this Appendix, the following words shall have the following
meanings:
(a) "Eligible Member" means a Member who is an Employee
during any particular Plan Year.
(b) "Highly Compensated Eligible Member" means any
Eligible Member who is a Highly Compensated Employee.
(c) "Matching Contribution" means any contribution made
by a Plan Sponsor to a Matching Account and any other contribution
made to a plan by a Plan Sponsor or an Affiliate on behalf of an
Employee on account of a contribution made by an Employee or on
account of an Elective Deferral.
(d) "Qualified Matching Contributions" means Matching
Contributions which are immediately nonforfeitable when made, and
which would be nonforfeitable, regardless of the age or service of the
Employee or whether the Employee is employed on a certain date, and
which may not be distributed, except upon one of the events described
under Section 401(k)(2)(B) of the Code and the regulations thereunder.
(e) "Qualified Nonelective Contributions" means
contributions of the Plan Sponsor or an Affiliate, other than Matching
Contributions or Elective Deferrals, which are nonforfeitable when
made, and which would be nonforfeitable regardless of the age or
service of the Employee or whether the Employee is employed on a
certain date, and which may not be distributed, except upon one of the
events described under Code Section 401(k)(2)(B) and the regulations
thereunder.
SECTION 2
In addition to any other limitations set forth in the Plan, for each
Plan Year one of the following tests must be satisfied:
(a) the actual deferral percentage for the Highly
Compensated Eligible Members for the Plan Year must not be more than
the actual deferral percentage of all other Eligible Members for the
preceding Plan Year multiplied by 1.25; or
(b) the excess of the actual deferral percentage for the
Highly Compensated Eligible Members for the Plan Year over that of all
other Eligible Members for the preceding Plan Year must not be more
than two (2) percentage points, and the actual deferral percentage for
the Highly Compensated Eligible Members for the Plan Year must not be
more than the actual deferral percentage of all other Eligible Members
for the preceding Plan Year multiplied by two (2).
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<PAGE> 40
The "actual deferral percentage" for the Highly Compensated Eligible
Members and all other Eligible Members for a Plan Year is the average in each
group of the ratios, calculated separately for each Employee, of the Deferral
Amounts contributed by the Plan Sponsor on behalf of an Employee for the Plan
Year to the Annual Compensation of the Employee in the Plan Year. In addition,
for purposes of calculating the "actual deferral percentage" as described
above, Deferral Amounts of Employees who are not Highly Compensated Employees
which are prohibited by Code Section 401(a)(30) shall not be taken into
consideration. Except to the extent limited by Treasury Regulation section
1.401(k)-1(b)(5) and any other applicable regulations promulgated by the
Secretary of the Treasury, all or part of the Qualified Matching Contributions
and Qualified Nonelective Contributions made pursuant to the Plan may be
treated as Deferral Amounts for purposes of determining the "actual deferral
percentage."
SECTION 3
If the Deferral Amount contributed on behalf of any Highly Compensated
Eligible Member exceeds the amount permitted under the "actual deferral
percentage" test described in Section 2 of this Appendix A for any given Plan
Year, then before the end of the Plan Year following the Plan Year for which
the Excess Deferral Amount was contributed, the portion of the Excess Deferral
Amount for the Plan Year attributable to a Highly Compensated Eligible Member,
as adjusted to reflect income, gain, or loss attributable to it through the
date the Excess Deferral Amount is distributed to the Member and reduced by any
excess Elective Deferrals as determined pursuant to Plan Section 3.1 previously
distributed to a Member for the Member's taxable year ending with or within the
Plan Year, shall be distributed to the Highly Compensated Eligible Member. The
income allocable to such Excess Deferral Amount shall be determined in a
similar manner as described in Section 4.2 of the Plan. The Excess Deferral
Amount to be distributed shall be reduced by Deferral Amounts previously
distributed for the taxable year ending in the same Plan Year, and shall also
be reduced by Deferral Amounts previously distributed for the Plan Year
beginning in such taxable year. In the event the multiple use of limitations
contained in Sections 2(b) and 5(b) of this Appendix, pursuant to Treasury
Regulations section 1.401(m)-2 as promulgated by the Secretary of the Treasury,
requires a corrective distribution, such distribution shall be made pursuant to
this Section 3, and not Section 6 of Appendix A.
(a) For purposes of this Section 3, "Excess Deferral
Amount" means, with respect to a Plan Year, the excess of:
(1) the aggregate amount of Deferral Amounts
contributed by a Plan Sponsor on behalf of Highly Compensated
Eligible Members for the Plan Year, over
(2) the maximum amount of Deferral Amounts
permitted under Section 2 of this Appendix A for the Plan
Year, which shall be determined by reducing the Deferral
Amounts contributed on behalf of Highly Compensated Eligible
Members in order of the actual deferral percentages beginning
with the highest of such percentages.
A-2
<PAGE> 41
(b) Distribution of the Excess Deferral Amount for any
Plan Year shall be made to Highly Compensated Eligible Members on the
basis of the dollar amount of Deferral Amounts attributable to each
Highly Compensated Eligible Member. The Plan Sponsor shall determine
the amount of Excess Deferral Amounts which shall be distributed to
each Highly Compensated Eligible Member as follows.
(1) The Deferral Amounts allocated to the
Highly Compensated Eligible Member with the highest dollar
amount of Deferral Amounts for the Plan Year shall be reduced
by the amount required to cause that Highly Compensated
Eligible Member's remaining Deferral Amounts for the Plan
Year to be equal to the dollar amount of the Deferral Amounts
allocated to the Highly Compensated Eligible Member with the
next highest dollar amount of Deferral Amounts for the Plan
Year. This amount is then distributed to the Highly
Compensated Eligible Member with the highest dollar amount of
Deferral Amount, unless a smaller reduction, when added to
the total dollar amount already distributed pursuant to this
Subsection (1), equals the total Excess Deferral Amounts.
(2) If the total amount distributed under
Subsection (1) of this Section 3 is less than the total
Excess Deferral Amounts, the procedure in Subsection (1)
shall be repeated successively until the total dollar amount
distributed is equal to the total Excess Deferral Amounts
attributable to Highly Compensated Eligible Members.
If a distribution of the Excess Deferral Amounts attributable
to the Highly Compensated Eligible Members is made in
accordance with Subsections (1) and (2) of this Section, the
limitations in Section 2 of this Appendix A shall be treated
as being met regardless of whether the actual deferral
percentage, if recalculated after such distributions, would
have satisfied the requirements of Section 2.
SECTION 4
The Plan Administrator shall have the responsibility of monitoring the
Plan's compliance with the limitations of this Appendix A and shall have the
power to take all steps it deems necessary or appropriate to ensure compliance,
including, without limitation, restricting the amount which Highly Compensated
Eligible Members can elect to have contributed pursuant to Plan Section 3.1.
Any actions taken by the Plan Administrator pursuant to this Section 4 shall be
pursuant to non-discriminatory procedures consistently applied.
A-3
<PAGE> 42
SECTION 5
In addition to any other limitations set forth in the Plan, Matching
Contributions under the Plan and the amount of nondeductible employee
contributions under the Plan, for each Plan Year must satisfy one of the
following tests:
(a) The contribution percentage for Highly Compensated
Eligible Members for the Plan Year must not exceed 125% of the
contribution percentage for all other Eligible Members for the
preceding Plan Year; or
(b) The contribution percentage for Highly Compensated
Eligible Members for the Plan Year must not exceed the lesser of (1)
200% of the contribution percentage for all other Eligible Members for
the preceding Plan Year, and (2) the contribution percentage for all
other Eligible Members for the preceding Plan Year plus two (2)
percentage points.
Notwithstanding the foregoing, for purposes of this Section 5, the
terms Highly Compensated Eligible Member and Eligible Member shall not include
any Member who is not eligible to receive a Matching Contribution under the
provisions of the Plan, other than as a result of the Member failing to
contribute to the Plan or failing to have an Elective Deferral contributed to
the Plan on the Member's behalf. Notwithstanding the foregoing, if Qualified
Matching Contributions are taken into account for purposes of applying the test
contained in Section 2 of this Appendix A, they shall not be taken into account
under this Section 5. In applying the above tests, the Plan Administrator shall
comply with any regulations promulgated by the Secretary of the Treasury which
prevent or restrict the use of the test contained in Section 2(b) of this
Appendix A and the test contained in Section 5(b) of this Appendix A. The
"contribution percentage" for Highly Compensated Eligible Members and for all
other Eligible Members for a Plan Year shall be the average of the ratios,
calculated separately for each Member, of (A) to (B), where (A) is the amount
of Matching Contributions under the Plan (excluding Qualified Matching
Contributions which are used to apply the test set forth in Section 2 of this
Appendix A or Matching Contributions which are used to satisfy the minimum
required contributions to the Accounts of Eligible Members who are not Key
Employees pursuant to Section 1 of Appendix C to the Plan) and nondeductible
employee contributions made under the Plan for the Eligible Member for the Plan
Year, and where (B) is the Annual Compensation of the Eligible Member for the
Plan Year. Except to the extent limited by Treasury Regulation Section
1.401(m)-1(b)(5) and any other applicable regulations promulgated by the
Secretary of the Treasury, a Plan Sponsor may elect to treat Deferral Amounts
and Qualified Nonelective Contributions and/or Qualified Matching Contribution
as Matching Contributions for purpose of determining the "contribution
percentage," provided the Deferral Amounts, excluding those treated as Matching
Contributions, satisfy the test set forth in Section 2 of Appendix A.
