UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
Virtual Radiologic Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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VIRTUAL RADIOLOGIC
CORPORATION
11995
Singletree Lane
Suite 500
Eden Prairie MN 55344
Tel:
952-595-1100
Dear Stockholders:
You are cordially invited to join us for our Annual Meeting of
Stockholders, which will be held on Thursday, May 13, 2010,
at 9:30 a.m. (Central Time) at our headquarters, located at
11995 Singletree Lane, Suite 500, Eden Prairie, Minnesota.
Holders of record of our common stock as of March 22, 2010
are entitled to notice of, and to vote, at the Annual Meeting.
The Notice of Annual Meeting of Stockholders and the proxy
statement that follow describe the business to be conducted at
the Annual Meeting.
We hope you will be able to attend the Annual Meeting. However,
even if you plan to attend in person, please vote your shares
promptly to ensure that they are represented at the Annual
Meeting. You may submit your proxy vote by completing and
signing the enclosed proxy card and returning it in the envelope
provided. If you decide to attend the Annual Meeting and wish to
change your proxy vote, you may do so by voting in person at the
Annual Meeting.
We look forward to seeing you at the Annual Meeting.
By order of the Board of Directors,
Robert C. Kill
Chairman of the Board, President and Chief
Executive Officer
Eden Prairie, Minnesota
April 9, 2010
TABLE OF CONTENTS
VIRTUAL RADIOLOGIC
CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Date and Time:
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Thursday, May 13, 2010 at 9:30 a.m. Central Time
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Place:
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Virtual Radiologic Corporation Headquarters
11995 Singletree Lane
Suite 500
Eden Prairie, MN 55344
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Items of Business:
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1. To elect three Class III directors to the Board of
Directors, each to serve a three-year term.
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2. To ratify the appointment of Deloitte & Touche
LLP as Virtual Radiologic Corporations registered
independent public accounting firm for the year ending
December 31, 2010.
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3. To consider and vote upon a stockholder proposal
requesting the adoption of a majority vote standard in the
election of directors.
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4. To act upon any other business that may properly be
brought before the Annual Meeting of Stockholders, and any
adjournment thereof.
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Record Date and Voting of Securities:
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Our Board of Directors has set March 22, 2010 as the record
date for determining stockholders entitled to attend and vote at
our Annual Meeting of Stockholders. Holders of our common stock,
par value $0.001 per share, appearing on our books as of
March 22, 2010 are entitled to notice of, and to vote at,
our Annual Meeting of Stockholders. At the close of business on
March 22, 2010, a total of 16,235,624 shares of common
stock were outstanding, each entitled to one vote. The holders
of a majority of the common stock entitled to vote shall
constitute a quorum for the transaction of business at the
Annual Meeting of Stockholders. If such quorum shall not be
present or represented at the Annual Meeting of Stockholders,
the stockholders present or represented at the Annual Meeting of
Stockholders may adjourn the meeting from time to time without
notice other than announcement at the meeting until a quorum
shall be present or represented. Holders of common stock do not
have cumulative voting rights.
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Voting by Proxy:
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The persons named as proxies in the enclosed form of proxy will
vote the common shares according to the instructions given
therein or, if no instruction is given, then in favor of all
nominees named in the accompanying proxy statement, in favor of
Proposal 2, and against Proposal 3 identified therein,
and in the discretion of such persons as to any other matters to
be voted upon at the Annual Meeting of Stockholders. A person
giving a proxy may revoke it (i) before it is exercised, by
delivering to the attention of Michael J. Kolar, our Corporate
Secretary, a written notice terminating the proxys
authority, (ii) by duly executing and delivering to the
attention of Mr. Kolar a proxy bearing a later date, or
(iii) attending the Annual Meeting of Stockholders and
voting in person. A stockholder who attends the Annual Meeting
of Stockholders need not revoke his or her proxy and vote in
person unless he or she wishes to do so.
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 13, 2010
This Proxy Statement and the 2009 Annual Report are available
at
http://ir.virtualrad.com/phoenix.zhtml?c=202538&p=proxy
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VIRTUAL RADIOLOGIC
CORPORATION
PROXY STATEMENT
2010 ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of Virtual Radiologic Corporation is
soliciting proxies for its Annual Meeting of Stockholders, to be
held on Thursday, May 13, 2010, and any adjournment of the
Annual Meeting. This proxy statement and the enclosed proxy card
are being mailed or provided to stockholders on or about
April 9, 2010.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is
the purpose of the Annual Meeting?
There are three matters scheduled to be voted on at the meeting:
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Election of three Class III directors to the Board of
Directors, each to serve a three year term;
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Ratification of the appointment of Deloitte & Touche
LLP as Virtual Radiologic Corporations independent
registered public accounting firm for the year ending
December 31, 2010; and
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To consider and vote upon a stockholder proposal requesting the
adoption of a majority vote standard in the election of
directors.
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Because no other stockholder proposals to be presented at the
Annual Meeting were received prior to the deadline set forth in
our Amended and Restated Bylaws and not withdrawn, only matters
described in this proxy statement will be acted upon at the
Annual Meeting. In general, if another matter requiring a vote
of stockholders properly comes before the Annual Meeting, the
persons named as proxies in the enclosed proxy form will vote on
such matter according to their judgment.
Who is
entitled to vote?
Stockholders as of the close of business on March 22, 2010,
referred to as the Record Date, may vote at the
Annual Meeting. As of the Record Date, there were
16,235,624 shares of Virtual Radiologic Corporations
common stock issued and outstanding and eligible to vote at the
Annual Meeting. Holders of Virtual Radiologic Corporations
common stock are entitled to one vote per share and do not have
cumulative voting rights.
How do I
vote my shares without attending the meeting?
