SC 14D9
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION
STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
EMAGEON
INC.
(Name of Subject
Company)
EMAGEON
INC.
(Name of Person(s) Filing
Statement)
Common
Stock, par value $0.001 per share
(Title of Class of
Securities)
29076V 10
9
(CUSIP Number of Class of
Securities)
Charles
A. Jett, Jr.
Chief Executive Officer
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
(205) 980-9222
(Name Address and Telephone
Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing
Statement)
Copies
to:
W. Todd
Carlisle
Sirote & Permutt, P.C.
2311 Highland Avenue South
Birmingham, AL 35205
(205) 930-5100
and
David A.
Stockton
Justin B. Heineman
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309
(404) 815-6500
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1.
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SUBJECT
COMPANY INFORMATION.
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Name and
Address
The name of the subject company to which this
Solicitation/Recommendation Statement on
Schedule 14D-9
(together with its exhibits and annexes, the
Schedule) relates is Emageon Inc., a Delaware
corporation (the Company, or Emageon).
The address of the Companys principal executive offices is
1200 Corporate Drive, Suite 200, Birmingham, Alabama 35242,
and the Companys telephone number at that address is
(205) 980-9222.
Securities
The title of the class of equity securities to which this
Schedule relates is the common stock, par value $0.001 per
share, of the Company (the Shares, or the
Common Stock). As of the close of business on
February 27, 2009, there were 21,449,718 shares of
Common Stock issued and outstanding.
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ITEM 2.
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IDENTITY
AND BACKGROUND OF FILING PERSON.
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Name and
Address
The filing person is Emageon. Emageons business address
and business telephone number are set forth under the heading
Name and Address in Item 1 above.
Tender
Offer
This Schedule relates to a tender offer by AMICAS Acquisition
Corp. (Purchaser), a Delaware corporation and wholly
owned subsidiary of AMICAS, Inc., a Delaware corporation
(Parent), disclosed in a Tender Offer Statement on
Schedule TO filed by Purchaser and Parent on March 5,
2009 (as amended or supplemented from time to time, the
Schedule TO), to purchase all of the issued and
outstanding Shares at a purchase price of $1.82 per Share (the
Offer Price), net to the stockholder in cash without
interest and subject to applicable withholding taxes, upon the
terms and subject to the conditions set forth in the Offer to
Purchase, dated March 5, 2009 (the Offer to
Purchase) and the related Letter of Transmittal, dated
March 5, 2009 (the Letter of Transmittal). The
Offer to Purchase and Letter of Transmittal, each as may be
amended or supplemented from time to time, are referred to in
this Schedule as the Offer. The Offer was commenced
by Purchaser on March 5, 2009 and expires at 11:59 p.m.,
New York City time, on April 1, 2009, subject to extension
in certain circumstances as required or permitted by the Merger
Agreement and applicable law. The Offer is conditioned on, among
other things, there being validly tendered and not properly
withdrawn before the expiration of the Offer at least a majority
of the Shares then outstanding on a fully-diluted basis, as
described in the Offer to Purchase (the Minimum
Condition). Copies of the Offer to Purchase and the Letter
of Transmittal are filed as Exhibits (a)(1) and (a)(2) hereto,
respectively, and are incorporated herein by reference.
The Offer is being made pursuant to the Agreement and Plan of
Merger, dated February 23, 2009, by and among Purchaser,
Parent and the Company (as such agreement may from time to time
be amended or supplemented, the Merger Agreement).
The Merger Agreement provides that, following the consummation
of the Offer and subject to the satisfaction or waiver of the
conditions set forth in the Merger Agreement, Purchaser will
merge with and into the Company (the Merger) in
accordance with the provisions of the Delaware General
Corporation Law (DGCL), and the Company will
continue as the surviving corporation in the Merger and a wholly
owned subsidiary of Parent. In the Merger, each outstanding
Share (other than Shares held by Parent, Purchaser, the Company
or stockholders who properly exercise appraisal rights, if any,
under Section 262 of the DGCL) that is not tendered in the
Offer will be converted into the right to receive the same
consideration paid per Share pursuant to the Offer, without
interest and subject to applicable withholding taxes. A copy of
the Merger Agreement is filed as Exhibit (e)(1) hereto and is
incorporated herein by reference, and descriptions of it
contained herein are qualified in their entirety by reference to
the Merger Agreement.
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Information about the Offer, this Schedule, the Merger Agreement
and related materials with respect to the Offer can be found on
the Companys website at www.emageon.com.
As set forth in the Schedule TO, the address of the
principal executive offices of Parent and Purchaser is 20 Guest
Street, Boston, Massachusetts 02135, and their telephone number
at that address is
(617) 779-7878.
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ITEM 3.
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PAST
CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS.
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Except as set forth in this Item 3 or in the Information
Statement of the Company, which is attached to this Schedule as
Annex A and incorporated herein by reference (the
Information Statement), as of the date hereof, there
are no material agreements, arrangements or understandings or
any actual or potential conflicts of interest between the
Company or its affiliates and (i) the Companys
executive officers, directors or affiliates, or (ii) Parent
or Purchaser or their respective executive officers, directors
or affiliates. The Information Statement is being furnished to
the Companys stockholders pursuant to Section 14(f)
of the Securities Exchange Act of 1934, as amended (the
Exchange Act), and
Rule 14f-1
promulgated under the Exchange Act, in connection with
Purchasers right to designate persons to the Board of
Directors of the Company (the Company Board) other
than at a meeting of the stockholders of the Company.
Arrangements
with the Companys Executive Officers, Directors and
Affiliates
The Companys executive officers, directors and affiliates
may be deemed to have interests in the transactions contemplated
by the Merger Agreement that may be different from, or in
addition to, those of the Companys stockholders generally.
These interests may create potential conflicts of interest. The
Company Board was aware of these interests and considered them,
among other matters, in reaching its decision to approve the
Merger Agreement and the transactions contemplated by the Merger
Agreement, and to recommend that Company stockholders accept the
Offer and tender their Shares in the Offer.
Cash
Consideration Payable Pursuant to the Offer
If the Companys executive officers and directors and their
affiliates tender the Shares that they own in the Offer, they
will receive the same cash consideration per Share on the same
terms and conditions as the other stockholders of the Company.
As of February 27, 2009, the Companys executive
officers and directors and their affiliates beneficially owned
in the aggregate 3,794,387 Shares (which includes Shares
beneficially owned by affiliates of Oliver Press Partners, LLC
(OPP), of which the Companys directors
Augustus K. Oliver and Benner Ulrich are a managing member and a
principal and employee, respectively, but excludes stock options
and restricted stock units with respect to Shares). If the
executive officers and directors and their affiliates tender all
3,794,387 Shares beneficially owned by them in the Offer
and those Shares are accepted for purchase and purchased by
Purchaser, the executive officers and directors and their
affiliates would receive an aggregate of approximately
$6,905,784 in cash. The executive officers and directors of the
Company and their affiliates who own these Shares have entered
into Tender and Support Agreements, dated as of the date of the
Merger Agreement, with Parent and Purchaser pursuant to which
such executive officers, directors and affiliates have agreed to
tender into the Offer all Shares beneficially owned by them and
not to withdraw any such Shares previously tendered. The Tender
and Support Agreements are described in more detail in this
Item 3 below under the heading Tender and Support
Agreements.
Stock
Options and Other Stock-Based Awards
Under the Merger Agreement, at the effective time of the Merger
(the Effective Time):
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each outstanding option to acquire Common Stock will become
fully vested and will be cancelled, and the holder of such
option will be entitled to receive an amount in cash, without
interest and less any applicable withholding tax, equal to the
product of the maximum number of shares of Common Stock subject
to such option with respect to which such option has not
previously been exercised, multiplied by the excess, if any, of
$1.82 over the exercise price per share of such option; and
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each outstanding restricted stock unit award will be cancelled,
and the holder will be entitled to receive an amount in cash,
without interest and less any applicable withholding tax, equal
to the maximum number of shares of Common Stock subject to such
restricted stock unit award, multiplied by $1.82 (and the holder
also will be entitled to receive any dividend equivalents
accrued, but not yet distributed, with respect to such
restricted stock unit award (other than any such dividend
equivalents that are held in the form of restricted stock units
as of the Effective Time)).
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The table below summarizes, as of February 27, 2009,
(i) the outstanding options with exercise prices of less
than $1.82 per share held by the Companys executive
officers and the consideration (rounded to the nearest dollar)
that each of them will receive under the Merger Agreement in
connection with the cancellation of those options, and
(ii) the number of restricted stock unit awards that would
vest for the Companys executive officers and the
consideration (rounded to the nearest dollar) that each of them
will receive under the Merger Agreement in connection with the
cancellation of their outstanding restricted stock unit awards,
in each case assuming, as applicable, continued employment
through the Effective Time.
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No. of Shares
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No. of
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Underlying
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Exercise Price
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Resulting
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Restricted
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Resulting
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Total
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Name
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Options
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of Options
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Consideration
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Stock Units
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Consideration
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Consideration
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Charles A. Jett, Jr.
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78,000
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$
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1.73
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$
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7,020
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35,622
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$
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64,832
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$
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71,852
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John W. Wilhoite
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3,000
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5,460
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5,460
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Keith Stahlhut
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3,000
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5,460
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5,460
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No director of the Company holds any restricted stock unit
awards, or any options to purchase Shares with an exercise price
less than the Offer Price, so no payments will be made to
directors with respect to restricted stock unit awards or
options in connection with the Merger.
Agreements
with President and Chief Executive Officer
Employment Agreement. The Company entered into
an employment agreement with Charles A. Jett, Jr., its
President and Chief Executive Officer, on August 10, 2004,
and amended the agreement on July 8, 2008. The term of
Mr. Jetts employment agreement is two years, and the
term automatically renews on a daily basis unless notice is
given by the Company or Mr. Jett. Under his employment
agreement, Mr. Jett is entitled to an annual base salary,
and is eligible for a cash bonus under the Companys
informal performance-based annual bonus program for its
executive officers. In addition, Mr. Jett is eligible for
the same employee benefits, including health, life, disability,
dental and retirement benefits, as are available to all
employees of the Company.
Mr. Jetts employment agreement provides that if he
terminates his employment for any reason during either the
60-day
period following a change in control of the Company or the
30-day
period following the first anniversary of a change in control of
the Company, or the Company terminates his employment other than
for cause, death or disability following a change in
control of the Company, then Mr. Jett will be entitled to
receive, in addition to any earned but unpaid base salary and
other benefits accrued through the date of termination, a lump
sum payment that is equal to his then-current monthly base
salary plus the product of one-twelfth of his target annual
bonus (calculated as if all performance metrics had been
achieved) multiplied by the number of months in
Mr. Jetts severance period, as well as
group health and dental care during the severance period, among
other things. If the Company terminates Mr. Jetts
employment other than for cause, death or disability
following a change in control of the Company, then the severance
period under his employment agreement is equal to the greater of
12 months or the number of months remaining under the term
of the employment agreement, which currently is 24 months.
If Mr. Jett terminates his employment during one of the
specified time periods following a change in control of the
Company, then the severance period under his employment
agreement is equal to 12 months. The employment agreement
also provides for tax protection in the form of a
gross-up
payment to reimburse Mr. Jett for any excise tax under
Internal Revenue Code Section 4999 as well as any
additional income and employment taxes resulting from any such
reimbursement.
3
Severance Agreement. On February 23,
2009, the Company entered into a severance agreement with
Mr. Jett pursuant to which his employment with the Company
will be terminated effective upon completion of the Offer. Under
the severance agreement, in addition to receipt of his earned
but unpaid base salary and his other benefits accrued through
the date of termination, Mr. Jett will be entitled to
receive the following severance benefits, which are consistent
with the benefits that would be payable under his employment
agreement in the event of a termination of his employment by the
Company other than for cause following a change in
control of the Company, in each case less applicable statutory
deductions and withholding:
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a lump sum payment of $1,235,000, which is equal to
Mr. Jetts current monthly base salary plus the
product of one-twelfth of his target annual bonus multiplied by
24 months;
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a lump sum payment of $23,203, which is equal to the cost for
Mr. Jett to maintain continuing family health and dental
insurance for 24 months, less Mr. Jetts share of
insurance benefits under the Companys current benefit
plans;
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a lump sum payment of $8,000 for maintenance of life insurance
coverage; and
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vesting in all stock options, stock appreciation rights,
restricted stock and restricted stock units that he holds as of
the date of termination (the value of which is described above
under the heading Stock Options and Other Stock-Based
Awards).
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The severance agreement also provides that Mr. Jett is
eligible to receive a
gross-up
payment to reimburse him for any excise tax under Internal
Revenue Code Section 4999 as well as any additional income
and employment taxes resulting from such reimbursement.
In addition, under the severance agreement, the Company has
agreed to indemnify Mr. Jett from and against claims,
losses or causes of action arising from or out of his
performance as an officer, director or employee of the Company
or any of its subsidiaries or other affiliates or in any other
capacity, in each case to the maximum extent permitted by law,
pursuant to his employment agreement, under the Companys
Amended and Restated Certificate of Incorporation and bylaws,
and in accordance with the Companys insurance policy
covering directors and officers. Such indemnification
obligations are in addition to those described under the heading
Indemnification and Insurance below.
The foregoing summaries of Mr. Jetts employment
agreement, as amended, and severance agreement are qualified by
reference to the amended employment agreement and severance
agreement, which have been filed as Exhibits (e)(3)(i),
(e)(3)(ii) and (e)(4) hereto, respectively, and are incorporated
herein by reference.
Agreements
with Other Executive Officers
Agreement with John W. Wilhoite. On
April 29, 2008, the Company entered into an employment
agreement with John W. Wilhoite, its Chief Financial Officer,
Treasurer and Secretary. The term of the employment agreement is
12 months, and the term automatically renews on a daily
basis unless notice is given by the Company or
Mr. Wilhoite. Under the employment agreement,
Mr. Wilhoite is entitled to an annual base salary, and is
eligible for a cash bonus under the Companys informal
performance-based annual bonus program for its executive
officers. In addition, Mr. Wilhoite is eligible for the
same employee benefits, including health, life, disability,
dental and retirement benefits, as are available to similarly
situated officers of the Company. If Mr. Wilhoite
terminates his employment for good reason, the
Company terminates his employment other than for
cause, or the Company provides written notice to
Mr. Wilhoite of its desire to cease the automatic renewal
of the term of the employment agreement, then in addition to
base salary and bonus through the last day of his employment,
Mr. Wilhoite will, subject to his execution of a release of
claims against the Company, be entitled to receive, among other
benefits, a lump sum payment that is equal to (i) his
then-current monthly base salary plus one-twelfth of his target
annual bonus multiplied by (ii) 12 months, and any
outstanding stock options and restricted stock units held by
Mr. Wilhoite will become fully vested. The employment
agreement also provides that, upon a change in control of the
Company, Mr. Wilhoite will become fully vested in all stock
options, stock appreciation rights, restricted stock and
restricted stock units held by him as of the effective date of
the change in control.
4
The foregoing summary of Mr. Wilhoites employment
agreement is qualified by reference to the employment agreement,
which has been filed as Exhibit (e)(5) hereto, and is
incorporated herein by reference.
Agreement with Keith Stahlhut. On May 8,
2008, the Company entered into an employment agreement with
Keith Stahlhut, its Senior Vice President, Sales, and Chief
Operating Officer (Interim). The term of the employment
agreement is 6 months, and the term automatically renews on
a daily basis unless notice is given by the Company or
Mr. Stahlhut. Under the employment agreement,
Mr. Stahlhut is entitled to an annual base salary, and is
eligible for a cash bonus under the Companys informal
performance-based annual bonus program for its executive
officers, and a cash bonus under his individual annual sales
compensation plan. In addition, Mr. Stahlhut is eligible
for the same employee benefits, including health, life,
disability, dental, and retirement benefits, as are available to
similarly situated officers of the Company. If Mr. Stahlhut
terminates his employment for good reason, the
Company terminates his employment other than for
cause, or the Company provides written notice to
Mr. Stahlhut of its desire to cease the automatic renewal
of the term of the employment agreement, then in addition to
base salary and bonus through the last day of his employment,
Mr. Stahlhut will, subject to his execution of a release of
claims against the Company, be entitled to receive, among other
benefits, a lump sum payment that is equal to (i) his
then-current monthly base salary plus one-twelfth of his target
annual bonus multiplied by (ii) 6 months, and any
outstanding stock options and restricted stock units held by
Mr. Stahlhut will become fully vested. The employment
agreement also provides that, upon a change in control of the
Company, Mr. Stahlhut will become fully vested in all stock
options, stock appreciation rights, restricted stock and
restricted stock units held by him as of the effective date of
the change in control.
The foregoing summary of Mr. Stahlhuts employment
agreement is qualified by reference to the employment agreement,
which has been filed as Exhibit (e)(6) hereto, and is
incorporated herein by reference.
Relationship
with Significant Stockholder
Augustus K. Oliver and Benner Ulrich, directors of the Company,
are also a managing member and a principal and employee,
respectively, of OPP, which, through its affiliates, is the
beneficial owner of approximately 16.64% of the outstanding
Shares. On June 22, 2008, the Company entered into an
agreement with Mr. Jett and affiliates of OPP terminating a
proxy contest being pursued by OPP with respect to the
Companys 2008 annual meeting of stockholders. Under the
terms of the agreement, among other things, the size of the
Company Board was ultimately expanded to nine members,
Mr. Jett and Douglas D. French tendered their resignations
from the Company Board and Messrs. Oliver and Ulrich were
appointed to the Company Board. In addition, the Company Board
appointed Bradley S. Karro as a director. Further,
Mr. Ulrich and, upon his subsequent appointment to the
Company Board, Mr. Karro were added to the Company
Boards former Strategic Alternatives Committee, and
Mr. Ulrich was also added to the Compensation Committee.
The foregoing summary of the agreement among Mr. Jett, the
Company and OPP is qualified by reference to the agreement,
which has been filed as Exhibit (e)(7) hereto, and is
incorporated herein by reference.
Indemnification
and Insurance
As permitted by Section 102 of the DGCL, the Companys
Amended and Restated Certificate of Incorporation contains
provisions eliminating a directors personal liability for
monetary damages to the Company and its stockholders arising
from a breach of a directors fiduciary duty, except for
liability (i) for any breach of the directors duty of
loyalty to the Company or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under
Section 174 of the DGCL; or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the DGCL provides that a corporation has the
power to indemnify a director, officer, employee or agent of the
corporation and certain other persons serving at the request of
the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to
which he is or is threatened to be made a party by reason of
such position, if such person shall have acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe
his conduct was unlawful; provided
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that, in the case of actions brought by or in the right of the
corporation, indemnification is limited to expenses and no
indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the adjudicating
court or the Delaware Court of Chancery determines that such
indemnification is proper under the circumstances.
Article VIII of the Companys Amended and Restated
Certificate of Incorporation provides that the Company shall
indemnify all officers and directors to the fullest extent
permitted by the DGCL.
In addition to the indemnification provided for in the
Companys Amended and Restated Certificate of
Incorporation, the Company has entered into separate
indemnification agreements with its directors and executive
officers. The indemnification agreements provide, among other
things, that the Company will indemnify its directors and
executive officers for specified expenses, including
attorneys fees, judgments, fines and settlement amounts
that the director or officer actually and reasonably incurs in
any action or proceeding arising out of the persons
services as the Companys director or executive officer. In
particular circumstances, expenses may be paid in advance to the
officer or director.
The foregoing summary of the Companys directors and
officers indemnification agreements is qualified by
reference to the Form of Indemnification Agreement, filed as
Exhibit (e)(8) which is incorporated herein by reference.
The Company also maintains insurance on behalf of its directors
and officers insuring them against liability asserted against
them in their capacities as directors or officers or arising out
of such status.
Under the Merger Agreement, Parent and the surviving corporation
in the Merger have agreed to defend, and to indemnify for any
losses, claims, costs and expenses, the present and former
directors and officers of the Company and its subsidiaries in
respect of threatened or actual legal action arising out of the
fact that the indemnified person was an officer or director of
the Company or any of its subsidiaries, to the fullest extent
permitted by law and required by the organizational documents of
the Company and its subsidiaries. The Merger Agreement also
provides that, for a period of six years after the Effective
Time, the certificate of incorporation and bylaws of the
surviving corporation in the merger, and those of its
subsidiaries, will have provisions no less advantageous with
respect to the elimination of liability of directors,
indemnification of officers and directors and advancement of
expenses than the provisions contained in the certificate of
incorporation and bylaws of the Company and its subsidiaries as
of the date of the Merger Agreement.
The Merger Agreement provides that the surviving corporation in
the Merger shall maintain in effect for a period of six years
after the Effective Time the Companys directors and
officers liability insurance and fiduciary liability
insurance in respect of acts or omissions occurring at or before
the Effective Time on terms that are no less favorable in terms
of coverage, deductible and amount than those in the existing
policies of the Company. In satisfying its obligations, the
surviving corporation is not obligated to pay annual premiums in
excess of 200% of the amount currently paid by the Company, in
which case the surviving corporation agrees to obtain a policy
offering the maximum amount of coverage available for such
annual 200% amount. Alternatively, the Company may purchase a
six-year pre-paid tail policy to cover the
Companys officers and directors following the Effective
Time, provided that the purchase price for any such pre-paid
policy is subject to a cap of $725,000.
Arrangements
with Purchaser, Parent and Their Executive Officers, Directors
and Affiliates
The
Merger Agreement
The summary of the Merger Agreement and the descriptions of the
terms and conditions of the Offer and related procedures and
withdrawal rights contained in the Offer, which is being filed
as an exhibit to the Schedule TO, are incorporated in this
Schedule by reference. Such summary and description are
qualified by reference to the Merger Agreement, which has been
filed as Exhibit (e)(1) to this Schedule and is incorporated
herein by reference.
The Merger Agreement governs the contractual rights among the
Company, Parent and Purchaser in relation to the Offer and the
Merger. The Merger Agreement has been filed as an exhibit to
this Schedule to provide you with information regarding its
terms. It is not intended to provide any factual, business or
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operational information about the Company or to modify or
supplement any factual disclosures about the Company or Parent
in the Companys or Parents public reports filed with
the U.S. Securities and Exchange Commission (SEC).
The Merger Agreement contains representations and warranties
that the Company, Parent and Purchaser made to each other for
purposes of the Merger Agreement. These representations and
warranties were made as of specific dates, were solely for the
benefit of the Company, Parent and Purchaser, and may be subject
to qualifications, limitations and exceptions agreed to by the
contracting parties, including being qualified by confidential
disclosures exchanged among the parties in connection with the
negotiation and execution of the Merger Agreement. The
representations and warranties may have been made for the
purposes of allocating contractual risk among the Company,
Parent and Purchaser rather than establishing matters as facts,
and may be subject to contractual standards of materiality that
may differ from those generally applicable to disclosures to
stockholders. The Companys stockholders are not
third-party beneficiaries under the Merger Agreement, and should
not rely on the representations and warranties, or any
descriptions thereof, as characterizations of the actual state
of facts or condition of the Company or Parent or any of their
respective subsidiaries or affiliates. Information concerning
the subject matter of the representations and warranties may
change after the date of the Merger Agreement, which subsequent
information may or may not be fully reflected in the
Companys public disclosures.
Tender
and Support Agreements
In order to induce Parent and Purchaser to enter into the Merger
Agreement, each member of the Company Board; Charles A.
Jett, Jr., the Companys President and Chief Executive
Officer; John W. Wilhoite, the Companys Chief Financial
Officer, Treasurer and Secretary; Keith Stahlhut, the
Companys Senior Vice President of Sales and Chief
Operating Officer (Interim); and OPP (each, a Signing
Stockholder), each entered into a Tender and Support
Agreement, dated as of February 23, 2009, with Parent and
Purchaser (each, a Tender Agreement). Under each
Tender Agreement, each Signing Stockholder agreed, in such
Signing Stockholders capacity as a stockholder of the
Company, among other things: (i) to tender in the Offer
(and not to withdraw) all Shares beneficially owned or
subsequently acquired by such signing stockholder; (ii) to
vote such Shares in favor of adoption of the Merger Agreement
and against any takeover or competing proposal other than the
Merger; (iii) to appoint designees of Parent as its proxy
to vote such Shares in connection with the Merger Agreement;
(iv) not to otherwise transfer any of its Shares; and
(v) not to initiate, solicit, propose, participate or
engage in negotiations with respect to any takeover proposal or
to provide confidential information regarding the Company or the
Merger to any other person. As of the date of this Schedule, the
Signing Stockholders beneficially own, in the aggregate,
approximately 18.0% of the outstanding Shares. The Tender
Agreements terminate upon the termination of the Merger
Agreement.
The foregoing summary of the Tender and Support Agreements is
qualified by reference to the form of Tender and Support
Agreement, which has been filed as Exhibit (e)(2) hereto and is
incorporated herein by reference.
Representation
on the Company Board
The Merger Agreement provides that after the purchase by
Purchaser of at least a majority of the outstanding Shares in
the Offer (the time of such purchase, the Acceptance
Time), and from time to time thereafter, Purchaser will be
entitled to designate a number of the Companys directors,
rounded up to the next whole number, that is equal to the
product of the total number of directors on the Company Board
(giving effect to the directors designated by Purchaser)
multiplied by the percentage that the aggregate number of Shares
so acquired by Purchaser bears to the total number of Shares
outstanding. After the Acceptance Time, the Company will, at the
request of Purchaser, take all actions necessary to cause
Purchasers designees to be elected or appointed to the
Company Board, including increasing the size of the Company
Board and/or
seeking the resignation of one or more incumbent directors. The
Company has also agreed to take all actions necessary to cause
directors designated by Purchaser to have equivalent
representation on each committee of the Company Board.
Notwithstanding the foregoing, the Merger Agreement provides
that from the time that Purchasers designees are elected
or appointed to the Company Board until the Effective Time, the
Company Board and its
7
committees shall have such number of independent
directors as may be required by NASDAQ rules or the
federal securities laws. If the Company Board includes fewer
independent directors than are required by NASDAQ rules or the
federal securities laws, the Company Board will cause a person
(who is not a stockholder or affiliate of Parent or Purchaser)
designated by the remaining independent directors (or if no
independent directors remain, such other members of the current
Company Board as may then be members of the Company Board (each
such member, a Continuing Director)) to fill such
vacancy who shall be deemed to be an independent director for
purposes of the Merger Agreement.
In addition, from the time that Purchasers designees are
elected or appointed to the Company Board until the Effective
Time, any (i) amendment or termination of the Merger
Agreement by the Company, (ii) extension of time for the
performance of any of the obligations or other acts of Parent or
Purchaser under the Merger Agreement, (iii) waiver of
compliance with any of the agreements or conditions under the
Merger Agreement (other than those that are for the benefit of
Parent), (iv) exercise of the Companys rights or
remedies under the Merger Agreement, any action to seek to
enforce any obligation of Parent or Purchaser under the Merger
Agreement (or any other action by the Company Board with respect
to the Merger Agreement or the Merger if such other action
adversely affects, or could reasonably be expected to adversely
affect, any of the holders of Shares other than Parent or
Purchaser) or (v) amendment to the Companys charter
or bylaws, may only be authorized by a majority of the
Continuing Directors (or if there are no Continuing Directors,
then by a majority of the independent directors, or if there are
no independent directors, then by a majority vote of the Company
Board). As long as there remains at least one Continuing
Director on the Company Board, if any Continuing Director is
unable to continue to serve as a result of death, disability,
resignation or refusal to serve, the remaining Continuing
Director(s) shall be entitled to elect or designate another
person that satisfies the applicable independence requirements
to fill such vacancy, and such person will be deemed to be a
Continuing Director for purposes of the Merger Agreement.
In connection with the foregoing, the Company is providing to
its stockholders an Information Statement pursuant to
Section 14(f) of the Exchange Act and
Rule 14f-1
thereunder, which is attached as Annex A to this Schedule.
The foregoing summary concerning representation on the Company
Board is qualified by reference to the Merger Agreement, which
has been filed as Exhibit (e)(1) hereto and is incorporated
herein by reference.
Confidentiality
Agreement
On December 21, 2007, the Company and Parent entered into a
confidentiality agreement (the Confidentiality
Agreement) with respect to certain confidential
information. Pursuant to the Confidentiality Agreement, each
party agreed to keep certain information of the other party
confidential, and not to use the confidential information of the
other party for any purpose other than for evaluating a possible
transaction between the Company and Parent. The Company and
Parent also agreed to disclose the other partys
confidential information only to those people who need to know
such information for the purposes of evaluating a potential
transaction, who are informed by the receiving party of the
confidential nature of such information and who are directed to
keep such information confidential. The Companys and
Parents obligations under the Confidentiality Agreement do
not apply to information that (i) was within the possession
of the other party prior to it being furnished by the disclosing
party, (ii) is or becomes generally available to the public
other than as a result of disclosure in breach of the
Confidentiality Agreement by the other party or its
representatives, or (iii) was or becomes available to the
other party on a non-confidential basis from a source other than
the other party or its representatives, provided that the source
is not known by other party to be bound by an obligation of
confidentiality to the other party.