SECTION 6
If the Matching Contributions and nondeductible employee contributions
and, if taken into account under Section 5 of this Appendix A, the Deferral
Amounts made by or on behalf of
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<PAGE> 43
Highly Compensated Eligible Members exceed the amount permitted under the
"contribution percentage test" for any given Plan Year, then, before the close
of the Plan Year following the Plan Year for which the Excess Aggregate
Contributions were made, the portion of the Excess Aggregate Contributions
attributable to a Highly Compensated Eligible Member for the Plan Year, as
adjusted to reflect any income, gain or loss attributable to such contributions
through the date the Excess Aggregate Contributions are distributed may be
distributed or, if the Excess Aggregate Contributions are forfeitable,
forfeited. The income allocable to such contributions shall be determined in a
similar manner as described in Section 4.2 of the Plan. As to any Highly
Compensated Employee, any distribution or forfeiture of his allocable portion
of the Excess Aggregate Contributions for a Plan Year shall first be attributed
to any nondeductible employee contributions made by the Member during the Plan
Year for which no corresponding Plan Sponsor contribution is made and then to
any remaining nondeductible employee contributions made by the Member during
the Plan Year and any Matching Contributions thereon. As between the Plan and
any other plan or plans maintained by the Plan Sponsor in which Excess
Aggregate Contributions for a Plan Year are held, each such plan shall
distribute or forfeit a pro-rata share of each class of contribution based on
the respective amounts of a class of contribution made to each plan during the
Plan Year. The payment of the Excess Aggregate Contributions shall be made
without regard to any other provision in the Plan. In the event the multiple
use of limitations contained in Sections 2(b) and 5(b) of this Appendix,
pursuant to Treasury Regulation section 1.401(m)-2 as promulgated by the
Secretary of the Treasury, requires a corrective distribution, such
distribution shall be made pursuant to Section 3 of Appendix A, and not this
Section 6.
(a) For purposes of this Section 6, "Excess Aggregate
Contributions" means, with respect to a Plan Year, the excess of:
(1) the aggregate amount of the Matching
Contributions and nondeductible employee contributions (and
any Qualified Nonelective Contributions or Qualified Matching
Contributions) and, if taken into account under Section 5 of
this Appendix A, the Deferral Amounts actually made on behalf
of Highly Compensated Eligible Members for the Plan Year,
over
(2) the maximum amount of contributions
permitted under the limitations of Section 5 of this Appendix
A, determined by reducing contributions made on behalf of
Highly Compensated Eligible Members in order of their
contribution percentages beginning with the highest of such
percentages.
The determination of the amount of Excess Aggregate Contributions
under this Section 6 shall be made after (1) first determining the excess
Elective Deferrals under Section 3.1(b) of the Plan and (2) then determining
the Excess Deferral Amounts under Section 3 of this Appendix A.
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(b) Distribution or forfeiture of nondeductible employee
contributions or Matching Contributions in the amount of the Excess
Aggregate Contributions for any Plan Year shall be made with respect
to Highly Compensated Eligible Members on the basis of the dollar
amount of the Excess Aggregate Contributions attributable to each
Highly Compensated Eligible Member. Forfeitures of Excess Aggregate
Contributions may not be allocated to Members whose contributions are
reduced under this Section 6. The Plan Sponsor shall determine the
amount of Excess Aggregate Contributions which shall be distributed to
each Highly Compensated Eligible Member as follows.
(1) The Matching Contributions and
nondeductible contributions allocated to the Highly
Compensated Eligible Member with the highest dollar amount of
such contributions for the Plan Year shall be reduced by the
amount required to cause that Highly Compensated Eligible
Member's remaining Matching Contributions and nondeductible
contributions for the Plan Year to be equal to the dollar
amount of such contributions allocated to the Highly
Compensated Eligible Member with the next highest dollar
amount of Matching Contributions and nondeductible
contributions for the Plan Year. This amount is then
distributed to the Highly Compensated Eligible Member with
the highest dollar amount of Matching Contributions and
nondeductible contributions, unless a smaller reduction, when
added to the total dollar amount already distributed pursuant
to this Subsection (1), equals the total Excess Aggregate
Contributions.
(2) If the total amount distributed under
Subsection (1) is less than the total Excess Aggregate
Contributions, the procedure in Subsection (1) shall be
repeated successively until the total dollar amount of
Matching Contributions and nondeductible contributions
distributed is equal to the total Excess Aggregate
Contributions attributable to Highly Compensated Eligible
Members.
If a distribution of the total Excess Aggregate Contributions
is made in accordance with Subsections (1) and (2) of this Section,
the limitations in Section 5 of this Appendix A shall be treated as
being met regardless of whether the actual contribution percentage, if
recalculated after such distributions, would have satisfied the
requirements of Section 5.
SECTION 7
Except to the extent limited by rules promulgated by the Secretary of
the Treasury, if a Highly Compensated Eligible Member is a participant in any
other plan of the Plan Sponsor or any Affiliate which includes Matching
Contributions, deferrals under a cash or deferred arrangement pursuant to Code
Section 401(k), or nondeductible employee contributions, any contributions made
by or on behalf of the Member to the other plan shall be allocated with the
same class of contributions under the Plan for purposes of determining the
"actual deferral percentage" and "contribution percentage" under the Plan;
provided, however, contributions that
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are made under an "employee stock ownership plan" (within the meaning of Code
Section 4975(e)(7)) shall not be combined with contributions under any plan
which is not an employee stock ownership plan (within the meaning of Code
Section 4975(e)(7)).
Except to the extent limited by rules promulgated by the Secretary of
the Treasury, if the Plan and any other plans which include Matching
Contributions, deferrals under a cash or deferred arrangement pursuant to Code
Section 401(k), or nondeductible employee contributions are considered as one
plan for purposes of Code Section 401(a)(4) and 410(b)(1), any contributions
under the other plans shall be allocated with the same class of contributions
under the Plan for purposes of determining the "contribution percentage" and
"actual deferral percentage" under the Plan; provided, however, contributions
that are made under an "employee stock ownership plan" (within the meaning of
Code Section 4975(e)(7)) shall not be combined with contributions under any
plan which is not an employee stock ownership plan (within the meaning of Code
Section 4975(e)(7)).
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<PAGE> 46
APPENDIX B
LIMITATION ON ALLOCATIONS
SECTION 1
The "annual addition" for any Member for any one limitation year may
not exceed the lesser of:
(a) $30,000 as adjusted for changes in the cost of
living as provided in regulations issued by the Secretary of the
Treasury; or
(b) 25% of the Member's Annual Compensation.
SECTION 2
For the purposes of this Appendix B, the term "annual addition" for
any Member means for any limitation year, the sum of certain Plan Sponsor and
Member contributions, forfeitures, and other amounts as determined in Code
Section 415(c)(2) in effect for that limitation year.
SECTION 3
Effective until December 31, 1999, in the event that a Plan Sponsor
maintains a defined benefit plan under which a Member also participates, the
sum of the defined benefit plan fraction and the defined contribution plan
fraction for any limitation year for any Member may not exceed 1.0.
(a) The defined benefit plan fraction for any limitation
year is a fraction:
(1) the numerator of which is the projected
annual benefit of the Member under the defined benefit plan
(determined as of the close of such year); and
(2) the denominator of which is the lesser of
(A) the product of 1.25, multiplied by
the maximum annual benefit allowable under Code
Section 415(b)(1)(A), or
(B) the product of
(i) 1.4, multiplied by
(ii) the maximum amount which
may be taken into account under Section
415(b)(1)(B) of the Code with respect to
the Member under the defined benefit plan
for the limitation year (determined as of
the close of the limitation year).
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(b) The defined contribution plan fraction for any
limitation year is a fraction:
(1) the numerator of which is the sum of a
Member's annual additions as of the close of the year; and
(2) the denominator of which is the sum of the
lesser of the following amounts determined for the year and
for all prior limitation years during which the Member was
employed by a Plan Sponsor:
(A) the product of 1.25, multiplied by
the dollar limitation in effect under Code Section
415(c)(1)(A) for the limitation year (determined
without regard to Section 415(c)(6) of the Code); or
(B) the product of
(i) 1.4, multiplied by
(ii) the amount which may be
taken into account under Code Section
415(c)(1)(B) (or Code Section 415(c)(7), if
applicable) with respect to the Member for
the limitation year.
SECTION 4
For purposes of this Appendix B, the term "limitation year" shall mean
a Plan Year unless a Plan Sponsor elects, by adoption of a written resolution,
to use any other twelve-month period adopted in accordance with regulations
issued by the Secretary of the Treasury. For purposes of applying the
limitations set forth in this Appendix B, the term "Plan Sponsor" shall mean a
Plan Sponsor and any other corporations which are members of the same
controlled group of corporations (as described in Section 414(b) of the Code,
as modified by Code Section 415(h)) as is a Plan Sponsor, any other trades or
businesses (whether or not incorporated) under common control (as described in
Code Section 414(c), as modified by Code Section 415(h)) with a Plan Sponsor,
any other corporations, partnerships, or other organizations which are members
of an affiliated service group (as described in Section 414(m) of the Code)
with a Plan Sponsor, and any other entity required to be aggregated with a Plan
Sponsor pursuant to regulations under Code Section 414(o).
SECTION 5
For purposes of applying the limitations of this Appendix B, all
defined contribution plans maintained or deemed to be maintained by a Plan
Sponsor shall be treated as one defined contribution plan, and all defined
benefit plans now or previously maintained or deemed to be maintained by a Plan
Sponsor shall be treated as one defined benefit plan. In the event any of the
actions to be taken pursuant to Section 6 of this Appendix or pursuant to any
language of similar import in another defined contribution plan are required to
be taken as a result of the annual additions of a Member exceeding the
limitations set forth in Section 1 of this Appendix because
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of the Member's participation in more than one defined contribution plan, the
actions shall be taken first with regard to this Plan.