If you are a stockholder of record, meaning that your shares are
not held in street name by your broker, you may vote
your shares directly by proxy. Your proxy may be submitted by
completing the proxy card enclosed with this proxy statement,
and mailing it in the pre-addressed envelope that has been
provided.
If your shares are held in a brokerage account, bank, trust, or
other nominee, they are held in street name. The
broker, bank, trust or other nominee is considered the
stockholder of record with respect to those shares, although you
are considered the beneficial owner. In order to vote your
shares held in street name, you need to instruct your broker,
bank, trust or other nominee how to vote. If this applies to
you, the broker, bank, trust or other nominee has included
instructions describing how you can direct your vote.
How do I
vote my shares if I wish to attend the meeting?
If you are a stockholder of record, you may bring a valid form
of identification to the meeting and vote your shares at that
time. If your shares are held in street name, you may not vote
your shares at the meeting in person, unless you have received a
written proxy from the stockholder of record allowing you to do
so.
Even if you currently plan on attending the meeting, you are
encouraged to vote in advance by proxy, so that you can ensure
your vote is counted if you become unable to attend in person.
Can I
change my vote?
Yes. If you have submitted your vote by proxy, you may change
your vote by:
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Delivering to the attention of Michael J. Kolar, our Corporate
Secretary, a written notice terminating the proxys
authority before it is exercised;
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Duly executing and delivering to the attention of Mr. Kolar
a proxy bearing a later date; or
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Attending the Annual Meeting of Stockholders and voting in
person.
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What
constitutes a quorum?
Under our Amended and Restated Bylaws, at least a majority of
the shares of our common stock outstanding as of the Record Date
must be present at the Annual Meeting in person or by proxy in
order to hold the Annual Meeting. This is referred to as a
quorum. Your shares are counted for the purposes of determining
whether there is quorum present if you are either
(i) present and vote in person at the Annual Meeting or
(ii) have properly submitted a proxy. In addition,
abstentions, broker non-votes and votes withheld from director
nominees are considered as shares present at the Annual Meeting
for the purposes of determining a quorum. A broker non-vote
occurs when a broker or other nominee who holds shares for the
beneficial owner of the shares does not vote on a particular
proposal because the nominee does not have discretionary voting
authority for that proposal and has not received voting
instructions from the beneficial owner of the shares.
How many
votes are required for a proposal to be approved?
For the election of the Class III directors, the three
individuals receiving the highest number of FOR
votes will be elected. The ratification of Deloitte &
Touche LLP as our independent registered public accounting firm
for the year ending December 31, 2010 and the approval of
the stockholder proposal requesting the adoption of a majority
vote standard in the election of directors each require the
FOR vote of at least a majority of the shares
present or represented by proxy at the Annual Meeting and
entitled to vote.
How are
votes counted?
You may either vote FOR or WITHHOLD
authority to vote for each nominee for election to the Board of
Directors. You may vote FOR, AGAINST or
ABSTAIN on the ratification of the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm for the year ending December 31,
2010 and on the approval of the stockholder proposal requesting
the adoption of a majority vote standard in the election of
directors. If you abstain from voting on the proposal regarding
the ratification of Deloitte & Touche LLP or the
stockholder proposal requesting the adoption of a majority vote
standard in the election of directors, it has the same effect as
a vote against the proposal. If you just sign and submit your
proxy card without voting instructions, your shares will be
voted FOR each director nominee and FOR
the ratification of the appointment of Deloitte &
Touche LLP as our independent registered public accounting firm
for the year ending December 31, 2010 and
AGAINST the stockholder proposal requesting the
adoption of a majority vote standard in the election of
directors.
If you hold your shares in a brokerage account in your
brokers name (referred to as street name) and
do not provide voting instructions to your broker or other
nominee, your shares will be considered to be broker
non-votes and will not be voted on any proposal on which
your broker or other nominee does not
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have discretionary authority to vote. Your broker or other
nominee has discretionary authority to vote your shares on the
ratification of Deloitte & Touche LLP as our
independent registered public accounting firm, even if your
broker or other nominee does not receive voting instructions
from you, but does not have discretionary authority to vote your
shares on the election of directors or on the stockholder
proposal requesting the adoption of a majority vote standard in
the election of directors.
Who is
soliciting my vote and who pays for the cost of the proxy
solicitation?
This proxy statement is furnished in connection with the
solicitation of your vote by our Board of Directors. We will pay
expenses for the solicitation of proxies. Proxies are being
solicited primarily by mail, but, in addition, directors,
officers and regular employees of ours, who will receive no
extra compensation for their services, may solicit proxies
personally, by telephone, facsimile,
e-mail
or
personal conversation.
How does
the Board of Directors recommend I vote?
Our Board of Directors recommends that you vote:
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FOR
the election of Nabil N. El-Hage, Richard
J. Nigon and Brian F. Sullivan to the Board of Directors of
Virtual Radiologic Corporation as Class III Directors for a
three year term;
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FOR
the ratification of Deloitte &
Touche LLP as our independent registered public accounting firm
for the year ending December 31, 2010; and
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AGAINST
the stockholder proposal requesting
the adoption of a majority vote standard in the election of
directors.
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Where and
when will I be able to find the results of the voting?
Preliminary results will be announced at the Annual Meeting. We
will publish the final results in a current report on
Form 8-K
to be filed with the Securities and Exchange Commission, or SEC,
within four business days of the Annual Meeting.
What are
the deadlines for submitting stockholder proposals for the 2011
Annual Meeting of Stockholders?
In order for a stockholder proposal to be considered for
inclusion in the proxy materials for the 2011 Annual Meeting of
Stockholders, the written proposal must be received at our
principal executive offices no later than the close of business
on December 10, 2010. Any stockholder proposals intended to
be presented in our proxy materials must satisfy the
requirements of the proxy rules promulgated by the SEC.