The foregoing summary of the Confidentiality Agreement is
qualified by reference to the Confidentiality Agreement, which
has been filed as Exhibit (e)(9) hereto and is incorporated
herein by reference.
Effect
on Company Benefit Plans
The Merger Agreement provides that the surviving corporation in
the Merger will honor all Company Benefit Plans (as that term is
defined in the Merger Agreement) in accordance with their terms
as in effect
8
immediately prior to the Effective Time, subject to any
amendment or termination of any such Company Benefit Plan that
may be permitted in accordance with its terms. The Merger
Agreement also provides that the surviving corporation will,
from the Effective Time until the first anniversary of the
Effective Time, provide all continuing employees of the Company
and its subsidiaries with benefits (other than equity based
compensation) that are substantially similar in the aggregate
(on a group basis) to the benefits being provided to such
employees at the Effective Time. For all purposes under the
applicable benefit plans of the surviving corporation and its
affiliates, continuing employees of Emageon and its subsidiaries
will receive credit for prior service with the Company and its
affiliates prior to the Effective Time (to the extent recognized
in any similar Company Benefit Plan in which they participated
immediately prior to the closing of the Merger).
The foregoing summary is qualified by reference to the Merger
Agreement, which has been filed as Exhibit (e)(1) to this
Schedule and is incorporated herein by reference.
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ITEM 4.
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THE
SOLICITATION OR RECOMMENDATION.
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Recommendation
of the Company Board
The Company Board, at a meeting duly called and held on
February 22, 2009, by unanimous vote of all directors
present at the meeting:
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declared that the Merger Agreement, the Offer, the Merger and
the other transactions contemplated by the Merger Agreement are
advisable, fair to and in the best interests of the Company and
its stockholders;
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approved the Merger Agreement and the Tender Agreements, and the
Offer, the Merger and the other transactions contemplated by the
Merger Agreement;
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recommended to the stockholders of the Company that they accept
the Offer and tender their Shares in the Offer; and
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recommended to the stockholders of the Company that, if required
by applicable law in order to consummate the Merger, they vote
for the adoption of the Merger Agreement and approval of the
Merger at the applicable meeting of Company stockholders.
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THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
A letter to stockholders communicating the Company Boards
recommendation and the press release announcing the Offer are
filed herewith as Exhibits (a)(8) and (a)(6), respectively.
Background
of the Transaction
Emageon regularly reviews and evaluates its business strategy
and strategic alternatives with the goal of enhancing
stockholder value. In this regard, in early 2007, the Company
Board determined to consider what strategic alternatives might
be available to Emageon.
During the first quarter of 2007, Charles A. Jett, Jr., in
his capacity as Chief Executive Officer, reviewed with the
Company Board current market trends and sales expectations for
2007 and initiated the consideration by the Company Board of
various strategic alternatives. On April 24, 2007, at a
regularly scheduled meeting of the Company Board, Emageons
management reviewed a presentation with the Company Board
regarding managements assessment of industry trends,
Emageons business plan and future prospects and
managements preliminary analysis of a number of strategic
alternatives Emageon might consider pursuing in order to enhance
stockholder value. After extended discussions, the Company Board
determined to commence a formal review of potential strategic
alternatives for the benefit of Emageons stockholders.
Representatives of Kilpatrick Stockton LLP (Kilpatrick
Stockton, counsel for Emageon, advised the Company Board
regarding its fiduciary duties in engaging in a strategic
alternatives review process. The Company Board determined that
because one of the possible alternatives, a sale of Emageon,
could involve potential conflicts of interest with management
and certain directors, it should establish a strategic
alternatives committee comprised of
9
independent, disinterested directors to review, evaluate and
consider potential strategic alternatives, including, but not
limited to, acquisitions of other businesses, a merger or
combination with another company, the sale of part or all of
Emageon to a financial or strategic purchaser
and/or a
refinancing or recapitalization of Emageon. Accordingly, the
Company Board established a strategic alternatives committee
(the Strategic Alternatives Committee), comprised
entirely of independent members of the Company Board, being Hugh
H. Williamson III (the chair), Fred C. Goad, Jr. and
Roddy J. H. Clark, and granted it the authority to engage
independent attorneys, investment advisors and other such
advisors as it deemed appropriate.
Following this meeting, the Strategic Alternatives Committee
members discussed the engagement of legal and financial advisors
to assist the Strategic Alternatives Committee in its evaluation
of strategic alternatives for the benefit of Emageons
stockholders. Over the next several days following the Company
Board meeting, members of the Strategic Alternatives Committee
held conversations with potential legal counsel and various
investment banks, including SunTrust Robinson Humphrey and Bass,
Berry and Sims PLC (Bass, Berry & Sims).
On May 3, 2007, the Strategic Alternatives Committee met to
discuss the purpose, duties and role of the Strategic
Alternatives Committee and the process by which it would begin
to examine potential strategic alternatives. The Strategic
Alternatives Committee invited representatives of Bass,
Berry & Sims and SunTrust Robinson Humphrey to
participate in the meeting. Also participating at the Strategic
Alternatives Committees request were Mr. Jett and
Todd Carlisle, Emageons General Counsel. Mr. Jett
reviewed with the Strategic Alternatives Committee
managements assessment of Emageons business plan and
future prospects as discussed at the April 24, 2007 Company
Board meeting. Mr. Jett expressed his desire to work with
the Strategic Alternatives Committee in evaluating strategic
alternatives and to act in the best interest of Emageons
stockholders. Mr. Jett discussed with the Strategic
Alternatives Committee conversations Emageon had held with
various potential acquisition targets as well as inquiries by
various parties interested in Emageon, its business operations
and technology. The Strategic Alternatives Committee reviewed
SunTrust Robinson Humphreys preliminary analysis regarding
a process for evaluating organic growth opportunities and both
buy side and sell side opportunities,
including a potential timeline for completing the Strategic
Alternatives Committees analysis and making a
recommendation to the full Company Board. The Strategic
Alternatives Committee excused the SunTrust Robinson Humphrey
representatives from the meeting and met in executive session to
review its discussions with various investment banks (to serve
as financial advisor to the Strategic Alternatives Committee)
and the engagement of a financial advisor and legal counsel.
Following this discussion, the Strategic Alternatives Committee
authorized and approved the engagement of Bass,
Berry & Sims to serve as legal counsel to the
Strategic Alternatives Committee and SunTrust Robinson Humphrey
to serve as financial advisor to the Strategic Alternatives
Committee, subject to negotiation and execution of appropriate
engagement letters with each firm.
On May 21, 2007, the Strategic Alternatives Committee met
and discussed with Mr. Jett various operational matters as
well as his observations from Emageons first quarter
earnings conference call held May 9, 2007 in which Emageon
had announced a reduction in its financial guidance for 2007.
The Strategic Alternatives Committee reviewed SunTrust Robinson
Humphreys recommendation for evaluating, through a
targeted, controlled process coordinated by SunTrust Robinson
Humphrey, the potential market value of Emageon from the
perspectives of strategic parties and financial sponsors, as
well as analyzing potential organic growth opportunities for
Emageon. The Strategic Alternatives Committee discussed and
agreed upon a list of potential Tier One and
Tier Two strategic parties and financial
sponsors selected primarily on the basis of their potential
level of interest in and ability to act on a transaction with
Emageon. The Strategic Alternatives Committee also considered
the parties knowledge of Emageons industry in
compiling these lists. The Strategic Alternatives Committee
initially authorized SunTrust Robinson Humphrey to contact 15
potential Tier One strategic parties and five potential
Tier One financial sponsors. The Strategic Alternatives
Committee articulated to SunTrust Robinson Humphrey and Bass,
Berry & Sims that discussions with these parties were
to be undertaken in connection with the Strategic Alternatives
Committees evaluation of a full continuum of alternatives
including continuing as an independent public company with
certain internal reorganization efforts and analysis of capital
needs, evaluating various possible acquisition opportunities and
analyzing the markets valuation of Emageon to determine
whether a potential sale of Emageon was in the best interest of
Emageons
10
stockholders. The Strategic Alternatives Committee engaged in an
executive session during which the Strategic Alternatives
Committee members discussed the proposed process and the
Strategic Alternatives Committees actions going forward.
Representatives of Bass, Berry & Sims advised the
Strategic Alternatives Committee concerning its fiduciary
duties, including the Strategic Alternatives Committee
members duties of care and loyalty and the importance that
they act independently on behalf of Emageons stockholders.
From May 21, 2007 through October 24, 2007, SunTrust
Robinson Humphrey contacted 27 entities, including 19 strategic
parties and eight financial sponsors, on behalf of the Strategic
Alternatives Committee. During this time, Emageon executed
confidentiality agreements with eight of these parties,
including two strategic parties and six financial sponsors.
Parties executing confidentiality agreements were provided
preliminary financial information about Emageon, were granted
access to an electronic data room and engaged in telephone calls
and meetings with Emageons management. Most of the
strategic parties contacted were not interested in pursing a
transaction with Emageon for a variety of reasons. As a result
of this process, Emageons management, with the assistance
of SunTrust Robinson Humphrey, continued to revise its analysis
of Emageons continuing viability as an independent,
publicly traded company.
The Strategic Alternatives Committee held teleconference
meetings on each of May 31, 2007, June 7, 2007 and
June 15, 2007. During these calls, the Strategic
Alternatives Committee members reviewed with SunTrust Robinson
Humphrey the ongoing discussions with various strategic parties
and financial sponsors as well as additional potential parties
SunTrust Robinson Humphrey could contact in connection with the
Strategic Alternatives Committees evaluation of strategic
alternatives for the benefit of Emageons stockholders. The
Strategic Alternatives Committee also reviewed updates from
management regarding managements assessment of various
operational, financial and business development matters during
these calls.
On June 26, 2007, the Strategic Alternatives Committee met
and discussed with SunTrust Robinson Humphrey and management the
status of discussions with various strategic parties and
financial sponsors, including the lack of interest indicated by
a number of the strategic parties contacted. The Strategic
Alternatives Committee also discussed the proposed timeline for
completing its evaluation of strategic alternatives on behalf of
Emageon and its stockholders and making a recommendation to the
full Company Board. The Strategic Alternatives Committee
discussed with Mr. Jett Emageons financial outlook
for 2007 and 2008 and Emageons ongoing conversations with
various potential acquisition targets. The Strategic
Alternatives Committee members further discussed with
representatives of Bass, Berry & Sims their fiduciary
duties, the Strategic Alternatives Committees role in the
evaluation of strategic alternatives for the benefit of
Emageons stockholders and the full continuum of
alternatives being evaluated. The Strategic Alternatives
Committee also met in executive session to discuss the
evaluation process, market observations and managements
role in assisting the Strategic Alternatives Committee in its
evaluation process.
During July 2007, the Strategic Alternatives Committee, with the
assistance of SunTrust Robinson Humphrey, continued discussions
with four financial sponsors and one strategic party regarding a
possible transaction with Emageon. Each of these parties
continued a due diligence investigation of Emageon with the
assistance of Emageons management and representatives of
SunTrust Robinson Humphrey. On July 20, 2007, the Strategic
Alternatives Committee executed a confidentiality agreement with
a second strategic party. In late July, one of the financial
sponsors expressed to SunTrust Robinson Humphrey that it no
longer wished to be involved in the process. In addition, a
third strategic party, referred to herein as Company
A, contacted Mr. Jett to express an interest in a
strategic transaction with Emageon.
On July 30, 2007, Oliver Press Partners, LLC (Oliver
Press), filed a Schedule 13D with the SEC indicating
it had purchased a significant stake in Emageon. On
August 2, 2007, the Strategic Alternatives Committee met to
discuss the investment by Oliver Press in Emageon and the
potential impact of Oliver Presss investment and possible
desire to influence Emageons activities on the ongoing
strategic alternatives evaluation process. The Strategic
Alternatives Committee discussed with Mr. Jett
conversations he had held with representatives of Oliver Press
as well as various business development and operational matters
regarding Emageon. The Strategic Alternatives Committee
discussed the status of discussions with the three strategic
parties, including Company A, and the three financial sponsors
that continued to express interest in Emageon.
11
On August 9, 2007, at a regularly scheduled meeting of the
Company Board, the Strategic Alternatives Committee made a
presentation to the board regarding the status of the strategic
alternatives evaluation process. The Company Board reviewed a
presentation by SunTrust Robinson Humphrey regarding the three
financial sponsors and three strategic parties (including
Company A), the level of interest indicated by each and an
evaluation of each partys ability to complete a
transaction.
During the week following the August 9, 2007 Company Board
meeting, the two strategic parties other than Company A and one
of the financial sponsors informed SunTrust Robinson Humphrey
they were not interested in further discussions regarding a
transaction with Emageon. The Strategic Alternatives Committee
instructed SunTrust Robinson Humphrey to prepare a bid letter to
the remaining two financial sponsors, one of which is referred
to herein as Company D, requesting a formal offer
and markup of a form of merger agreement. The Strategic
Alternatives Committee worked with Emageons management,
Bass, Berry & Sims and Kilpatrick Stockton to prepare
a form of merger agreement to be delivered to the parties. On
August 22, 2007, SunTrust Robinson Humphrey delivered the
bid letter on behalf of the Strategic Alternatives Committee to
the two remaining financial sponsors, including Company D. A
form of merger agreement, which had been approved by the
Strategic Alternatives Committee, was delivered to these parties
on August 31, 2007. The Strategic Alternatives Committee,
with SunTrust Robinson Humphreys assistance, continued to
engage in discussions with Company A regarding a possible
strategic transaction based on a number of scenarios, including
a stock for stock combination of the two entities.
During the first part of September 2007, the two remaining
financial sponsors, including Company D, informed SunTrust
Robinson Humphrey they were no longer interested in a
transaction with Emageon. The Strategic Alternatives Committee,
with the assistance of SunTrust Robinson Humphrey, continued to
engage in discussions with Company A regarding a number of
possible scenarios under which the parties might structure a
strategic transaction, including as a stock for stock business
combination.
On September 17, 2007, the Strategic Alternatives Committee
addressed the withdrawal of all parties other than Company A
from discussions with Emageon. The Strategic Alternatives
Committee discussed the feasibility of a possible transaction
with Company A, including the potential timeline for negotiating
a definitive transaction, the structure of such a transaction
and the potential value of such a transaction to Emageons
stockholders. The Strategic Alternatives Committee reviewed with
representatives of Bass, Berry & Sims the Strategic
Alternatives Committees fiduciary duties and its role in
connection with its evaluation of strategic alternatives for the
benefit of Emageons stockholders, including with respect
to negotiations with Company A. The Strategic Alternatives
Committee also reviewed current operations, Emageons
financial condition and a wide range of additional alternatives
it might consider that might enhance stockholder value. After
this discussion, the Strategic Alternatives Committee excused
Mr. Jett and Mr. Carlisle from the meeting and engaged
in an extended discussion regarding the process, the timeline
for reporting to the full Company Board and the feasibility and
potential value to Emageons stockholders of a possible
transaction with Company A. The representatives of SunTrust
Robinson Humphrey were then excused from the meeting and the
Strategic Alternatives Committee met in executive session to
discuss the strategic alternatives available to Emageon.
Following this executive session, the Strategic Alternatives
Committee authorized members of Emageons management and
Mr. Clark, as representative of the Strategic Alternatives
Committee, to meet with representatives of Company A to further
gauge Company As level of interest in pursuing a
definitive transaction. The Strategic Alternatives Committee
also requested SunTrust Robinson Humphrey to prepare and
distribute to the Strategic Alternatives Committee members
SunTrust Robinson Humphreys valuation analysis of a
transaction with Company A based on various scenarios as
discussed at this meeting. On September 18, 2007, SunTrust
Robinson Humphrey distributed to the Strategic Alternatives
Committee members its analysis of a transaction between Emageon
and Company A, including its analysis of an appropriate
valuation of Emageons and Company As common stock.
During the following weeks, the Strategic Alternatives Committee
continued to negotiate with Company A regarding a proposed
transaction. On October 19, 2007, the Strategic
Alternatives Committee delivered a form of merger agreement to
Company A in furtherance of these negotiations. The parties
continued to disagree as to the value attributable to
Emageons stock in a stock for stock combination.
12
On October 22, 2007, the Strategic Alternatives Committee
met to discuss the status of discussions with Company A,
including a discussion of a number of open issues on which the
parties differed, including among other things, Company As
valuation of Emageons common stock. The Strategic
Alternatives Committee also reviewed generally the results of
its evaluation of strategic alternatives for the benefit of
Emageon and its stockholders. The Strategic Alternatives
Committee members discussed with Bass, Berry & Sims
their fiduciary duties in connection with the Strategic
Alternatives Committees evaluation of strategic
alternatives on behalf of Emageons stockholders, noting
that the feasible alternatives currently available to Emageon,
which included primarily a strategic transaction with Company A
or continuing as an independent public company with such
internal restructuring and assessment of capital needs as
determined by the full Company Board, would not involve a
conflict of interest with members of management or any
directors. After this discussion, the Strategic Alternatives
Committee determined to recommend to the full Company Board that
the review of strategic alternatives be returned to the full
Company Board pending further developments, if any, that might
require a committee of independent directors.
On October 24, 2007, at a regularly scheduled meeting of
the Company Board, the Strategic Alternatives Committee
delivered its report to the Company Board. The Strategic
Alternatives Committee noted it had contacted an aggregate of 27
parties, including 19 strategic parties and eight financial
sponsors as part of its strategic alternatives evaluation
process and had entered into confidentiality agreements with
eight of those parties, including two strategic parties and six
financial sponsors. The Strategic Alternatives Committee
discussed various other possible strategic alternatives,
including continuing as an independent public company with a
reorganization of Emageons management team, investment in
product development initiatives and a continuing analysis of
Emageons capital needs, as well as the evaluation of
possible acquisitions of other businesses. The Strategic
Alternatives Committee stated that, as of the date of the Board
meeting, only Company A continued to indicate an interest in
exploring strategic alternatives with Emageon. Accordingly, the
Strategic Alternatives Committee recommended to the Company
Board that Emageon continue negotiations with Company A
regarding a definitive transaction and, if agreement could not
be reached regarding a transaction that would be in the best
interest of Emageons stockholders, Emageon should continue
operating on a standalone basis with such restructuring and
other steps as were determined by management and the full
Company Board to be in the best interest of Emageons
stockholders. After discussion, the Company Board approved the
cessation of the Strategic Alternatives Committees
activities. The Company continued to negotiate with Company A
following the October 24, 2007 Company Board meeting but
was unable to reach agreement regarding a definitive transaction.
On November 6, 2007, Emageon issued a press release
reporting its financial results for the quarter ended
September 30, 2007. The market value of Emageons
common stock declined substantially following the release of
Emageons financial results. At a special Company Board
meeting on November 13, 2007, the Company Board, noting the
decline in the market value of Emageons stock, closing at
$4.58 per share (as reported on NASDAQ) on November 13,
2007, following the release of Emageons financial results
for the third quarter of 2007 and the difficulties Emageon faced
in the public market, determined further analysis of strategic
alternatives would be required and requested that the Strategic
Alternatives Committee reconvene. Following the Company Board
meeting, Mr. Williamson, on behalf of the Strategic
Alternatives Committee, requested Mr. Jett to contact
representatives of Company B, a strategic party that
the Strategic Alternatives Committee believed might have an
interest in a potential acquisition of Emageon.
The Strategic Alternatives Committee met on November 16,
2007 and discussed with Mr. Jett his preliminary
conversations with Company B, which indicated an interest in a
possible acquisition of Emageon. The Strategic Alternatives
Committee also authorized representatives of SunTrust Robinson
Humphrey to contact parties previously contacted as part of the
Strategic Alternatives Committees process, as well as
certain additional strategic parties and financial sponsors with
which the Strategic Alternatives Committee had not yet had
discussions but who might be interested, particularly in light
of Emageons reduced market valuation.
On December 4, 2007, the Strategic Alternatives Committee
met to discuss the ongoing conversations with Company B and
certain other strategic parties and financial sponsors contacted
by SunTrust Robinson Humphrey. Mr. Jett and representatives
of SunTrust Robinson Humphrey reported to the Strategic
Alternatives
13
Committee at this meeting that Company B continued to express an
interest in Emageon as did one other strategic party, referred
to herein as Company C. Additionally, Mr. Jett
reported that one of Emageons current institutional
investors had contacted him regarding a possible investment
transaction that would include as a condition to such investment
representation on Emageons Company Board. The Strategic
Alternatives Committee instructed Mr. Jett to pursue
further the interest expressed by this institutional investor in
a potential investment transaction. The Strategic Alternatives
Committee discussed with representatives of SunTrust Robinson
Humphrey additional parties the Strategic Alternatives Committee
might contact and instructed SunTrust Robinson Humphrey to
contact those parties to determine their interest in a possible
transaction with Emageon.
Throughout December 2007 and January 2008, the Strategic
Alternatives Committee, with the assistance of SunTrust Robinson
Humphrey, held ongoing discussions with six strategic parties,
including Company B and Company C, regarding a possible
transaction with Emageon. Company B and Company C continued to
conduct due diligence on Emageon during this time. SunTrust
Robinson Humphrey subsequently received a call from a financial
sponsor that had previously expressed an interest in Emageon,
Company D, in which representatives of Company D expressed a
renewed interest in discussing an acquisition of Emageon. In
early January, Company B informed the Strategic Alternatives
Committee that it was no longer interested in pursuing an
acquisition of Emageon. On January 22, 2008, Company C
submitted an indication of interest in which it offered to
purchase only Emageons cardiology line of business. After
reviewing SunTrust Robinson Humphreys analysis of Company
Cs proposal, the Strategic Alternatives Committee
determined Company Cs proposal undervalued Emageon and
that splitting Emageon into segments was not in the best
interest of Emageons stockholders.
On January 28, 2008, the Strategic Alternatives Committee
met and discussed the withdrawal of Company B from discussions
with Emageon and the continued interest of Company D in a
possible transaction. The Strategic Alternatives Committee
discussed the costs and benefits of an investment in Emageon by
one of its current institutional investors as well as the
feasibility of a stock buyback as a way to generate value for
Emageons stockholders. After extended discussion, the
Strategic Alternatives Committee determined that a possible sale
of Emageon represented the best way to enhance stockholder value
at this time. Accordingly, the Strategic Alternatives Committee
agreed to continue its current evaluation of strategic
alternatives, including the potential transaction with Company D.
Subsequent to the meeting on January 28, 2008, the
Strategic Alternatives Committee received an indication of
interest from Company D. The Strategic Alternatives Committee
reconvened on the morning of January 29, 2008 to discuss
the indication of interest received from Company D, a financial
sponsor. Mr. Jett and Mr. Carlisle were present at the
meeting but Mr. Jett was excluded from the discussion of
the indication of interest from Company D and was not provided a
copy for his review. The Strategic Alternatives Committee
instructed SunTrust Robinson Humphrey to obtain additional
information from Company D and to inquire as to the possibility
of including an equity component as part of the transaction so
as to allow Emageons current stockholders to retain an
interest in Emageon following an acquisition of Emageon by
Company D.
On February 11, 2008, the Strategic Alternatives Committee
met to discuss further Company Ds indication of interest.
Mr. Williamson expressed to the Strategic Alternatives
Committee that Company D was not willing to consider an equity
component but remained interested in pursuing an acquisition of
Emageon for cash. The Strategic Alternatives Committee also
noted that Company D had requested Emageon to enter into an
exclusivity agreement before it continued its due diligence
review. The Strategic Alternatives Committee requested SunTrust
Robinson Humphrey to prepare an analysis of Company Ds
offer and report back to the Strategic Alternatives Committee.
On February 19, 2008, the Strategic Alternatives Committee
met and reviewed SunTrust Robinson Humphreys analysis of a
transaction with Company D, including the feasibility of
completing a transaction, the structure of the proposed
transaction, the timeframe for negotiating the transaction and
the potential value of the transaction to Emageons
stockholders. Following this discussion, the Strategic
Alternatives Committee instructed SunTrust Robinson Humphrey,
with the assistance of Bass, Berry & Sims, to
negotiate an
14
exclusivity agreement on behalf of the Strategic Alternatives
Committee with Company D. Subsequent to this meeting, on
February 25, 2008, Emageon entered into a
45-day
exclusivity agreement with Company D.
Mr. Williamson, on behalf of the Strategic Alternatives
Committee, requested Bass, Berry & Sims to draft a
form of merger agreement for the Strategic Alternatives
Committees review. From February 25, 2008 through
March 20, 2008, Company D conducted an extensive due
diligence review of Emageon. On March 14, 2008, the
Strategic Alternatives Committee met and discussed the form of
merger agreement to be delivered to Company D. Following this
discussion, the Strategic Alternatives Committee instructed
Bass, Berry & Sims to deliver the agreement to
SunTrust Robinson Humphrey and convey the Strategic Alternatives
Committees authorization for its distribution to Company
D. The form of merger agreement was immediately delivered to
Company D.
On March 20, 2008, Company D communicated to SunTrust
Robinson Humphrey that based on its analysis of its due
diligence review and market conditions, it was no longer willing
to pursue a transaction within the range communicated in its
indication of interest and that it was significantly reducing
its offer price. The Strategic Alternatives Committee met on
March 24, 2008 and discussed Company Ds reduced offer
with representatives of SunTrust Robinson Humphrey. The
Strategic Alternatives Committee reviewed SunTrust Robinson
Humphreys analysis of the reduced offer and after extended
discussions determined that a sale of Emageon at the reduced
offer price would undervalue Emageon and would not provide
adequate value to Emageons stockholders. The Strategic
Alternatives Committee instructed representatives of SunTrust
Robinson Humphrey to contact Company D to confirm that the
Strategic Alternatives Committee would no longer consider such a
reduced offer and request the termination of the exclusivity
arrangement between Emageon and Company D, which exclusivity
agreement was subsequently terminated. The Strategic
Alternatives Committee authorized SunTrust Robinson Humphrey to
contact Company C to determine whether it had any interest in
discussing an acquisition of Emageon as a whole as opposed to
only the cardiology segment of Emageons business. Company
C did not express an interest in an acquisition of Emageon as a
whole.
On April 18, 2008, the Strategic Alternatives Committee met
and discussed the strategic alternatives evaluation process with
SunTrust Robinson Humphrey and reviewed managements
observations regarding the impact of the process on
Emageons ongoing business operations. Noting the lack of
executable offers received as a result of the strategic
alternatives process despite the substantial number of parties
contacted and the disruption of Emageons operations that
would result from continuing the process, the Strategic
Alternatives Committee determined it was in the best interest of
Emageon and its stockholders to conclude the evaluation of
strategic alternatives and to take such steps as the full board
determined were necessary for Emageon to continue operating on
an independent basis. The Company Board received, discussed and
accepted this recommendation at its regularly scheduled meeting
on April 29, 2008.
On May 9, 2008, in connection with Emageons annual
stockholders meeting, Oliver Press filed with the SEC a
preliminary proxy statement seeking stockholder support for
three directors nominated by Oliver Press to Emageons
Company Board at Emageons annual stockholder meeting
scheduled for June 23, 2008. Over the ensuing weeks,
Emageon engaged in a proxy contest with Oliver Press. On
June 22, 2008, Emageon entered into an agreement with
Mr. Jett and representatives of Oliver Press terminating
the proxy contest with respect to the election of directors at
Emageons annual meeting. Under the terms of the agreement,
the size of Emageons Company Board was ultimately expanded
to nine members, Mr. Jett and Douglas D. French tendered
their resignations from the Company Board and Augustus K. Oliver
and Benner Ulrich, principals of Oliver Press, were appointed to
the Company Board. In addition, the Company Board agreed to
appoint Bradley S. Karro to the Company Board, subject to the
Boards review of Mr. Karros qualifications and
a background check of Mr. Karro. Mr. Karro was
appointed to the Company Board on July 29, 2008. Further,
Mr. Ulrich and, upon his subsequent appointment to the
Company Board, Mr. Karro were added to the Strategic
Alternatives Committee by the Company Board. The settlement
agreement also contemplated that the Strategic Alternatives
Committee would be reconstituted and would recommence its
evaluation of strategic alternatives and that it would meet on
June 23, 2008 to contemplate the engagement of an
additional (or alternative) financial advisor and develop a
schedule of activities in connection with its evaluation of
strategic alternatives.
15
On June 23, 2008, the reconstituted Committee, consisting
of four directors Mr. Ulrich, Mr. Clark,
Mr. Goad and Mr. Williamson, met by telephone.