SECTION 6
In the event that as a result of either the allocation of forfeitures
to the Account of a Member or a reasonable error in estimating the Member's
Annual Compensation, the annual addition allocated to the Account of a Member
exceeds the limitations set forth in Section 1 of this Appendix B or in the
event that the aggregate contributions made on behalf of a Member under both a
defined benefit plan and a defined contribution plan, subject to the reduction
of allocations in other defined contribution plans required by Section 5 of
this Appendix B, cause the aggregate limitation fraction set forth in Section 3
of this Appendix B to be exceeded, the Plan Administrator shall, in writing,
direct the Trustee to take such of the following actions as the Plan
Administrator shall deem appropriate, specifying in each case the amount or
amounts of contributions involved:
(a) A Member's annual addition shall be reduced by
distributing to the Member contributions made by the Plan Sponsor on
behalf of the Member pursuant to Plan Section 3.1 with respect to
which no contribution is made under Plan Section 3.2 which cause the
annual addition to exceed such limitations;
(b) If further reduction is necessary, contributions
made by the Plan Sponsor on behalf of the Member pursuant to Plan
Section 3.1 and contributions of the Plan Sponsor thereon pursuant to
Plan Section 3.2 shall be reduced in the amount of the remaining
excess. The amount of the reduction under Plan Section 3.1 shall be
distributed to the Member. The amount of the reduction under Plan
Section 3.2 shall be reallocated to the Matching Accounts of Members
who are not affected by the limitation in the same proportion as the
contribution of the Plan Sponsor for the year is allocated under Plan
Section 4.1 to the Accounts of such Members;
(c) If further reduction is necessary, contributions
made by the Plan Sponsor on behalf of the Member pursuant to Plan
Section 3.3 shall be reduced in the amount of the remaining excess.
The amount of the reduction shall be reallocated to the Accounts of
Members who are not affected by the limitations in the same proportion
as the contribution of the Plan Sponsor for the year is allocated
under Plan Section 4.1 to the Accounts of such Members; and
(d) If further reduction is necessary, forfeitures
allocated to the Member's Account shall be reduced by the amount of
the remaining excess. The amount of the reduction shall be reallocated
to the Company Accounts of Members who are not affected by the
limitations in the same proportions as the contributions of the Plan
Sponsor for the year are allocated to the Company Accounts of such
Members;
(e) If the contribution of the Plan Sponsor and
forfeitures would cause the annual addition to exceed the limitations
set forth herein with respect to all Members under the Plan, the
portion of such contribution in excess of the limitations shall be
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segregated in a suspense account. While the suspense account is
maintained, (1) no Plan Sponsor contributions under the Plan shall be
made which would be precluded by this Appendix B, (2) income, gains
and loses of the Fund shall not be allocated to such suspense account
and (3) amounts in the suspense account shall be allocated in the same
manner as Plan Sponsor contributions and forfeitures under the Plan as
of each Valuation Date on which Plan Sponsor contributions may be
allocated until the suspense account is exhausted. In the event of the
termination of the Plan, the amounts in the suspense account shall be
returned to the Plan Sponsor to the extent that such amounts may not
then be allocated to the Members' Accounts.
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APPENDIX C
TOP-HEAVY PROVISIONS
SECTION 1
As used in this Appendix, the following words shall have the following
meanings:
(a) "Determination Date" means, with respect to any Plan Year,
the last day of the preceding Plan Year, or, in the case of the first Plan
Year, means the last day of the first Plan Year.
(b) "Key Employee" means an Employee or former Employee
(including a Beneficiary of a Key Employee or former Key Employee) who at any
time during the Plan Year containing the Determination Date or any of the four
(4) preceding Plan Years is:
(1) An officer of the Plan Sponsor or any Affiliate
whose Annual Compensation was greater than fifty
percent (50%) of the amount in effect under Code Section 415(b)(1)(A)
for the calendar year in which the Plan year ends, where the term
"officer" means an administrative executive in regular and continuous
service to the Plan Sponsor or Affiliate; provided, however, than in
no event shall the number of officers exceed the lesser of Clause (A)
or (B) of this subparagraph (1); where:
(A) equals fifty (50) Employees; and
(B) equals the greater of (i) three (3)
Employees or (ii) ten percent (10%) of the number of
Employees during the Plan Year, with any non-integer being
increased to the next largest integer.
(2) One of the ten (10) Employees owning both (A) more
than one-half percent (1/2%) of the outstanding stock of the Plan
Sponsor or an Affiliate, more than one-half percent (1/2%) of the
total combined voting power of all stock of the Plan Sponsor or an
Affiliate, or more than one-half percent (1/2%) of the capital or
profits interest in the Plan Sponsor or an Affiliate, and (B) the
largest percentage ownership interests in the Plan Sponsor or any of
its Affiliates, and whose Annual Compensation is equal to or greater
than the amount in effect under Section 1(a) of Appendix B to the Plan
for the calendar year in which the Determination Date falls; or
(3) An owner of more than five percent (5%) of the
outstanding stock of the Plan Sponsor or an Affiliate or more than
five percent (5%) of the total combined voting power of all stock of
the Plan Sponsor or an Affiliate; or
(4) An owner of more than one percent (1%) of the
outstanding stock of the Plan Sponsor or an Affiliate or more than one
percent (1%) of the total
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combined voting power of all stock of the Plan Sponsor or an
Affiliate, and who in such Plan Year had Annual Compensation from the
Plan Sponsor and all of its Affiliates of more than $150,000.
Employees other than Key Employees are sometimes referred to in this Appendix
as "non-key employees."
(c) "Required Aggregation Group" means:
(1) each plan of the Plan Sponsor and its Affiliates
which qualifies under Code Section 401(a) in which a Key Employee is a
participant, and
(2) each other plan of the Plan Sponsor and its
Affiliates which qualifies under Code Section 401 (a) and which
enables any plan described in Subsection (a) of this Section to meet
the requirements of Section 401(a)(4) or 410 of the Code.
(d) (1) "Top-Heavy" means:
(A) if the Plan is not included in a Required
Aggregation Group, the Plan's condition in a Plan Year for
which, as of the Determination Date:
(i) the present value of the
cumulative Accrued Benefits under the Plan for all
Key Employees exceeds 60 percent of the present
value of the cumulative Accrued Benefits under the
Plan for all Members; and
(ii) the Plan, when included in every
potential combination, if any, with any or all of:
(I) any Required Aggregation
Group, and
(II) any plan of the Plan Sponsor
which is not part of any Required
Aggregation Group and which qualifies under
Code Section 401 (a)
is part of a Top-Heavy Group (as defined in
Paragraph (2) of this Subsection); and
(B) if the Plan is included in a Required
Aggregation Group, the Plan's condition in a Plan Year for
which, as of the Determination Date:
(i) the Required Aggregation Group is
a Top-Heavy Group (as defined in Paragraph (2) of
this Subsection); and
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(ii) the Required Aggregation Group,
when included in every potential combination, if
any, with any or all of the plans of the Plan
Sponsor and its Affiliates which are not part of the
Required Aggregation Group and which qualify under
Code Section 401(a), is part of a Top-Heavy Group
(as defined in Paragraph (2) of this Subsection).
(C) For purposes of Subparagraphs (A)(ii) and
(B)(ii) of this Paragraph (1), any combination of plans must
satisfy the requirements of Sections 401(a)(4) and 410 of the
Code.
(2) A group shall be deemed to be a Top-Heavy Group if:
(A) the sum, as of the Determination Date, of
the present value of the cumulative accrued benefits for all
Key Employees under all plans included in such group exceeds
(B) 60 percent of a similar sum determined for
all participants in such plans.
(3) (A) For purposes of this Section, the present
value of the accrued benefit for any participant in
a defined contribution plan as of any Determination
Date or last day of a plan year shall be the sum of:
(i) as to any defined contribution
plan other than a simplified employee pension, the
account balance as of the most recent valuation date
occurring within the plan year ending on the
Determination Date or last day of a plan year, and
(ii) as to any simplified employee
pension, the aggregate employer contributions, and
(iii) an adjustment for contributions
due as of the Determination Date or last day of a
plan year.
In the case of a plan that is not subject to the
minimum funding requirements of Code Section 412, the
adjustment in Clause (iii) of this Subparagraph (A) shall be
the amount of any contributions actually made after the
valuation date but on or before the Determination Date or
last day of the plan year to the extent not included under
Clause (i) or (ii) of this Subparagraph (A); provided,
however, that in the first plan year of the plan, the
adjustment in Clause (iii) of this Subparagraph (A) shall
also reflect the amount of any contributions made thereafter
that are allocated as of a date in such first plan year. In
the case of a plan that is subject to the minimum funding
requirements, the account balance in Clause (i) and
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the aggregate contributions in Clause (ii) of this
Subparagraph (A) shall include contributions that would be
allocated as of a date not later than the Determination Date
or last day of a plan year, even though those amounts are not
yet required to be contributed, and the adjustment in Clause
(iii) of this Subparagraph (A) shall be the amount of any
contribution actually made (or due to be made) after the
valuation date but before the expiration of the extended
payment period in Code Section 412(c)(10) to the extent not
included under Clause (i) or (ii) of this Subparagraph (A).
(B) For purposes of this Subsection, the
present value of the accrued benefit for any participant in a
defined benefit plan as of any Determination Date or last day
of a plan year must be determined as of the most recent
valuation date which is within a 12-month period ending on
the Determination Date or last day of a plan year as if such
participant terminated as of such valuation date; provided,
however, that in the first plan year of a plan, the present
value of the accrued benefit for a current participant must
be determined either (i) as if the participant terminated
service as of the Determination Date or last day of a plan
year or (ii) as if the participant terminated service as of
such valuation date, but taking into account the estimated
accrued benefit as of the Determination Date or last day of a
plan year. For purposes of this Subparagraph (B), the
valuation date must be the same valuation date used for
computing plan costs for minimum funding, regardless of
whether a valuation is performed that year. The actuarial
assumptions utilized in calculating the present value of the
accrued benefit for any participant in a defined benefit plan
for purposes of this Subparagraph (B) shall be established by
the Plan Administrator after consultation with the actuary
for the plan, and shall be reasonable in the aggregate and
shall comport with the requirements set forth by the Internal
Revenue Service in Q&A T-26 and T-27 of Regulation Section
1.416-1; provided that, the accrued benefit for any
participant (other than a Key Employee) in a defined benefit
plan shall be determined in accordance with Code Section
416(g)(4)(F).
(C) For purposes of determining the present
value of the cumulative accrued benefit under a plan for any
participant in accordance with this Subsection, the present
value shall be increased by the aggregate distributions made
with respect to the participant (including distributions paid
on account of death to the extent they do not exceed the
present value of the cumulative accrued benefit existing
immediately prior to death) under each plan being considered,
and under any terminated plan which if it had not been
terminated would have been in a Required Aggregation Group
with the Plan, during the 5-year period ending on the
Determination Date or last day of the plan year that falls
within the calendar year in which the Determination Date
falls.