Any other stockholder proposals to be presented at the 2011
Annual Meeting must be given in writing to our secretary at our
corporate headquarters, and must be received not later than
March 14, 2011 and no earlier than February 12, 2011.
The proposal must contain specific information required by
Article II, Section 4 of our Amended and Restated
Bylaws, a copy of which may be obtained by writing to our
secretary or accessing our public filings with the SEC at
www.sec.gov.
If a proposal is not timely and properly
made in accordance with all necessary procedures, it will be
defective and may not be brought before the meeting. If the
proposal is nonetheless brought before the meeting and the
chairman of the meeting does not exercise the power and duty to
declare the proposal defective, the persons named in the proxy
may vote on such matter in their discretion.
As described below, our Nominating and Corporate Governance
Committee will consider recommendations for the nomination of
directors from stockholders who are eligible to vote for the
election of directors. In accordance with our Amended and
Restated Bylaws, stockholders of record may separately propose
nominees for consideration by our Nominating and Corporate
Governance Committee only after providing timely written notice
to our secretary. In order to be timely for the 2011 Annual
Meeting, the notice must be received at our corporate
headquarters no later than February 12, 2011, and no
earlier than January 13, 2011. The notice must set forth,
among other things, (i) as to each nominee for election as
a director, all
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information relating to such nominee that would be required to
be disclosed in solicitations of proxies for election of
directors, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, including such
persons written consent to being named in the proxy
statement as a nominee and to serving as a director if elected,
and (ii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (a) the name and address of such
stockholder, as they appear on our stock transfer books, and of
such beneficial owner and (b) the class, series and number
of shares of our Company which are owned beneficially and of
record by such stockholder and such beneficial owner.
How can I
communicate with Virtual Radiologic Corporations Board of
Directors?
Stockholders may communicate with our Board of Directors by
sending a letter addressed to the Board of Directors, to all
independent directors or to specified individual directors to:
Virtual Radiologic Corporation,
c/o Corporate
Secretary, 11995 Singletree Lane, Suite 500, Eden Prairie,
Minnesota 55344. All communications will be compiled by the
Corporate Secretary and submitted to the Board of Directors or
the specified director or directors on a periodic basis.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Board of Directors is divided into three staggered classes
of directors of the same or nearly the same number. The members
of each class are elected for a three-year term, with the term
of one class expiring each year. The terms of our current
Class III directors, Nabil N. El-Hage, Richard J. Nigon and
Brian F. Sullivan, are due to expire on the date of the Annual
Meeting. The terms of our Class I directors, Eduard
Michel, M.D., Ph.D., Kevin H. Roche and Andrew P.
Hertzmark, are due to expire on the date of our 2011 Annual
Meeting of Stockholders, and the terms of our Class II
directors, Robert C. Kill, David L. Schlotterbeck and Mark E.
Jennings, are due to expire on the date of our 2012 Annual
Meeting of Stockholders.
Following the recommendation of our Nominating and Corporate
Governance Committee, the Board of Directors has nominated Nabil
N. El-Hage, Richard J. Nigon and Brian F. Sullivan for election
as Class III directors at the Annual Meeting. Each of the
nominees for election as a Class III director has consented
to being named in this proxy statement, and has indicated a
willingness to serve as a director if elected. If, for some
reason, any of these nominees is unable to serve or is not a
candidate at the Annual Meeting for any other reason, the
proxies named in the enclosed form of proxy may vote for a
substitute nominee in their discretion.
The following paragraphs provide information about each nominee
and each director not standing for election. We believe that all
of our director nominees and directors have personal and
professional integrity, relevant business experience, strategic
leadership ability and a diversity of experiences and
background. The information presented below regarding each
nominee or director also sets forth specific experience,
qualifications, attributes and skills that led our Board of
Directors to the conclusion that each nominee and each director
not standing for election should serve as a director in light of
our business and structure.
Information
Regarding Nominees for Class III Directors (to serve a
three-year term ending in 2013)
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Name
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Age
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Director Since
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Position
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Nabil N. El-Hage
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51
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2007
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Director
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Richard J. Nigon
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62
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2007
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Director
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Brian F. Sullivan
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48
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2008
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Director
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Nabil N. El-Hage
, 51, has been a director since May 2007.
Since January 2010, Mr. El-Hage has served as Senior
Associate Dean for External Relations and Adjunct Professor of
Business Administration at Harvard Business School; from 2005
until January 2010, Mr. El-Hage had been a Professor of
Management Practice at Harvard Business School in the Finance
Area. From January 2003 to June 2005, he was a Senior Lecturer
at Harvard Business School. Mr. El-Hage originally joined
the faculty of Harvard Business School in 1984. Prior to 2003,
Mr. El-Hage gained experience in venture capital with TA
Associates and Advent International, as well as on the operating
side, as CFO of Back Bay Restaurant Group. He also served from
1995 to 2003 as
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Chairman and from 1995 to 2002 as CEO of Jeepers! Inc., a
private-equity-financed national chain of indoor theme parks.
Mr. El-Hage is currently the Chairman and a trustee of the
MassMutual Premier Funds. Mr. El-Hage graduated cum laude
from Yale University with a degree in electronic engineering and
earned his M.B.A. with the Highest Honors as a Baker Scholar
from Harvard Business School. Our Board believes that
Mr. El-Hage is qualified to serve as a director due to his
audit and financial expertise, growth company operating
experience, academic business and management expertise and
substantial corporate governance expertise.
Richard J. Nigon
, 62, has been a director since May 2007.