Mr. Oliver and Mr. Jett participated in the meeting at
the Strategic Alternatives Committees request. At this
meeting, the Strategic Alternatives Committee discussed the
activities of the Strategic Alternatives Committee since its
inception in April 2007, the viability of recommencing the
investigation of strategic alternatives and the proposed
timeline for a potential process. The Strategic Alternatives
Committee also discussed with Mr. Jett managements
views of the potential impact of such a process on Emageon and
its relationships with its employees and customers.
Mr. Ulrich inquired about the possibility of separating the
cardiology and imaging businesses of Emageon both for purposes
of evaluating strategic alternatives and operationally, and
Mr. Jett agreed to provide financial and other information
to the Strategic Alternatives Committee to assist in analyzing
this possibility. In addition, the Strategic Alternatives
Committee discussed its engagement of SunTrust Robinson Humphrey
and the possible benefits and risks of engaging a new financial
advisor. In this regard, Mr. Ulrich and Mr. Oliver
agreed to contact certain firms the Strategic Alternatives
Committee might consider and report to the Strategic
Alternatives Committee the following day regarding these
preliminary conversations.
The Strategic Alternatives Committee met again on June 24,
2008. Mr. Ulrich stated that he and Mr. Oliver had
engaged in conversations with SunTrust Robinson Humphrey as well
as three other investment banks, including Jefferies &
Company, Inc. (Jefferies), regarding their interest
in working with the Strategic Alternatives Committee.
Mr. Ulrich stated that Jefferies had expressed a desire to
work with the Strategic Alternatives Committee. The Strategic
Alternatives Committee discussed further the process for
evaluating strategic alternatives, including conducting a
controlled process as had been done previously or conducting a
broader public auction within a timeframe that would limit the
potential risk to Emageons ability to operate but that
would allow Emageon to analyze whether a buyer might be found
for Emageon at a valuation beneficial to Emageons
stockholders. The Strategic Alternatives Committee agreed to
continue discussions with Jefferies regarding a possible
engagement and instructed Mr. Jett to coordinate with
Jefferies regarding a visit to Emageons headquarters in
Birmingham, Alabama to conduct due diligence. The Strategic
Alternatives Committee also instructed Mr. Jett to prepare
an analysis regarding managements views of Emageons
continuing viability as an independent public company. Also at
this meeting, the Strategic Alternatives Committee agreed to
appoint Mr. Ulrich as Chair of the Strategic Alternatives
Committee.
On June 30, 2008, the Strategic Alternatives Committee met
to discuss the possible engagement of a financial advisor as
well as certain inquiries Mr. Jett had received regarding
Emageons interest in a possible transaction. The Strategic
Alternatives Committee discussed with Mr. Jett
conversations he had had with one financial sponsor, referred to
herein as Company E, and two strategic parties,
Parent and Health Systems Solutions, Inc. (HSS).
Mr. Jett stated that each of these parties had contacted
him to express an interest in discussing a possible acquisition
of Emageon. Mr. Oliver stated that another financial
sponsor, referred to herein as Company G, had
contacted him to express an interest in acquiring Emageon. The
Strategic Alternatives Committee determined to obtain a final
proposal from Jefferies and to meet again on July 2, 2008.
On July 2, 2008, the Strategic Alternatives Committee met
by telephone with representatives of Jefferies who made a
presentation to the Strategic Alternatives Committee regarding,
among other matters, the Strategic Alternatives Committees
strategic alternatives process, including parties Jefferies
thought the Strategic Alternatives Committee should approach,
the proposed timeline for completing a possible transaction and
Jefferies proposed fee structure for serving as financial
advisor to the Strategic Alternatives Committee.
The Strategic Alternatives Committee met again on July 3,
2008 to discuss the engagement of a financial advisor, including
the possible engagement of Jefferies and the role of SunTrust
Robinson Humphrey going forward. After discussion, the Strategic
Alternatives Committee determined it was in the best interest of
Emageon and its stockholders to engage Jefferies as its lead
financial advisor and authorized Mr. Ulrich, working with
Bass, Berry & Sims, to negotiate and enter into an
engagement letter with Jefferies and an amendment to the
engagement letter with SunTrust Robinson Humphrey reflecting
SunTrust Robinson Humphreys revised role and including
SunTrust Robinson Humphreys willingness to, if
appropriate, evaluate and render an opinion as to the fairness,
from a financial point of view, of a selected transaction.
16
On July 11, 2008, the Strategic Alternatives Committee
entered into an engagement letter with Jefferies pursuant to
which Jefferies agreed to serve as the Strategic Alternatives
Committees lead financial advisor, and Emageon issued a
press release announcing that the Strategic Alternatives
Committee had retained Jefferies to assist it in its evaluation
of strategic alternatives available to Emageon. Also on
July 11, 2008, the Strategic Alternatives Committee entered
into an amendment to its engagement letter with SunTrust
Robinson Humphrey whereby SunTrust Robinson Humphrey agreed to a
reduction in its fee and agreed to, if appropriate, evaluate and
provide its opinion as to the fairness, from a financial point
of view, of a selected transaction. Mr. Ulrich, on behalf
of the Strategic Alternatives Committee, requested that
Jefferies begin contacting the parties discussed at the
July 2, 2008 meeting, including, among others, Company E,
Parent, Company G and HSS, and report to the Strategic
Alternatives Committee regarding its preliminary conversations
and the status of its due diligence investigation of Emageon.
From July 11, 2008 to September 12, 2008, the
Strategic Alternatives Committee, with Jefferies
assistance, contacted 47 parties, including 17 strategic parties
and 30 financial sponsors, most of which had not previously been
contacted by the Strategic Alternatives Committee. An extensive
financial information package was delivered to 27 parties with
which Emageon had executed confidentiality agreements. The
process was structured to solicit interest, provide diligence
materials and receive indications of interest on or about
September 8, 2008.
The Strategic Alternatives Committee met on July 22, 2008
and discussed with representatives of Jefferies its preliminary
conversations with various parties. The Strategic Alternatives
Committee also discussed with Mr. Jett his recent
conversations with representatives of Parent who had discussed a
possible valuation, which represented a discount to
Emageons then current market price. Mr. Jett stated
that Parent requested to negotiate on an exclusive basis with
Emageon. After discussion, the Strategic Alternatives Committee
determined that the valuation proposed by Parent was inadequate
and that the Strategic Alternatives Committee should continue
with its evaluation of other strategic alternatives.
On July 28, 2008, Company E submitted a preliminary
indication of interest to the Strategic Alternatives Committee
proposing to purchase all of the outstanding shares of common
stock of Emageon. The proposal indicated that Company E was
unwilling to move forward in discussions with Emageon without
Emageon agreeing to either negotiate exclusively with Company E
through September 8, 2008 or reimburse Company Es
expenses through September 8, 2008, if Emageon was
unwilling to enter into an exclusive negotiating arrangement.
The Strategic Alternatives Committee met on July 29, 2008
and discussed the proposal made by Company E as well as the
status of discussions with various strategic parties and
financial sponsors. Representatives of Jefferies reported to the
Strategic Alternatives Committee that in addition to Company E,
Parent continued to indicate an interest in a transaction with
Emageon. The Strategic Alternatives Committee also discussed
several parties with which Jefferies had discussed a potential
transaction but which had subsequently indicated they were not
interested. The Strategic Alternatives Committee noted that
Company E had done a substantial amount of due diligence
regarding Emageon and had expressed the most interest of any of
the parties with which the Strategic Alternatives Committee was
currently engaged in discussions. Following discussion regarding
Company E and the ongoing diligence being conducted by several
other parties who had indicated an interest in Emageon, the
Strategic Alternatives Committee determined it was not prudent
to negotiate exclusively with Company E but that Company
Es continued participation in the process was important.
Accordingly, the Strategic Alternatives Committee instructed
Mr. Jett, along with Mr. Ulrich and representatives of
Jefferies and Bass, Berry & Sims to engage in
discussions with representatives of Company E regarding an
appropriate expense reimbursement arrangement.
During the following week, Mr. Jett, Mr. Ulrich and
representatives of Jefferies and Bass, Berry & Sims
had several phone conversations with representatives of Company
E and Company Es outside legal counsel in which Company E
reiterated its interest in acquiring Emageon at the price range
indicated in its indication of interest, but expressed that it
would not move forward in discussions with Emageon without
either entering into an exclusivity agreement or an expense
reimbursement arrangement. The Strategic Alternatives Committee,
with the assistance of Bass, Berry & Sims, began
negotiating an expense reimbursement agreement with
17
Company E under which Emageon would agree to reimburse Company E
for certain third party expenses incurred in connection with its
investigation of Emageon and negotiation of a transaction with
Emageon through September 8, 2008, subject to an agreed
upon maximum amount. Additionally, the expense reimbursement was
only payable if Emageon discontinued discussions with Company E
prior to September 8, 2008, or entered into a separate
transaction not involving Company E within one year.
On August 5, 2008, the Strategic Alternatives Committee met
and discussed with representatives of Jefferies the status of
its discussions with various parties and considered further the
proposed expense reimbursement agreement with Company E. The
Strategic Alternatives Committee discussed managements
views regarding certain financial and operational circumstances
surrounding Emageon, including Emageons declining revenue
growth and employee attrition as well as the impact of declining
conditions in the credit market on Emageon and its customers.
After discussing the interest in Emageon indicated by Company E
and their offer range representing a premium to the then current
market price of Emageons common stock, as well as the
uncertainty of the level of interest of other parties contacted,
the Strategic Alternatives Committee determined it was in the
best interest of Emageon and its stockholders to enter into the
expense reimbursement agreement with Company E in order to
ensure Company Es continued participation in the process.
Accordingly, the Strategic Alternatives Committee authorized
entering into the expense reimbursement agreement with Company E.
During the week following the Strategic Alternatives
Committees August 5, 2008 meeting, representatives of
Jefferies discussed regularly with representatives of Company E
the status of Company Es diligence review of Emageon.
Mr. Jett also had various conversations with
representatives of Company E regarding Emageons business
operations. Jefferies continued to discuss with a number of
other parties their possible interest in a transaction with
Emageon and worked with Emageons management to prepare an
extensive financial information package for distribution to
parties participating in the process.
The Strategic Alternatives Committee met on August 12, 2008
and discussed with representatives of Jefferies and
Mr. Jett the status of Company Es due diligence
review of Emageon as well as the status of the financial
information package to be delivered to various other parties
that had expressed interest in a transaction. The Strategic
Alternatives Committee discussed the timing of the distribution
of a proposed merger agreement to Company E and the proposed
timing for requiring other parties to submit indications of
interest. The Strategic Alternatives Committee discussed with
representatives of Bass, Berry & Sims the Strategic
Alternatives Committees fiduciary duties, including the
Strategic Alternatives Committee members duties of care
and loyalty and the importance of their independence on behalf
of Emageons stockholders. The Strategic Alternatives
Committee and representatives of Bass, Berry & Sims
also discussed the continued involvement of Mr. Jett in the
Strategic Alternatives Committees discussions with various
parties, including Company E. The Strategic Alternatives
Committee discussed Mr. Jetts knowledge of Emageon
and its industry and the various parties involved in discussions
with the Strategic Alternatives Committee, which was helpful to
the Strategic Alternatives Committee in its analysis of
strategic alternatives. The Strategic Alternatives Committee
noted Mr. Jetts desire to act in the best interest of
Emageons stockholders and that his actions throughout the
strategic alternatives evaluation process had been consistent
with this goal. The Strategic Alternatives Committee
specifically instructed Mr. Jett that no discussions were
to take place regarding any arrangements for members of the
management team in connection with a potential transaction.
Mr. Jett confirmed such understanding and stated that no
such conversations had taken place. Finally, the Strategic
Alternatives Committee instructed representatives of Bass,
Berry & Sims to prepare a form of merger agreement for
the Strategic Alternatives Committees review to be
distributed with a bid package to be delivered to potential
buyers.
From August 5, 2008 to August 21, 2008,
representatives of Company E and Company Es lenders
continued to conduct a due diligence review of Emageon and held
several meetings with members of Emageons management.
Jefferies engaged in several discussions with representatives of
Company E regarding the status of Company Es due diligence
investigation of Emageon. During these discussions, Company E
indicated that it had concerns its lenders might not be willing
to provide adequate financing to support a price in the range
proposed by Company E in its initial indication of interest.
18
On August 19, 2008, the Strategic Alternatives Committee
met to discuss the status of its discussions with various
parties, including Company E. Representatives of Bass,
Berry & Sims advised the Strategic Alternatives
Committee concerning its fiduciary duties, including the
Strategic Alternatives Committee members duties of care
and loyalty and the importance that they act independently on
behalf of Emageons stockholders. Representatives of
Jefferies stated that a financial information package regarding
Emageon had been delivered to 27 parties currently engaged in
the process. The Strategic Alternatives Committee discussed with
representatives of Jefferies Company Es diligence process
and Company Es desire to preempt the bid process by
seeking to negotiate a definitive transaction by
September 8, 2008. The Strategic Alternatives Committee
reviewed the proposed bid letter to be distributed to parties
interested in submitting a bid for Emageon and instructed
Jefferies to deliver to such parties the bid letter requesting
indications of interest by no later than September 8, 2008.
The Strategic Alternatives Committee also reviewed with
representatives of Bass, Barry & Sims the form of
merger agreement to be sent to Company E and, at the appropriate
time, to other potential bidders in the process. The Strategic
Alternatives Committee agreed to wait to distribute the merger
agreement to Company E until it confirmed it would be able to
obtain financing.
On August 21, 2008, representatives of Jefferies spoke with
representatives of Company E who stated they were unable to
provide guidance regarding Company Es ability to obtain
adequate financing in connection with its offer to acquire
Emageon at the price range indicated in its indication of
interest. Company E agreed to cease incurring reimbursable
expenses under the expense reimbursement agreement until it had
confirmation from its lenders regarding financing.
The Strategic Alternatives Committee met on August 26, 2008
and discussed the status of discussions with various parties in
the process. The Strategic Alternatives Committee also discussed
with representatives of Jefferies Company Es concerns
about its financing. Representatives of Jefferies informed the
Strategic Alternatives Committee that one strategic party had
expressed interest in discussing the Strategic Alternatives
Committees thoughts on an offer that included the
potential buyers stock as part of the consideration and
had requested an opportunity to meet with the Strategic
Alternatives Committee. After further discussion, the Strategic
Alternatives Committee agreed to meet by teleconference with
representatives of this strategic party and asked
representatives of Jefferies to coordinate a time for a meeting,
which meeting was held on September 9, 2008. The Strategic
Alternatives Committee also discussed with Mr. Jett various
operational matters of Emageon and considered managements
views regarding the impact of the ongoing process on Emageon.
From August 26, 2008 to September 8, 2008,
representatives of Jefferies held a number of conversations with
various parties to which it had delivered the bid letter and a
number of parties continued to conduct due diligence on Emageon.
In addition, Mr. Jett and other members of management
addressed various questions regarding the business operations of
Emageon and met either in person or by phone with various
parties in the process.
On September 8, 2008, the Strategic Alternatives Committee
received indications of interest from six parties, one of which
was HSS.
On September 9, 2008, the Strategic Alternatives Committee
held a meeting to discuss the indications of interest with
representatives of Jefferies, including price ranges and the
qualifications of each party submitting a bid. The Strategic
Alternatives Committee also discussed with Jefferies other
parties expected to submit an indication of interest, including,
among others, Company E and Company G, based on discussions
Jefferies had held with such parties. Representatives of Bass,
Berry & Sims reviewed with the Strategic Alternatives
Committee members their fiduciary duties in evaluating the
proposals, negotiating a transaction for the benefit of
Emageons stockholders and making a recommendation to the
full Company Board. The Strategic Alternatives Committee
instructed Jefferies to prepare an analysis of each of the
indications received and to deliver the analysis to the
Strategic Alternatives Committee as soon as possible.
Over the next two days, the Strategic Alternatives Committee
received six additional indications of interest, including from,
among others, Company E, which confirmed that it expected to be
able to obtain financing for the transaction, Parent and Company
G. Jefferies prepared an analysis of each of the indications of
interest received and distributed the analysis to the Strategic
Alternatives Committee for its review. In total,
19
the Strategic Alternatives Committee received indications of
interest from 12 parties, including five strategic parties and
seven financial sponsors. The preliminary non-binding
indications of interest proposed valuations for Emageons
common stock ranging from $2.00 per share to $3.75 per share,
subject to various qualifications.
On September 12, 2008, the Strategic Alternatives Committee
met and reviewed Jefferies analysis of the 12 indications
of interest received, including the price ranges indicated, the
form of consideration and the qualifications of each party
submitting a bid. At the Strategic Alternatives Committees
request, Mr. Jett and Mr. Carlisle participated in the
meeting and provided the Strategic Alternatives Committee with
managements views on each party, including the amount of
diligence each had undertaken and their views as to the
feasibility of completing a definitive transaction with each
party. The Strategic Alternatives Committee reviewed
Mr. Jetts analysis of Emageons operational and
financial condition and noted that a sale of Emageon continued
to be in the best interest of Emageons stockholders.
Mr. Jett and Mr. Carlisle were then excused from the
meeting, and the Strategic Alternatives Committee met in
executive session with representatives of Bass,
Berry & Sims and Jefferies. The Strategic Alternatives
Committee members discussed with representatives of Bass,
Berry & Sims their fiduciary duties in connection with
the evaluation of the indications of interest received and the
possible negotiation of a definitive agreement with such
parties. The Strategic Alternatives Committee discussed the
number of parties with which it should continue discussions
based on the valuations indicated by the parties and the ability
of each to complete a transaction within the next three to four
weeks, which was considered advisable in order to limit the
distraction caused by the process for management and employees
of Emageon. Based on this discussion, the Strategic Alternatives
Committee agreed that Company E and HSS should remain in the
process based on their respective valuations of Emageon, their
knowledge of Emageons industry and the substantial amount
of diligence conducted by each. The Strategic Alternatives
Committee then discussed in detail four other parties, all
financial sponsors, which had submitted bids ranging from $2.40
to $3.75 per share in cash, including each partys ability
to complete a transaction within the timeframe contemplated by
the Strategic Alternatives Committee. After this discussion, the
Strategic Alternatives Committee instructed Jefferies to contact
each of these parties to determine their willingness to continue
in the process without an exclusivity agreement and whether the
parties would be able to submit a formal bid, that would include
comments to the form of merger agreement, to the Strategic
Alternatives Committee on or before October 3, 2008. The
parties were contacted in an order based primarily on the
valuation range submitted, with the parties indicating a higher
valuation being given the first opportunity to continue in the
process.
On September 15, 2008, the Strategic Alternatives Committee
met and discussed the status of conversations with the four
financial sponsors discussed at the Strategic Alternatives
Committees meeting on September 12, 2008.
Representatives of Jefferies indicated they had contacted the
two parties submitting the highest valuation range and were
confirming whether these parties were willing to continue in the
process. The Strategic Alternatives Committee noted that, given
the valuation ranges proposed by these two parties, Jefferies
should determine these parties willingness to continue in
the process before approaching the other two financial sponsors,
one of which was Company G. However, if neither of the parties
were willing to continue in the process, Jefferies should
contact Company G and the other party discussed at the
September 12, 2008 Committee meeting in an effort to have
at least three parties in total (including Company E and HSS)
continue in the process. The Strategic Alternatives Committee
then instructed Jefferies to send the bid package to HSS and
Company E with instructions that formal bids were due to the
Strategic Alternatives Committee on or before October 3,
2008.
Over the next two days the first three of the four parties
Jefferies contacted subsequent to the September 12, 2008
Committee meeting informed Jefferies they would not continue to
participate in the process. Representatives of Jefferies
discussed these conversations with Mr. Ulrich, who, on
behalf of the Strategic Alternatives Committee, instructed
Jefferies to contact Company G. On September 17, 2008,
representatives of Company G indicated to Jefferies they would
be willing to continue in the process without exclusivity and
that they could deliver a formal bid to the Strategic
Alternatives Committee on or before October 3, 2008.
Accordingly, at the instruction of Mr. Ulrich, on behalf of
the Strategic Alternatives Committee, a bid package was
delivered to Company G.
20
Between September 17, 2008 and September 29, 2008,
representatives of Jefferies and Emageons management
responded to a number of requests from and held informational
meetings with representatives of each of Company E, Company G
and HSS. In addition, Parent contacted the Strategic
Alternatives Committee and requested the opportunity to enter a
formal bid. Parent was told that the valuation submitted in its
indication of interest was substantially below the valuation
ranges received from other parties. Parent stated that it
believed it would be able to increase its offer price. Given the
substantial due diligence done by Parent and Parents
knowledge of Emageons industry, the Strategic Alternatives
Committee agreed to send Parent a bid package.
On September 29, 2008, the full Company Board met to
discuss the strategic alternatives process with the Strategic
Alternatives Committee. Representatives of Jefferies and Bass,
Berry & Sims as well as Mr. Jett and
Mr. Carlisle also participated in the meeting. At this
meeting, members of the Strategic Alternatives Committee
reviewed with the full Company Board the process conducted by
the Strategic Alternatives Committee, the indications of
interest received, the four parties from whom formal bids were
expected, the process for selecting these four parties and the
October 3, 2008 deadline. The Company Board discussed with
the Strategic Alternatives Committee and representatives of
Jefferies the qualifications of each of the four parties and the
background of each. The Company Board discussed with
Mr. Jett managements perspective on the parties and
reviewed Mr. Jetts analysis of Emageons
financial and operational condition as well as managements
support of pursuing a transaction in the time frame recommended
by the Strategic Alternatives Committee. Following the Board
meeting, the Strategic Alternatives Committee met with
representatives of Jefferies and Bass, Berry & Sims to
discuss further the process and conversations Jefferies and
management continued to have with the potential bidders
regarding the process and Emageons operations.
During the week of September 29, 2008, the Strategic
Alternatives Committee received preliminary markups of the form
of merger agreement from each of Company E, Company G and HSS.
The Strategic Alternatives Committee, with the assistance of
Bass, Berry & Sims, reviewed and held discussions with
legal counsel for each of these parties regarding the changes to
the merger agreement proposed by each party and delivered
revised drafts of the merger agreement to each party.
On October 3, 2008, Emageon received final bids, including
markups of the form of merger agreement, from Parent, Company G
and HSS. Parent proposed to purchase Emageon for $2.20 per
share, Company G proposed $2.45 per share, and HSS proposed
$3.00 per share, each in all cash transactions. Company E
informed Jefferies that it would not be submitting a bid.
On October 4, 2008, the Strategic Alternatives Committee
met for the primary purpose of discussing the bids received.
Representatives of Jefferies, Bass, Berry & Sims and
SunTrust Robinson Humphrey participated in the meeting. The
Strategic Alternatives Committee members discussed with
representatives of Bass, Berry & Sims their fiduciary
duties in connection with the Strategic Alternatives
Committees role in considering whether to proceed with a
possible sale of Emageon and the Strategic Alternatives
Committees choice and recommendation of a buyer to the
full Company Board of Emageon. The Strategic Alternatives
Committee reviewed Jefferies presentation regarding the
bids received and discussed with representatives of Bass,
Berry & Sims the key terms, including terms relating
to the conditionality of the potential acquirors
obligation to consummate the merger, Emageons fiduciary
out and the deal protection terms, the expected timing of their
closing and the remedies available to each party for a breach of
the merger agreement, as well as issues to be negotiated in the
merger agreement markups submitted by each party. The Strategic
Alternatives Committee discussed with representatives of
SunTrust Robinson Humphrey its preliminary analysis of the bids
received. After extended discussion, the Strategic Alternatives
Committee determined to focus its attention on reaching a
definitive agreement with HSS, primarily due to the superior
value proposed and representations regarding the availability of
its financing, while maintaining dialogue with Parent and
Company G to ensure an alternative transaction in the event HSS
did not execute a definitive agreement.
From October 4, 2008 through October 9, 2008, the
Strategic Alternatives Committee and HSS and their respective
legal and financial advisors engaged in extensive negotiations
regarding open issues in the proposed merger agreement between
Emageon and HSS (the HSS Merger Agreement). At the
Strategic Alternatives Committees request, in light of
financing risks in the current environment, HSS was requested to
make a
21
$5.0 million deposit at signing to be held in escrow as
unliquidated damages in the event its financing was not
available at closing or HSS otherwise intentionally breached the
HSS Merger Agreement. At this point, however, HSS was not
willing to make the deposit a non-exclusive remedy or have the
deposit payable upon its intentional breach of the HSS Merger
Agreement. The parties also negotiated the terms of a voting
agreement (the Voting Agreement), to be executed by
Oliver Press and Emageons directors and executive
officers. HSS also continued to negotiate a purchase agreement
with an affiliate of its majority stockholder regarding the
purchase of additional convertible debentures in HSS for
purposes of funding HSSs acquisition of Emageon and
additional working capital following the transaction.
Separately, HSS negotiated the principal terms of an agreement
with Keith Stahlhut, Emageons acting Principal Operating
Officer, pursuant to which Mr. Stahlhut would be employed
by HSS following consummation of the proposed merger between
Emageon and HSS (the HSS Merger).
The Strategic Alternatives Committee met on October 9, 2008
primarily to consider its recommendation to the Company Board
regarding the sale of Emageon to HSS. Representatives of Bass,
Berry & Sims, Jefferies, SunTrust Robinson Humphrey
and Emageons management, including Mr. Jett,
participated in the meeting at the Strategic Alternatives
Committees request. Representatives of Bass,
Berry & Sims reviewed with the Strategic Alternatives
Committee members their fiduciary duties in connection with
their consideration of whether to recommend a possible sale of
Emageon to the Company Board. The Strategic Alternatives
Committee reviewed a presentation by management regarding
Emageons operations and financial results for the third
quarter of 2008 and Emageons projected financial results
for the year ending December 31, 2008. Mr. Jett
discussed with the Strategic Alternatives Committee
managements continued belief that the sale of Emageon in
the near term was in the best interest of Emageon and its
stockholders. The Strategic Alternatives Committee discussed
with representatives of Jefferies the Strategic Alternatives
Committees evaluation of strategic alternatives, including
the parties contacted since July 2008 and the process for
qualifying these parties to become potential buyers of Emageon,
as well as the valuation of the bid proposals received from HSS,
Parent and Company G. The Strategic Alternatives Committee
reviewed a detailed presentation from SunTrust Robinson
Humphrey, including all of the analyses that would ultimately
form the basis for its fairness opinion. SunTrust Robinson
Humphreys report was extensive and provided an evaluation
of Emageon from a number of perspectives, including a reference
companies analysis, a reference transactions analysis, a
discounted cash flows analysis and a premiums paid analysis. The
Strategic Alternatives Committee reviewed the assumptions
utilized by SunTrust Robinson Humphrey in connection with each
analysis. Representatives of SunTrust Robinson Humphrey
articulated to the Strategic Alternatives Committee that
SunTrust Robinson Humphrey was prepared to render its opinion to
the Strategic Alternatives Committee that the consideration to
be received by Emageons stockholders in the proposed
transaction with HSS was fair, from a financial point of view,
to such holders. The Strategic Alternatives Committee reviewed
with representatives of Bass, Berry & Sims the terms
of the proposed HSS Merger Agreement, including the material
open items and the timeline for finalizing the HSS Merger
Agreement. Mr. Jett then left the meeting and after
extended discussion, the Strategic Alternatives Committee agreed
that the sale of Emageon to HSS was the best strategic
alternative reasonably available to Emageon and unanimously
determined to recommend to the Company Board a sale of Emageon
to HSS, pursuant to the transaction terms discussed at the
meeting.
Following the Strategic Alternatives Committee meeting on
October 9, 2008, the full Company Board held a special
meeting to consider the recommendation of the Strategic
Alternatives Committee regarding the sale of Emageon to HSS.