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<PAGE> 54
(D) For purposes of this Paragraph (3),
participant contributions which are deductible as "qualified
retirement contributions" within the meaning of Code Section
219 or any successor, as adjusted to reflect income, gains,
losses, and other credits or charges attributable thereto,
shall not be considered to be part of the accrued benefits
under any plan.
(E) For purposes of this Paragraph (3), if any
employee is not a Key Employee with respect to any plan for
any plan year, but such employee was a Key Employee with
respect to such plan for any prior plan year, any accrued
benefit for such employee shall not be taken into account.
(F) For purposes of this Paragraph (3), if any
employee has not performed any service for any Plan Sponsor
or Affiliate maintaining the plan during the five-year period
ending on the Determination Date, any accrued benefit for
that employee shall not be taken into account.
(G) (i) In the case of an "unrelated
rollover" (as defined below) between plans which
qualify under Code Section 401(a), (a) the plan
providing the distribution shall count the
distribution as a distribution under Subparagraph
(C) of this Paragraph (3), and (b) the plan
accepting the distribution shall not consider the
distribution part of the accrued benefit under this
Section; and
(ii) in the case of a "related
rollover" (as defined below) between plans which
qualify under Code Section 401(a), (a) the plan
providing the distribution shall not count the
distribution as a distribution under Subparagraph
(C) of this Paragraph (3), and (b) the plan
accepting the distribution shall consider the
distribution part of the accrued benefit under this
Section.
For purposes of this Subparagraph (G), an "unrelated rollover" is a rollover as
defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan transfer which
is both initiated by the participant and made from a plan maintained by one
employer to a plan maintained by another employer where the employers are not
Affiliates. For purposes of this Subparagraph (G), a "related rollover" is a
rollover as defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan
transfer which is either not initiated by the participant or made to a plan
maintained by the employer or an Affiliate.
SECTION 2
(a) Notwithstanding anything contained in the Plan to
the contrary, except as otherwise provided in Subsection (b) of this
Section, in any Plan Year during which the Plan is Top-Heavy,
allocations of Plan Sponsor contributions and forfeitures for the Plan
Year for the Account of each Member who is not a Key Employee and who
has not separated from service with the Plan Sponsor prior to the end
of the Plan Year shall not
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be less than three percent (3%) of the Member's Annual Compensation.
The Plan Sponsor shall make such allocations to each Member who is not
a Key Employee regardless of whether such Member has declined to make
a contribution to the Plan. For purposes of this Subsection (a), an
allocation to a Member's Account resulting from any Plan Sponsor
contribution attributable to a salary reduction or similar arrangement
shall not be taken into account.
(b) The percentage referred to in Subsection (a) of this
Section for any Plan Year shall not exceed the percentage at which
allocations are made or required to be made under the Plan for the
Plan Year for the Key Employee for whom the percentage is highest for
the Plan Year. The Plan operator shall make such allocations to each
member who is not a key Employee regardless of whether such member has
declined to make a contribution to the Plan.
(1) For purposes of this Subsection (b), all
defined contribution plans which are members of a Required
Aggregation Group shall be treated as part of the Plan.
(2) This Subsection (b) shall not apply to any
plan which is a member of a Required Aggregation Group if the
plan enables a defined benefit plan which is a member of the
Required Aggregation Group to meet the requirements of Code
Section 401(a)(4) or 410.
(3) If the Plan Sponsor maintains a defined
benefit plan which is qualified under Code Section 401(a) and
which would be Top-Heavy within the meaning of the Plan for
its plan year ending within or coincident with the Plan Year,
no allocation shall be made pursuant to Subsection (a) of
this Section on behalf of any Member who participates in the
defined benefit plan and acquires a year of service within
the meaning of paragraphs (4), (5) and (6) of Code Section
411(a) under the defined benefit plan for the plan year, if
the defined benefit plan provides generally that the accrued
benefit of the member when expressed as an annual retirement
benefit shall not, when expressed as a percentage of the
Member's compensation, be less than the lesser of (A) 2
percent multiplied by the number of such years of service in
plan years during which such plan was Top-Heavy, or (B) 20
percent.
SECTION 3
Effective until December 31, 1999, in any limitation year (as defined
in Section 4 of Appendix B to the Plan) which contains any portion of a Plan
Year in which the Plan is Top-Heavy, the number "1.0" shall be substituted for
the number "1.25" in Section 3 of Appendix B to the Plan.
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APPENDIX D
SPECIAL RULES
SECTION 1
DEFINITIONS
(a) "CompMed Employee" means an individual who was an Employee of
CompMed, Inc. immediately before January 1, 1994.
(b) "CompMed Plan" means the CompMed, Inc. 401(k) Savings Plan.
(c) "Gottlieb Plan" means the GFS 401(k) Savings Plan.
(d) "MMNE Plan" means the Medical Management of New England, Inc.
401(k) Salary Savings Retirement Plan.
SECTION 2
SPECIAL RULES FOR GOTTLIEB EMPLOYEES
(a) Any Member who was a participant in the Gottlieb Plan
immediately before January 1, 1994 shall have the same number of Years of
Service under the Plan as he had under the Gottlieb Plan. In addition, for the
Plan Year beginning January 1, 1994, any such Member shall be given credit for
the greater of the period of Service he would have received under the terms of
the Gottlieb Plan or the period of Service he would receive as a participant in
the Plan. For the Plan Year beginning January 1, 1995, and for all subsequent
years, the Years of Service for any such Member will be credited in accordance
with the terms of the Plan.
(b) For any Member who was a participant in the Gottlieb Plan
immediately before January 1, 1994, "Normal Retirement Age" means age 59 1/2.
SECTION 3
SPECIAL RULES FOR COMPMED EMPLOYEES
(a) Any Member who was a participant in the CompMed Plan
immediately before January 1, 1994 shall have the same number of Years of
Service under the Plan as he had under the CompMed Plan. In addition, for the
Plan Year beginning January 1, 1994, any such Member shall be given credit for
the greater of the period of Service he would have received under the terms of
the CompMed Plan or the period of Service he would receive as a participant in
the Plan. For the Plan Year beginning January 1, 1995, and for all subsequent
years, the Years of Service for any such Member will be credited in accordance
with the terms of the Plan.
(b) For any CompMed Employee, "Eligibility Service" shall be as
defined in the CompMed Plan.
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<PAGE> 57
SECTION 4
SPECIAL RULES FOR MMNE EMPLOYEES
(a) Any Member who was a participant in the MMNE Plan immediately
before January 1, 1994 shall have the same number of Years of Service under the
Plan as he had under the MMNE Plan. In addition, for the Plan Year beginning
January 1, 1994, any such Member shall be given credit for the greater of the
period of Service he would have received under the terms of the MMNE Plan or
the period of Service he would receive as a participant in the Plan. For the
Plan Year beginning January 1, 1995, and for all subsequent years, the Years of
Service for any such Member will be credited in accordance with the terms of
the Plan.
(b) Any Member who was a participant in the MMNE Plan immediately
before January 1, 1994 shall be 25% vested after the completion of one Year of
Service.
(c) For any Member who was a participant in the MMNE Plan
immediately before January 1, 1994 and who completes 2 Years of Service, such
Member may request a withdrawal of any vested amounts from his Matching Account
by submitting such request to the Plan Administrator according to normal
administrative procedures. Upon receipt of such request, the Plan Administrator
will provide for such distribution at a reasonable time and in a reasonable
manner.
D-2
<PAGE> 1
EXHIBIT 10.32
FOURTH AMENDMENT TO THE
MEDAPHIS DEFERRED COMPENSATION PLAN
THIS FOURTH AMENDMENT, is made as of January 20, 2000, by PER-SE
TECHNOLOGIES, INC. (formerly Medaphis Corporation), a corporation duly
organized and existing under the laws of the State of Delaware (hereinafter
called the "Primary Sponsor");
W I T N E S S E T H:
WHEREAS, the Primary Sponsor adopted the Medaphis Deferred
Compensation Plan (the "Plan") by indenture originally dated April 1, 1995 and
the Plan was last amended on December 31, 1997; and
WHEREAS, the Primary Sponsor wishes to amend the Plan to change the
name of the Plan to the Per-Se Technologies Deferred Compensation Plan.
NOW, THEREFORE, the Primary Sponsor does hereby amend the Plan,
effective as of January 20, 2000, to change the name of the Plan to the "Per-Se
Technologies Deferred Compensation Plan."
Except as specifically amended hereby, the Plan shall remain in full
force and effect as prior to this Fourth Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this Fourth
Amendment to be executed on the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
-------------------------------------
Allen W. Ritchie
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
By: /s/ RANDOLPH L. M. HUTTO
-------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
EXHIBIT 10.37
AMENDMENT NUMBER 1
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER 1 to that certain Employment Agreement, dated
November 19, 1996, by and between Per-Se Technologies, Inc., formerly known as
Medaphis Corporation, a Delaware corporation (the "Company"), and David E.
McDowell (the "Employee") is made and entered into this 21st day of October
1999.
STATEMENT OF BACKGROUND INFORMATION
The Company and the Employee entered into that certain Employment
Agreement, dated November 19, 1999 (the "Agreement"), providing, among other
things, for the employment of the Employee as Chairman of the Board and Chief
Executive Officer of the Company. Employee is currently serving in the capacity
of Chairman of the Board of the Company and is providing strategic planning and
corporate development services to the Company.
The Company and the Employee desire to amend the Agreement to extend
the term, adjust the Employee's annual salary, reflect a change in Employees
duties and make such other changes, deletions or additions as the parties may
agree.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement.
STATEMENT OF AGREEMENT
In consideration of the mutual covenants, promises and conditions set
forth herein and in the Agreement, the parties agree to amend the Agreement as
follows:
1. The second paragraph under "Statement of Background
Information" is deleted in its entirety.
2. The fourth paragraph under "Statement of Background
Information" is amended by deleting the phrase "the Subrogation Business" from
the definition of the Business.