Mr. Nigon is currently the Senior Vice President of Cedar
Point Capital, Inc., a private company that raises capital for
early stage companies. From February 2001 until December 2006,
Mr. Nigon was a Director of Equity Corporate Finance for
Miller Johnson Steichen Kinnard (MJSK), a privately
held investment firm. Following the December 2006 acquisition of
MJSK by Stifel Nicolaus through May 2007, Mr. Nigon was a
Managing Director of Private Placements at Stifel Nicolaus. From
February 2000 to February 2001, Mr. Nigon served as the
Chief Financial Officer of Dantis, Inc., a web hosting company.
Prior to joining Dantis, Mr. Nigon was employed by
Ernst & Young, LLP from 1970 to 2000, where he served
as a partner from 1981 to 2000. While at Ernst &
Young, Mr. Nigon served as the Director of
Ernst & Youngs Twin Cities Entrepreneurial
Services Group and was the coordinating partner on several
publicly-traded companies in the consumer retailing and
manufacturing sectors. Mr. Nigon also serves as a director
of Vascular Solutions, Inc. and Northern Technologies
International Corporation; he served as a director of Restore
Medical, Inc. until it was acquired by Medtronic, Inc. in July
2008. Our Board believes that Mr. Nigon is qualified to
serve as a director due to his audit and financial expertise,
audit committee leadership experience, growth company operating
experience, public company director experience and medical
device and healthcare investment experience.
Brian F. Sullivan
, 48, has been a director since
September 2008. Mr. Sullivan is a seasoned executive and
entrepreneur with more than 18 years of corporate board
experience. Since 2003, Mr. Sullivan has served as
president and chief executive officer of Maple Grove,
Minnesota-based SterilMed, Inc., which repairs and refurbishes
medical devices and equipment for the healthcare industry.
Previously, Mr. Sullivan was co-founder, chairman and chief
executive officer of Recovery Engineering, Inc., an industry
leader in the design, manufacture, and marketing of consumer
water treatment systems sold under the PUR brand name. Under
Mr. Sullivans leadership, Recovery Engineering
recorded compound annual growth of 51 percent, eventually
growing annual revenue to nearly $200 million.
Mr. Sullivan took Recovery Engineering public in 1993 and
sold the company to Proctor and Gamble in 1999.
Mr. Sullivan graduated magna cum laude from Harvard
University with a degree in economics , and currently serves on
the Board of Directors for Entegris, Inc., and the R.L. Winston
Rod Company. Our Board believes that Mr. Sullivan is
qualified to serve as a director due to his growth company
experience, prior public company leadership experience and
healthcare industry experience.
The Board
of Directors recommends that stockholders vote
FOR
each of the nominees listed above.
Information
Regarding Class I and Class II Directors
In addition to the three incumbent Class III Directors now
standing for election, we have six additional directors who will
stand for election according to their class over the next two
years.
Eduard Michel, M.D., Ph.D.
, 47, is our Chief Medical
Officer, and has served as a director since 2001. Please refer
to Executive Officers and Key Employees for a
description of Dr. Michels experience and positions
within our Company. Dr. Michel will stand for election in
2011. Our Board believes that Dr. Michel is qualified to
serve as a director due to his experience and perspective as a
diagnostic radiologist, his leadership of our affiliated medical
practices, and his unique teleradiology market perspective based
upon his role as Company founder.
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Andrew P. Hertzmark
, 34, has been a director since April
2006. Since 2007, Mr. Hertzmark has been a partner of
Generation Partners, a private investment firm that acquires and
provides growth capital to companies primarily in the
healthcare, business and information services, and media and
entertainment sectors. From 2004 to 2007, Mr. Hertzmark was
a vice president at Generation Partners. Prior to joining
Generation Partners, Mr. Hertzmark was an associate at
Galen Associates, a private investment firm focused on the
healthcare industry. Mr. Hertzmark was also an analyst in
the Investment Banking Division of UBS AG. Mr. Hertzmark
currently serves on the board of directors of Post Education,
Inc. and is a trustee of Post University. Mr. Hertzmark
earned a B.A. from the University of Pennsylvania and received
his M.B.A. from The Wharton School of Business.
Mr. Hertzmark will stand for election in 2011. Our Board
believes that Mr. Hertzmark is qualified to serve as a
director due to his healthcare and growth company investment
experience and his financial expertise.
Kevin H. Roche
, 59, has been a director since November
2008. Mr. Roches extensive background in the
healthcare industry includes more than 25 years in legal,
strategic advisory and executive operating roles. Mr. Roche
is currently a managing partner at Vita Advisors LLC, a mergers
and acquisition advisory firm focused solely on the healthcare
industry. Previously, Mr. Roche spent 14 years with
UnitedHealth Group, serving as General Counsel before becoming
the CEO of the Ingenix division. Prior to UnitedHealth, he held
senior executive and legal positions with Partners National
Health Plans and American Medcenters Inc. Mr. Roche earned
his law degree from the University of Minnesota Law School and
received his M.B.A. from the University of Minnesotas
Carlson School of Business. Mr. Roche will stand for
election in 2011. Our Board believes that Mr. Roche is
qualified to serve as a director due to his healthcare industry
experience and third party payer experience.
Robert C. Kill
, 46, has served as our President and Chief
Executive Officer since January 2009 and has served as a
director since 2009. Please refer to Executive Officers
and Key Employees for a description of
Mr. Kills experience and positions within our
Company. Mr. Kill will stand for election in 2012. Our
Board believes that Mr. Kill is qualified to serve as a
director due to his healthcare industry experience, operating
and sales experience and teleradiology market perspective based
upon Company experience.