Representatives of Bass, Berry & Sims, Jefferies,
SunTrust Robinson Humphrey and Emageons management,
including Mr. Jett and Mr. Carlisle, participated in
the meeting at the request of the Company Board. Representatives
of Bass, Berry & Sims reviewed with the Company Board
its fiduciary duties in connection with the consideration of
whether to proceed with a possible sale of Emageon. The Company
Board reviewed a presentation by management regarding
Emageons operations and financial results for the third
quarter of 2008 and Emageons projected financial results
for the year ending December 31, 2008. Mr. Jett
reiterated managements continued belief that the sale of
Emageon in the near term was in the best interest of Emageon and
its stockholders. Next, at the request of Mr. Williamson,
Mr. Ulrich and representatives of Jefferies led a
discussion regarding the Strategic Alternatives Committees
evaluation of strategic alternatives, including the parties
contacted since July 2008, the process for qualifying these
parties to become potential buyers of Emageon, the role of the
Strategic Alternatives Committees financial and legal
22
advisors in the process and the potential transaction with HSS
recommended by the Strategic Alternatives Committee and being
considered by the Company Board. The Company Board reviewed a
detailed presentation from SunTrust Robinson Humphrey, including
all of the analyses that would ultimately form the basis for its
fairness opinion. The Company Board reviewed the assumptions
utilized by SunTrust Robinson Humphrey in connection with its
analysis. Representatives of SunTrust Robinson Humphrey
articulated to the Company Board that the transaction with HSS
offered the highest value reasonably available and that SunTrust
Robinson Humphrey was prepared to render its opinion to the
Strategic Alternatives Committee that the consideration to be
received by Emageons stockholders in the proposed
transaction with HSS was fair, from a financial point of view,
to such holders. The Company Board reviewed with representatives
of Bass, Berry & Sims the terms of the proposed HSS
Merger Agreement, including the material open items (including
whether HSS would be willing to fund a $5 million escrow
fund as unliquidated damages in case it failed to secure
financing for the transaction or HSS otherwise intentionally
breached the HSS Merger Agreement) and the timeline for
finalizing the HSS Merger Agreement. Each member of the Company
Board indicated his or her willingness to sign the Voting
Agreement in support of the proposed transaction with HSS, as
did Mr. Ulrich and Mr. Oliver on behalf of Oliver
Press. The Strategic Alternatives Committee confirmed its
recommendation and belief that the sale to HSS was the best
strategic alternative reasonably available to Emageon. At this
time, the Strategic Alternatives Committee members excused
themselves from the meeting to allow the remaining directors of
the Company Board to address any concerns and questions to the
financial and legal advisors and Mr. Jett and
Mr. Carlisle. Thereafter, upon the Strategic Alternatives
Committee members rejoining the meeting, Bass, Berry &
Sims reviewed the terms of the proposed resolutions relating to
the proposed HSS Merger and responded to questions. After
extended discussions, the Company Board, in part based on the
recommendation of the Strategic Alternatives Committee and the
review of SunTrust Robinson Humphreys fairness
presentation, unanimously approved the HSS Merger Agreement, the
Voting Agreement and the deposit agreement governing the
$5.0 million to be held in escrow (the Deposit
Agreement), subject to satisfactory resolution of the
final terms of the Deposit Agreement in the manner discussed at
the meeting.
On October 10, 2008 and October 11, 2008, the
Strategic Alternatives Committee and HSS and their respective
financial and legal advisors continued to negotiate the
remaining outstanding issues in the various transaction
documents and to finalize Emageons disclosure schedules.
On the morning of October 12, 2008, a representative of HSS
contacted Jefferies and stated HSS and its financing sources
were concerned about the recent turbulence in the credit markets
and the outlook of the global economy and reduced the offer
price from $3.00 per share to $2.75 per share. Following further
discussion, HSS revised its reduced purchase price from $2.75
per share to $2.85 per share. In addition, HSS conceded to the
demands of Emageon regarding the $5.0 million Deposit
Agreement, primarily that it include payment to Emageon for
HSSs intentional breach of the HSS Merger Agreement and
that the deposit payment would be a non-exclusive remedy when
payable, and not liquidated damages.
Later on October 12, 2008, the Company Board held a special
meeting to discuss the revised offer price proposed by HSS.
Mr. Jett and representatives of SunTrust Robinson Humphrey,
Jefferies and Bass, Berry & Sims participated in the
meeting at the Company Boards request. The Company Board
reviewed the revised purchase price proposed by HSS and
discussed the reasons given for the reduction. Jefferies also
confirmed that based on recent discussions with Parent and
Company G that such parties would not be able to offer a similar
value to HSSs revised proposal. SunTrust Robinson Humphrey
provided an update of its analyses presented on October 9,
2008 in light of the reduced price, and confirmed that the
reduced offer price did not result in any meaningful changes to
its financial analyses. Representatives of SunTrust Robinson
Humphrey expressed their oral opinion that the merger
consideration to be received by Emageons stockholders in
the HSS Merger was fair to such stockholders from a financial
point of view, which opinion was subsequently confirmed in
writing to the Strategic Alternatives Committee. The Strategic
Alternatives Committee reaffirmed its recommendation to enter
into the HSS Merger Agreement. Following extended discussions,
the Company Board, in part based on the recommendation of the
Strategic Alternatives Committee and the review of SunTrust
Robinson Humphreys fairness presentation, unanimously
approved the HSS Merger Agreement, the Voting Agreement and the
Deposit Agreement.
23
The HSS Merger Agreement and the related transaction documents
were finalized and executed by the parties on October 13,
2008, and Emageon and HSS issued a joint press release publicly
announcing the proposed HSS Merger.
Emageons stockholders approved the HSS Merger at a special
meeting held on December 17, 2008 and Emageon, believing it
had satisfied the requisite conditions under the HSS Merger
Agreement, delivered a letter to HSS formally requesting a
closing of the HSS Merger by December 23, 2008. On
December 23, 2008, HSS notified Emageon that Stanford
International Bank Limited (SIBL) would not provide
funding to consummate the HSS Merger at such time. Emageon, with
the assistance of Bass, Berry & Sims, began preparing
to file suit in Delaware Chancery Court to enforce
Emageons rights under the HSS Merger Agreement, including
the right to specific performance of HSSs obligations
under the HSS Merger Agreement. Simultaneously, from
December 24, 2008 through December 29, 2008, Emageon
and HSS and their respective legal and financial advisors
engaged in negotiations regarding a possible extension of the
closing date of the HSS Merger.
On December 29, 2008, Emageon and HSS, based upon written
affirmations and assurances from SIBL to HSS (as to SIBLs
support for closing the HSS Merger and its continued commitment
to fulfill its obligations under its funding agreement with
HSS), entered into an amendment to the HSS Merger Agreement
providing for an extension of the closing date of the HSS Merger
to February 11, 2009. In exchange for this extension and
the continuing financing risk to the closing of the HSS Merger,
the amendment also provided for the removal of substantially all
conditions to HSSs obligation to close the HSS Merger and
the deposit by HSS of an additional $4 million into the
deposit escrow account established in connection with the HSS
Merger, increasing the total amount held in such escrow account
to $9 million (such amount, the Deposit Escrow
Amount), which amount would automatically be distributed
to Emageon in the event the HSS Merger did not close on
February 11, 2009 for any reason other than the breach by
Emageon of its nonsolicitation obligations under the HSS Merger
Agreement.
On February 10, 2009, Emageon received formal notice from
HSS stating it did not expect SIBL to provide the financing
necessary to fund the HSS Merger. Emageon issued a press release
on the morning of February 11, 2009 stating it had received
the notice and was evaluating its options in response to this
development. On February 11, 2009, SIBL did not fulfill its
obligations under the financing agreement with HSS and, as a
result, HSS failed to consummate the HSS Merger and the HSS
Merger. Pursuant to the terms of the amended HSS Merger
Agreement and the amended Deposit Agreement, the Deposit Escrow
Amount was released to Emageon by wire transfer on
February 12, 2009.
On February 12, 2009, the Company Board met to discuss the
alternatives available to Emageon in light of the failure of the
HSS Merger to close. The Company Board, among other matters,
discussed with representatives of Jefferies and
management (i) the prospects for HSS to obtain alternative
financing to fund the HSS Merger, which were considered to be
very uncertain at best, (ii) the potential for Emageon to
find an alternative buyer in the event it terminated the HSS
Merger Agreement and (iii) the proposed restructuring plan
developed by management and discussed with the Company Board
during the period of time since the failure of the initial
closing of the HSS Merger to occur in December 2008.
Mr. Jett reviewed with the Company Board Emageons
ongoing operations and financial condition, as well as the
proposed restructuring plan for implementation in the event
Emageon continued as an independent company. The Company Board
discussed with representatives of Bass, Berry & Sims
Emageons alternatives with respect to filing suit against
HSS, including the potential timeline and costs for any
litigation, the potential for successful enforcement of a claim
for specific performance and the potential for recovery of
additional damages from HSS beyond funds provided pursuant to
the Deposit Escrow Amount. Following further discussion, the
Company Board determined it was in the best interest of Emageon
and its stockholders to terminate the HSS Merger Agreement and
to promptly evaluate the strategic alternatives available to
Emageon, including a sale of Emageon to an alternate buyer or
continuing as an independent company with such restructuring and
other steps as determined by management and the Company Board.
The Company Board instructed Mr. Jett and
Mr. Carlisle, with the assistance of Bass,
Berry & Sims, to prepare and deliver a termination
notice to HSS terminating the HSS Merger Agreement. The Company
Board authorized Jefferies following the termination of the HSS
Merger Agreement to speak with all parties (excluding HSS) that
had participated in the final stages
24
of the sale process that occurred in late September
early October 2008, including Parent and Company G. The HSS
Merger Agreement was terminated on February 12, 2009.
From February 12, 2009 to February 16, 2009, Jefferies
held discussions regarding a possible acquisition of Emageon
with seven parties, including Company C, Company E, Company G,
Parent and three other parties that had previously expressed an
interest in acquiring Emageon. In addition, Mr. Jett and
other members of management addressed various questions
regarding Emageons ongoing business operations and engaged
in teleconferences for diligence and other purposes with
representatives of certain of these parties. During this time,
Emageon received written indications of interest from two
parties, Parent and Company G, offering $2.05 per share and
$2.03 per share, respectively, for all of Emageons
outstanding shares of common stock. Company Gs
indication of interest was subject to completion of its due
diligence review of Emageon.
On February 16, 2009, the Company Board met to further
discuss strategic alternatives, including a discussion of the
indications of interest received from Parent and Company G. The
Company Board discussed with representatives of Jefferies the
indications of interest received from each of Parent and Company
G, including the prices indicated, the conditions to and
certainty of a closing, the source of the parties funding for a
transaction and the ability of the parties to move promptly to
negotiate and finalize definitive transaction documents. The
Company and Emageon management all concurred that a prompt
resolution of Emageons strategic direction was critical in
light of the potentially harmful effects of another prolonged
bidding process on Emageons business operations and
because of the adverse impact that the uncertainty over such
strategic direction was having on Emageons customers,
employees, sales efforts and share price. The Company Board also
discussed Jefferies conversations with the other parties
with which Jeffries held discussions on behalf of the Company
Board; however, no other party presented a written indication of
interest. Representatives of Bass, Berry & Sims
reviewed with the members of the Company Board their fiduciary
duties in evaluating strategic alternatives for Emageon,
including the possible sale of Emageon. The Company Board
discussed with Mr. Jett the Companys operations and
financial condition and managements perspective on the
indications of interest received. After extended discussions,
the Company Board instructed Jefferies to solicit from Parent
and Company G each partys best and final offer, including
a markup of the HSS Merger Agreement to better understand any
proposed material changes to the transaction documentation that
was previously negotiated with HSS. Jefferies contacted
representatives of Parent and Company G promptly following the
Company Board meeting and delivered to each party a copy of the
HSS Merger Agreement and other requested due diligence materials.
Also on February 16, 2009, the SEC filed suit against,
among others, SIBL, alleging fraud related to certificates of
deposit sold by SIBL, and a temporary restraining order and
orders freezing the assets of SIBL were issued by the United
States District Court for the Northern District of Texas. These
events prompted both Parent and Company G to inquire of Emageon
regarding the status of the Deposit Escrow Amount and over the
next two days, representatives of Emageon and each of Parent and
Company G engaged in extensive discussions regarding the Deposit
Escrow Amount and the proposed merger transaction.
On the evening of February 18, 2009 and early morning of
February 19, 2009, Emageon received revised bids and a
markup of the HSS Merger Agreement from each of Company G and
Parent, respectively. Company G offered to purchase all the
outstanding shares of Emageon for approximately $1.69 per share
to be delivered at closing, with an additional $0.41 per share
(which approximates to the Deposit Escrow Amount on a per share
basis) to be held in escrow pending the resolution, pursuant to
a final court order, of any claims that might be made with
respect to the Deposit Escrow Amount within the applicable
statutes of limitations. Parent offered to purchase the
outstanding shares of Emageon for $1.69 per share, with an
additional $0.41 per share to be held pursuant to a comparable
escrow arrangement and released upon triggering events to be
specified in the agreement or, alternatively, to purchase all
the outstanding shares of Emageon at a price of $1.82 per share
with no amount to be held in escrow.
On the morning of February 19, 2009, the Company Board met
to discuss the revised bids received from Parent and Company G.
The Company Board discussed with representatives of Jefferies
the bids received from Parent and Company G, including the
prices indicated, the inclusion of an escrow in the indications
of interest received and the funding sources of the parties. The
Company Board discussed with representatives of Bass,
25
Berry & Sims the key terms of each bid, including
terms related to the conditionality of each partys
obligation to consummate a transaction, the timeline for
negotiating and finalizing transaction documents, expected
timing of their closing and the possibility and related benefits
and risks of structuring the transaction as a tender offer. Each
party had confirmed that it would require an escrow of the full
Deposit Escrow Amount if it was to be reflected in the purchase
price they were willing to pay, although Parent had presented an
alternative purchase price that would include approximately 32%
of the Deposit Escrow Amount in the purchase price with no
escrow. The Company Board discussed with representatives of
Bass, Berry & Sims possible risk exposure with respect
to the Deposit Escrow Amount and the practical difficulties and
uncertainties that the proposed escrow arrangement would cause.
Mr. Jett discussed with the Company Board the level of due
diligence each party had completed and managements
perspective on each bid received, including Jefferies and
managements views regarding certainty of closure and the
feasibility of each partys ability to finalize a
transaction within the timeframe being considered. After further
discussion, the Company Board instructed Jefferies to request
that Company G provide an alternative bid that did not include
an amount to be held in escrow and to determine whether either
party was willing to increase its bid.
Throughout the day on February 19, 2009, representatives of
Jefferies engaged in discussions with representatives of Parent
and Company G. Parent confirmed that it was finished conducting
due diligence, and reiterated that it was willing to pay $1.82
per share with no escrow and would fund the proposed transaction
with cash currently on its balance sheet, but noted that it
would not increase its offer price. Company G indicated it would
pay $1.80 per share with no escrow, and requested an additional
24 to 48 hour period to complete its due diligence review
of Emageon with significant assistance from management required
to do so. Company G also indicated that it desired to use
external financing to fund the transaction but that if none
could be obtained, it would fully fund the transaction with an
equity investment from its investment funds.
The Company Board met on February 20, 2009 to further
discuss its strategic alternatives and discuss the proposals
from Parent and Company G. Mr. Jett, Mr. Carlisle and
representatives of Jefferies and Bass, Berry & Sims
also participated at the request of the Company Board. The
Company Board discussed with representatives of Jefferies and
Bass, Berry & Sims the revised bids from Parent and
Company G, including the price offered by each, the level of
conditionality to their obligation to close under the merger
agreement markups submitted, and each partys ability to
fund a transaction and to move promptly to finalize definitive
transaction documents. Mr. Jett discussed with the Company
Board the ongoing operations and financial condition of Emageon,
as well as managements perspective regarding execution
risk of the restructuring plan and the merger proposals that had
been submitted by each of Parent and Company G. Mr. Jett,
with the support of management, reiterated his belief that
obtaining as much certainty of closure as possible in a
transaction was vital to Emageons ability to maintain its
customer and key employee relationships and that
managements proposed restructuring plan involved
significant execution risks, especially given the current
macroeconomic environment. Following further discussion, the
Company Board determined to pursue a sale of Emageon and
instructed Mr. Jett and Mr. Carlisle, with the
assistance of Bass, Berry & Sims and Jefferies, to
negotiate and finalize definitive transaction documents. Company
G subsequently indicated it would be willing to match
Parents offer price, provided it was not materially
higher. Given the uncertainty regarding the additional due
diligence required by Company G and concerns regarding relative
certainty of closure, the Company Board instructed its advisors
to focus their primary efforts on finalizing Parents
proposal for consideration.
From February 19, 2009 through February 23, 2009,
Emageon and Parent and their respective legal and financial
advisors engaged in extensive negotiations regarding open issues
in the Merger Agreement and related transaction documents.
On February 22, 2009, the Company Board held a special
meeting to consider the possible sale of Emageon to Parent.
Representatives of Bass, Berry & Sims, Jefferies,
SunTrust Robinson Humphrey and Emageons management,
including Mr. Jett, Mr. Stahlhut and
Mr. Carlisle, participated in the meeting at the request of
the Company Board. Representatives of Bass, Berry &
Sims reviewed with the Company Board its fiduciary duties in
connection with the consideration of whether to proceed with a
possible sale of Emageon. The Company Board reviewed a
presentation by management regarding Emageons operations
and financial results for 2008 and Emageons projected
financial results for the first quarter of 2009 and the full
year 2009 assuming implementation of the proposed restructuring
plan for Emageon to continue as an independent
26
company. Mr. Jett reiterated managements continued
belief that a sale of Emageon in the near term, at the values
presented to and discussed with the Company Board, was in the
best interest of Emageon and its stockholders. Next, at the
request of Mr. Williamson, representatives of Jefferies led
a discussion regarding the potential transaction with Parent
being considered by the Company Board, including the indications
of interest received since the termination of the HSS Merger
Agreement and the process for qualifying these indications of
interest. The Company Board reviewed a detailed presentation
from SunTrust Robinson Humphrey, including all of the analyses
that would ultimately form the basis for its fairness opinion.
The Company Board reviewed the assumptions utilized by SunTrust
Robinson Humphrey in connection with its analysis.
Representatives of SunTrust Robinson Humphrey articulated to the
Company Board its belief that the transaction with Parent
offered the highest value reasonably available under the current
circumstances and that SunTrust Robinson Humphrey was prepared
to render its opinion to the Company Board that the
consideration to be received by Emageons stockholders in
the proposed transaction with Parent was fair, from a financial
point of view, to such holders. The full text of the written
opinion of SunTrust Robinson Humphrey, which set forth the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with such
opinion, is attached as Annex B to this Schedule. The
Company Board reviewed with representatives of Bass,
Berry & Sims the terms of the proposed Merger
Agreement with Parent, including the proposed structure of the
transaction as a tender offer, the material open items, the
timeline for finalizing the Merger Agreement and the material
terms and conditions of the proposed form of Tender Agreement.
Each member of the Company Board indicated his or her
willingness to sign the form of Tender Agreement in support of
the proposed transaction with Parent, as did Mr. Ulrich and
Mr. Oliver on behalf of Oliver Press. After extended
discussions, the Company Board, in part based on the review of
SunTrust Robinson Humphreys fairness presentation,
unanimously approved the Merger Agreement and the Tender
Agreement.
The Merger Agreement and the related transaction documents were
finalized and executed by the parties on February 23, 2009,
and Emageon and Parent issued a joint press release publicly
announcing the proposed merger.
Reasons
for the Company Boards Recommendation
In reaching its decision to approve the Merger Agreement and
recommend that Company stockholders accept the Offer and tender
their Shares in the Offer, the Company Board consulted with the
Companys senior management and the independent financial
advisors and legal counsel to the Company and to the former
Strategic Alternatives Committee of the Company Board, reviewed
a significant amount of information and considered a number of
factors, including, among others, the following potentially
favorable factors in support of the Offer and the Merger:
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the possible alternatives to the sale of the Company, including
continuing to operate the Company on an independent basis, and
the Company Boards resulting belief that no other
alternative reasonably available to the Company and its
stockholders would provide greater value and certainty to
stockholders in the foreseeable future;
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the certainty of realizing in cash a fair value for Company
stockholders in the offer compared to the high level of risk and
uncertainty associated with the continued execution of the
Companys current strategic plan and the operation of the
Companys business resulting from, among other
things, (i) the mature condition of the Companys
primary market for sales of its picture archiving and
communications radiology systems, or PACS, and the consequent
pressure on revenue growth; (ii) slow overall market demand
for medical imaging software, hardware and support services;
(iii) high penetration of the Companys primary
radiology market and the related delay in the timing of customer
software replacement cycles; (iv) disruption of the
Companys base of existing and potential customers and
employees as a result of the Companys investigation of
strategic alternatives; and (v) difficulties associated
with the development, marketing and sale of next generation
medical imaging software to replace the Companys current
software offerings;
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the potential for continued negative effects on the operation of
the Companys business, operating results and profitability
associated with the ongoing deterioration in general economic
conditions and
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prospects for the Companys industry, and the continued
difficulty of hospitals and other health care providers to
access credit as a result of the ongoing negative lending
environment;
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the financial presentation and oral opinion of SunTrust Robinson
Humphrey rendered to the Company Board on February 22,
2009, which opinion was subsequently confirmed by delivery of a
written opinion to the effect that, as of the date of the
written opinion and based upon and subject to the considerations
described in the written opinion, the Offer Price was fair, from
a financial point of view, to Company stockholders;
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the results of the Companys comprehensive investigation of
strategic alternatives that began in April 2007, pursuant to
which the Company Board and the former Strategic Alternatives
Committee of the Company Board, with the assistance of their
financial advisors, Jefferies and SunTrust Robinson Humphrey,
(i) considered the potential strategic alternatives
available to the Company, including a sale of the Company, a
merger of equals, acquisitions of other companies complementary
to the Companys business, recapitalizations, share
repurchases and operational and management changes, and
(ii) engaged in extensive discussion and negotiation with
numerous third parties regarding a business combination with the
Company, including conducting preliminary discussions, entering
into confidentiality agreements, receiving indications of
interest and receiving definitive proposals to acquire the
Company;
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the fact that the Offer Price will be paid in cash at closing,
with no portion of the purchase price subject to future
conditions in order to be paid, which provides certainty and
immediate value to Company stockholders;
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the fact that the Offer and Merger are not subject to a
financing condition, the representations of Parent and Purchaser
that they have the financial resources on hand that are
necessary to consummate the Offer and the Merger and the
resulting increased certainty that the proposed acquisition will
be completed;
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the fact that the transaction is structured as a tender offer
for all Shares, which can generally be completed and cash
consideration delivered to tendering Company stockholders more
promptly than would have been the case with a merger subject to
stockholder approval at a stockholder meeting;
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the terms of the Merger Agreement, which, among other things,
permit the Company Board to exercise its fiduciary duties to
Company stockholders under Delaware corporate law to consider
unsolicited acquisition proposals and to change the Company
Boards recommendation with respect to the Merger, as well
as the limited number and nature of closing conditions and the
limited risk of non-satisfaction of the closing conditions;
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the attractiveness of Parent as a strategic buyer, having a
business platform that complements the Companys business
and provides an opportunity for the growth of the Companys
business;
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the belief that the $1.6 million termination fee payable by
the Company to Parent if the Merger Agreement is terminated
under certain circumstances is reasonable, would not likely
deter competing bids and would not likely be required to be paid
unless the Company Board entered into or intended to enter into
a more favorable transaction;
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the significant costs associated with continuing as an
independent public company, and the implications of such costs
for the Companys future profitability and the trading
prices of the Common Stock in light of the Companys
relative size;
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the fact that stockholders who do not tender their Shares under
the circumstances described in the Offer will have the right to
demand appraisal of the fair value of their Shares under
Delaware law if they meet the prescribed conditions; and
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the fact that the per share Offer Price represented an
approximate 143% premium over the closing price of the
Companys Common Stock on the last trading date prior to
the announcement of the Offer.
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28
In the course of their deliberations, the Company Board also
considered a variety of risks and other potentially negative
factors relating to the Offer and the Merger, including the
following:
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the risks and contingencies related to the announcement and
pendency of the Offer and the Merger, including diverting
management focus and resources from other opportunities and the
effect of the Offer and Merger on the Companys customers,
employees, suppliers and its relationships with other third
parties (including the potential negative reaction of these
parties to the fact that the Company would be acquired by
Parent);
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the risk that the conditions to Parents and
Purchasers obligations to complete the Offer and Merger,
including the Minimum Condition, will not be satisfied;
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the right of Parent to terminate the Merger Agreement in certain
circumstances, including for certain breaches by the Company of
its representations, warranties, covenants and agreements in the
Merger Agreement;
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the fact that under the terms of the Merger Agreement, the
Company cannot solicit other acquisition proposals and must pay
to Parent a termination fee of $1.6 million if the Merger
Agreement is terminated under certain circumstances, which, in
addition to being costly, might have the effect of discouraging
other parties from proposing an alternative transaction that
might be more advantageous to Company stockholders than the
Offer and the Merger;
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the fact that the income realized by stockholders as a result of
the Offer and the Merger generally will be taxable to Company
stockholders;
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the fact that the Company will no longer exist as an independent
public company and Company stockholders will forgo any future
increase in value that might result from the possible growth of
the Company;
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the interests that the Companys directors and executive
officers have or may have with respect to the Offer and the
Merger, in addition to their interests as stockholders of the
Company generally, as described above under the heading
Arrangements with the Companys Executive Officers,
Directors and Affiliates; and
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the fact that, pursuant to the Merger Agreement, the Company is
subject to a variety of other restrictions on the conduct of its
business prior to consummation of the Offer and the closing of
the Merger or termination of the Merger Agreement, which may
delay or preclude actions that would be advisable if the Company
were to remain an independent company.
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The foregoing discussion of the factors considered by the
Company Board is not intended to be exhaustive, but rather
includes material factors that the Company Board considered in
approving the Merger Agreement and recommending that
stockholders tender their Shares in the Offer. In view of the
wide variety of factors considered by the Company Board in
connection with their evaluation of these transactions and the
complexity of these factors, the Company Board did not consider
it practical to, nor did it attempt to, quantify, rank or
otherwise assign any specific or relative weights to the
specific factors they considered in reaching their
determination, except that, as noted above, the Company Board of
Directors put significant weight on the financial presentations
and fairness opinion delivered to the Company Board by SunTrust
Robinson Humphrey, its financial advisor. The Company Board
considered all these factors as a whole, and determined that the
transaction was in the best interests of the Company and its
stockholders. In considering the factors described above,
individual directors may have assigned different weights to
different factors.
Opinion
of SunTrust Robinson Humphrey
The Strategic Alternatives Committee of the Company Board
engaged SunTrust Robinson Humphrey to assist the Strategic
Alternatives Committee in its evaluation of various strategic
alternatives that may be available to Emageon. Pursuant to this
engagement, SunTrust Robinson Humphrey and Emageon management
began a targeted marketing process, as more fully described
above under Background of the Transaction. On
July 11, 2008, Emageon announced that the Strategic
Alternatives Committee had selected Jefferies &
Company, Inc. as Lead Advisor and SunTrust Robinson Humphrey as
Co-Advisor to assist the Strategic
29
Alternatives Committee to evaluate all strategic options
available for Emageon. Following this announcement, Jefferies
and Emageon conducted an extensive marketing process, and
Emageon eventually entered into an agreement and plan of merger
with Health Systems Solutions, Inc., as described above under
the heading Background of the Transaction.
In connection with SunTrust Robinson Humphreys engagement,
the Company Board requested that SunTrust Robinson Humphrey
evaluate the fairness, from a financial point of view, to the
holders of Shares of the $1.82 per share Offer Price to be
received in the Offer and the Merger by such holders. On
February 22, 2009, at a meeting of the Company Board held
to evaluate the Offer and the Merger, SunTrust Robinson Humphrey
rendered to the Company Board its oral opinion, which opinion
was confirmed by the delivery of a written opinion dated
February 22, 2009, to the effect that, as of that date and
based on and subject to the matters described in its opinion,
the $1.82 per Share Offer Price to be received by the holders of
such shares was fair, from a financial point of view, to such
holders.
The full text of SunTrust Robinson Humphreys written
opinion, dated February 22, 2009, which sets forth the
procedures followed, assumptions made, matters considered and
limitations on the review undertaken, is attached as
Annex B to this Schedule and is incorporated herein by
reference. SunTrust Robinson Humphreys opinion was
provided to the Company Board for its information in connection
with its evaluation of the Offer Price from a financial point of
view, does not address any other aspect of the Offer and the
Merger and is not intended to be and does not constitute a
recommendation to any holder of Common Stock as to how or
whether such holder should tender, vote or act in connection
with the Offer or the Merger or any other matters. The summary
of the SunTrust Robinson Humphrey opinion is qualified in its
entirety by reference to the full text of the opinion. Holders
of Common Stock are encouraged to read the SunTrust Robinson
Humphrey opinion carefully in its entirety.
In arriving at its opinion, SunTrust Robinson Humphrey, among
other things:
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reviewed the Merger Agreement;
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reviewed certain publicly available information concerning
Emageon;
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reviewed certain financial and operating information with
respect to the business, operations and prospects of Emageon
furnished to SunTrust Robinson Humphrey by Emageon;
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reviewed historical trading information with respect to Common
Stock;
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reviewed certain historical and projected financial information
for Emageon and selected publicly traded companies that SunTrust
Robinson Humphrey deemed relevant;
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reviewed certain historical information relating to premiums
paid in acquisitions of selected publicly traded companies that
SunTrust Robinson Humphrey deemed relevant;
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had discussions with the management of Emageon concerning its
business, operations, financial condition and prospects; and
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undertook such other studies, analyses and investigations as
SunTrust Robinson Humphrey deemed appropriate.
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In arriving at its opinion, SunTrust Robinson Humphrey assumed
and relied upon, without independent investigation or
verification, the accuracy and completeness of the financial and
other information furnished or discussed with it by Emageon.