3. Section 2, "Duties of Employee" is deleted in its entirety
and the following new Section 2 is substituted in lieu thereof:
2. Duties of Employee. Employee agrees to provide to
management of the Company and the Board such services, including, but
not limited to, strategic planning, corporate development and
corporate governance advice, as management of the Company or the Board
may reasonably request. Employee shall report to the Board. Employee
<PAGE> 2
acknowledges and agrees that the compensation provided for in
Paragraph 5 of this Agreement shall be for services provided to the
Company in his capacity as an employee of the Company without regard
to his position as Chairman of the Board and that his position as
Chairman of the Board, or a position as a member of the Board if not
the Chairman, does not entitle Employee to any additional
compensation.
4. Section 3 "Term" is deleted in its entirety and the following
new Section 3 substituted in lieu thereof:
3. Term. The term of this Agreement will be for a period
of six (6) years commencing on October 21, 1999 and expiring on the
sixth anniversary of such date, subject to earlier termination as
provided for in Section 4.
5. Section 4(b) is amended by deleting the phrase "November 19,
2001" and substituting in lieu thereof the phrase "October 21, 2005."
6. Section 4(e)(4) is amended by deleting the phrase "November
19, 2001" and substituting in lieu thereof the phrase "October 21, 2005."
7. Section 5 is amended by deleting each of subsection (a)
"Signing Incentive," subsection (g) "Relocation Expenses" and subsection (h)
"Tax Gross-Up Payment" in its entirely and renumbering the remaining
subsections of Section 5 as appropriate.
8. Renumbered Section 5(a) (formerly 5(b)) is amended by deleting
the phrase "Three Hundred Thousand Dollars" and substituting in lieu thereof
the phrase "One Hundred Thousand Dollars."
9. Renumbered Section 5(b) (formerly 5(c)) is amended by deleting
the last two sentences in the subsection in their entirety and substituting in
lieu thereof the following:
In addition to any other rights provided Employee under the
Amended and Restated Medaphis Corporation Non-Qualified Stock
Option Plan or in the stock option agreements evidencing the
awards contemplated by this Section 5, if an Employee Event
(as defined herein) shall occur, then Employee shall be
deemed to continue as an "employee of the Company" (within
the meaning of the Amended and Restated Medaphis Corporation
Non-Qualified Stock Option Plan) until October 21, 2005 for
the purposes of: (i) continued vesting of the stock option
awards set forth in this Section 5(b) and the options so
awarded shall not expire or terminate prior to the later of
the ninetieth day following said date and the expiration date
otherwise applicable under the Amended and Restated Medaphis
Corporation Non-Qualified Stock Option Plan; and (ii)
determining the exercise period of such options and the
options so awarded shall remain
<PAGE> 3
exerciseable until the ninetieth day following said date. For
purposes of this Section 5(b), an "Employee Event" shall be
deemed to occur upon: (x) Employee's termination of this
Agreement pursuant to the provisions of Section 4(b) hereof;
or (y) involuntary termination of Employee by the Company for
any reason other than as set forth in Section 4(a) hereof.
10. Section 16 is amended by deleting the notice address specified
for the Company and substituting in lieu thereof the following notice address:
2840 Mt. Wilkinson Parkway
Suite 300
Atlanta, Georgia 30339
Attn: General Counsel
Except as specifically amended herein, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
Number 1 to the Agreement as of the day and year first above written.
PER-SE TECHNOLOGIES, INC. EMPLOYEE
By: /s/ ALLEN W. RITCHIE /s/ DAVID E. MCDOWELL [L.S.]
--------------------- ------------------------------
Allen W. Ritchie David E. McDowell
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this 25th day of June 1999, by and between Medaphis Physician Services
Corporation., a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Medaphis Corporation, a Delaware corporation ("Medaphis"), and
William J. DeZonia, a resident of the State of Georgia (the "Employee").
Statement of Background Information
The Company renders to hospitals, physicians, and/or other healthcare
organizations and providers: (a) billing services, accounts receivable
management services, collection services, electronic claims services, financial
management services, and practice and facilities management services: (b)
eligibility verification and certification for Medicaid, Medicare and other
healthcare assistance programs; (c) filing and other medical claims
securitization services; (d) medical coverage information services; and (e)
medical and insurance claims monitoring and tracking services (collectively,
the "Processing Business") (the Processing Business and any other distinct
business segment in which the Company engages during Employee's employment are
collectively referred to herein as the "Business").
In consideration of the mutual covenants, promises and conditions set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts such employment upon the terms and conditions set forth in
this Agreement.
2. Duties of Employee. Employee's title will be Senior Vice President,
Process Improvement of the Company. Employee agrees to perform and
discharge such other duties as may be assigned to Employee from time
to time by the Company to the reasonable satisfaction of the Company,
and such duties will be consistent with those duties regularly and
customarily assigned by the Company to the position of Senior Vice
President, Process Improvement and by Medaphis to executives in
comparable positions with operating subsidiaries. Employee also agrees
to comply with all of Medaphis' and the Company's policies, standards
and regulations as promulgated and in effect from time to time, and to
follow the instructions and directives of Employee's superiors within
Medaphis. Employee will devote Employee's full professional and
business-related time, skills and best efforts to such duties and will
not, during the term of this Agreement, be engaged (whether or not
during normal business hours) in any other business or professional
activity, whether or not such activity is pursued for gain, profit or
other pecuniary advantage, without the prior written consent of the
Chief Executive Officer of Medaphis, which consent will not
1
<PAGE> 2
be unreasonably withheld; provided, however, that Employee's assisting
his daughter in the start-up and conduct of a photography and greeting
card business shall not violate this restriction. This Section will
not be construed to prevent Employee from (a) investing personal
assets in businesses which do not compete with the Company in such
form or manner that will not require any services on the part of
Employee in the operation or the affairs of the companies in which
such investments are made and in which Employee's participation is
solely that of an investor; (b) purchasing securities in any
corporation whose securities are listed on a national securities
exchange or regularly traded in the over-the-counter market, provided
that Employee at no time owns, directly or indirectly, in excess of
one percent (1%) of the outstanding stock of any class of any such
corporation engaged in a business competitive with that of the
Company; or (c) participating in conferences, preparing and publishing
papers or books or teaching, so long as the Chief Executive Officer of
Medaphis approves such participation, preparation and publication or
teaching prior to Employee's engaging therein.
3. Term. The term of this Agreement will be for a two (2) year period
of time, commencing as of June 1, 1999 and expiring on the second
anniversary thereof subject to earlier termination as provided for in
Section 4 of this Agreement. This Agreement shall be automatically
renewed for successive one (1) year periods at the end of the initial
term, unless either party gives notice to the other of its intent to
terminate this Agreement not less than sixty (60) days prior to the
commencement of any such one (1) year period. In the event such notice
is properly and timely given, this Agreement shall terminate at the
end of the initial term or one (1) year period in which such notice is
given without further payment by or obligation on the part of the
Company, subject to applicable Company standard severance guidelines.
4. Termination.
(a) Termination by Company for Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate this
Agreement and all of its obligations hereunder immediately if any of
the following events occur:
(i) Employee materially breaches any of the terms or
conditions set forth in this Agreement and fails to cure such
breach within ten (10) days after Employee's receipt from the
Company of written notice of such breach (notwithstanding the
foregoing, no cure period shall be applicable to breaches by
Employee of Sections 6, 7 or 8 of this Agreement);
(ii) Employee commits any other act materially detrimental
to the business or reputation of the Company;
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<PAGE> 3
(iii) Employee commits or is convicted of any crime
involving fraud, deceit or moral turpitude; or
(iv) Employee dies or becomes mentally or physically
incapacitated or disabled so as to be unable to perform
Employee's duties under this Agreement. Without limiting the
generality of the foregoing, Employee's inability adequately
to perform services under this Agreement for a period of
sixty (60) consecutive days will be conclusive evidence of
such mental or physical incapacity or disability, unless such
inability adequately to perform services under this Agreement
is pursuant to a mental or physical incapacity or disability
covered by the Family Medical Leave Act, in which case such
sixty (60)-day period shall be extended to a one hundred and
twenty (120)-day period.
(b) Termination by Company Without Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate
Employee's employment pursuant to this Agreement without cause upon at
least thirty (30) days' prior written notice to Employee. In the event
Employee's employment with the Company is terminated by the Company
without cause or Employee elects to terminate voluntarily his
employment following the occurrence of events constituting "Good
Reason" for his voluntary termination of employment (in each case,
other than in connection with a Change in Control in which event the
provisions of subsection (c) of this section 4 will apply, it being
understood that the provisions of subsection (c) of this section and
this subsection (b) are mutually exclusive), the Company shall pay to
Employee an amount equal to his then current salary (not including the
right to receive any incentive bonus payments) multiplied by the
greater of (i) the number of months remaining in the initial or any
renewal term of this Agreement, as applicable or (ii) twelve (12).
Such amount shall be paid pursuant to the Company's normal payroll
practices over the period of such payments. For purposes of this
Agreement, "Good Reason" is defined as (w) a material reduction
(greater than 10%) in Employee's annual base salary; (x) a change in
Employee's work location to a work location more than 50 miles from
Employee's existing work location, except for required travel on the
Company's business to an extent consistent with Employee's then
present business travel obligations; (y) an assignment to any duties
inconsistent in any material adverse respect with Employee's current
position, duties or responsibilities, other than an insubstantial and
inadvertent act that is remedied by the Company promptly after receipt
of notice thereof given by Employee; or (z) the failure by the Company
to continue any material benefit or compensation plan in which
Employee is participating unless Employee is provided with comparable
benefits.