David L. Schlotterbeck
, 62, has been a director since
June 2008. Since 2009, Mr. Schlotterbeck has been the
Chairman and CEO of CareFusion, a $4 billion medical
technology company traded on the NYSE. He has spent more than
20 years in the healthcare industry. He previously served
as vice chairman of Cardinal Health, a publicly traded,
$90 billion provider of pharmaceutical, clinical and
medical products from 2004 to 2009, and was chief executive
officer of Cardinal Healths Clinical and Medical Products
Sector, one of the largest and fastest growing medical device
businesses in the world, from 2006 to 2009.
Mr. Schlotterbeck served as president and chief executive
officer of Alaris Medical Systems until it was acquired by
Cardinal Health in 2004. Mr. Schlotterbeck has also held
senior management positions at publicly traded medical device
and healthcare information technology companies, and has public
company board experience. Mr. Schlotterbeck holds an
engineering degree from General Motors Institute, and a
post-graduate degree in engineering from Purdue University.
Mr. Schlotterbeck will stand for election in 2012. Our
Board believes that Mr. Schlotterbeck is qualified to serve
as a director due to his healthcare and medical device industry
experience and public company leadership experience.
Mark E. Jennings
, 47, has been a director since May 2005.
Since 1996, Mr. Jennings has been the Managing Partner and
co-founder of Generation Partners, a private investment firm
that acquires and provides growth capital to companies primarily
in the healthcare, business and information services, and media
and entertainment sectors. Prior to founding Generation
Partners, Mr. Jennings was a Partner at Centre Partners, a
private equity firm affiliated with Lazard Freres, and prior to
that, he was employed at Goldman, Sachs & Co. Through
Generation Partners and predecessor firms, he has invested in
more than 50 companies over the past 20 years and has
served on the Board of Directors of 23 companies, including
inVentiv Health, MedVance Institute, Agility Recovery Solutions,
Sterling Infosystems and Six Flags, Inc. Mr. Jennings also
serves as the Chairman of the Board of Post University.
Mr. Jennings earned a Bachelor of Science in Mechanical
Engineering with Highest Honors from the University of Texas and
received his M.B.A. from the Harvard Business School.
Mr. Jennings is the brother of Richard W. Jennings, our
Chief Technology Officer. Mr. Jennings will stand for
election in 2012. Our Board believes that Mr. Jennings is
qualified to serve as a
6
director due to his healthcare and growth company investment
experience, financial expertise, and corporate strategy
expertise.
CORPORATE
GOVERNANCE
Board of
Directors and Committees
Board
of Directors Meetings
During the year ended December 31, 2009, the Board of
Directors of Virtual Radiologic Corporation met 10 times. Each
director attended more than 75% of the meetings of the Board of
Directors and committees on which such director served during
the period when such director was serving on the Board or a
committee thereof. The Board of Directors conducted business by
written action from time to time and also occasionally engaged
in informal discussions with management during the year.
Board
Leadership
In May 2009, our Board of Directors appointed Mr. Kill to
serve as Chairman of the Board. In appointing Mr. Kill, the
Board determined that Mr. Kills service as both
Chairman of the Board and CEO is in the best interest of the
Company and its stockholders given Mr. Kills in-depth
knowledge of the issues, opportunities and challenges facing the
Company, and that Mr. Kill is best positioned to
communicate these issues to the other directors and to
efficiently develop and lead agendas that ensure that the
Boards time and attention are focused on the most critical
matters. The Board also determined that the active involvement
of the Boards independent directors, the constructive
relationship between the independent directors and management,
and the regular meetings of the independent directors in
executive session (chaired on a rotating basis by the chairs of
the independent board committees) supported this combined role
and did not warrant the additional appointment of any individual
as a lead independent director. The Board retains the authority
to review and modify this leadership structure as it may deem
appropriate from time in the interests of the Companys
stockholders.
Audit
Committee
Our Audit Committee oversees a broad range of issues surrounding
our accounting and financial reporting processes and audits of
our financial statements. Our Audit Committee (i) assists
our Board of Directors in monitoring the integrity of our
financial statements, our compliance with legal and regulatory
requirements and the performance of our independent auditors;
(ii) maintains direct responsibility for the appointment,
compensation, retention and oversight of the work of any
registered public accounting firm engaged for the purpose of
performing any audit, review or attest services and for dealing
directly with any such accounting firm; (iii) provides a
medium for consideration of matters relating to any audit
issues; (iv) has authority to approve any transaction
between our Company and any related party (including officers,
directors and owners of 5% or more of our outstanding stock);
and (v) has prepared the Audit Committee Report
found in this proxy statement. A more detailed description of
the Audit Committees functions can be found in our Audit
Committee Charter.
Our Audit Committee currently consists of Richard J. Nigon
(Chair), Nabil N. El-Hage and Brian F. Sullivan. Our Board of
Directors has determined that Messrs. Nigon, El-Hage and
Sullivan are independent as such terms are defined under the
rules of the Nasdaq Global Market and, for purposes of audit
committee membership, the Securities Exchange Act of 1934, as
amended. Our Board of Directors has also determined that
Mr. Nigon and Mr. El-Hage are both audit
committee financial experts as defined in applicable SEC
rules, and that all members of the committee satisfy the
financial sophistication requirements of the Nasdaq Global
Market. The Audit Committee met five times and acted by written
action at various times during 2009.
7
Compensation
Committee
Our Compensation Committee reviews and recommends policy
relating to compensation and benefits of our officers and
employees, including reviewing and approving corporate goals and
objectives relevant to the compensation of our Chief Executive
Officer and other executive officers, evaluating the performance
of these officers in light of those goals and objectives, and
recommending compensation of these officers based on such
evaluations. Our President and Chief Executive Officer assists
our Compensation Committee primarily by making recommendations
regarding the amount and type of compensation to be paid to our
executives and in so doing, shares information with the
Compensation Committee from performance reviews conducted with
each of our other executives. In making final recommendations
regarding the form and amount of compensation to be paid to our
named executive officers, our Compensation Committee considers
the recommendations of our President and Chief Executive
Officer, but also considers other factors, such as those listed
under the heading Compensation Discussion and
Analysis Determination of Compensation. A more
detailed description of the Compensation Committees
functions can be found in our Compensation Committee Charter.