With respect to the financial forecasts of Emageon furnished to
or discussed with SunTrust Robinson Humphrey, SunTrust Robinson
Humphrey assumed that they were reasonably prepared on bases
reflecting the then best currently available estimates and
judgments of the management of Emageon as to the future
financial performance of Emageon. In arriving at its opinion,
SunTrust Robinson Humphrey did not conduct a physical inspection
of the properties and facilities of Emageon and SunTrust
Robinson Humphrey did not make, nor was it provided with any
evaluations or appraisals of the assets or liabilities, if any,
contingent or otherwise, of Emageon. With respect to certain
contingent or potential tax and environmental liabilities,
SunTrust Robinson Humphrey relied, without independent
investigation or verification, upon the assessments of
Emageons management and counsel. SunTrust Robinson
Humphrey also
30
assumed that the Offer and Merger will be consummated in
accordance with its terms and that all material governmental,
regulatory or other consents and approvals necessary for the
consummation of the Offer or the Merger will be obtained without
any adverse effect on Emageon, the Offer or the Merger.
The SunTrust Robinson Humphrey opinion is necessarily based upon
business, economic, market and other conditions as they existed
on and could be evaluated as of the date of its opinion.
SunTrust Robinson Humphrey did not express an opinion as to the
underlying valuation, future performance or long-term viability
of Emageon. Subsequent developments may affect SunTrust Robinson
Humphreys opinion and SunTrust Robinson Humphrey does not
have any obligation to update or revise its opinion.
The SunTrust Robinson Humphrey opinion did not address any terms
or other aspects or implications of the Offer or the Merger
(other than the Offer Price to the extent expressly specified in
the opinion) or any aspects or implications of any other
agreement, arrangement or understanding to be entered into in
connection with, or otherwise contemplated by, the Offer or the
Merger. SunTrust Robinson Humphrey also expressed no view as to,
and its opinion did not address, the fairness (financial or
otherwise) of the amount or nature or any other aspect of any
compensation to any officers, directors or employees of any
parties to the Offer and the Merger, or any class of such
persons, relative to the Offer Price. SunTrust Robinson
Humphreys opinion was necessarily based on information
available to SunTrust Robinson Humphrey, and financial, stock
market and other conditions and circumstances existing and
disclosed to SunTrust Robinson Humphrey, as of the date of its
opinion. The issuance of SunTrust Robinson Humphreys
opinion was authorized by its fairness opinion committee.
In preparing its opinion, SunTrust Robinson Humphrey performed a
variety of financial and other analyses, including those
described below. This summary is not a complete description of
the analyses underlying SunTrust Robinson Humphreys
opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, is not readily susceptible to summary
description. Accordingly, SunTrust Robinson Humphrey believes
that its analyses and all relevant factors must be considered as
an integrated whole and that selecting portions of its analyses
or factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes
underlying such analyses and SunTrust Robinson Humphreys
opinion.
In performing its analyses, SunTrust Robinson Humphrey
considered general business, economic, industry and market
conditions (financial and otherwise), many of which are beyond
the control of Emageon. No company, transaction or business used
in SunTrust Robinson Humphreys analyses as a comparison is
identical to Emageon, the Offer or the Merger and, accordingly,
the analyses necessarily involve complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and transactions reviewed and
other factors that would affect the market values of the
relevant companies and Emageon. While the results of each
analysis were taken into account in reaching its overall
conclusion with respect to fairness, SunTrust Robinson Humphrey
did not make separate or quantifiable judgments regarding
individual analyses. The estimates contained in these analyses
and the valuation ranges indicated by any particular analysis
are illustrative and not necessarily indicative of actual values
or predictive of future results or values, which may be
significantly more or less favorable than those suggested by
such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty.
The type and amount of consideration payable in the Offer and
the Merger was determined through negotiations between Emageon
and Parent and the decision to enter into the Merger Agreement
was solely that of the Company Board. SunTrust Robinson
Humphreys opinion was only one of many factors considered
by the Company Board in its evaluation of the Offer and the
Merger and should not be viewed as determinative of the views of
the Company Board or management with respect to the Offer and
the Merger or the consideration payable in the Offer and the
Merger.
The following is a summary of the material financial and other
analyses performed by SunTrust Robinson Humphrey in connection
with the preparation of its opinion dated February 22, 2009
and presented by SunTrust
31
Robinson Humphrey to the Company Board on February 22,
2009. The following summary, however, does not purport to be a
complete description of the financial analyses performed by
SunTrust Robinson Humphrey.
Selected
Companies Analysis
SunTrust Robinson Humphrey calculated ratios of firm value and
equity value to certain historical and projected financial data
for selected publicly traded companies in the Imaging Technology
industry that were considered by SunTrust Robinson Humphrey to
have, for purposes of its analyses, operations similar to
certain operations of Emageon. For purposes of its analysis,
SunTrust Robinson Humphrey defined firm value as the market
value of the relevant entitys outstanding equity
securities (sometimes referred to herein as equity value) plus
the value of its outstanding indebtedness and certain other
liabilities less the amount of any cash and cash equivalents on
its most recent financial statements. The selected publicly
traded companies in the Imaging Technology industry used for
this analysis were:
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Allscripts Healthcare Solutions Inc.
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Computer Programs & Systems Inc.
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NightHawk Radiology Holdings, Inc.
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Virtual Radiologic Corporation
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Vital Images Inc.
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Merge Healthcare Incorporated
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AMICAS Inc.
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Mediware Information Systems Inc.
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Aspyra Inc.
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For the selected publicly traded companies, SunTrust Robinson
Humphrey calculated firm value as a multiple of the relevant
entitys latest twelve months, or LTM, and
actual 2008 revenues and projected 2009 revenues, and earnings
before interest, taxes, depreciation and amortization, or
EBITDA. All multiples were based on closing stock
prices as of February 20, 2009. Historical revenues and
EBITDA results were based on publicly available financial
information for the selected companies. Projected revenues and
EBITDA estimates for the selected publicly traded companies were
based on consensus research analyst estimates published by
Thomson Reuters.
SunTrust Robinson Humphrey applied the multiples indicated by
the selected companies analysis to corresponding financial
data for Emageon, including projected financial data provided by
the management of Emageon. That analysis indicated (a) an
implied low and high value per share of Common Stock based on
the actual 2009 revenue multiples of the selected companies of
$1.29 and $2.90, (b) an implied low and high value per
share of Emageon common stock based on the projected 2009
revenue multiples of the selected companies of $1.20 and $2.51,
and (c) an implied low and high value per share of Common
Stock based on the projected 2009 EBITDA multiples of the
selected companies of $1.69 and $2.19, in each case as compared
to the proposed Offer Price of $1.82 per share.
32
Selected
Transactions Analysis
SunTrust Robinson Humphrey reviewed implied transaction
multiples for the following 29 selected merger and acquisition
transactions completed since January 1, 2005:
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Acquiror
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Target
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Eclipsys Corporation
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Premise Corporation
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Canopy Financial, Inc.
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CareGain, Inc.
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Eclipsys Corporation
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MediNotes Corporation
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Medassets, Inc.
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MedAssurant, Inc.
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BPO Management Services, Inc.
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Healthaxis Inc.
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Health Care Service Corporation
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MEDecision, Inc.
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St. Jude Medical Inc.
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EP Medsystems Inc.
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Bio-Imaging Technologies Inc.
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Phoenix Data Systems, Inc.
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Misys Healthcare Solutions, Inc.
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Allscripts Healthcare Solutions Inc.
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Opto Circuits Ltd.
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Criticare Systems Inc.
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Zimmer Holdings Inc.
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ORTHOsoft Inc.
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AMICAS, Inc.
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Inspiration Technology, Inc.
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Radiology Practice Software
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Battery Ventures
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Quovadx Inc.
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Nighthawk Radiology Holdings, Inc.
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Teleradiology Diagnostic Service, Inc.
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Sage Software, Inc.
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Emdeon Practice Services
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RadNet, Inc.
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Radiologix Inc.
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Koninklijke Philips Electronics NV
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Witt Biomedical Corporation
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Allscripts Healthcare Solutions Inc.
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A4 Health Systems, Inc.
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Emageon Inc.
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Camtronics Medical Systems, Ltd.
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GE Healthcare Ltd.
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IDX Systems Corporation
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Siemens Medical Solutions USA, Inc.
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CTI Molecular Imaging, Inc.
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Merge Technologies Incorporated
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Cedara Software Corporation
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Elekta AB
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IMPAC Medical Systems, Inc.
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For each of the selected transactions, SunTrust Robinson
Humphrey calculated the ratio of the firm value of the target
based on the transaction consideration as a multiple of LTM
revenues, EBITDA and EBIT. The firm values of the targets were
based on the aggregate consideration paid in the relevant
selected transaction and where available, the revenues, EBITDA
and EBIT values for each of the target companies were based on
publicly available historical financial information.
SunTrust Robinson Humphrey applied the multiples indicated by
the selected transactions analysis to corresponding year-end
financial data for Emageon for 2008. That analysis indicated an
implied low and high value per share of Common Stock based on
the selected multiples of the selected transactions of $4.02 and
$7.23, in each case as compared to the proposed Offer Price of
$1.82 per share.
Premiums
Paid Analysis
SunTrust Robinson Humphrey reviewed the premiums paid in
approximately 60 selected mergers and acquisitions involving
publicly traded target companies from January 1, 2005 to
January 30, 2009 with a transaction value between
$50 million and $1.5 billion. SunTrust Robinson
Humphrey also reviewed approximately 10 selected mergers and
acquisitions involving publicly traded target companies in the
Imaging Technology industry. SunTrust Robinson Humphrey reviewed
the percentage premium paid for the common stock of the target
company in such transactions relative to the target
companys closing stock price one day and 30 days
prior to public announcement of the transaction.
SunTrust Robinson Humphrey applied the percentage premiums
indicated by the premiums paid analysis to the closing prices of
Common Stock one day and 30 days prior to February 20,
2009. That analysis indicated (a) an implied low and high
value per share of Common Stock based on selected one day
premiums paid analysis of $0.94 and $1.16 and (b) an
implied low and high value per share of Emageon common stock
33
based on selected 30 day premiums paid analysis of $2.46
and $3.05, in each case as compared to the proposed Offer Price
of $1.82 per share.
Other
Analyses
SunTrust Robinson Humphrey also considered the historical market
prices and trading volumes for Emageons common stock as
compared to corresponding data for selected publicly traded
companies and selected market indexes, including the S&P
500 Index and the NASDAQ Index.
The Strategic Alternatives Committee had retained SunTrust
Robinson Humphrey to act as its financial advisor and render a
fairness opinion to the Board of Directors in connection with
the Offer and the Merger because of SunTrust Robinson
Humphreys experience and reputation and its familiarity
with Emageon and its business. SunTrust Robinson Humphrey is a
nationally recognized investment banking firm regularly engaged
in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, secondary distributions of listed and
unlisted securities and private placements. In the ordinary
course of its business, SunTrust Robinson Humphrey and its
affiliates may actively trade in debt and equity securities of
Emageon, as well as securities of Parent, for its own account
and for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities. In
addition, SunTrust Robinson Humphrey acted as a Co-Advisor for
Emageon in connection with the evaluation of strategic options
available for Emageon.
Intent to
Tender
As described above in Item 3 under the heading Tender
and Support Agreements, the Signing Stockholders
(i.e., the Companys directors and executive
officers, along with OPP, the Companys largest
stockholder), who beneficially own, in the aggregate,
approximately 18.0% of the outstanding Shares, have each entered
into a Tender Agreement with Parent and Purchaser under which
such Signing Stockholder agreed, as a stockholder of the Company:
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to tender in the Offer (and not to withdraw) all Shares
beneficially owned or subsequently acquired by such Signing
Stockholder;
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to vote such Shares in favor of adoption of the Merger Agreement
and against any takeover or competing proposal other than the
Merger;
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to appoint designees of Parent as its proxy to vote such Shares
in connection with the Merger Agreement;
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not to otherwise transfer any of its Shares; and
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not to initiate, solicit, propose, participate or engage in
negotiations with respect to any takeover proposal or to provide
confidential information regarding the Company or the Merger to
any other person.
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Therefore, to the knowledge of the Company, all of the
Companys executive officers and directors intend to tender
or cause to be tendered all Shares held of record or
beneficially owned by them pursuant to the Offer other than
Shares, if any, that such person may have an unexercised right
to purchase by exercising options, and, if necessary, to vote
such Shares in favor of the Merger.
The foregoing summary of the Tender Agreements is qualified by
reference to the form of Tender and Support Agreement, which has
been filed as Exhibit (e)(2) hereto and is incorporated herein
by reference.
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ITEM 5.
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PERSON/ASSETS,
RETAINED, EMPLOYED, COMPENSATED OR USED.
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SunTrust
Robinson Humphrey
Pursuant to a letter agreement dated May 23, 2007, as
modified on July 10, 2008 and February 23, 2009, the
Company engaged SunTrust Robinson Humphrey to act, along with
Jefferies, as its financial advisor in connection with its
investigation of strategic alternatives, including the
contemplated Offer and Merger. Under
34
the terms of the engagement, the Company agreed to pay SunTrust
Robinson Humphrey $500,000 from funds received from escrow in
connection with the recent termination of the Companys
merger agreement with Health Systems Solutions, Inc., and a fee
of $315,000, payable upon delivery of SunTrust Robinson
Humphreys fairness opinion, for its financial advisory
services in connection with the Offer and the Merger. In
addition, the Company has agreed to reimburse SunTrust Robinson
Humphrey for its reasonable expenses, including fees,
disbursements and other charges of counsel, and to indemnify
SunTrust Robinson Humphrey and related parties against
liabilities, including liabilities under federal securities
laws, relating to, or arising out of, its engagement.
Jefferies
Pursuant to a letter agreement dated July 11, 2008, as
modified on February 19, 2009, the Company engaged
Jefferies to act, along with SunTrust Robinson Humphrey, as its
financial advisor in connection with its investigation of
strategic alternatives, including the contemplated Offer and
Merger. Under the terms of the engagement, as modified, the
Company paid Jefferies $750,000 from funds received from escrow
in connection with the recent termination of the Companys
merger agreement with Health Systems Solutions, Inc., and agreed
to pay Jefferies for its financial advisory services in
connection with the Offer and the Merger an additional aggregate
fee of $750,000, a portion ($200,000) of which became payable
upon the announcement of the execution of the Merger Agreement,
and a portion of which will become payable only if the Offer is
consummated. In addition, the Company has agreed to reimburse
Jefferies for its reasonable expenses, including fees,
disbursements and other charges of counsel, and to indemnify
Jefferies and related parties against liabilities, including
liabilities under federal securities laws, relating to, or
arising out of, its engagement.
Other
Except as set forth above in this Item 5, neither the
Company nor any person acting on its behalf has directly or
indirectly employed, retained or agreed to compensate any person
to make solicitations or recommendations in connection with the
Offer or the Merger.
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ITEM 6.
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INTEREST
IN SECURITIES OF THE SUBJECT COMPANY.
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Other than in the ordinary course of business in connection with
the Companys employee benefit plans, no transactions in
the Shares have been effected during the past 60 days by
the Company, or, to the best of the Companys knowledge, by
any director, executive officer, affiliate or subsidiary of the
Company.
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ITEM 7.
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PURPOSES
OF THE TRANSACTION AND PLANS OR PROPOSALS.
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Except as indicated in Items 2, 3 and 4 of this Schedule,
the Company is not undertaking or engaged in any negotiations in
response to the Offer that relate to:
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a tender offer for or other acquisition of the Companys
securities by the Company, any of its subsidiaries or any other
person;
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any extraordinary transaction, such as a merger, reorganization
or liquidation, involving the Company or any of its subsidiaries;
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any purchase, sale or transfer of a material amount of assets of
the Company or any of its subsidiaries; or
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any material change in the Companys present dividend rate
or policy, or indebtedness or capitalization.
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There are no transactions, resolutions of the Company Board or
agreements in principle or signed contracts in response to the
Offer that relate to one or more of the events referred to in
the foregoing paragraph.
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ITEM 8.
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ADDITIONAL
INFORMATION.
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Information
Statement
The Information Statement attached as Annex A to this
Schedule is being furnished in connection with Purchasers
right, pursuant to the Merger Agreement, to designate certain
persons to be appointed or elected to the Company Board, other
than at a meeting of the Companys stockholders, as
described in Item 3 above and in the Information Statement,
and such Information Statement is incorporated herein by
reference.
Top-Up
Option
Subject to the terms of the Merger Agreement, the Company has
granted Purchaser an irrevocable option, exercisable at any time
after the Acceptance Time, to purchase from the Company a number
of newly-issued Shares that, when added together with Shares
owned directly or indirectly by Purchaser and Parent immediately
following the Acceptance Time, constitutes one share more than
90% of the total Shares then outstanding (the
Top-Up
Option). Purchaser may exercise the
Top-Up
Option at any time after the Acceptance Time, however, the
Top-Up
Option is not exercisable to the extent it would be exercisable
for a number of newly-issued Shares in excess of the
Companys then authorized and unissued shares of Common
Stock. Purchaser will pay to the Company a per share amount
equal to the Offer Price for each Share acquired upon exercise
of the
Top-Up
Option, which amount will be payable in cash or by delivery of a
note.
The
Merger Stockholder Approval
Section 253 of the DGCL provides that, if a parent
corporation owns at least 90% of the outstanding shares of each
class of stock of a subsidiary, the parent corporation can
effect a short-form merger with that subsidiary without the
action of the other stockholders of either entity. Under the
Merger Agreement, Parent, Purchaser and the Company have agreed
that if, following completion of the Offer and, if applicable,
any subsequent offering period or the exercise of the
Top-Up
Option, Parent, Purchaser or any other direct or indirect
subsidiary of Parent owns at least 90% of the outstanding Shares
on a fully diluted basis, each of Purchaser, Parent and the
Company will take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable
thereafter, without the approval of the Companys
stockholders, pursuant to a short-form merger in accordance with
Section 253 of the DGCL.
If, following completion of the Offer and any subsequent
offering period, Parent or Purchaser (or any other direct or
indirect subsidiary of Parent) does not exercise the
Top-Up
Option and does not own at least 90% of the outstanding Shares
on a fully diluted basis, the approval of the Companys
stockholders will be required in order to consummate the Merger.
In this case, if permitted by law, the Companys
organizational documents and any applicable rules and
regulations of any stock exchange, Parent and Purchaser will, as
holders of a majority of the voting power of the outstanding
Shares entitled to vote, adopt the Merger Agreement by written
consent without a meeting of the Companys stockholders.
Alternatively, if Parent and Purchaser are not permitted by law,
the Companys organizational documents or any rules or
regulations of any stock exchange to adopt the Merger Agreement
by written consent, the Company will duly call, give notice of,
convene and hold a stockholders meeting for the purpose of
adopting the Merger Agreement. At any such meeting, Purchaser
will be able to approve the Merger without the affirmative vote
of any other stockholders.
Appraisal
Rights
Holders of Shares do not have appraisal rights as a result of
the Offer. However, if the Merger is consummated, each holder of
Shares (that did not previously tender such holders Shares
in the Offer) immediately prior to the Effective Time who has
neither voted in favor of the adoption of the Merger Agreement
nor consented thereto in writing, and who otherwise complies
with the applicable statutory procedures under Section 262
of the DGCL (the Shares held by each such holder being referred
to as Appraisal Shares) will be entitled to receive
a judicial determination of the fair value of the holders
Appraisal Shares (exclusive of any element of value arising from
the accomplishment or expectation of the Merger or similar
business combination) and to receive payment of such fair value
in cash, together with a fair
36
rate of interest, if any, for such Appraisal Shares. Any such
judicial determination of the fair value of the Shares could be
based upon considerations other than, or in addition to, the
price paid in the Offer and the market value of the Shares.
Stockholders should recognize that the value determined in the
appraisal could be higher or lower than the Offer Price.
Moreover, the Company may argue in an appraisal proceeding that,
for purposes of such a proceeding, the fair value of the Shares
is less than the Offer Price.
At the Effective Time, all Appraisal Shares shall no longer be
outstanding and shall automatically be canceled and shall cease
to exist, and each holder of Appraisal Shares shall cease to
have any rights with respect thereto, except the rights provided
under Section 262 of the DGCL. If any holder of Shares who
demands appraisal of their Shares under Section 262 of the
DGCL fails to perfect, or effectively withdraws or loses his,
her, or its rights to appraisal of those Shares pursuant to
Section 262 of the DGCL (or a court of competent
jurisdiction determines that such holder is not entitled to the
relief provided by Section 262), such Shares will be
converted into, and represent the right to receive, the Offer
Price in accordance with the Merger Agreement. A stockholder may
withdraw a demand for appraisal by delivering to the Company a
written withdrawal of the demand for appraisal and acceptance of
the Merger. Failure to follow the steps required by
Section 262 of the DGCL for perfecting appraisal rights may
result in the loss of those rights.
The Company has agreed to give Parent prompt notice of any
written demands for appraisal, attempted withdrawals of such
demands, and any other instruments served pursuant to applicable
law received by the Company relating to stockholders
rights of appraisal. The Company has also agreed to give Parent
the opportunity to participate in and direct all negotiations
and proceedings with respect to demands for appraisal. The
Company will not, except with the prior written consent of
Parent, make any payment with respect to any demands for
appraisal of Appraisal Shares, offer to settle or settle any
such demands or approve any withdrawal or other treatment of any
such demands.
The foregoing summary is not intended to be complete and is
qualified by reference to the Merger Agreement and
Section 262 of the DGCL, which have been filed as Exhibit
(e)(1) and included as Annex C hereto, respectively, and
which are incorporated herein by reference.
State
Takeover Laws
As a Delaware corporation, the Company is subject to
Section 203 of the DGCL (Section 203). In
general, Section 203 would prevent an interested
stockholder (generally defined as a person beneficially
owning 15% or more of a corporations voting stock) from
engaging in a business combination (as defined in
Section 203) with a Delaware corporation for three
years following the time that person became an interested
stockholder unless:
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before that person became an interested stockholder, the board
of directors of the corporation approved the transaction in
which the interested stockholder became an interested
stockholder or approved the business combination;
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upon consummation of the transaction which resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of
shares of outstanding stock, those shares held by directors who
are also officers and by employee stock plans that do not allow
plan participants to determine confidentially whether to tender
shares); or
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following the transaction in which that person became an
interested stockholder, the business combination is
(i) approved by the board of directors of the corporation
and (ii) authorized at a meeting of stockholders by the
affirmative vote of the holders of at least
662/3%
of the outstanding voting stock of the corporation not owned by
the interested stockholder.
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In accordance with the provisions of Section 203, the
Company Board has approved the Merger Agreement and the
transactions contemplated thereby, as described in Item 4
above, and, therefore, the restrictions of Section 203 are
inapplicable to the Offer and the Merger and the transactions
contemplated by the Merger Agreement.
37
Regulatory
Approvals
The Company is not aware of any filings, approvals or other
actions by or with any governmental authority or administrative
or regulatory agency that would be required for Purchasers
or Parents acquisition or ownership of the Shares.
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Exhibit No.
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Description
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(a)(1)
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Offer to Purchase dated March 5, 2009 (incorporated herein by
reference to Exhibit (a)(1)(A) to the Schedule TO filed by
Purchaser and Parent on March 5, 2009).
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(a)(2)
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Form of Letter of Transmittal (including Guidelines for
Certification of Taxpayer Identification Number on Substitute
Form W-9) (incorporated herein by reference to Exhibit (a)(1)(B)
to the Schedule TO filed by Purchaser and Parent on March 5,
2009).
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(a)(3)
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Form of Notice of Guaranteed Delivery (incorporated herein by
reference to Exhibit (a)(1)(C) to the Schedule TO filed by
Purchaser and Parent on March 5, 2009).
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(a)(4)
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Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees (incorporated herein by reference
to Exhibit (a)(1)(D) to the Schedule TO filed by Purchaser and
Parent on March 5, 2009).
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(a)(5)
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Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and other Nominees
(incorporated herein by reference to Exhibit (a)(1)(E) to the
Schedule TO filed by Purchaser and Parent on March 5, 2009).
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(a)(6)
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Joint Press Release issued by Parent and the Company on February
23, 2009 (incorporated herein by reference to the Joint Press
Release filed under the cover of Schedule 14D-9 by the Company
on February 23, 2009).
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(a)(7)
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Form of summary advertisement, published March 5, 2009
(incorporated herein by reference to Exhibit (a)(1)(G) to the
Schedule TO filed by Purchaser and Parent on March 5, 2009).
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(a)(8)
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Letter to Stockholders of the Company from the Company, dated
March 5, 2009.*
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(a)(9)
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Information Statement Pursuant to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder (included as Annex A hereto).*
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(e)(1)
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Agreement and Plan of Merger, dated as of February 23, 2009, by
and among Purchaser, Parent and the Company (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed
by the Company on February 24, 2009).
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(e)(2)
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Form of Tender and Support Agreement, dated as of February 23,
2009, by and between Parent, Purchaser, and each of Charles A.
Jett, Jr., Keith Stahlhut, John W. Wilhoite, Arthur P. Beattie,
Roddy J.H. Clark, Fred C. Goad, Bradley S. Karro, Mylle H.
Mangum, Augustus K. Oliver, John W. Thompson, Benner Ulrich,
Hugh H. Williamson, III and Oliver Press Partners, LLC
(incorporated by reference to Exhibit 99.1 to the Current Report
on Form 8-K filed by the Company on February 24, 2009).
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(e)(3)(i)
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Employment Agreement with Charles A. Jett, Jr. dated August 10,
2004 (incorporated by reference to Exhibit 10.5 the Registration
Statement on Form S-1 filed by the Company on November 19, 2004).
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(e)(3)(ii)
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Amendment No. 1 to Employment Agreement with Charles A. Jett,
Jr. Dated July 8, 2008 (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed by the Company on
July 11, 2008).
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(e)(4)
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Severance Agreement and General Release with Charles A. Jett,
Jr. dated February 23, 2009 (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed by the
Company on February 24, 2009).
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(e)(5)
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Employment Agreement with John W. Wilhoite dated April 29, 2008
(incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K filed by the Company on May 1, 2008).
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(e)(6)
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Employment Agreement with Keith Stahlhut dated May 8, 2008.**
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(e)(7)
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Agreement, dated June 22, 2008, among the Company, Charles A.
Jett, Jr. and certain affiliates of Oliver Press Partners, LLC
(incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K filed by the Company on June 23, 2008).
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38
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Exhibit No.
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Description
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(e)(8)
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Form of Indemnification Agreement between the Company and its
Executive Officers and Directors (incorporated by reference to
Exhibit 10.10 to the Registration Statement on Form S-1 filed by
the Company on November 19, 2004).
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(e)(9)
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Confidentiality Agreement, dated December 21, 2007, between
Parent and the Company.**
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(e)(10)
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Opinion of SunTrust Robinson Humphrey, dated February 22, 2009
(included as Annex B hereto).*
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* |
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Filed herewith and included in the copy of the Schedule mailed
to the Companys stockholders. |
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** |
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Filed herewith. |
39
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
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By:
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/s/ Charles
A. Jett, Jr.
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Charles A. Jett, Jr.
Chief Executive Officer
Date: March 5, 2009
40
ANNEX A
EMAGEON
INC.
1200 Corporate Drive,
Suite 200
Birmingham, Alabama 35242
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1
THEREUNDER
GENERAL
INFORMATION
This Information Statement is being mailed on or about
March 5, 2009 to holders of record of common stock, par
value $0.001 per share (the Shares, or the
Common Stock), of Emageon Inc. (Emageon,
or the Company) as a part of Emageons
Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9)
with respect to a tender offer by AMICAS Acquisition Corp.
(Purchaser), a Delaware corporation and wholly owned
subsidiary of AMICAS, Inc., a Delaware corporation
(Parent), for all of the issued and outstanding
Shares. You are receiving this Information Statement in
connection with the possible appointment or election of persons
designated by Purchaser to at least a majority of the seats on
the Companys Board of Directors (the Company
Board, or the Board). The designation is to be
made pursuant to the Agreement and Plan of Merger, dated
February 23, 2009, by and among Purchaser, Parent and the
Company (as such agreement may from time to time be amended or
supplemented, the Merger Agreement).
Pursuant to the Merger Agreement, Purchaser commenced a cash
tender offer on March 5, 2009, to purchase all of the
issued and outstanding Shares at a purchase price of $1.82 per
Share, net to the stockholder in cash without interest thereon
and subject to applicable withholding taxes, upon the terms and
subject to the conditions set forth in that certain Offer to
Purchase, dated March 5, 2009 (the Offer to
Purchase) and the related Letter of Transmittal, dated
March 5, 2009 (the Letter of Transmittal, and
together with the Offer to Purchase, the Offer).