(c) Change in Control. In the event there is a Change in Control
(as defined herein) of the Company or Medaphis and if: (A) Employee's
employment is
3
<PAGE> 4
terminated by the Company without cause or by Employee for Good Reason
within one (1) year following any such Change in Control; (B) if
Employee's employment is terminated by the Company at the request of
or pursuant to an agreement with a third party who has taken steps
reasonably calculated to effect a Change in Control; or (C) if
Employee's employment is terminated by the Company or by Employee for
Good Reason in connection with or in anticipation of a Change in
Control, then Employee will be entitled to receive severance payments,
payable over a two year period, equal in the aggregate to two times
the sum of: (i) Employee's then current annual base salary; and (ii)
the most recent incentive bonus payment received by Employee prior to
the Change in Control. In addition, Employee shall be entitled to
receive monthly for a period of eighteen (18) months commencing on the
date of termination in connection with a Change in Control an amount
equal to the difference between the monthly cost to Employee of
healthcare coverage at the levels at which Employee is participating
on the date of such termination and the monthly cost of comparable
COBRA coverage actually incurred. All amounts payable pursuant to this
Section 4 (c) shall be paid in accordance with the Company's normal
payroll practices. For purposes of this Agreement, a "Change in
Control" of the Company shall be deemed to occur upon any of the
following:
(i) a consolidation or merger of Medaphis or the Company
with or into any other corporation, or any other entity or
person, in the case of the Company, other than Medaphis or a
wholly-owned subsidiary of Medaphis, excluding any
transaction in which the shares of Medaphis common stock or
the Company's common stock, as applicable, outstanding
immediately prior to any such consolidation or merger
represent immediately thereafter more than 50% of the
combined voting power of the resulting entity after the
transaction;
(ii) any corporate reorganization, including an exchange
offer, in which Medaphis or the Company shall not be the
continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the shares
of Medaphis common stock or the Company's common stock
outstanding immediately prior to any such reorganization
represent immediately thereafter more than 50% of the
combined voting power of the resulting entity after the
transaction; or
(iii) the failure for any reason of individuals who
constitute the Incumbent Board to continue to constitute at
least a majority of the Board. For purposes of this Section 4
(d), the term "Board" shall mean the Board of Directors of
Medaphis or the Company, as applicable, and the term
"Incumbent Board" shall mean the members of the Board as of
the date hereof and any person becoming a member of the Board
hereafter whose election or nomination is by a vote of at
least a majority of the directors then comprising the
Incumbent
4
<PAGE> 5
Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the directors of Medaphis or the Company, as
applicable, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended).
5. Compensation and Benefits.
a) Annual Salary. During the term of this Agreement and for all
services rendered by Employee under this Agreement, the Company will
pay Employee a base salary of Two Hundred Fifteen Thousand and No/100
Dollars ($215,000.00) per annum to be paid in accordance with the
Company's regular payroll practices, provided, however, that such
payments shall be made no less frequently than in equal monthly
installments. Such annual salary will be subject to increases in the
normal course of business.
b) Incentive Compensation. Employee shall be eligible to
participate in the current Medaphis Incentive Compensation Plan (and
any comparable future incentive compensation plans during the term of
this Agreement) at a participation category of up to Seventy-five
Percent (75%) of Employee's base salary, payable at the discretion of
the Board of Directors of the Company.
c) Stock Options. As soon as reasonably practicable after the
signing of this Agreement, and subject to the approval of the
Compensation Committee of the Board of Directors of Medaphis
Corporation, the Company will cause Medaphis to issue to Employee,
effective as of the date approved by the Compensation Committee of the
Board of Directors of Medaphis Corporation, options to purchase Fifty
Thousand (50,000) shares of Medaphis Common Stock pursuant to the terms
and conditions of the Amended and Restated Medaphis Corporation
Non-Executive Employee Stock Option Plan ("Stock Option Plan"), as
amended. Such options will vest at the rate of thirty-three and
one-third percent (33.3%) per year for a three-year period beginning on
the starting date of this Agreement, subject to the terms and
conditions of the Stock Option Plan. Such Options shall vest in full
immediately upon the occurrence of certain change in control events
outlined in the Stock Option Plan. Employee shall be considered for
additional grants of options to purchase shares of Medaphis common
stock in a manner which is consistent with other senior officers of the
Company. Except as expressly set forth herein, nothing in this
Agreement shall give rise to a contractual right to Employee to receive
grants of additional stock options of Medaphis. Further, Medaphis has
no obligation to Employee to create parity with any other Medaphis
executives with respect to any options granted to such other
executives.
5
<PAGE> 6
d) Other Benefits. Employee will be entitled to such fringe
benefits as may be provided from time-to-time by the Company to its
Employees, including, but not limited to, group health insurance, life
and disability insurance, vacation and any other fringe benefits, in
each case as now or hereafter provided by the Company to its Employees,
if and when, and for so long as, Employee meets the eligibility
requirements for such benefits. The Company reserves the right to
change or discontinue any employee benefit plans or programs now being
offered to its employees; provided, however, that all benefits provided
for employees of the same position and status as Employee will be
provided to Employee on an equal basis.
e) Business Expenses. Employee will be reimbursed for all
reasonable expenses incurred in the discharge of Employee's duties
under this Agreement pursuant to the Company's standard reimbursement
policies.
f) Withholding. The Company will deduct and withhold from the
payments made to Employee under this Agreement, state and federal
income taxes, FICA and other amounts normally withheld from
compensation due employees.
6. Non-Disclosure of Proprietary Information. Employee recognizes and
acknowledges that the Trade Secrets (as defined below) and
Confidential Information (as defined below) of the Company and its
affiliates and all physical embodiments thereof (as they may exist
from time-to-time, collectively, the "Proprietary Information") are
valuable, special and unique assets of the Company's and its
affiliates' businesses. Employee further acknowledges that access to
such Proprietary Information is essential to the performance of
Employee's duties under this Agreement. Therefore, in order to obtain
access to such Proprietary Information, Employee agrees that, except
in connection with performing duties assigned to him by the Company,
Employee shall hold in confidence all Proprietary Information and will
not reproduce, use, distribute, disclose, publish or otherwise
disseminate any Proprietary Information, in whole or in part, and will
take no action causing, or fail to take any action necessary to
prevent causing, any Proprietary Information to lose its character as
Proprietary Information, nor will Employee make use of any such
information for Employee's own purposes or for the benefit of any
person, firm, corporation, association or other entity (except the
Company) under any circumstances.
For purposes of this Agreement, the term "Trade Secrets" means
information, without regard to form, including, but not limited to,
any technical or non-technical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data,
financial plan, product plan, list of actual or potential customers or
suppliers, or other information similar to any of the foregoing, which
is not commonly known by or available to the public and (i) derives
economic value, actual or potential, from not being generally known
to, and not being readily
6
<PAGE> 7
ascertainable by proper means by, other persons who can derive
economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy. For purposes of this Agreement, the term "Trade Secrets" does
not include information that Employee can show by competent proof (i)
was known to Employee and reduced to writing prior to disclosure by
the Company (but only if Employee promptly notifies the Company of
Employee's prior knowledge); (ii) was generally known to the public at
the time the Company disclosed the information to Employee; (iii)
became generally known to the public after disclosure by the Company
through no act or omission of Employee; or (iv) was disclosed to
Employee by a third party having a bona fide right both to possess the
information and to disclose the information to Employee. The term
"Confidential Information" means any data or information of the
Company, other than trade secrets, which is valuable to the Company
and not generally known to competitors of the Company. The provisions
of this Section 6 will apply to Trade Secrets for so long as such
information remains a trade secret and to Confidential Information
during Employee's employment with the Company and for a period of two
(2) years following any termination of Employee's employment with the
Company for whatever reason.
7.A. Non-Competition Covenant. During Employee's employment by the Company
Employee will be a member of the Company's management team. Employee
agrees that during his employment and for a period of one (1) year
following any termination of Employee's employment for whatever reason,
Employee will not, directly or indirectly, on Employee's own behalf
or in the service of or on behalf of any other individual or entity,
compete with the Company within the Geographical Area (as hereinafter
defined). The term "compete" means to engage in, have any equity
or profit interest in, make any loan to or for the benefit of, or
render services of any marketing, management, sales, administrative,
supervisory or consulting nature, directly or indirectly, on Employee's
own behalf or in the service of or on behalf of any other individual or
entity, either as a proprietor, employee, agent, independent
contractor, consultant, director, officer, partner or stockholder
(other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the
over-the-counter market, provided that Employee at no time owns,
directly or indirectly, in excess of one percent (1%) of the
outstanding stock of any class of any such corporation) any business
which provides Business products or services. For purposes of this
Agreement, the term "Geographical Area" means the territory located
within a seventy-five (75) mile radius of Company headquarters of any
Company facility for which Employee exercised managerial control.
B. Non-Solicitation of Clients Covenant. Employee agrees that during
Employee's employment by the Company and for a period of two (2) years
following the termination of Employee's employment for whatever
reason, Employee will not,
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<PAGE> 8
directly or indirectly, on Employee's own behalf or in the service of
or on behalf of any other individual or entity, divert, solicit or
attempt to divert or solicit any individual or entity (i) who is a
client of the Company at any time during the six (6)-month period
prior to Employee's termination of employment with the Company
("Client"), or was actively sought by the Company as a prospective
client, and (ii) with whom Employee had material contact while
employed by the Company, to provide Business services or products to
such Clients or prospects.
C. Construction. The parties hereto agree that any judicial authority
construing all or any portion of this Section 7 or Section 8 below
may, if it chooses, sever any portion of the Geographical Area, client
base, prospective relationship or prospect list or any prohibited
business activity from the coverage of such Section and to apply the
provisions of such Section to the remaining portion of the
Geographical Area, the client base or the prospective relationship or
prospect list, or the remaining business activities not so severed by
such judicial authority. In addition, it is the intent of the parties
that the judicial authority may, if it chooses, replace each such
severed provision with a provision as similar in terms to such severed
provision as may be possible and be legal, valid and enforceable. It
is the intent of the parties that Sections 7 and 8 be enforced to the
maximum extent permitted by law. In the event that any provision of
either such Section is determined not to be specifically enforceable,
the Company shall nevertheless be entitled to bring an action to seek
to recover monetary damages as a result of the breach of such
provision by Employee.
8. Non-Solicitation of Employees Covenant. Employee further agrees and
represents that during Employee's employment by the Company and for a
period of two (2) years following any termination of Employee's
employment for whatever reason, Employee will not, directly or
indirectly, on Employee's own behalf or in the service of, or on
behalf of any other individual or entity, divert or solicit, or
attempt to divert or solicit, to or for any individual or entity which
is engaged in providing Business services or products, any person
employed by the Company, whether or not such employee is a full-time
employee or temporary employee of the Company, whether or not such
employee is employed pursuant to written agreement and whether or not
such employee is employed for a determined period or at-will.