Our Compensation Committee also has the responsibility to review
and make recommendations to our Board of Directors concerning
compensation for non-employee members of our Board of Directors,
including retainers and any other cash compensation, equity
compensation, benefits and perquisites. To ensure that such pay
levels for our non-employee directors remain competitive, when
making recommendations to our Board of Directors concerning
compensation for our non-employee directors, the Compensation
Committee may take into account such factors as our size,
industry characteristics, location, the practices of comparable
companies and such other factors as the Compensation Committee
deems relevant. Decisions regarding director compensation made
by our Compensation Committee are not considered final and are
subject to final review and approval by our entire Board of
Directors.
The Compensation Committee currently consists of Nabil N.
El-Hage (Chair), Richard J. Nigon and Kevin H. Roche.
Messrs. El-Hage, Nigon and Roche are independent as such
term is defined under the rules of the Nasdaq Global Market. The
Compensation Committee met five times and acted by written
action at various times during 2009.
Compensation
Committee Interlocks and Insider Participation
None of our executive officers currently serves as a member of
the board of directors or compensation committee of any entity
that has one or more executive officers serving on our Board of
Directors or Compensation Committee.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee oversees and
assists our Board of Directors in identifying, reviewing and
recommending nominees for election as directors; evaluating our
Board of Directors and management; developing, reviewing and
recommending corporate governance guidelines and a corporate
code of business conduct and ethics; administering and
overseeing our Equity Ownership Guidelines, which are discussed
in more detail under the heading Compensation Discussion
and Analysis Equity Ownership Guidelines,
including the annual progress measurement, and reporting the
results thereof to the covered individuals and our Board of
Directors; and generally advising our Board of Directors on
corporate governance and related matters. A more detailed
description of the Nominating and Corporate Governance
Committees functions can be found in our Nominating and
Corporate Governance Committee Charter.
Our Nominating and Corporate Governance Committee consists of
Brian F. Sullivan (Chair), Kevin H. Roche, and David L
Schlotterbeck, each of whom is independent as such term is
defined under the rules of the Nasdaq Global Market. The
Nominating and Corporate Governance Committee met five times and
acted by written action at various times during 2009.
The Nominating and Corporate Governance Committee establishes
and approves criteria for nomination to serve on the Board of
Directors. The committee has historically identified candidates
based upon
8
recommendations from directors, management and significant
stockholders, and will consider other stockholder nominees.
While we do not have a stand-alone diversity policy, in
considering whether to recommend any director nominee, including
candidates recommended by stockholders, we believe that the
backgrounds and qualifications of the directors, considered as a
group, should provide a significant mix of experience, knowledge
and abilities that will allow our Board of Directors to fulfill
its responsibilities. Accordingly, the Nominating and Corporate
Governance Committee seeks nominees with a broad diversity of
experience and backgrounds and will consider factors such as
relevant business experience, prior director experience,
strategic leadership and personal and professional integrity
individually and as a part of its diversity assessment. The
committee will also assess the prior contributions of incumbent
directors in considering their potential re-nomination to the
Board. The Nominating and Corporate Governance Committee does
not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all
prospective nominees.
Any stockholder who wishes to nominate a director candidate for
consideration by the Nominating and Corporate Governance
Committee in anticipation of the 2011 Annual Meeting of
Stockholders may write to the Nominating and Corporate
Governance Committee
c/o the
Corporate Secretary, Virtual Radiologic Corporation, 11995
Singletree Lane, Suite 500, Eden Prairie, Minnesota 55344.
Such recommendations must be received no later than
February 12, 2011 and no earlier than January 13, 2011.
The Nominating and Corporate Governance Committee will consider
the same membership criteria for those individuals recommended
by stockholders as that considered for all other individuals,
although the committee does not have a formal process for such
consideration. The Nominating and Corporate Governance Committee
has not adopted such a formal process because of its historical
experience of a lack of stockholder recommendations, and will
consider a more formal policy should stockholder recommendations
become more common.
Board
Oversight of Risk
The Board of Directors as a whole has responsibility for risk
oversight, with reviews of certain areas of risk being conducted
by the relevant board committees that report on their
deliberations to the full Board of Directors. The oversight
responsibility of the Board of Directors and its committees is
enabled by management reporting processes that are designed to
provide information to the Board of Directors about the
identification, assessment and management of critical risks and
managements risk mitigation strategies. These areas of
risk that the Board of Directors and its committees focus on
include competitive, economic, operational, financial
(accounting, credit, liquidity, and tax), legal, regulatory,
compliance, health, safety and environment, political, and
reputational risks.
The standing committees of the Board of Directors oversee risks
associated with their respective principal areas of focus. The
Audit Committees role includes a particular focus on the
qualitative aspects of financial reporting to stockholders on
our processes for the management of business and financial risk,
and for compliance with significant applicable legal, ethical
and regulatory requirements as they relate to our financial
statements and financial reporting obligations. The Audit
Committee, along with management, is also responsible for
developing and participating in a process for review of
important financial and operating topics that present potential
significant risk to our Company. The Compensation Committee is
responsible for overseeing risks and exposures associated with
our executive and director compensation programs and
arrangements and management succession planning. The Nominating
and Corporate Governance Committee oversees risks relating to
our compliance efforts with respect to legal and regulatory
requirements and relevant Company policies and procedures,
including our Corporate Governance Guidelines, Code of Business
Conduct and Ethics, and Code of Ethics for Senior Executive and
Financial Officers, and risks related to our corporate
governance matters and policies and director succession planning.