Unless extended in accordance with the terms and conditions of
the Merger Agreement, the Offer is scheduled to expire at 11:59
p.m., New York City time, on April 1, 2009, at which time,
if all conditions to the Offer have been satisfied or waived,
Purchaser will be obligated to purchase all Shares that have
been validly tendered in the Offer and not properly withdrawn.
Copies of the Offer to Purchase and the accompanying Letter of
Transmittal have been mailed with this
Schedule 14D-9
to Company stockholders and are filed as exhibits to the
Schedule 14D-9
filed by the Company with the U.S. Securities and Exchange
Commission (the SEC) on March 5, 2009.
The Merger Agreement provides that after the purchase by
Purchaser of at least a majority of the outstanding Shares in
the Offer, Purchaser will be entitled to designate a number of
the Companys directors, rounded up to the next whole
number, that is equal to the product of (i) the total
number of directors on the Company Board (giving effect to the
directors designated by Purchaser) multiplied by (ii) the
percentage that the aggregate number of Shares so acquired by
Purchaser bears to the total number of Shares outstanding. As a
result, Purchaser will have the ability to designate a majority
of the Company Board following the consummation of the Offer.
The Merger Agreement also provides that, following the
consummation of the Offer and subject to the satisfaction or
waiver of the conditions set forth in the Merger Agreement,
Purchaser will merge with and into the Company (the
Merger) in accordance with the provisions of the
Delaware General Corporation Law, and the Company will continue
as the surviving corporation in the Merger and a wholly owned
subsidiary of Parent. In the Merger, each outstanding Share that
is not tendered in the Offer (other than Shares held by Parent,
Purchaser, the Company or stockholders who properly exercise
appraisal rights, if any, under Section 262 of the Delaware
General Corporation Law) will be converted into the right to
receive the same consideration paid per Share pursuant to the
Offer, without interest and subject to applicable withholding
taxes.
This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), and
Rule 14f-1
promulgated thereunder in connection with the appointment or
election of Purchasers designees to the Company Board.
Capitalized terms used but not otherwise defined herein will
have the meanings set forth in the
Schedule 14D-9.
In this information statement, we sometimes use the terms
us, we and our to refer to
the Company.
You are urged to read this Information Statement carefully. You
are not, however, required to take any action.
The information contained in this Information Statement
(including any information incorporated by reference) concerning
Parent, Purchaser and Purchasers designees has been
furnished to the Company by Parent, and the Company assumes no
responsibility for the accuracy or completeness of such
information.
PURCHASERS
BOARD DESIGNEES
Right to
Designate Directors
The Merger Agreement provides that after the purchase by
Purchaser of at least a majority of the outstanding Shares in
the Offer, Purchaser will be entitled to designate a number of
the Companys directors, rounded up to the next whole
number, that is equal to the product of (i) the number of
directors on the Company Board (giving effect to the directors
designated by Purchaser) multiplied by (ii) the percentage
that the aggregate number of Shares so acquired by Purchaser
bears to the total number of Shares outstanding. The Company has
agreed to take, upon the request of Purchaser, all actions
necessary to cause Purchasers designees to be elected or
appointed to the Company Board, including increasing the size of
the Company Board
and/or
seeking the resignation of one or more incumbent directors. The
Company has also agreed to take all actions necessary to cause
directors designated by Purchaser to have equivalent
representation on each committee of the Company Board.
Notwithstanding the foregoing, the Merger Agreement provides
that from the time that Purchasers designees are elected
or appointed to the Company Board until the Effective Time, the
Company Board and its committees will have such number of
independent directors as may be required by NASDAQ
rules or the federal securities laws. If the Company Board
includes fewer than the required number of independent
directors, the Company Board will cause a person (other than a
stockholder or affiliate of Parent or Purchaser) designated by
the remaining independent directors (or if no independent
directors remain, such other members of the current Company
Board as may at that time be members of the Company Board (each
such member, and his or her designated successor, a
Continuing Director)) to fill the vacancy, and such
person will be deemed an independent director for purposes of
the Merger Agreement.
In addition, from the time that Purchasers designees are
elected or appointed to the Company Board until the Effective
Time, the approval of a majority of the Continuing Directors (or
if there are no Continuing Directors, then of the independent
directors, or if there are no independent directors, then of the
Company Board) is required to authorize (i) any amendment
or termination of the Merger Agreement by the Company,
(ii) any extension of time for the performance of any
obligations or other acts of Parent or Purchaser under the
Merger Agreement, (iii) any waiver or exercise of the
Companys rights under the Merger Agreement, or
(iv) any amendment to the Companys charter or bylaws.
If a Continuing Director cannot continue to serve, the remaining
Continuing Director(s) are entitled to elect or designate
another person that satisfies the applicable independence
requirements to fill the vacancy, and such person will be deemed
to be a Continuing Director for purposes of the Merger Agreement.
Purchasers
Designees
Purchaser has informed the Company that it will choose its
designees for the Company Board from the list of persons set
forth below. In the event that additional designees of Purchaser
are required to constitute a majority of the Company Board, such
additional designees will be selected by Purchaser from among
the
A-2
executive officers and directors of Purchaser listed in
Schedule A to the Offer to Purchase, which is incorporated
herein by reference.
The following table, prepared from information furnished to the
Company by Parent and Purchaser, sets forth, as of March 5,
2009, with respect to each individual who may be designated by
Purchaser as one of its designees, the individuals name
and age, present principal occupation and employment history
during the past five years. Purchaser has informed the Company
that each such individual has consented to act as a director of
the Company if so appointed or elected. The business address of
each such person is
c/o AMICAS,
Inc., 20 Guest Street, Boston, MA 02135.
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Name of Designee
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Age
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Principal Occupation and Five-Year Employment History
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Stephen J. DeNelsky
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41
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Mr. DeNelsky has served as a director of AMICAS since March
2001. Since November 2008, Mr. DeNelsky has served as a senior
research analyst for 11:11 Capital Management, Inc. Prior to
this, he served as general partner of Sapphire Capital
Management LP, a New York based investment fund, since October
2004. From March 2003 until October 2004, Mr. DeNelsky worked
at Copper Arch Capital, LLC as a senior research analyst. From
November 2001 through March 2003, he served as the portfolio
manager of Forstmann-Leff Associates, LLC. In December 2000,
Mr. DeNelsky founded Sapphire Capital Management LLC, a New
York-based investment fund, and he served as its managing
partner until November 2001. From June 1999 until December
2000, he was a senior research analyst in Credit Suisse First
Bostons Health Care Equity Research Group, covering
primarily the healthcare information technology and e-health
sectors. Mr. DeNelsky does not serve on the board of any other
public company.
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Joseph D. Hill
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46
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Mr. Hill served as AMICAS Senior Vice President and Chief
Financial Officer from October 2004 until April 2008. Mr. Hill
is currently the Chief Financial Officer of Metabolix, Inc.
Prior to this, from April 2003 until March 2004, Mr. Hill served
as Vice President and Chief Financial Officer of Dirig Software,
an application performance management solutions provider based
in Nashua, New Hampshire. In February 2004, Dirig Software was
acquired by Allen Systems Group of Naples, Florida. From August
2000 until June 2002, Mr. Hill served as Vice President and
Chief Financial Officer of Maconomy Corporation, a Web-based
business management solutions provider with headquarters in
Copenhagen, Denmark and Marlborough, Massachusetts. Prior to
joining Maconomy, Mr. Hill was Vice President and Chief
Financial Officer of Datamedic Holding Corp., a practice
management and clinical software company specializing in
ophthalmology and general medical practices. AMICAS acquired
Datamedic in 1999. Mr. Hill does not serve on the board of any
other public company.
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Stephen J. Lifshatz
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50
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Mr. Lifshatz is currently the Chief Financial Officer of
Authoria, Inc. Previously, Mr. Lifshatz served as Chief
Financial Officer and Senior Vice President of Lionbridge
Technologies, Inc, which he joined soon after its founding in
1997 and had the overall responsibility for worldwide
accounting, risk management, reporting, and financial control
activities of the company. Prior to joining Lionbridge, Mr.
Lifshatz was the Chief Financial Officer and treasurer of the
Dodge Group. Previously, Mr. Lifshatz spent 15 years with
Marcam Corporation in various senior roles, including operations
controller, corporate controller, treasurer and Chief Financial
Officer as well as president of an operating unit.
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A-3
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Name of Designee
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Age
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Principal Occupation and Five-Year Employment History
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David B. Shepherd
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57
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Since 1990, Mr. Shepherd has been employed by Louis Dreyfus
Property Group LLC, an international commercial property company
owned by Louis Dreyfus S.A.S., and currently is its Vice
President and Chief Financial Officer and holds equivalent
positions at various affiliated joint ventures. Mr. Shepherd
also is Treasurer and Secretary of LDS Advisors LLC, the sponsor
and managing member of LDS Investment Group LLC, a real estate
investment fund formed in February 2007. From 1975 until 1990,
Mr. Shepherd was a certified public accountant with the audit
practice of Ernst & Young LLP.
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John J. Sviokla
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51
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Since September 1998 he has served as vice president of
DiamondCluster International (formerly Diamond Technology
Partners) and director of the firms Innovation efforts.
He became a director of DiamondCluster International in August
1999 and since April 2000 has been its vice chairman.
DiamondCluster International is a public company. From 1993 to
1998, he was a professor at Harvard Business School.
Dr. Sviokla has been a consultant to large and small
companies around the world specializing in issues related to
information technology adoption, sales force productivity,
knowledge management and business performance. He has authored
over 100 articles, cases, videos and tele-seminars.
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Purchaser has advised the Company that none of the individuals
listed above has, during the past five years, (i) been
convicted in a criminal proceeding (excluding traffic violations
or misdemeanors), (ii) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or
final order enjoining the person from future violations of, or
prohibiting activities subject to, U.S. federal or state
securities laws, or a finding of any violation of
U.S. federal or state securities laws, (iii) filed a
petition under federal bankruptcy laws or any state insolvency
laws or has had a receiver appointed to the persons
property or (iv) been subject to any judgment, decree or
final order enjoining the person from engaging in any type of
business practice.
Purchaser has advised the Company that none of its designees is
currently a director of, or holds any position with, the Company
or any of its subsidiaries. Purchaser has advised the Company
that none of its designees (i) has a familial relationship
with any directors, other nominees or executive officers of the
Company or any of its subsidiaries, (ii) has been involved
in, nor has any of his or her immediate family members been
involved in, any transactions with the Company or any of its
subsidiaries, in each case, that are required to be disclosed
pursuant to the rules and regulations of the SEC, except as may
be disclosed herein, or (iii) beneficially owns any equity
securities or rights to acquire any equity securities of the
Company.
It is expected that Purchasers designees will assume
office as promptly as practicable following the purchase by
Purchaser of Shares pursuant to the Offer, which cannot be
earlier than 11:59 p.m., New York City time, on Wednesday,
April 1, 2009, and that, upon assuming office,
Purchasers designees will constitute at least a majority
of the Company Board. It is not currently known which, if any,
of the current directors of the Company will resign in
connection therewith. However, to the extent the Company Board
will consist of persons who are not nominees of Purchaser, the
Company Board is expected to continue to consist of those
persons who are currently directors of the Company who do not
resign.
CERTAIN
INFORMATION CONCERNING THE COMPANY
The Companys authorized capital stock consists of
165,050,000 shares of Common Stock and
88,415,000 shares of preferred stock, par value $0.001 per
share, (the Preferred Stock). As of the close of
business on February 27, 2009, 21,449,718 shares of
Common Stock were issued and outstanding (including restricted
shares) and no shares of Preferred Stock were issued or
outstanding. The Common Stock is the only class of voting
securities of the Company outstanding that is entitled to vote
at a meeting of stockholders of the Company. Each Share entitles
the record holder to one vote on all matters submitted to a vote
of the stockholders.
A-4
CURRENT
BOARD OF DIRECTORS
Currently, the Company Board consists of nine directors. The
Companys Amended and Restated Certificate of Incorporation
provides for a classified board of directors consisting of three
classes, each serving staggered three year terms. Set forth
below is information, including the name and age, regarding each
director of the Company as of February 27, 2009.
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Name
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Age
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Director Since
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Directors Whose Terms Expire in 2009
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Roddy J.H. Clark (1)
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62
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2000
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Mylle H. Mangum (2)
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59
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2004
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John W. Thompson (3)
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64
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2003
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Directors Whose Terms Expire in 2010
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Augustus K. Oliver
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59
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2008
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Benner Ulrich (4)
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33
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2008
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Hugh H. Williamson, III (5)
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67
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2000
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Directors Whose Terms Expire in 2011
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Arthur P. Beattie (6)
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53
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2004
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Fred C. Goad, Jr. (7)
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67
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2004
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Bradley S. Karro (8)
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47
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2008
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(1) |
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Member, Compensation Committee; Member, Governance
Committee. |
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(2) |
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Chairman, Governance Committee; Member, Compensation
Committee. |
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(3) |
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Member, Audit Committee. |
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(4) |
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Member, Compensation Committee. |
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(5) |
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Chairman of the Board and Lead Independent Director;
Chairman, Compensation Committee. |
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(6) |
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Chairman, Audit Committee. |
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(7) |
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Member, Governance Committee. |
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(8) |
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Member, Audit Committee. |
Arthur P. Beattie has served as a member of the Board
since August 2004 and serves as the Chairman of the Boards
Audit Committee. Mr. Beattie has served as Executive Vice
President, Chief Financial Officer and Treasurer of Alabama
Power Company, a subsidiary of Southern Company, since February
2005. Mr. Beattie previously served as Vice President and
Comptroller of Alabama Power Company beginning in 1997.
Mr. Beattie is a director of several non-profit entities.
Roddy J.H. Clark has served as a member of the Board
since June 2000. Mr. Clark has been a managing partner of
Redmont Venture Partners, Inc., a private equity firm
concentrating in technology markets, since 1998. Mr. Clark
is a director of several private companies.
Fred C. Goad, Jr. has served as a member of the
Board since June 2004. Mr. Goad is a partner in Voyent
Partners LLC, a private equity firm that he co-founded in August
2001. Mr. Goad served as Co-Chief Executive Officer of the
Transaction Services Division of Healtheon/WebMD Corporation
(now Emdeon Corporation) from 1999 to 2001. From 1985 to 1997,
he served as Chief Executive Officer, and subsequently, from
1997 to 1999, as Co-Chief Executive Officer and Chairman, of
ENVOY Corporation, a provider of electronic transaction
processing services for the health care industry, which was
acquired by WebMD in 1999. Mr. Goad is a director of
Performance Food Group Company, Luminex Corp., and several
private companies.
Bradley S. Karro has served as a member of the Board
since July 2008. From January 2006 to March 2007, Mr. Karro
served as Executive Vice President of Information Technology and
Medicare Programs for Caremark Rx, Inc., a pharmaceutical
services company. From October 1999 until December 2006,
Mr. Karro
A-5
served as Executive Vice President of Corporate Development of
Caremark, and from May 1998 through September 1999, he served as
President and Chief Operating Officer of Caremarks
physician practice management operations in California. From
February 1996 through May 1998, Mr. Karro served as
President, Chief Executive Officer and director of Maternicare,
Inc., a physician practice management company.
Mylle H. Mangum has served as a member of the Board since
June 2004 and serves as the Chairman of the Boards
Governance Committee. Mrs. Mangum is Chairman and Chief
Executive Officer of IBT Enterprises, LLC, a retail bank design,
build and consulting firm, since October 2003. She was Chief
Executive Officer of True Marketing Services LLC, a marketing
services company, from June 2002 through October 2003. She was
Chief Executive Officer of MMS Incentives, LLC, a private equity
company concentrating on high-tech marketing solutions, from
1999 to 2002. She previously served as Senior Vice President of
Carlson Wagonlit Travel Holdings, Inc. and Executive Vice
President of Holiday Inn Worldwide, and has held many management
positions with General Electric. Mrs. Mangum is a director
of Barnes Group Inc., Haverty Furniture Companies, Inc.,
Collective Brands, Inc. (formerly, Payless ShoeSource, Inc.),
and Matria. She is also a director of privately-owned Decatur
First Bank.
Augustus K. Oliver has served as a member of the Board
since June 2008. Mr. Oliver has been a Managing Member of
Oliver Press Partners LLC, an investment advisor, since 2005. In
addition, since 1999, Mr. Oliver has been a partner of
WaterView Advisors, the investment manager for two companion
private equity investment partnerships. Mr. Oliver is
currently a director of Scholastic Corp., Comverse Technology,
Inc. and The Phoenix Companies, Inc.
John W. Thompson has served as a member of the Board
since May 2003. Mr. Thompson has served as President of
Thompson Investment Management, LLC, a mutual fund investment
advisor, since January 2004. Previously, he served as President
of Thompson Plumb & Associates, LLC, a mutual fund
investment advisor, from 1984 to January 2004 and as its
Treasurer from 1993 to January 2004.
Benner Ulrich has served as a member of the Board since
June 2008. Mr. Ulrich has been a Principal and director of
research of Oliver Press Partners, LLC, an investment advisory
firm, since March 2007. From 2000 to 2007, Benner worked at UBS
Investment Bank in the healthcare research group, most recently
as a director covering medical technology companies. Benner is a
graduate of Lehigh University.
Hugh H. Williamson, III has served as a member of
the Board since January 2000, as Lead Independent Director since
May 2007, as Chairman of the Company Board since 2008 and is the
Chairman of the Boards Compensation Committee.
Mr. Williamson has served as Chairman of the Board and
Chief Executive Officer of XeDAR Corporation (XDRC) since
January 2007. Previously he was Chief Executive Officer of
Cherry Creek Capital Partners, LLC, a private financial services
and venture capital firm, from January 1999 until May of 2007.
He also served as Manager of Humanade, LLC, a private equity
technology and real estate firm from 1995 until May of 2007.
From July of 1992 until June of 2007 he served as Chief
Executive Officer of Schutte & Koerting, Inc.
(formerly Ketema, Inc.) an industrial manufacturer of advanced
materials, components, and equipment, formerly an AMEX listed
company that was taken private in 1994. Mr. Williamson is
also a director of several private technology companies.
CURRENT
EXECUTIVE OFFICERS
Set forth below is the name, age and current position of each
executive officer of the Company as of February 27, 2009.
There are no family relationships between the Companys
directors and executive officers.
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Name
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Age
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|
Current Positions with Emageon
|
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Charles A. Jett, Jr.
|
|
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49
|
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President and Chief Executive Officer
|
Keith Stahlhut
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52
|
|
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Chief Operating Officer (Interim) and Senior Vice President,
Sales
|
John W. Wilhoite
|
|
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56
|
|
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Chief Financial Officer, Treasurer and Secretary
|
Charles A. Jett, Jr. has served as Chief Executive
Officer since January 2000, and was appointed President in March
2006. In addition, Mr. Jett served as Chairman of the Board
of Directors of the Company
A-6
from 2000 through June 2008. From 1997 through 1999,
Mr. Jett was Vice President and General Manager of Walker
Interactive Systems, Inc. (now Elevon, Inc.), a provider of
enterprise financial and management software. He joined Walker
Interactive upon its acquisition of Revere, Inc., a software
company, where Mr. Jetts position prior to the
acquisition was Chairman, President, and Chief Executive
Officer. Mr. Jett joined Revere, Inc. in 1988 as Vice
President of Sales, was promoted to President in 1991, and
assumed the Chairman and CEO positions in 1994. Prior to his
tenure at Revere, Mr. Jett was national sales manager of
Shoptrac Data Collection Systems, Inc. Mr. Jett is a
director of several non-profit entities.
Keith Stahlhut has served as the Companys Chief
Operating Officer (Interim) since July 2008, and as the
Companys Senior Vice President, Sales, since January 2008.
He served as the Companys Vice President, National Account
Sales, from January 2006 to December 2007, as the Companys
Vice President, Client Sales and Support, from January 2004 to
December 2005, and as the Companys Vice President,
Strategic Partnerships, from February 2000 to December 2003.
John W. Wilhoite has served as the Chief Financial
Officer and Treasurer of the Company since March 2008, and as
the Secretary of the Company since 2007. He also served as the
Vice President of Finance and Controller of the Company from
March 2006 to March 2008. From March 2005 to March 2006,
Mr. Wilhoite served as Chief Financial Officer of Telairity
Semiconductor Corp., a manufacturer of video processing
solutions for broadcast and professional video applications, and
from August 2004 to January 2005, he served as the Chief
Financial Officer of ComFrame Software Corporation, a software
consultant and developer. He served as Vice President of Finance
and Chief Financial Officer of Integrated Defense Technologies,
Inc., a developer and provider of advanced electronics and
technology products to the defense and intelligence industries,
from April 2001 to January 2004. Before joining Integrated
Defense Technologies in April 2001, Mr. Wilhoite held
various management and executive management positions (including
Executive Vice President and Chief Financial Officer) with
Intergraph Corporation, a technical solutions and systems
integration services company, and Mr. Wilhoite also spent
twelve years in public accounting with Price
Waterhouse & Co. (now PricewaterhouseCoopers LLP).
BOARD
STRUCTURE AND CORPORATE GOVERNANCE
Board of
Directors and Meetings
The Board held 16 meetings during the year ended
December 31, 2008. During 2008, following the time that he
or she became a director, each director attended 75% or more of
the aggregate number of (i) meetings of the Board and
(ii) meetings of those committees of the Board on which he
or she served. Members of the Board and its committees also
consulted informally with management from time to time and acted
at various times by written consent without a meeting during
2008.
The Company encourages its directors to attend the
Companys annual stockholder meetings. One director
attended the 2008 Annual Meeting of Stockholders.
Board
Committees
The Board has established a standing Audit Committee,
Compensation Committee and Governance Committee. Each such
committee has a written charter that is reviewed annually and
revised as appropriate. A copy of each such committees
charter is available on the Companys website at
www.emageon.com. Additionally, a copy of each charter may be
obtained, free of charge, by writing to the Corporate Secretary,
Emageon Inc., 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242.
Audit
Committee
The Board has determined that each of the current members of the
Audit Committee, consisting of Mr. Beattie (Chairman),
Mr. Karro, and Mr. Thompson, are
independent under the NASDAQ Marketplace Rules and
satisfy the other requirements of the NASDAQ Marketplace Rules
and rules of the SEC regarding audit committee membership. The
Board has also determined that Mr. Beattie qualifies as an
audit committee
A-7
financial expert under applicable SEC rules and
regulations governing the composition of audit committees and
satisfies the financial sophistication requirements
of the NASDAQ Marketplace Rules. The Audit Committee held seven
meetings during 2008.
The Audit Committee assists the Board in fulfilling its
oversight responsibility relating to (i) the integrity of
the Companys financial statements, (ii) the
Companys compliance with legal and regulatory
requirements, (iii) the independent registered
auditors qualifications and independence, (iv) the
compensation and performance of the Companys independent
registered public accounting firm, (v) the functioning of
the Companys systems of internal accounting and financial
reporting controls, (vi) the portions of the Companys
Code of Ethics that relate to the integrity of accounting and
financial reporting, (vii) review and approval of any
related party transactions, and (viii) assessment of risk and
implementation of policies and procedures for mitigation of
risk. The Audit Committees procedures for receipt,
retention and treatment of complaints regarding accounting,
internal accounting and financial controls or auditing matters,
and the confidential anonymous submission by employees of
concerns regarding questionable accounting and auditing
practices, may be found on the Companys website at
www.emageon.com.
Compensation
Committee
Committee Members and
Independence. Mr. Williamson (Chairman),
Mrs. Mangum, Mr. Goad and Mr. Ulrich are the
current members of the Compensation Committee. Mr. Ulrich
joined the Compensation Committee following his appointment to
the Company Board in June 2008. Mr. Williamson is also the
Companys Lead Independent Director and Chairman of the
Company Board. Each member of the Compensation Committee
qualifies as an independent director under the
NASDAQ Marketplace Rules.
Role and Responsibilities of the
Committee. The Compensation Committee administers
the compensation program for the named executive officers and
certain key employees of the Company and makes all related
decisions. The Compensation Committee also administers the
Companys equity incentive plans. The Compensation
Committee seeks to ensure that the total compensation paid to
the named executive officers is fair, reasonable and competitive.
The fundamental responsibilities of the Compensation Committee
are:
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|
|
to review at least annually the goals and objectives, and
structure, of the Companys plans for executive
compensation, incentive compensation and equity-based
compensation, as well as its general compensation plans and
employee benefit plans (including retirement and health
insurance plans);
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|
to evaluate annually the performance of the Chief Executive
Officer in light of the goals and objectives of the Company and
its executive compensation plans, and to determine his or her
compensation level based on this evaluation;
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|
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|
to review annually and determine the compensation level of all
other executive officers of the Company, in light of the goals
and objectives of the Company and its executive compensation
plans;
|
|
|
|
periodically, as it deems necessary or desirable and pursuant to
the applicable equity-based compensation plan, to grant, or
recommend that the Board grant, equity-based compensation awards
to any officer or employee of the Company for such number of
shares of common stock as the Compensation Committee, in its
sole discretion, shall deem to be in the best interest of the
Company; and
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to review and recommend to the Board all equity-based
compensation plans.
|
In 2006, the Compensation Committee enlisted the services of
Mercer Human Resource Consulting, an internationally recognized
compensation consulting firm, to provide additional information
for its evaluation of the competitiveness of the compensation
packages of the Companys named executive officers.
Specifically, the Compensation Committee asked Mercer to review
the Companys overall mix of equity and cash compensation.
Mercer provided a written report to the Compensation Committee
regarding its review and made recommendations regarding
adjustments to the size and nature of, and the methodology for,
the Companys equity award grants relative to the cash
component of its employee compensation packages. The
Compensation Committee considered the information provided by
Mercer in connection with establishing
A-8
2006 compensation packages for the named executive officers and
key employees of the Company, but did not rely exclusively on
Mercers recommended methodology.
Committee Meetings. The Compensation Committee
meets as often as necessary to perform its duties and
responsibilities. The Compensation Committee held nine meetings
during 2008. The Compensation Committee typically meets with the
Chief Executive Officer and also meets in executive session
without management.
The Compensation-Setting Process. The
Compensation Committee meets in executive session each year to
evaluate the performance of the named executive officers and
certain key employees, to determine their incentive bonuses for
the prior fiscal year, to set their base salaries for the next
calendar year, and to consider and approve any grants to them of
equity incentive compensation.
Although many compensation decisions are made in the fourth and
first quarters, the compensation planning process continues
throughout the year. Compensation decisions are designed to
promote the Companys fundamental business objectives and
strategy. Business and succession planning, evaluation of
management performance and consideration of the business
environment are year-round processes.
Management plays a significant role in the compensation-setting
process. The most significant aspects of managements role
are:
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evaluating employee performance; and
|
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recommending salary levels and option awards to the Compensation
Committee.
|
The Chief Executive Officer also participates in Compensation
Committee meetings at the Committees request to provide:
|
|
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|
|
background information regarding the Companys strategic
objectives;
|
|
|
|
his evaluation of the performance of the named executive
officers and other key employees; and
|
|
|
|
compensation recommendations as to the named executive officers
(other than himself).
|
Governance
Committee
The Board has determined that each of the current members of the
Governance Committee, consisting of Mrs. Mangum (Chairman),
Mr. Clark, and Mr. Goad, are independent
under the current NASDAQ Marketplace Rules. The Governance
Committee held 17 meetings during 2008.
The Governance Committee assists the Board in fulfilling its
oversight responsibility regarding (i) the size,
composition and structure of the Board, (ii) the structure,
responsibilities and membership of the Boards committees,
(iii) criteria for the selection of qualified directors and
nominees for Board membership for recommendation to the Board
and stockholders, (iv) nominees for the Board submitted by
the stockholders in accordance with established procedures for
such nominations, (v) the resignation or termination of
directors, (vi) director compensation, benefits, tenure and
retirement, (vii) evaluation of Board and committee
performance, and (viii) policies, practices and procedures
regarding the Boards oversight of management, and the
Boards self-governance.
Criteria
for Director Nominees
The Board believes that it should be composed of directors with
varied, complementary backgrounds, and that directors should, at
a minimum, exhibit proven leadership capabilities and experience
at a high level of responsibility within their chosen fields.
Directors should possess the highest personal and professional
ethics, integrity and values and should be committed to
representing the long-term interests of the stockholders.
When considering a candidate for director, the Governance
Committee takes into account a number of factors, including the
following:
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|
independence from management;
|
A-9
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|
|
professional and educational background, reputation, industry
knowledge and business experience and its relevance;
|
|
|
|
existing commitments to other businesses and the ability to
devote sufficient time to the Company;
|
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|
|
whether the candidate will complement the existing mix of skills
and talent resident in the Board;
|
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|
|
the candidates ability to fulfill the responsibilities of
one or more committees of the Board; and
|
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|
whether the candidate is financially literate or a financial
expert.
|
Prior to nominating a sitting director for re-election at an
annual meeting of stockholders, the Governance Committee will
consider the directors past attendance at, and
participation in, meetings of the Board and its committees and
the directors formal and informal contributions to the
work of the Board and its committees.