9. Existing Restrictive Covenants. Employee represents and warrants that
Employee's employment with the Company does not and will not breach
any agreement which Employee has with any former employer to keep in
confidence confidential information or not to compete with any such
former employer. Employee will not disclose to the Company or use on
its behalf any confidential information of any other party required to
be kept confidential by Employee.
10. Return of Proprietary Information. Employee acknowledges that as a
result of Employee's employment with the Company, Employee may come
into the
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<PAGE> 9
possession and control of Proprietary Information, such as proprietary
documents, drawings, specifications, manuals, notes, computer
programs, or other proprietary material. Employee acknowledges,
warrants and agrees that Employee will return to the Company all such
items and any copies or excerpts thereof, in any form or medium, and
any other properties, files or documents obtained as a result of
Employee's employment with the Company, immediately upon the
termination of Employee's employment with the Company.
11. Proprietary Rights. During the course of Employee's employment with
the Company, Employee may make, develop or conceive of useful
processes, machines, compositions of matter, computer software,
algorithms, works of authorship expressing such algorithm, or any
other discovery, idea, concept, document or improvement which relates
to or is useful to the Company's Business (the "Inventions"), whether
or not subject to copyright or patent protection, and which may or may
not be considered Proprietary Information. Employee acknowledges that
all such Inventions will be "works made for hire" under United States
copyright law and will remain the sole and exclusive property of the
Company. Employee also hereby assigns and agrees to assign to the
Company, in perpetuity, all right, title and interest Employee may
have in and to such Inventions, including without limitation, all
copyrights, and the right to apply for any form of patent, utility
model, industrial design or similar proprietary right recognized by
any state, country or jurisdiction. Employee further agrees, at the
Company's request and expense, to do all things and sign all documents
or instruments necessary, in the opinion of the Company, to eliminate
any ambiguity as to the ownership of, and rights of the Company to,
such Inventions, including filing copyright and patent registrations
and defending and enforcing in litigation or otherwise all such
rights.
Employee will not be obligated to assign to the Company any Invention
made by Employee while in the Company's employ which does not relate
to any business or activity in which the Company is or may reasonably
be expected to become engaged, except that Employee is so obligated if
the same relates to or is based on Proprietary Information to which
Employee will have had access during and by virtue of Employee's
employment or which arises out of work assigned to Employee by the
Company. Employee will not be obligated to assign any Invention which
may be wholly conceived by Employee after Employee leaves the employ
of the Company, except that Employee is so obligated if such Invention
involves the utilization of Proprietary Information obtained while in
the employ of the Company. Employee is not obligated to assign any
Invention which relates to or would be useful in any business or
activities in which the Company is engaged if such Invention was
conceived and reduced to practice by Employee prior to Employee's
employment with the Company.
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12. Remedies. Employee agrees and acknowledges that the violation of any
of the covenants or agreements contained in Sections 6, 7, 8, 9, 10
and 11 of this Agreement would cause irreparable injury to the
Company, that the remedy at law for any such violation or threatened
violation thereof would be inadequate, and that the Company will be
entitled, in addition to any other remedy, to temporary and permanent
injunctive or other equitable relief without the necessity of proving
actual damages or posting a bond.
13. Notices. Any notice or communication under this Agreement will be in
writing and sent by registered or certified mail addressed to the
respective parties as follows:
If to the Company: If to Employee:
Medaphis Corporation William J. DeZonia
2840 Mt. Wilkinson Parkway 2840 Mt. Wilkinson Parkway
Suite 300 Suite 300
Atlanta, GA 30339 Atlanta, GA 30339
Attn: General Counsel
or to such other address or agent as may be hereafter designated in
writing by either party hereto. All such notices shall be deemed given
on the date personally delivered or mailed.
14. Severability. Subject to the application of Section 7(C) to the
interpretation of Sections 7 and 8, in case one or more of the
provisions contained in this Agreement is for any reason held to be
invalid, illegal or unenforceable in any respect, the parties agree
that it is their intent that the same will not affect any other
provision in this Agreement, and this Agreement will be construed as
if such invalid or illegal or unenforceable provision had never been
contained herein. It is the intent of the parties that this Agreement
be enforced to the maximum extent permitted by law.
15. Entire Agreement. This Agreement embodies the entire agreement of the
parties relating to the subject matter of this Agreement and
supersedes all prior agreements, oral or written, regarding the
subject matter hereof, including, but not limited to, any prior
restrictive covenants of the Employee in favor of the Company. No
amendment or modification of this Agreement will be valid or binding
upon the parties unless made in writing and signed by the parties.
16. Binding Effect. This Agreement will be binding upon the parties and
their respective heirs, representatives, successors, transferees and
permitted assigns.
17. Assignment. This Agreement is one for personal services and will not
be assigned by Employee. The Company may assign this Agreement to its
parent company or
10
<PAGE> 11
to any of its subsidiaries or affiliated companies; provided that the
parent or any subsidiary or affiliate fulfills the obligations of the
Company under this Agreement.
18. Governing Law. This Agreement is entered into and will be interpreted
and enforced pursuant to the laws of the State of Georgia. The parties
hereto hereby agree that the appropriate forum and venue for any
disputes between any of the parties hereto arising out of this
Agreement shall be any federal court in the state or state court in
the event diversity is not present, where the Company has its
principal place of business and each of the parties hereto hereby
submits to the personal jurisdiction of any such court. The foregoing
shall not limit the rights of any party to obtain execution of
judgment in any other jurisdiction. The parties further agree, to the
extent permitted by law, that a final and unappealable judgment
against either of them in any action or proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgment, a
certified exemplified copy of which shall be conclusive evidence of
the fact and amount of such judgment.
19. Indemnification. Employee shall be entitled to the indemnification and
exculpation offered through and set forth in the Company's Charter and
By-laws.
20. Surviving Terms. Sections 6, 7, 8, 9, 10, 11 and 12 of this Agreement
shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
COMPANY: EMPLOYEE:
By: /s/ RANDOLPH L. M. HUTTO /s/ WILLIAM J. DEZONIA
-------------------------- -----------------------
Randolph L.M. Hutto William J. DeZonia
Title: Executive Vice President
11
<PAGE> 12
EXHIBIT A
INVENTIONS
Employee represents that there are no Inventions.
/s/ WJD
-------------------
Employee's Initials
12
<PAGE> 1
EXHIBIT 10.45
FIRST AMENDMENT
TO
SECOND AMENDED AND RESTATED
PER-SE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION PLAN
THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED PER-SE
TECHNOLOGIES, INC. NON-QUALIFIED STOCK OPTION PLAN is made as of February 24,
2000, by Per-Se Technologies, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Second Amended and
Restated Per-Se Technologies, Inc. Non-Qualified Stock Option Plan (the "Plan");
and
WHEREAS, the Company desires to amend the Plan in order to prohibit
the repricing of options outstanding under the Plan.
NOW, THEREFORE, the Plan is hereby amended by deleting Section 8
thereof in its entirety and substituting in lieu thereof the following new
Section 8:
"8. Amendments.
(a) Amendment of the Plan. The Plan may be
amended by the Committee from time to time to the extent that
the Committee deems necessary or appropriate except that the
Committee shall not amend the Plan, absent the approval of
the stockholders of the Company (i) to materially increase
(within the meaning of Rule 16b-3) the benefits accruing to
participants under the Plan, (ii) to materially increase
(within the meaning of Rule 16b-3) the number of securities
which may be issued under the Plan, or (iii) to materially
modify (within the meaning of Rule 16b-3) the requirements as
to eligibility for participation in the Plan; provided,
however, that if the amendment would not alter the rights of
any participant under the Plan who is subject to Rule 16b-3,
then the Committee may approve such amendment without
obtaining the approval of the stockholders of the Company;
and provided, further however, the Committee shall have the
authority, for any employee who is not subject to Rule 16b-3,
to modify the three (3) and six (6) month time periods set
forth in Section 5(f) of the Plan without obtaining the
approval of the stockholders of the Company.
(b) Amendment of Outstanding Options. The Board
of Directors, acting through the Committee shall have the
power to amend any outstanding option; provided, however,
that the Committee shall not
<PAGE> 2
have to power to amend any outstanding option that would
alter the rights of the holder of such option to the
detriment of such holder without such holder's prior written
consent and, provided further, that the Committee shall not
have the power to reprice any outstanding option."
FURTHER, except as specifically amended by this First
Amendment, the Plan shall remain in full force and effect as prior to this
First Amendment.
IN WITNESS WHEREOF, the Company has caused this First
Amendment to be executed as of the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
---------------------
Allen W. Ritchie
President and Chief Executive Officer
ATTEST:
By: /s/ RANDOLPH L. M. HUTTO
------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
EXHIBIT 10.46
FOURTH AMENDMENT
TO
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
THIS FOURTH AMENDMENT (the "Fourth Amendment") is made effective as of
February 24, 2000, by PER-SE TECHNOLOGIES, INC., a Delaware corporation
formerly known as Medaphis Corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Company has previously adopted the Per-Se Technologies
Non-Employee Director Stock Option Plan, as amended (the "Plan");
WHEREAS, the Board of Directors of the Company has duly authorized and
approved, subject to the approval of the Company's stockholders, the Third
Amendment to the Plan increasing the number of shares authorized to be issued
under the Plan to 283,333 shares;
WHEREAS, the Board of Directors of the Company has duly authorized an
amendment of the Plan to grant the Board discretion in determining the number
of shares to be granted to non-employee directors of the Company and, subject
to approval by the Company's stockholders of the increase in shares authorized
to be issued under the Plan, to increase the initial and annual grants of
options to non-employee directors to 10,000 shares each, subject to the Board's
discretion to increase or decrease such awards from time to time or at any time
and to provide for a special one-time grant to existing directors in light of
the increase in the initial grant;
NOW, THEREFORE, Section 1 of the Plan is amended by deleting the last
sentence thereof and substituting in lieu thereof the following:
"This Plan is intended to comply with Rule 16b-3."