We believe our current board leadership structure is appropriate
and helps ensure proper risk oversight for our Company for a
number of reasons, including strong oversight by our standing
board committees that are currently comprised of and chaired by
our independent directors, and our President, Chief Executive
Officer
9
and Chairman of the Boards focus on leading productive
board strategic planning sessions and allocating the appropriate
time to discussion of risk.
Director
Attendance at the Annual Meeting
We encourage, but do not require, all of our directors to attend
the Annual Meeting. All of the directors who were serving on the
Board of Directors at the time of our 2009 Annual Meeting of
Stockholders attended the meeting other than Dr. Sean Casey.
Our
Codes of Conduct and Committee Charters
Because it is our policy to comply with all applicable laws,
rules and regulations and to conduct our business in keeping
with the highest moral, legal and ethical standards, we have
adopted a Code of Business Conduct applicable to all of our
employees, officers and members of the Board of Directors. The
Code of Business Conduct covers topics including:
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Conflicts of Interest;
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Protection and Proper Use of the Companys Assets;
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Corporate Opportunities;
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Compliance with Law;
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Fair Dealing;
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Confidentiality; and
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Accuracy of Public Disclosures.
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We have also adopted a separate Code of Ethics for Senior
Executive and Financial Officers, which outlines specific
standards applicable to our President and Chief Executive
Officer, Chief Financial Officer and General Counsel. The Code
of Ethics for Senior Executive and Financial Officers covers,
among other things, the accuracy and timeliness of our reports
and documents filed with the SEC, encouraging ethical behavior
among peers and subordinates, and preserving our confidential
information.
Our Board of Directors has also adopted Corporate Governance
Guidelines. The Corporate Governance Guidelines cover, among
other things, the primary functions of our Board of Directors,
director qualifications and responsibilities, director access to
management, director compensation, director orientation and
continuing education, management succession planning, and the
annual performance evaluation of our Board of Directors and its
committees.
The Code of Business Conduct, the Code of Ethics for Senior
Executive and Financial Officers, the Corporate Governance
Guidelines, the Audit Committee Charter, the Compensation
Committee Charter and the Nominating and Corporate Governance
Committee Charter can be found on our website,
www.virtualrad.com
, under the heading Investor
Relations Corporate Governance We intend to
post on our website any amendments to or waivers from the
provisions of our Code of Business Conduct and the Code of
Ethics for Senior Executive and Financial Officers within four
business days following the date of such amendment or waiver.
With respect to all references to our website throughout this
proxy statement, the information contained on or linked to our
website is not incorporated by reference into this proxy
statement and should not be considered part of this or any
report that we file with or furnish to the SEC.
10
EXECUTIVE
OFFICERS AND KEY EMPLOYEES
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Name
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Age
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Position and Experience
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Robert C. Kill
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46
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Robert C. Kill
has served as our President and Chief
Executive Officer since January 2009 and as one of our directors
since 2009, and was previously our President and Chief Operating
Officer beginning in May 2007. Prior to joining us, Mr. Kill was
President of Physician Systems for Misys Healthcare Systems, a
provider of clinical and practice management software
applications to physician practices, group practices, health
systems and managed services organizations. Before joining Misys
Healthcare Systems in 2002, Mr. Kill was Executive Vice
President of Entertainment Publications, Inc., where he was
employed from 1996 through 2001, and Vice President of
Operations for Baxter Healthcare, where he was employed from
1986 through 1996. Mr. Kill received a Bachelors degree in
Economics from the University of Notre Dame.
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Leonard C. Purkis
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61
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Leonard C. Purkis
has served as our Chief Financial
Officer since April 2008. Mr. Purkis was recruited out of
retirement to join us. He previously served as Chief Financial
Officer of E*TRADE Financial from 1998 to the end of 2003. Mr.
Purkis served as Chief Financial Officer of Iomega Corp. from
1995 to 1998. Before joining Iomega, Mr. Purkis spent
12 years in senior management roles with General
Electrics Capital, Lighting and Plastics businesses in
both the United States and Europe. Mr. Purkis is a Fellow member
of the Institute of Chartered Accountants in England and Wales,
and became a U.S. citizen in 2000.
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Richard W. Jennings
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49
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Richard W. Jennings
has served as our Chief Technology
Officer since April 2007. Prior to joining us, Mr. Jennings
served as president and managing director of Assess IT, a
technology management consulting firm providing technology
assessment and chief technology officer services to early-stage
public and private technology-enabled companies, since 2002.
Prior to founding Assess IT, Mr. Jennings also held numerous
management technical positions in the information technology
industry, including eight years as vice president and general
manager (Western Division) for Computer Sciences
Corporations technology management business unit,
providing technology integration, outsourcing, and consulting
services to clients in healthcare, aerospace, and energy
industries. Mr. Jennings serves on the board of MedNet
Solutions, a privately held healthcare clinical trials
technology firm. Mr. Jennings earned a B.S. degree in
Mechanical Engineering from the University of Texas at Austin,
and an M.S. degree in Management from Stanford Universitys
Graduate School of Business. Additionally, he holds the
Certified Information Systems Auditor (CISA) credential issued
by the Information Systems Audit and Control Association. Mr.
Jennings is the brother of Mark E. Jennings, one of our
directors.
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Name
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Age
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Position and Experience
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Eduard Michel, M.D., Ph.D.