When seeking candidates for director, the Governance Committee
may solicit suggestions from incumbent directors, management,
stockholders and others, and may use the services of third party
search firms to assist in identifying appropriate candidates.
After an initial evaluation of a candidate, the Governance
Committee will interview that candidate and may ask the
candidate to meet with management. If the Governance Committee
believes a candidate will be a valuable addition to the Board,
it may recommend to the Board the nomination of that candidate.
Stockholder
Recommendations for Nominations to the Board
The Governance Committee will consider candidates for director
recommended by any stockholder who beneficially owns shares
representing more than 5% of the then-outstanding Shares and who
has beneficially owned those Shares for more than two years at
the time of submission. The Governance Committee will evaluate
any such recommendation applying its regular criteria for
nominees and may consider the additional information set forth
below. Eligible stockholders wishing to recommend a candidate
for nomination as a director are requested to send the
recommendation in writing to the Chairman, Governance Committee,
Emageon Inc., 1200 Corporate Drive, Suite 200, Birmingham,
Alabama, 35242. A stockholder recommendation made to the
Governance Committee must contain the following information:
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documentation supporting that the writer is a stockholder of
Emageon and has been a beneficial owner of Shares representing
more than 5% of our then-outstanding Shares of common stock for
more than two years, and a statement that the writer is
recommending a candidate for nomination as a director;
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a resume of the candidates business experience and
educational background, including the candidates name,
business and residence address, and principal occupation or
employment, and an explanation of how the candidates
background and qualifications are directly relevant to the
Companys business;
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the number of Shares beneficially owned by the candidate;
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a statement detailing any relationship, arrangement or
understanding, formal or informal, between or among the
candidate, any affiliate of the candidate, and any customer,
supplier or competitor of the Company, or any other
relationship, arrangement or understanding that might affect the
independence of the candidate as a member of the Board;
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detailed information describing any relationship, arrangement or
understanding, formal or informal, between or among the
proposing stockholder, the candidate and any affiliate of the
proposing stockholder or the candidate;
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any other information that would be required under SEC rules in
a proxy statement soliciting proxies for the election of such
candidate as a director; and
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a signed consent of the candidate to serve as a director, if
nominated and elected.
|
In connection with its evaluation of director candidates, the
Governance Committee may request additional information from the
candidate or the recommending stockholder and may request an
interview with
A-10
the candidate. The Governance Committee has discretion to decide
which individuals, if any, to recommend for nomination as
directors.
Communications
with Directors
Stockholders and other interested parties may send
communications to the Board, the Lead Independent Director, the
non-management directors as a group or any specific director by
mailing the communication to the Board of Directors,
c/o Corporate
Secretary, Emageon Inc., 1200 Corporate Drive, Suite 200,
Birmingham, Alabama, 35242. Emageons Corporate Secretary
will forward the correspondence to the Chairman of the
Governance Committee unless it is addressed to an individual
director or the Lead Independent Director, in which case the
correspondence will be forwarded accordingly. The Board of
Directors has requested that certain items unrelated to its
duties be excluded, such as solicitations and advertisements,
junk mail, product-related communications, job referral
materials such as resumes, and surveys.
Director
Independence
Our Corporate Governance Guidelines provide that a majority of
the Board and all members of the Audit, Compensation and
Governance Committees of the Board will be independent. The
Board makes an annual determination as to the independence of
each member in accordance with the current standards for
independence under NASDAQ Marketplace Rules and the
federal securities laws. Before the meeting at which this review
occurs, each director is asked to supply the Governance
Committee and the full Board with complete information about the
directors relationship with the Company and with its
senior management and their affiliates. Senior management
provides additional information about transactions,
relationships or arrangements between the Company and the
directors or parties related to the directors. The Governance
Committee reviews this information and makes its own
determinations of the independence of each director. It reports
its findings and the reasons for those findings to the full
Board, which then makes the final determinations of director
independence. The Board has determined that, except for
Mr. Oliver, who is a managing member of Oliver Press
Partners, LLC, the Companys largest stockholder, all of
its directors are independent under these standards.
Certain
Relationships and Related Transactions
Policy
on Related Party Transactions
The Company recognizes that transactions between the Company or
its subsidiaries and any of its directors or executive officers
can present potential or actual conflicts of interest.
Accordingly, as a general matter it is the Companys
preference to avoid such transactions. Nevertheless, the Company
recognizes that there are circumstances where such transactions
may be in, or not inconsistent with, the best interests of the
Company. Therefore, the Company has adopted a formal policy that
requires its Audit Committee to review and, if appropriate,
approve or ratify any such transactions. Pursuant to the policy,
the Audit Committee will review any transaction in which the
Company is or will be a participant and the amount involved
exceeds $120,000 or one percent of the average of Emageons
total assets at year end for the last two completed fiscal
years, and in which any of the Companys directors,
executive officers or 5% stockholders had, has or will have a
direct or indirect material interest. After its review, the
Audit Committee will only approve or ratify those transactions
that are in, or are not inconsistent with, the best interests of
the Company and its stockholders.
Oliver
Press Partners
On June 22, 2008, the Company entered into an agreement
with Charles A. Jett, Jr. and affiliates of Oliver Press
Partners, LLC (the OPP Investors) terminating the
proxy contest then being pursued by the OPP Investors with
respect to the election of directors at the Companys 2008
Annual Meeting of Stockholders.
A-11
Under the agreement, the OPP Investors irrevocably withdrew
their nominations to the Companys Board and terminated
their pending proxy contest. The OPP Investors also agreed to
vote their shares of Common Stock in favor of the Company
Boards slate of nominees at the annual meeting.
In addition, under the agreement, the Company agreed to make the
following changes to the size and composition of the Company
Board:
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The size of the Board was expanded, effective upon execution of
the agreement, from eight to ten members, and Augustus K. Oliver
and Benner Ulrich, a managing member and a principal and
employee, respectively, of OPP, were appointed by the Board to
fill the two new seats, with terms expiring in 2010.
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Upon his appointment to the Board, Mr. Ulrich was appointed
as a member of the Boards former Strategic Alternatives
Committee.
|
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Mr. Jett and Douglas D. French resigned from the Company
Board, effective immediately following the annual meeting.
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The Company Board reduced its size from ten to nine members
immediately following the resignations of Mr. Jett and
Mr. French, and agreed that it would not thereafter,
without the written consent of the OPP Investors, take any
action to change the size of the Company Board so long as either
Mr. Oliver or Mr. Ulrich (or any replacement nominee
for either Mr. Oliver or Mr. Ulrich) continued to
serve on the Board.
|
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Bradley S. Karro was appointed as a member of the Company Board.
Upon the appointment of Mr. Karro, he was appointed as a
member of the former Strategic Alternatives Committee.
|
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Mylle H. Mangum resigned from the Board and was re-appointed by
the Board as a director with a term expiring in 2009.
|
The agreement also provided that the Company would adjourn its
annual meeting, which was scheduled for June 23, 2008, and
reconvene the meeting on July 8, 2008. In addition, under
the agreement, the Company agreed to reimburse the OPP Investors
for reasonable out-of-pocket fees and expenses incurred prior to
June 22, 2008 in connection with their nominations and
related filings, up to a maximum amount of $75,000.
A-12
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of its Common
Stock, as of February 27, 2009 (except as otherwise noted),
by (i) each member of the Companys Board of
Directors, (ii) the Companys named executive
officers, (iii) all of the Companys directors and
executive officers as a group, and (iv) any person who is
known by the Company to be the beneficial owner of more than 5%
of our common stock as defined in accordance with
Rule 13d-3
under the Exchange Act.
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Shares
|
|
|
|
|
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Beneficially
|
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Percent
|
|
Beneficial Owner
|
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Owned(1)(2)
|
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Owned(3)
|
|
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Non-Employee Directors(4)
|
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|
|
|
|
|
|
Arthur P. Beattie
|
|
|
21,909
|
(5)
|
|
|
*
|
|
Roddy J.H. Clark
|
|
|
21,424
|
(5)
|
|
|
*
|
|
Fred C. Goad, Jr.
|
|
|
21,909
|
(5)
|
|
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*
|
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Bradley S. Karro
|
|
|
|
|
|
|
*
|
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Mylle H. Mangum
|
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|
21,909
|
(5)
|
|
|
*
|
|
Augustus K. Oliver
|
|
|
3,569,360
|
(6)
|
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16.64
|
%
|
John W. Thompson
|
|
|
151,029
|
(5)(7)
|
|
|
*
|
|
Benner Ulrich
|
|
|
|
(8)
|
|
|
*
|
|
Hugh H. Williamson, III
|
|
|
28,560
|
(5)
|
|
|
*
|
|
Named Executive Officers(4)
|
|
|
|
|
|
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|
|
Charles A. Jett, Jr.
|
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703,042
|
(5)
|
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|
3.28
|
%
|
W. Randall Pittman
|
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|
15,083
|
(5)(9)
|
|
|
*
|
|
John W. Wilhoite
|
|
|
34,046
|
(5)(9)
|
|
|
*
|
|
Chris E. Perkins
|
|
|
6,751
|
(5)(10)
|
|
|
*
|
|
Keith Stahlhut
|
|
|
83,927
|
(5)(10)
|
|
|
*
|
|
All Directors and Executive Officers as a Group
(12 Persons)
|
|
|
4,657,115
|
(11)
|
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|
21.71
|
%
|
Five Percent or Greater Stockholders
|
|
|
|
|
|
|
|
|
Oliver Press Partners, LLC(6)
|
|
|
3,569,360
|
|
|
|
16.64
|
%
|
Oliver Press Investors, LLC
|
|
|
|
|
|
|
|
|
Augustus K. Oliver
|
|
|
|
|
|
|
|
|
Clifford Press
|
|
|
|
|
|
|
|
|
Accipiter Capital Management, LLC(12)
|
|
|
2,920,415
|
|
|
|
13.62
|
%
|
Candens Capital, LLC
|
|
|
|
|
|
|
|
|
Gabe Hoffman
|
|
|
|
|
|
|
|
|
Deerfield Management Company, LP(13)
|
|
|
1,814,000
|
|
|
|
8.46
|
%
|
Flynn Management LLC
|
|
|
|
|
|
|
|
|
James E. Flynn
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Except as indicated in the footnotes to this table, the persons
listed have sole voting and investment power with respect to all
Shares beneficially owned by them. |
|
(2) |
|
Does not include outstanding restricted stock unit awards which
vest within 60 days after February 27, 2009, but for
which the settlement date is one year after the final vesting
date under the award agreement therefor. |
|
(3) |
|
The percentage of Shares beneficially owned is based on
21,449,718 Shares outstanding as of February 27, 2009.
Shares of common stock subject to options that are currently
exercisable or exercisable within 60 days after
February 27, 2009 are deemed to be outstanding and
beneficially owned by the person holding the options for the
purpose of computing the number of Shares beneficially owned and
the percentage |
A-13
|
|
|
|
|
of ownership of such person, but are not deemed outstanding for
the purpose of computing the percentage ownership of any other
person. |
|
(4) |
|
The address for each non-employee director and named executive
officer is 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242. |
|
(5) |
|
Includes, for the respective beneficial owner, beneficial
ownership of the following numbers of Shares that may be
acquired by such beneficial owner upon the exercise of stock
options that are currently exercisable or exercisable within
60 days after February 27, 2009: |
|
|
|
|
|
Beneficial Owner
|
|
Shares
|
|
Arthur P. Beattie
|
|
|
19,909
|
|
Roddy J.H. Clark
|
|
|
19,424
|
|
Fred C. Goad, Jr.
|
|
|
19,909
|
|
Mylle H. Mangum
|
|
|
19,909
|
|
Augustus K. Oliver
|
|
|
|
|
John W. Thompson
|
|
|
17,000
|
|
Hugh H. Williamson, III
|
|
|
17,000
|
|
Charles A. Jett, Jr.
|
|
|
638,422
|
|
W. Randall Pittman
|
|
|
|
|
John W. Wilhoite
|
|
|
34,046
|
|
Chris E. Perkins
|
|
|
|
|
Keith Stahlhut
|
|
|
77,109
|
|
|
|
|
(6) |
|
Information based on a Schedule 13D/A jointly filed with
the SEC on October 21, 2008 by Oliver Press Partners, LLC,
Oliver Press Investors, LLC, Augustus K. Oliver and Clifford
Press, who shared, as of October 21, 2008, voting and
dispositive power over 100 Shares held by Davenport
Partners, L.P., a Delaware limited partnership,
2,934,600 Shares owned by JE Partners, a Bermuda
partnership, and 634,660 Shares owned by Oliver Press
Master Fund LP, a Cayman Islands limited partnership. The
address for these parties is 152 West 57th Street, New
York, New York 10019. |
|
(7) |
|
Does not include Shares held by the Marianna Thompson Trust, the
beneficiary of which is Mr. Thompsons former spouse,
or Shares held by two grantor retained annuity trusts, the
beneficiaries of which are Mr. Thompsons adult
children. Mr. Thompson has no pecuniary interest in these
trusts, and no voting or dispositive power with respect to the
Shares held by these trusts. |
|
(8) |
|
Mr. Ulrich is an employee of Oliver Press Partners, LLC
which, through its affiliates, is the beneficial owner of
3,569,360 Shares. See Note 6. Mr. Ulrich does not
exercise any voting, investment or other authority with respect
to the Shares beneficially owned by Oliver Press Partners, LLC,
and disclaims beneficial ownership of such Shares. |
|
(9) |
|
Mr. Wilhoite was appointed as Chief Financial Officer and
Treasurer of Emageon effective as of March 31, 2008.
Mr. Wilhoite succeeded Mr. Pittman, who resigned those
positions effective as of March 31, 2008. |
|
(10) |
|
Mr. Perkins resigned as Chief Operating Officer of Emageon
effective as of July 25, 2008. On July 29, 2008,
Mr. Stahlhut was appointed to serve as Emageons Chief
Operating Officer (Interim) until such time as a successor Chief
Operating Officer is appointed. |
|
(11) |
|
Includes options for 832,783 Shares subject to stock
options that are currently exercisable or exercisable within
60 days after February 27, 2009. |
|
(12) |
|
Information based on a Schedule 13G/A filed with the SEC on
February 17, 2009 by Candens Capital, LLC, a Delaware
limited liability company, Accipiter Capital Management, LLC, a
Delaware limited liability company, Gabe Hoffman, Accipiter Life
Sciences Fund, LP, a Delaware limited partnership, Accipiter
Life Sciences Fund (Offshore), Ltd., a Cayman Islands company,
Accipiter Life Sciences Fund II, LP, a Delaware limited
partnership, Accipiter Life Sciences Fund II (Offshore),
Ltd., a Cayman Islands company, and Accipiter Life Sciences
Fund II (QP), LP, a Delaware limited partnership, which |
A-14
|
|
|
|
|
share voting and investment power over certain Shares. The
address for these parties is 666 5th Avenue, 35th Floor, New
York, New York 10103. |
|
(13) |
|
Information based on a Form 4 filed with the SEC on
March 2, 2009 by James e. Flynn. Flynn Management LLC
is the general partner of Deerfield Management Company and James
E. Flynn is the managing member of Flynn Management. The address
for these parties is 780 Third Avenue, 37th Floor, New York, New
York 10017. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Members of the Company Board, the Companys executive
officers, and persons who beneficially own more than 10% of the
outstanding Common Stock, if any, are subject to the
requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended, which requires them to file reports
with the SEC with respect to their ownership and changes in
their ownership of the Common Stock. Based solely upon
(i) the copies of Section 16(a) reports received by
the Company from such persons for their transactions in 2008 in
the Common Stock and their Common Stock holdings, and
(ii) the written representations received from certain of
such persons that no annual Form 5 reports were required to
be filed by them for 2008, the Company believes that all
reporting requirements under Section 16(a) for such year
were met in a timely manner by the Companys directors and
executive officers, and by greater than 10% owners of the Common
Stock, except that Forms 4 reflecting grants of
non-employee stock options in June and July of 2008 were not
filed until December 15, 2008, for Messrs. Beattie,
Clark, Goad, Williamson, Thompson, and Oliver and
Ms. Mangum, and a Form 3 for Mr. Karro was not
filed until December 15, 2008.
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
Summary
Compensation Table
The following table provides certain summary information
concerning the compensation earned for services rendered in all
capacities to the Company for the fiscal years ended
December 31, 2008 and 2007, by the Companys named
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary(1)
|
|
|
Bonus
|
|
|
Awards(2)
|
|
|
Awards(2)
|
|
|
Compensation
|
|
|
Compensation(3)
|
|
|
Total
|
|
|
Charles A. Jett, Jr.
|
|
|
2008
|
|
|
$
|
353,832
|
|
|
$
|
132,375
|
|
|
$
|
57,042
|
|
|
$
|
608,529
|
|
|
|
|
|
|
|
|
|
|
$
|
1,151,778
|
|
President and Chief Executive Officer
|
|
|
2007
|
|
|
$
|
353,825
|
|
|
|
|
|
|
$
|
43,917
|
|
|
$
|
717,709
|
|
|
|
|
|
|
|
|
|
|
$
|
1,115,451
|
|
Keith Stahlhut(4)
|
|
|
2008
|
|
|
$
|
218,283
|
|
|
$
|
20,000
|
|
|
$
|
9,270
|
|
|
$
|
101,037
|
|
|
$
|
132,341
|
(5)
|
|
|
|
|
|
$
|
480,931
|
|
Chief Operating Officer (Interim) and SVP, Sales
|
|
|
2007
|
|
|
$
|
163,729
|
|
|
|
|
|
|
$
|
116,937
|
|
|
$
|
7,750
|
|
|
$
|
204,347
|
(5)
|
|
|
|
|
|
$
|
492,763
|
|
John W. Wilhoite(6)
|
|
|
2008
|
|
|
$
|
216,867
|
|
|
$
|
61,250
|
|
|
$
|
9,270
|
|
|
$
|
71,115
|
|
|
|
|
|
|
|
|
|
|
$
|
358,502
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
|
2007
|
|
|
$
|
163,230
|
|
|
$
|
13,200
|
|
|
$
|
60,983
|
|
|
$
|
7,750
|
|
|
|
|
|
|
|
|
|
|
$
|
245,163
|
|
Chris E. Perkins(7)
|
|
|
2008
|
|
|
$
|
207,189
|
|
|
|
|
|
|
$
|
23,317
|
(8)
|
|
$
|
43,848
|
(8)
|
|
|
|
|
|
$
|
14,423
|
|
|
$
|
288,777
|
|
Former Chief Operating Officer
|
|
|
2007
|
|
|
$
|
27,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,500
|
|
W. Randall Pittman(6)
|
|
|
2008
|
|
|
$
|
63,958
|
|
|
|
|
|
|
$
|
30,570
|
(9)
|
|
$
|
405,331
|
(9)
|
|
|
|
|
|
$
|
401,418
|
|
|
$
|
901,277
|
|
Former Chief Financial Officer and Treasurer
|
|
|
2007
|
|
|
$
|
255,832
|
|
|
|
|
|
|
$
|
13,016
|
|
|
$
|
219,327
|
|
|
|
|
|
|
|
|
|
|
$
|
488,175
|
|
|
|
|
(1) |
|
Includes amounts deferred under the Companys employee
savings plan under Section 401(k) of the Internal Revenue
Code. The Company contributed $295,938 to this plan for 2007 and
$250,124 for 2008 on behalf of all of its eligible participating
employees. |
|
(2) |
|
Represents the amount recognized by the Company as an expense
for financial reporting purposes pursuant to FAS 123R, but
disregarding for this purpose the estimate of forfeitures
related to service-based vesting conditions. The methodology and
assumptions used to calculate the cost of each named executive
officers outstanding restricted stock unit and option
grants are described in Note 2, Summary of
Significant Accounting Policies, beginning on
page F-8,
and Note 13, Stock-Based Compensation,
beginning on |
A-15
|
|
|
|
|
page F-23
of the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, as updated by
the assumptions in Note 11, Stock Based
Compensation, beginning on page 9 of the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2008. No
restricted stock unit grants or option grants to the named
executive officers listed above were forfeited in 2007. All
restricted stock units and all unvested options held by
Mr. Perkins were forfeited by Mr. Perkins on
July 25, 2008, the effective date of his resignation, and
all vested options held by Mr. Perkins expired on
October 23, 2008, in accordance with the terms of the
agreements pursuant to which they were granted. All options and
restricted stock units held by Mr. Pittman became fully
vested on March 31, 2008 under the Severance Agreement and
General Release, dated February 20, 2008, between
Mr. Pittman and the Company, and all such options expired
on June 29, 2008 in accordance with the terms of the option
agreements pursuant to which they were granted. Other than the
foregoing, no restricted stock unit grants or option grants to
the named executive officers listed above were forfeited in 2008. |
|
(3) |
|
Mr. Perkins received a payment of $14,423 for accrued but
unused vacation time in connection with the termination of his
employment in July 2008. Mr. Pittman received a payment of
$9,810 for accrued but unused vacation time, and a lump sum
severance payment of $391,608 in connection with the termination
of his employment in March 2008. No other perquisites or
personal benefits exceeded $10,000 for any named executive
officer. |
|
(4) |
|
On July 29, 2008, Mr. Stahlhut was appointed to serve
as Emageons Chief Operating Officer (Interim), to serve
until such time as a successor Chief Operating Officer is
appointed. |
|
(5) |
|
Includes amounts received in non-equity incentive plan
compensation pursuant to a sales incentive compensation plan. |
|
(6) |
|
Mr. Wilhoite was appointed as Chief Financial Officer and
Treasurer of Emageon effective as of March 31, 2008.
Mr. Wilhoite succeeded Mr. Pittman, who resigned those
positions effective as of March 31, 2008. |
|
(7) |
|
Mr. Perkins joined the Company as its Chief Operating
Officer on December 6, 2007 and resigned as Chief Operating
Officer of Emageon effective as of July 25, 2008. |
|
(8) |
|
Includes amounts recognized by the Company as an expense in
connection with vesting of restricted stock units and options
held by Mr. Perkins prior to July 25, 2008, the
effective date of his resignation. See Notes 2 and 3 above
for additional detail regarding the recognition of such expense
pursuant to FAS 123R. |
|
(9) |
|
Includes amounts recognized by the Company as an expense in
connection with the vesting of all equity awards as of
March 31, 2008 in accordance with the Severance Agreement
and General Release entered into by Mr. Pittman on
February 20, 2008 in connection with the termination of his
employment with the Company. See Note 2 above for
additional detail regarding the recognition of such expense
pursuant to FAS 123R. |
A-16
Outstanding
Equity Awards at Fiscal Year-End 2008
The following table sets forth information on stock options and
stock awards held by the named executive officers at
December 31, 2008. The market value of the stock awards is
based upon the closing market price for the Companys
common stock as of December 31, 2008, the last trading day
in 2008, which was $1.85.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares or
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Units of Stock
|
|
|
Units of Stock
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have Not
|
|
|
That Have Not
|
|
Name
|
|
Date of Award
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Vested
|
|
|
Vested
|
|
|
Charles A. Jett, Jr.
|
|
|
7/1/2000
|
|
|
|
148,187
|
|
|
|
0
|
|
|
$
|
4.70
|
|
|
|
7/1/2010
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2000
|
|
|
|
57,152
|
|
|
|
0
|
|
|
$
|
4.70
|
|
|
|
10/30/2010
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
12/14/2001
|
|
|
|
78,000
|
|
|
|
0
|
|
|
$
|
1.73
|
|
|
|
12/14/2011
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2003
|
|
|
|
9,538
|
|
|
|
0
|
|
|
$
|
4.70
|
|
|
|
1/28/2013
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2004
|
|
|
|
54,483
|
|
|
|
0
|
|
|
$
|
5.52
|
|
|
|
2/11/2014
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1/7/2005
|
|
|
|
30,820
|
|
|
|
30,820
|
|
|
$
|
7.17
|
|
|
|
1/7/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
11/1/2005
|
|
|
|
52,083
|
|
|
|
47,917
|
|
|
$
|
12.72
|
|
|
|
11/1/2015
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
39,833
|
|
|
|
55,767
|
|
|
$
|
16.56
|
|
|
|
4/3/2016
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,099
|
(5)
|
|
$
|
5,733
|
|
|
|
|
2/26/2007
|
|
|
|
16,594
|
|
|
|
63,056
|
|
|
$
|
12.46
|
|
|
|
2/26/2017
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,240
|
(5)
|
|
$
|
35,594
|
|
Keith Stahlhut
|
|
|
7/1/2000
|
|
|
|
31,665
|
|
|
|
0
|
|
|
$
|
4.70
|
|
|
|
7/1/2010
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
11/4/2004
|
|
|
|
6,060
|
|
|
|
0
|
|
|
$
|
7.17
|
|
|
|
11/4/2014
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
4/3/2006
|
|
|
|
22,368
|
|
|
|
8,335
|
|
|
$
|
16.56
|
|
|
|
4/3/2016
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,551
|
(5)
|
|
$
|
2,869
|
|
|
|
|
8/10/2007
|
|
|
|
8,861
|
|
|
|
16,139
|
|
|
$
|
9.19
|
|
|
|
8/10/2017
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2008
|
|
|
|
8,020
|
|
|
|
26,980
|
|
|
$
|
2.52
|
|
|
|
2/22/2018
|
(6)
|
|
|
|
|
|
|
|
|
John W. Wilhoite
|
|
|
4/3/2006
|
|
|
|
8,250
|
|
|
|
3,750
|
|
|
$
|
16.56
|
|
|
|
4/3/2016
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,551
|
(5)
|
|
$
|
2,869
|
|
|
|
|
8/10/2007
|
|
|
|
8,331
|
|
|
|
16,669
|
|
|
$
|
9.19
|
|
|
|
8/10/2017
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2008
|
|
|
|
11,458
|
|
|
|
38,542
|
|
|
$
|
2.52
|
|
|
|
2/22/2018
|
(6)
|
|
|
|
|
|
|
|
|
Chris E. Perkins(8)
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|
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|
|
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|
|
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|
|
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|
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W. Randall Pittman(9)
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|
|
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|
(1) |
|
These options vested in four equal annual installments
commencing on the first anniversary of the date of the award. |
|
(2) |
|
These options vested in three approximately equal annual
installments commencing on the first anniversary of the date of
the award. |
|
(3) |
|
Fifty percent of these options vested in one installment on the
second anniversary of the date of the award, with the balance
vesting in two equal annual installments commencing one year
after such anniversary. |
|
(4) |
|
Twenty-five percent of these options vested in one installment
on the first anniversary of the date of the award, with the
balance vesting in 36 approximately equal monthly installments
commencing one month after such anniversary. |
|
(5) |
|
These restricted stock units vest in 48 approximately equal
monthly installments commencing one month after the date of such
award. |
|
(6) |
|
These options vest in 48 approximately equal monthly
installments commencing one month after the date of such award. |
|
(7) |
|
One quarter of these options vested immediately upon the grant
date then one quarter vest on each of the first three
anniversaries of the grant date. |
|
(8) |
|
All restricted stock units and all unvested options held by
Mr. Perkins were forfeited by Mr. Perkins on
July 25, 2008, the effective date of his resignation, and
all vested options expired on October 23, 2008, in
accordance with the terms of the agreements pursuant to which
they were granted. |
A-17
|
|
|
(9) |
|
All options and restricted stock units held by Mr. Pittman
became fully vested on March 31, 2008 under the Severance
Agreement and General Release, dated February 20, 2008,
between Mr. Pittman and the Company, and all such options
expired on June 29, 2008 in accordance with the terms of
the option agreements pursuant to which they were granted. |
Discussion
of Information Included in Summary Compensation Table and
Outstanding Equity Awards at Fiscal Year-End 2008
Table
The procedures pursuant to which the Compensation Committee of
the Company Board determined the compensation set forth in the
Summary Compensation Table, and pursuant to which the awards set
forth in the Outstanding Equity Awards at Fiscal
Year-End 2008 Table were made, are described above
under the heading Compensation Committee. A
description of additional material factors necessary to an
understanding of the information disclosed in these tables is
set forth below.
Employment
Agreements of Named Executive Officers
Charles A. Jett, Jr., Keith Stahlhut and John W.
Wilhoite. Each of Messrs. Jett, Stahlhut and
Wilhoite, has an employment agreement with the Company. The
terms of Mr. Jetts employment agreement is two years,
the term of Mr. Stahlhuts agreement is 6 months,
and the term of Mr. Wilhoites agreement is
12 months. The terms of the agreements automatically renew
on a daily basis unless notice is given by the Company or by the
executive to cease the automatic renewal. Pursuant to the terms
of each agreement, the executive is entitled to a base annual
salary, subject to annual increase as recommended by the
Compensation Committee, and is eligible for an annual cash bonus
under the Companys informal performance-based annual bonus
program for its executive officers. In addition,
Mr. Stahlhut is eligible for an annual sales incentive
compensation bonus under a sales incentive compensation plan
based on certain minimum bookings targets. Each executive is
also eligible for the same employee benefits, including health,
life, disability, dental, and retirement benefits, as are
available to all employees of the Company.