FURTHER, the Plan is hereby amended by deleting Section 2 of the Plan
in its entirety and substituting in lieu thereof the following:
2. Administration. This Plan shall be administered by
the Board of Directors of the Company (the "Board"). The Board shall
have no authority, discretion or power to select the Non-Employee
Directors who will receive options (the "Options") to purchase shares
of voting common stock, par value $.01 per share, of the Company (the
"Common Stock") hereunder or to set or re-set the exercise price of
such Option or the period within which such Option may be exercised,
except in the sense of administering this Plan pursuant to its express
terms. The Board shall have the authority, discretion and power to set
the number of shares of Common Stock to be covered by each Option
granted hereunder, and to set the timing of the grant of any option
hereunder and to make
<PAGE> 2
special grants in addition to the initial and annual grants from time
to time and at any time. Subject to the foregoing and the provisions
of Section 16b) of the Exchange Act, and Rule 16b-3, the Board shall
have the authority to interpret and construe the provisions of this
Plan and of any agreements issued hereunder and make determinations
pursuant to any Plan provision or agreement. The Board shall interpret
and administer the provisions of this Plan or any agreement issued
hereunder in a manner consistent with the intentions referred to in
Section 1 hereof and any provisions of this Plan or any such agreement
inconsistent therewith shall be inoperative and shall not affect the
validity of this Plan. The Board shall have the power to place
transfer and other restrictions on the Options as may be required by
federal and state securities laws. Each interpretation, determination
or other action made or taken pursuant to the Plan by the Board shall
be final, conclusive and binding on all persons.
FURTHER, the Plan is hereby amended by deleting the figure 5,000 in
the first line of Section 5(b)(1) of the Plan and substituting in lieu thereof
the figure 10,000.
FURTHER, the Plan is hereby amended by deleting Section 5(b)(2) in its
entirety and substituting in lieu thereof the following:
(2) Annual Grants. An Option to purchase 10,000 Shares or
such other number of Shares as the Board may determine in its
discretion (an "Annual Grant") shall be granted each year immediately
following the Annual Meeting, or at such other time as the Board in
its discretion may determine, to each Non-Employee Director serving as
such, other than a Non-Employee Director then receiving an Initial
Grant under Section 5(b)(1)(ii)(1) hereof.
FURTHER, the Plan is hereby amended by adding to Section 5(b) a new
subsection 5(b)(3) as follows:
(3) Special Grant. An Option to purchase 10,000 Shares
shall be granted to each Director eligible to participate in this Plan
as of February 24, 2000, such Option to be granted as of such date
with an exercise price equal to the average of the Fair Market
Values of the Common Stock for the five (5) trading days prior to
February 24, 2000.
provided, however, that the increase in the Initial and Annual Grants and the
Special Grant reflected in the foregoing amendment shall be subject to and
conditioned upon approval by the stockholders of the Company at the 2000 Annual
Meeting of Stockholders or any adjournment thereof of the increase in shares
available for grant reflected in the Third Amendment to the Plan.
FURTHER, except as specifically amended by this Fourth Amendment, the
Plan shall remain in full force and effect as prior to this Fourth Amendment.
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to be
executed as of the day and year first above written.
PER-SE TECHNOLOGIES, INC.
By: /s/ ALLEN W. RITCHIE
-----------------------
Allen W. Ritchie, President and
Chief Executive Officer
ATTEST:
By: /s/ RANDOLPH L. M. HUTTO
---------------------------
Randolph L. M. Hutto
Secretary
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
STATE OF INCORPORATION
SUBSIDIARY OR ORGANIZATION
- ---------- ----------------------
<S> <C>
Health Data Sciences Corporation* Delaware
IIH, LLC Delaware
Knowledgeable Healthcare Solutions, Inc. Alabama
Per-Se Transaction Services, Inc.* Indiana
PST Emergency Medicine Services, Inc.* Georgia
PST Products, Inc.* California
PST Services, Inc.* Georgia
</TABLE>
- --------------
* Each of these subsidiaries also does business under the name "Per-Se
Technologies."
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33326289, 33326291, 33326113, 33307627, 33307201,
33307203, 33303213, 3395742, 3395746, 3395748, 3390874, 3390876, 3388444,
3388442, 3371556, 3367752, 3364952, 3346847, 33346489, 33360729, 33394151,
33378167, 33378775) of Per-Se Technologies, Inc. of our report dated February
8, 2000 relating to the financial statements, which appears in the Annual
Report to Shareholders, which is incorporated in this Annual Report on Form
10-K for the year ended December 31, 1999. We also consent to the incorporation
by reference of our report dated February 8, 2000 relating to the financial
statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PER-SE TECHNOLOGIES, INC. FOR THE YEAR ENDED DECEMBER
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 74,354
<SECURITIES> 0
<RECEIVABLES> 89,010
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 178,177
<PP&E> 34,103
<DEPRECIATION> 0
<TOTAL-ASSETS> 265,017
<CURRENT-LIABILITIES> 84,873
<BONDS> 175,000
0
0
<COMMON> 296
<OTHER-SE> 1,144
<TOTAL-LIABILITY-AND-EQUITY> 265,017
<SALES> 0
<TOTAL-REVENUES> 322,129
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 371,413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,102
<INCOME-PRETAX> (65,386)
<INCOME-TAX> (610)
<INCOME-CONTINUING> (64,776)
<DISCONTINUED> 31,074
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,702)
<EPS-BASIC> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Per-Se Technologies, Inc. ("Per-Se" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Per-Se. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Per-Se undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Per-Se provides the following risk factor disclosure in connection with its
continuing efforts to qualify its written and oral forward-looking statements
for the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in the Annual Report on Form 10-K
to which this statement is appended as an exhibit and also include the
following:
COMPETITION WITH MANAGEMENT SERVICES COMPANIES
The medical management services business is highly competitive. We compete
with national and regional physician and hospital reimbursement organizations,
national information and data processing organizations, and physician groups and
hospitals that provide their own business management services. Our successful
competition within this industry is dependent on numerous industry and market
conditions.
Potential industry and market changes that could adversely affect our
ability to compete for billing and collection business include:
- an increase in the number of managed care providers compared to
fee-for-service providers; and
- new alliances between healthcare providers and third-party payers in
which healthcare providers are employed by such third-party payers.
COMPETITION WITH INFORMATION TECHNOLOGY COMPANIES
The business of providing application software, information technology and
consulting services is also highly competitive. We compete with national and
regional companies in this regard. Some of our competitors have longer operating
histories and greater financial, technical and marketing resources than we. Our
successful competition within this industry is dependent on numerous industry
and market conditions.
1
<PAGE> 2
MAJOR CLIENT PROJECTS
Our application software business involves projects designed to reengineer
customer operations through the strategic use of imaging, client/server and
other advanced technologies. Failure to meet our customers' expectations with
respect to a major project could, possibly, have the following consequences:
- damage our reputation and standing in this marketplace;
- impairment of our ability to attract new client/server information
technology business; and
- the inability to collect for services performed on a project.
CHANGES IN OUR INDUSTRY
The markets for our software products and services are characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions. Our ability to keep pace with changes in our industry may
be dependent on our ability to:
- enhance our existing products and services;
- introduce new products and services quickly and cost effectively;
- achieve market acceptance for new products and services; and
- respond to emerging industry standards and other technological changes.
Our competitors may develop competitive products that could adversely
affect our operating results. It is possible that we will be unsuccessful in
refining, enhancing and developing our software and billing systems going
forward. The costs associated with refining, enhancing and developing our
software and billing systems may increase significantly in the future. Our
existing software and technology may become obsolete as a result of ongoing
technological developments in the marketplace.
CONSOLIDATION IN THE MARKETPLACE
In general, consolidation initiatives in the healthcare marketplace may
result in fewer potential customers for our services. Some of these types of
initiatives include:
- employer initiatives such as creating purchasing cooperatives, (HMOs);
- provider initiatives, such as risk-sharing among healthcare providers and
managed care companies through capitated contracts; and
- integration among hospitals and physicians into comprehensive delivery
systems.
Continued consolidation of management and billing services through
integrated delivery systems may result in a decrease in demand for our billing
and collection services for particular physician practices.
INVESTIGATIONS OF HEALTHCARE BILLING AND COLLECTION PRACTICES
Medical billing and collection activities are governed by numerous federal
and state civil and criminal laws. Federal and state regulators increasingly use
these laws to investigate healthcare providers and companies that provide
billing and collection services. In connection with these laws:
- federal or state government investigation and possible penalties may be
imposed upon us;
- false claims action may have to be defended;
- private payers may file claims against us;
- Medicare, Medicaid and/or other government funded healthcare programs may
exclude us.
2
<PAGE> 3
We have been the subject of federal investigations, and we may become the
subject of false claims litigation or additional investigations relating to our
billing and collection activities. Any such proceeding or investigation could
have a material adverse effect on our business.
The ownership and operation of hospitals is also subject to comprehensive
regulation by federal and state governments which may adversely affect hospital
reimbursement. This regulation could have an adverse effect on the operations of
hospitals in general, and consequently reduce the amount of our revenues related
to hospital clients. Current or future government regulations or healthcare
reform measures may effect our business.
DEBT
We have a significant amount of long-term indebtedness and, as a result,
obligations to make interest payments on our debt. If we are unable to make the
required debt payments, we could be required to reduce or delay capital
expenditures, sell certain of our assets, restructure or refinance our
indebtedness, or seek additional equity capital. Our ability to make payments on
our debt obligations will depend on our future operating performance, which will
be affected by certain conditions that are beyond our control.
LEGAL MATTERS AND GOVERNMENT INVESTIGATION
We are involved in legal matters which may expose us to loss contingencies.
These matters include, but are not limited to, claims involving Company
securities. We have also received written demands from customers and former
customers that have not yet resulted in legal action. We are also cooperating
with the Securities and Exchange Commission in a formal, non-public
investigation of former officers and Company transactions.
We may not be able to successfully resolve these legal matters. Other
lawsuits may be filed and other government investigations may be commenced
against us. In the event of an adverse outcome with respect to pending legal
matters, there is the risk that our insurance coverage may not fully cover any
damages assessed against us.
3