W. Randall Pittman and Chris E.
Perkins. Mr. Pittman, the Companys
former Chief Financial Officer and Treasurer, and
Mr. Perkins, the Companys former Chief Operating
Officer, are parties to employment agreements with the Company.
The term of each agreement was one year, and the agreements
otherwise contained terms with respect to salary, bonus and
benefits similar to those set forth in the employment agreements
of Messrs. Jett, Stahlhut and Wilhoite. The employment
agreements contain certain rights and obligations, including
non-competition and confidentiality obligations on the part of
the former executive and indemnification obligations on the part
of the Company, that continued following the termination of the
executives employment.
On February 20, 2008, the Company and Mr. Pittman
entered into a Severance Agreement and General Release with
respect to the termination of Mr. Pittmans
employment, which termination was effective March 31, 2008.
On June 23, 2008, Mr. Perkins announced that he would
resign from his position as Chief Operating Officer of the
Company. Mr. Perkins resignation was effective
July 25, 2008.
Annual
Cash Bonuses
The Company utilizes annual cash bonuses to reward the named
executive officers for their performance and the performance of
the Company during the prior year.
In 2007, under the Companys informal performance-based
annual bonus program, (i) the Compensation Committee
approved a target bonus for each named executive officer as a
percentage of base salary, and (ii) the named executive
officer was able to earn his bonus based on the achievement of
financial goals set by the Compensation Committee. The
Compensation Committee established two performance metrics for
this bonus plan: (i) $136 million in Company revenue,
and (ii) earnings per share of $.24 (before
acquisition-related charges). In addition, the Compensation
Committee determined that the target cash incentive amount for
which Mr. Jett would be eligible would be 63% of his base
salary, and the target cash incentive amounts for which the
Companys other named executive officers would be eligible
would be 45% of the executives base salary. One-half of
the cash incentive amount would be payable to the named
executive officer if the Company
A-18
achieved the total revenue target, and one-half would be payable
if the Company achieved the earnings per share target. No cash
incentive would be paid in the event the Companys
performance fell below both the revenue target and the earnings
per share target. The Company did not achieve either the revenue
performance metric or the earnings per share target; thus, no
cash incentive bonus payments were made to named executive
officers for 2007.
In 2008, the bonus program was not based on pre-established
performance targets or objectives. Instead, the Compensation
Committee utilized discretionary cash bonuses to compensate the
named executive officers for their performance over the course
of 2008. In determining the amount of such discretionary
bonuses, the Compensation Committee considered, among other
things, the Companys performance, the executives
overall performance and contribution to the Company over the
course of the year, the executives contribution to and
role in the Companys pursuit of strategic alternatives,
and the amounts of the performance-based bonuses paid to the
executive during prior years.
Sales
Incentive Compensation Plan Keith
Stahlhut
The Company agreed to sales incentive compensation plans with
Mr. Stahlhut for 2007 and 2008 that provided for payment of
quarterly, mid-year and annual incentive compensation subject to
achievement of certain minimum bookings targets.
Specifically, under Mr. Stahlhuts 2008 plan, he was
entitled to receive a quarterly bonus if the Companys
sales team achieved a specified minimum bookings target for a
quarter, and an annual bonus if the Companys sales team
achieved a specified level of overall annual bookings. If
minimum bookings did not reach the specified target for a
particular quarter or the year, Mr. Stahlhut would be
entitled to receive a prorated portion of the quarterly or
annual bonus amount, as applicable, based on the percentage of
the minimum bookings target that was actually achieved. In
addition, if annual bookings exceeded the specified annual
bookings target, Mr. Stahlhut would be entitled to receive,
in addition to the applicable bonus amount, a specified
percentage (which was less than 0.5%) of each dollar in excess
of the bookings target.
Under Mr. Stahlhuts 2007 plan, he was entitled to
receive quarterly, mid-year and annual bonuses if his sales team
achieved a specified minimum bookings target for radiology and
cardiology products for those periods. If minimum bookings did
not reach the specified target for a particular period,
Mr. Stahlhut would be entitled to receive a prorated
portion of the applicable bonus amount (provided that he was not
entitled to any prorated mid-year or annual bonus unless at
least 25% of the applicable minimum bookings target was actually
achieved). In addition, if annual bookings exceeded the
specified annual bookings target, Mr. Stahlhut would be
entitled to receive, in addition to the applicable bonus amount,
a specified percentage (which was less than 0.5%) of each dollar
in excess of the bookings target. Under the 2007 plan,
Mr. Stahlhut also was entitled to receive 3,000 shares
of restricted Common Stock.
Sales bookings targets under Mr. Stahlhuts sales
incentive compensation plans were established by the
Companys senior management team. These targets and goals
were established taking into account various factors, including
managements assessment of the probability of achieving
higher levels of financial performance within the fiscal year
and the Companys confidential, internal operating plans
and financial projections. The Company has not disclosed the
specific targets and goals discussed above because it believes
such disclosure would cause substantial competitive harm by,
among other things, providing competitors and other
third-parties with insight into certain of the Companys
non-public targeted financial metrics and sales level objectives
as well as competitively sensitive aspects of its compensation
practices for its key sales personnel. The targets and goals
are, however, intended to be realistic and reasonable, but
challenging, in order to drive increases in new sales bookings
to create revenue growth. Overall, the Company believes that
Mr. Stahlhuts sales incentive compensation plans
required strong performance in order for him to receive a
meaningful portion of the bonus payments for which they
provided, and that his overall compensation is closely aligned
with his and the Companys relative performance.
A-19
Equity
Incentive Awards
The Company Board adopted the Emageon Inc. 2005 Equity Incentive
Plan in January 2005. The plan gives the Compensation Committee
broad discretion to fashion the terms of awards to provide
eligible participants with such equity-based incentives as the
Compensation Committee deems appropriate. It permits the
issuance of awards in a variety of forms, including
non-qualified stock options and incentive stock options,
restricted stock, restricted stock units, stock appreciation
rights and performance shares.
The named executive officers are eligible to receive stock
options and restricted stock awards under the 2005 Equity
Incentive Plan. In determining the number of options and
restricted stock awards to be granted to named executive
officers, and the frequency of such grants, the Compensation
Committee takes into account the executives title, scope
of responsibility, ability to affect the profitability of the
Company, the executives performance and the value of stock
options and restricted stock awards in relation to other
elements of total compensation. The Company also believes that
revenue and stock price appreciation are useful measures of
managements effectiveness in creating value for the
Companys stockholders. Therefore, the Companys
revenue and stock price appreciation over the applicable
performance measurement periods are also taken into account when
determining the number of options and restricted stock awards to
be granted to executives. These factors are weighed by the
Compensation Committee taking into account the overall goals of
its equity-based award program.
The Company grants all stock options and restricted stock units
based on the fair market value of its common stock as of the
date of grant. The exercise price for stock option grants is
determined by reference to the closing price per Share on The
NASDAQ Global Market at the close of business on the date of
grant.
Option and restricted stock awards under the compensation
programs discussed above are made at regular or special
Compensation Committee meetings. The effective date for such
grants is the date of such meeting, or such future date as the
Compensation Committee may specify. The Company may also make
grants of equity incentive awards at the discretion of the
Compensation Committee or the Board of Directors in connection
with the hiring of new executive officers and other employees.
During 2008, the named executive officers received options to
purchase an aggregate of 85,000 Shares and no restricted
stock units under the 2005 Equity Compensation Plan. These
option awards were made in February 2008 to
Messrs. Wilhoite and Stahlhut.
Defined
Contribution Benefit Plan
The Company has established a 401(k) plan for all eligible
employees pursuant to Section 401(k) of the Internal
Revenue Code. Prior to 2006, the Company made no contributions
to this plan. Effective January 1, 2006, the Company began
matching employee contributions to the plan at a rate of 50% of
employee contributions up to a maximum of 3% of the
employees annual salary. The amounts shown in the Summary
Compensation Table under the heading Salary include
the value of Company matching contributions to the executive
officers 401(k) Plan accounts. The Companys
aggregate contribution to the plan for all participating
employees for the year ended December 31, 2007 was
$295,938, and its aggregate contribution to the plan for all
participating employees for the year ended December 31,
2008 will be $250,124.
Perquisites
and Other Personal Benefits Compensation
The Company provides named executive officers with perquisites
and other personal benefits that the Company and the
Compensation Committee believe are reasonable and consistent
with its overall compensation program to better enable the
Company to attract and retain superior employees for key
positions. The Compensation Committee periodically reviews the
levels of perquisites and other personal benefits provided to
named executive officers.
The named executive officers also are entitled to the same
benefits that are otherwise available to all employees. Benefits
which are available to all employees generally include
company-paid basic group term life insurance and basic
accidental death and dismemberment insurance, and an employer
match of eligible compensation that employees invest in their
401(k) Plan accounts.
A-20
Payments
Following Termination or Change in Control
The Company is party to employment agreements with certain of
its named executive officers, the basic terms of which are
described above under the heading Employment Agreements of
Named Executive Officers. These employment agreements also
address, among other things, compensation and benefits that
would be paid to each of the named executive officers if his
employment is terminated for various reasons, including
termination for cause or without cause, and termination in
connection with a change in control of the Company.
The Company also is party to recent severance agreements with
certain of its named executive officers. These severance
agreements address, among other things, the compensation and
benefits payable to each of these named executive officers in
connection with the termination of his employment.
In addition, certain of the Companys equity-based
incentive plans and the award agreements under those plans call
for compensation to be provided under certain circumstances in
connection with the termination of a named executive
officers employment or a change in control of the Company.
Employment
Agreements
The Companys employment agreements with Messrs. Jett,
Stahlhut, Wilhoite, Perkins and Pittman address, among other
things, the rights and obligations of the Company in connection
with the termination of the executives, or former
executives, employment in different situations.
Information regarding the terms of the Companys employment
agreements with Messrs. Pittman and Perkins is included
below because each was an executive officer for a portion of
2008. However, on February 20, 2008, the Company and
Mr. Pittman entered into a Severance Agreement and General
Release with respect to the termination of
Mr. Pittmans employment, which termination was
effective March 31, 2008. The terms of
Mr. Pittmans severance arrangement are described in
further detail under the heading Severance
Agreements below. On June 23, 2008, Mr. Perkins
announced that he would voluntarily resign from his position as
Chief Operating Officer of the Company, effective July 25,
2008.
Under each employment agreement:
|
|
|
|
|
Upon any termination of the executives employment,
including if the executives employment is terminated by
the Company for cause by the Company or the
executive by reason of death or disability, by the executive
without good reason, or by virtue of the expiration
of the term of the agreement, the executive (or his estate or
beneficiaries, as applicable) will be entitled to receive all
compensation due to him under the agreement through his last day
of employment.
|
|
|
|
If the executive terminates his employment for good
reason or the Company terminates the executives
employment other than for cause, death or
disability, then the executive will be entitled to receive a
lump sum payment that is equal to:
|
|
|
|
|
|
his then-current monthly base salary plus one-twelfth of his
target annual bonus, calculated as if all performance metrics
had been achieved (and in addition, for Mr. Stahlhut,
one-twelfth of his target annual sales commission bonus
calculated as if all performance metrics had been achieved),
multiplied by;
|
|
|
|
the number of months in the severance period.
|
The severance period for Mr. Jett is equal to the greater
of 12 months or the number of months remaining under the
term of the employment agreement, which is 24 months;
provided that the severance period in connection with a
voluntary termination (i.e., for other than good
reason) of his employment following a change in control is
12 months. The severance period for Messrs. Perkins,
Wilhoite and Pittman is equal to 12 months, and the
severance period for Mr. Stahlhut is equal to six months.
In addition, the executives coverage under the
Companys health, dental and life insurance plans would
continue during the severance period, and his outstanding stock
options and restricted stock units will become fully vested.
A-21
The employment agreements for Messrs. Jett, Wilhoite,
Perkins and Pittman each provide for tax protection in the form
of a gross up payment to reimburse the executive for any excise
tax under Internal Revenue Code Section 4999 as well as any
additional income and employment taxes resulting from such
reimbursement. Code Section 4999 imposes a 20%
non-deductible excise tax on the recipient of an excess
parachute payment and Code Section 280G disallows the
tax deduction to the payor of any amount of an excess parachute
payment that is contingent on a change in control.
Additionally, each of the employment agreements contains
non-compete, non-solicitation, confidentiality and related
provisions covering the term of employment and,
post-termination, for the longer of the severance period or one
year.
Under each of the employment agreements, the definition of
cause includes (i) the willful and continued
breach of duties by the executive, (ii) willfully engaging
in illegal conduct or gross misconduct that is demonstrably and
materially injurious to the Company, (iii) material breach
by the executive of the employment agreement, (iv) breach
by the executive of the non-solicitation, non-compete or
confidentiality provisions in the employment agreement, and
(v) conviction of a felony or serious misdemeanor involving
moral turpitude, theft, or dishonesty.
Under each of the employment agreements, the definition of
good reason includes (i) a material reduction
in the executives duties or responsibilities, (ii) a
reduction in the executives base salary or target bonus,
(iii) the relocation of the executives office or the
Companys headquarters to a location more than
35 miles away from its present location, and
(iv) material breach by the Company of the employment
agreement. In addition, under Mr. Jetts employment
agreement, good reason includes the failure by the
Company to maintain a benefit program that is material to the
executives overall compensation, and Mr. Jett may
terminate his employment for any reason during specified periods
following a change in control of the Company.
Severance
Agreements
Charles A. Jett, Jr. On February 23,
2009, the Company entered into a Severance Agreement and General
Release with Mr. Jett pursuant to which his employment with
the Company will be terminated upon the consummation of the
Offer. Under the severance agreement, in addition to earned but
unpaid base salary and other benefits accrued through the date
of termination (less all applicable statutory withholdings and
deductions), and in exchange for his agreement not to solicit
the Companys customers or employees and not to compete
with the Company for specified periods under his employment
agreement, Mr. Jett will be entitled to receive the
following severance benefits (which are consistent with the
benefits he would receive under his employment agreement in the
event of a termination of his employment by the Company other
than for cause following a change in control of the
Company):
|
|
|
|
|
a lump sum payment of $1,235,000, which is equal to
Mr. Jetts current monthly base salary plus the
product of one-twelfth of his target annual bonus for the year
of termination multiplied by 24 months;
|
|
|
|
a lump sum payment of $23,203, which is equal to the cost for
Mr. Jett to maintain continuing family health and dental
insurance for 24 months, less Mr. Jetts share of
insurance benefits under our current benefit plans;
|
|
|
|
a lump sum payment of $8,000 for maintenance of life insurance
coverage; and
|
|
|
|
full vesting in all stock options, stock appreciation rights,
restricted stock and restricted stock units that he holds as of
the date of termination.
|
In addition, Mr. Jett is eligible to receive a gross up
payment to reimburse him for any excise tax imposed on these
benefits under Internal Revenue Code Section 4999, as well
as any additional income and employment taxes resulting from
such reimbursement.
In addition, under the severance agreement, the Company has
agreed to indemnify Mr. Jett from and against claims,
losses or causes of action arising from or out of his
performance as an officer, director or employee of the Company
or any of its subsidiaries or other affiliates or in any other
capacity, in each case to
A-22
the maximum extent permitted by law, pursuant to his employment
agreement, under the Companys Amended and Restated
Certificate of Incorporation and bylaws, and in accordance with
the Companys insurance policy covering directors and
officers.
Under the severance agreement, Mr. Jett has also agreed to
a general release of the Company for all claims through the date
of termination of his employment, and the Company has agreed to
release Mr. Jett from all claims based on
Mr. Jetts employment with the Company. Mr. Jett
will remain subject to the non-compete, non-solicitation,
confidentiality and related provisions of his employment
agreement following termination of his employment with the
Company.
The Severance Agreement replaced and superseded that certain
Severance Agreement and General Release, dated as of
October 31, 2008, between Mr. Jett and the Company,
that was terminated in connection with the termination by the
Company of its Agreement and Plan of Merger, dated as of
October 13, 2008 and amended as of December 29, 2008,
by and among Health Systems Solutions, Inc., HSS Acquisition
Corp. and the Company.
W. Randall Pittman. Mr. Pittman
resigned his positions as Chief Financial Officer and Treasurer
effective as of March 31, 2008. In connection therewith,
Mr. Pittman entered into a Severance Agreement and General
Release with the Company. Under the severance agreement,
Mr. Pittman received: (i) all base salary accrued
through the effective date of his termination (less all
applicable statutory withholdings and deductions); (ii) a
lump sum severance payment of $382,500 (representing
12 months of base salary and target annual bonus); and
(iii) a lump sum payment of $9,108 for 12 months of
continuing healthcare and life insurance coverage. In addition,
under the severance agreement, all outstanding stock options and
restricted stock units held by Mr. Pittman became fully
vested as of the date of termination.
Under the severance agreement, Mr. Pittman also agreed to a
general release of the Company for all claims through the date
of the agreement, and the Company agreed to release
Mr. Pittman from all claims based on his employment with
the Company.
Other
Agreements
Perkins Restricted Stock Unit and Option
Agreements. The agreements pursuant to which
Mr. Perkins received restricted stock units and stock
options also addressed the rights and obligations of the Company
in connection with the termination of Mr. Perkins
employment in different situations, and provided for accelerated
vesting of his restricted stock units and stock options under
certain circumstances. In accordance with the terms of these
agreements, all restricted stock units and all unvested options
held by Mr. Perkins were forfeited by Mr. Perkins on
July 25, 2008, the effective date of his resignation. In
addition, all vested options expired on October 23, 2008 in
accordance with the terms of the option agreement pursuant to
which they were granted.
Change
in Control and Termination Provisions of the Companys
Other Benefit Plans
Under the terms of the Companys 2005 Equity Incentive
Plan, unless otherwise provided in a restricted stock unit,
employment or other agreement, if one of the named executive
officers becomes disabled, his restricted stock units will
become fully vested and nonforfeitable, but if he dies while
actively employed by the Company or his employment is terminated
for any other reason, all unvested restricted stock units are
forfeited.
Compensation
of Directors
The following table sets forth the compensation earned by or
awarded to each director who is not an employee of the Company
and also served on the Companys Board of Directors in
2008. Mr. Jett, who served as the only employee director of
the Company until July 8, 2008, received no additional cash
compensation
A-23
for his service as a director. Information regarding the
compensation awarded Mr. Jett for his service as an
employee is shown under Summary Compensation Table
in this Information Statement.
Non-Employee
Director Compensation Table 2008
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Fees Earned or
|
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|
|
Option
|
|
|
All Other
|
|
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|
|
Name
|
|
Paid in Cash
|
|
|
Stock Awards
|
|
|
Awards(1)(2)(3)
|
|
|
Compensation
|
|
|
Total
|
|
|
Arthur P. Beattie
|
|
$
|
29,750
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
41,912
|
|
Roddy J.H. Clark
|
|
$
|
50,500
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
63,662
|
|
Douglas D. French(4)
|
|
$
|
15,500
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
27,662
|
|
Fred C. Goad, Jr.
|
|
$
|
42,500
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
54,662
|
|
Bradley S. Karro(5)
|
|
$
|
11,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,500
|
|
Mylle H. Mangum
|
|
$
|
41,750
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
53,912
|
|
Augustus K. Oliver(6)
|
|
$
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,000
|
|
John W. Thompson
|
|
$
|
24,000
|
|
|
|
|
|
|
$
|
12,162
|
|
|
|
|
|
|
$
|
36,162
|
|
Benner Ulrich(6)
|
|
$
|
15,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,250
|
|
Hugh H. Williamson, III
|
|
$
|
41,750
|
|
|
|
|
|
|
$
|
9,437
|
|
|
|
|
|
|
$
|
51,187
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(1) |
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Represents the amount recognized by the Company as an expense in
2008 for financial reporting purposes pursuant to FAS 123R
with respect to options, but disregarding for this purpose the
estimate of forfeitures related to service-based vesting
conditions. Amounts include awards granted in and prior to 2008.
The methodology and assumptions used to calculate the cost of
each directors outstanding stock option grants for 2008
are described in Note 2, Summary of Significant
Accounting Policies, beginning on page F-8, and
Note 13, Stock-Based Compensation, beginning on
page F-23
of the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, as updated by
the assumptions in Note 11, Stock Based
Compensation, beginning on page 9 of the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2008. No stock
option grants to the directors listed above were forfeited in
2008. |
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(2) |
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Each director was granted options to purchase 7,500 shares
of common stock at an exercise price of $1.86 per share on
June 23, 2008. These options have a ten-year term and vest
on the day before the date of the 2009 annual meeting of
stockholders. The grant date fair value of the options granted
to each Director was $0.87. |
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(3) |
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Each director had the following unexercised options outstanding
at December 31, 2008: Mr. Beattie, options to purchase
27,409 shares; Mr. Clark, options to purchase
26,924 shares; Mr. French, options to purchase
11,250 shares; Mr. Goad, options to purchase
27,409 shares; Mr. Karro, options to purchase
7,500 shares; Mrs. Mangum, options to purchase
27,409 shares; Mr. Oliver, options to purchase
7,500 shares; Mr. Thompson, options to purchase
24,500 shares; Mr. Ulrich, options to purchase
7,500 shares; and Mr. Williamson, options to purchase
24,500 shares. |
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(4) |
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Mr. French resigned from the Company Board, effective
immediately following the Companys 2008 annual meeting of
stockholders. |
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(5) |
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Mr. Karro was appointed to the Companys Board on
July 29, 2008. |
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(6) |
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Messrs. Oliver and Ulrich were appointed to the
Companys Board on June 22, 2008. |
Director
Compensation
Directors of the Company receive both cash compensation and
equity compensation.
Cash Compensation. For the year ended
December 31, 2008, and subsequent years, the Board has
approved cash compensation to be paid non-employee directors as
follows:
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an annual retainer fee of $20,000;
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a per meeting fee of $1,000;
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A-24
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a per committee meeting fee of $500; and
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an annual retainer fee for committee chairmen of $5,000 for the
Audit Committee and $3,000 for the Compensation and Governance
Committees.
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Equity Compensation. Under the Companys
2005 Non-Employee Director Stock Incentive Plan (the
Director Plan), the Compensation Committee of the
Board, or other committee designated by the Board, may grant to
the group of non-employee directors a maximum of
500,000 Shares in the form of non-qualified stock options,
stock appreciation rights, restricted stock, or restricted stock
units. The Compensation Committee has the discretion to
determine the terms and conditions of the awards, including the
type, number of Shares, duration, conditions of exercise, and
consequences of a directors termination of service or a
change in control of the Company. The Compensation Committee may
amend or terminate the Director Plan and may amend outstanding
awards provided that no such amendment will adversely affect the
rights and obligations of a non-employee director without his or
her consent. All options are granted at the fair market value of
the Companys stock on the date of grant.
The Director Plan provides for an automatic award of stock
options to each non-employee director each year on the day
following the annual meeting of stockholders, and for the award
of stock options to each person first elected as a director on a
date other than the annual meeting date. The Director Plan also
allows the administering committee to make discretionary grants
to non-employee directors. For the year ended December 31,
2008, and subsequent years, the Board approved the automatic
award to non-employee directors of an option for
7,500 Shares on the day following the annual meeting of
stockholders in 2008.
A-25
ANNEX B
February 22, 2009
Board of Directors
Emageon, Inc.
1200 Corporate Drive
Suite 200
Birmingham, AL 35242
Ladies and Gentlemen:
We understand that Emageon, Inc. (the Company),
proposes to enter into a transaction whereby AMICAS, Inc., a
Delaware corporation (the Parent), will acquire the
Company. Pursuant to the terms of the Agreement and Plan of
Merger, to dated February 23, 2009 (the
Agreement), among Parent, AMICAS Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of Parent
(Merger Sub), and the Company, (i) Merger Sub
will commence a tender offer (the Tender Offer) to
purchase all of the outstanding shares of the common stock, par
value $0.001 per share, of the Company (Company Common
Stock) at a purchase price of $1.82 per share (the
Consideration), and (ii) subsequent to the
consummation of the Tender Offer, Merger Sub will be merged with
and into the Company (the Merger and, together with
the Tender Offer, the Transaction) and each
outstanding share of Company Common Stock (excluding any Company
Common Stock held by the Company, Parent, Merger Sub, or any
other wholly-owned subsidiary of the Company or with respect to
which the holder has exercised statutory appraisal rights) will
be converted into the right to receive the Consideration. The
terms and conditions of the Transaction are more fully set forth
in the Agreement.
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of Company Common Stock
of the Consideration to be received by such holders in the
Transaction.
In arriving at our opinion, we reviewed and analyzed:
(1) the Agreement; (2) proxy statements, annual
reports, quarterly reports, current reports, and such other
publicly available information concerning the Company which we
believe to be relevant to our inquiry; (3) financial and
operating information with respect to the business, operations
and prospects of the Company furnished to us by the Company;
(4) a trading history of the Companys Common Stock
from February 9, 2005 to the present and a comparison of
that trading history with those of other publicly traded
companies which we deemed relevant; (5) a comparison of the
historical financial results and present financial condition of
the Company with those of publicly traded companies which we
deemed relevant; and (6) historical data relating to
percentage premiums paid in acquisitions of publicly traded
healthcare companies from January 2005 to the present. In
addition, we have had discussions with the management of the
Company concerning its business, operations, assets, present
condition and future prospects and undertook such other studies,
analyses and investigations as we deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the financial and
other information discussed with or reviewed by us in arriving
at our opinion. With respect to the financial forecasts of the
Company provided to or discussed with us, we have assumed, at
the direction of the management of the Company and without
independent verification or investigation, that such forecasts
have been reasonably prepared on bases reflecting the best
currently available information, estimates and judgments of the
management of the Company as to the future financial performance
of the Company. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities
of the Company and have not made nor obtained any evaluations or
appraisals of the assets or liabilities (including, without
limitation, any potential environmental liabilities), contingent
or otherwise, of the Company. We have also assumed that the
Transaction will be consummated in accordance with the terms of
the Agreement. We have also assumed that all material
governmental, regulatory or other consents and approvals
necessary for the consummation of the Transaction will be
obtained without any adverse effect on the Company or on the
expected benefits of the Transaction. Our opinion is necessarily
based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter. We
express no opinion as to the
Emageon, Inc.
1200 Corporate Drive
Suite 200
Birmingham, AL 35242
February 22, 2009
Page 2
underlying valuation, future performance or long-term viability
of the Company. It should be understood that, although
subsequent developments may affect this opinion, we do not have
any obligation to update or revise the opinion.
We are acting as co-advisor in the Transaction and as financial
advisor to the Company for purposes of rendering this opinion
and will receive a fee for our services, a portion of which will
be payable upon the delivery of this opinion. The Company has
also agreed to indemnify us for certain liabilities arising out
of our engagement. In addition, we and our affiliates (including
SunTrust Banks, Inc.) may have other financing and business
relationships with the Company, Parent and their respective
affiliates in the ordinary course of business.
In the ordinary course of our business, we and our affiliates
may actively trade in debt and equity securities of the Company,
as well as securities for Parent, for our own account and for
the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
This opinion is being rendered at the behest of the Board of
Directors and is for the benefit of the Board in its evaluation
of the Transaction, and does not constitute a recommendation as
to whether or not any holder of Company Common Stock should
tender such Company Common Stock or how any holder of Company
Common Stock should vote with respect to the Merger or any other
matter. This opinion has been approved by the Fairness Opinion
Committee of SunTrust Robinson Humphrey, Inc. We do not express
any opinion as to the fairness of the amount or nature of any
compensation to be received in the Transaction by the
Companys officers, directors, or employees, or class of
such persons, whether relative to the Consideration to be
received by the holders of Company Common Stock in the Tender
Offer and the Merger or otherwise. This opinion may be
reproduced in full or referred to in any Schedule 14D-9 or in
any proxy or information statement mailed to shareholders of the
Company in connection with the Transaction if required by
applicable law but may not otherwise be disclosed publicly in
any manner without our prior approval.
Based upon and subject to the foregoing, and such other factors
as we deemed relevant, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of
Company Common Stock in the Transaction is fair, from a
financial point of view, to such holders.
SUNTRUST ROBINSON HUMPHREY, INC.
James H. Cotter
Managing Director
ANNEX C
SECTION 262
OF THE
DELAWARE GENERAL CORPORATION LAW
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
C-1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
C-2
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting
C-3
corporation pursuant to subsection (f) of this section and
who has submitted such stockholders certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation. (8 Del. C. 1953,
§ 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,
§ 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70
Del. Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16.)
C-4