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47
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Eduard Michel, M.D., Ph.D.
is our Chief Medical
Officer and a member of our Board of Directors. He is also one
of the co-founders of the Company, and has been a director since
2001. Prior to joining Virtual Radiologic Corporation, he was
engaged in a private neuroradiology practice in Minneapolis and
a clinical assistant professor of radiology at the University of
Minnesota. Dr. Michel has a CAQ in neuroradiology from the
American Board of Radiology. He received his B.S. and M.D.
degrees from the University of Minnesota, where he completed
training in diagnostic radiology and neuroradiology. He has
co-authored three book chapters and more than 20 peer-reviewed
articles and presented more than 45 scientific seminars at
medical conferences around the world.
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Michael J. Kolar, J.D.
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40
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Michael J. Kolar, J.D.
has served as our Vice
President, General Counsel and Secretary since January 2009.
Prior to joining Virtual Radiologic Corporation, Mr. Kolar was a
partner in the Corporate Finance Group of Oppenheimer Wolff
& Donnelly LLP in Minneapolis. His experience includes
extensive public company compliance, corporate governance and
corporate finance transactional work. He also served as co-chair
of the firms Corporate Finance and Transactions Group and
co-chair of the firms Medical Technology Industry Group.
Mr. Kolar rejoined Oppenheimer in 2001 after serving as general
counsel of Rooster.com, an Internet-based, business-to-business
exchange founded by the worlds leading agribusiness
companies. Prior to joining Rooster.com, he was a senior
associate with the firm. Mr. Kolar holds a Bachelors
degree in Business Administration from the University of Notre
Dame and earned his law degree, summa cum laude, from the
William Mitchell College of Law in St. Paul.
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COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis relates to the
material elements of our compensation policies and programs for
fiscal year 2009 for Mr. Kill, who became our Chief
Executive Officer on January 26, 2009, Mr. Purkis, our
Chief Financial Officer, and Dr. Michel, Mr. Richard
W. Jennings, and Mr. Kolar, our three other most highly
compensated executive officers during fiscal 2009. Pursuant to
applicable disclosure rules, this Compensation Discussion and
Analysis also discusses compensation paid during 2009 to
Dr. Casey, who served as our Chief Executive Officer from
January 1 to January 26, 2009. These individuals are
referred to as our named executive officers.
The Compensation Discussion and Analysis also reviews the
objectives, philosophy, process and decisions underlying the
compensation of our named executive officers. The Compensation
Discussion and Analysis should be read together with the
compensation tables and related footnotes found below under the
heading Executive Compensation.
Compensation
Philosophy
We believe that profitable growth of our Company is fundamental
to stockholder value creation and to our overall business
well-being, and that a significant contribution to that
well-being can be made by Company leaders. Thus, we believe that
an effective compensation program serves to attract and retain
key employees that are instrumental to our long-term success.
Such a compensation plan also serves to align our key
employees interests with the Companys and rewards
strong individual and Company performance.
12
Compensation
Policies and Objectives
Consistent with our philosophy, the primary objectives of our
compensation policies are (1) to attract and retain
qualified employees and (2) to incentivize them to promote
the continued profitable growth of our Company. In doing so, we
seek to align the interests of our key employees, our
stockholders and our Company through a combination of cash and
equity-based compensation. We also believe in keeping our
compensation programs reasonably simple and transparent. In this
spirit, we have historically kept our compensation programs to
basic elements consisting of base salary, cash incentive
compensation linked to Company and individual performance,
equity awards, and certain fringe benefit programs, such as
health insurance. We believe that the mix of cash-based and
equity-based compensation is effective in attracting top quality
talent for each of our top executive officer positions and
encouraging our executive officers to achieve our primary
corporate objectives of growth in revenues and profitability.
Determination
of Compensation
Our Compensation Committee develops, reviews and recommends
compensation policies and programs for our named executive
officers for approval by our Board of Directors. In addition to
developing, reviewing and recommending all elements of executive
compensation, the Compensation Committee is also responsible for
developing and overseeing our general compensation philosophy
and policy, specific compensation plans for our executive
officers, and making recommendations regarding non-employee
director compensation. Our Compensation Committee generally
meets between four and six times during each year to evaluate
the success of our past compensation programs, to develop new
compensation strategies for the future, to consider changes to
existing programs and to review and recommend annual
compensation changes. As discussed above under the heading
Board of Directors and Committees Compensation
Committee our Chief Executive Officer provides information
and recommendations to the Compensation Committee from time to
time regarding executive officer compensation.
The initial base salary and target incentive cash compensation
amounts for each of our named executive officers are set forth
in employment agreements with each named executive officer.
Equity-based compensation granted to our named executive
officers upon commencement of their employment with us is also
set forth in their employment agreements. Subsequent equity
grants recommended by the Compensation Committee and approved by
the Board are set forth in individual award agreements.
In October 2006, we engaged Hewitt Associates, Inc., an
independent compensation consultant, to evaluate our overall
compensation program and to provide us with its report of
comparable company compensation ranges. The identities of the
companies considered in the Hewitt report were not provided to
us. Our Compensation Committee considered the Hewitt report in
its deliberations and determined to establish 2007 and 2008 base
salaries for our named executive officers consistent with the
75
th
percentile
of the reported ranges for base salaries and incentive cash
compensation provided by Hewitt in its review of comparable
companies. The Compensation Committee selected the
75
th
percentile
as a basis for named executive officer compensation as it
believed that this level was appropriate to attract and retain
executive talent needed to support the Companys
significant growth efforts and manage the Company through and
following its initial public offering.
In setting Mr. Purkis compensation upon his initial
employment by the Company in 2008, the Compensation Committee
took into account the compensation studies and compensation
recommendations of Heidrick & Struggles, a nationally
recognized independent executive search firm hired by the
Company. Heidrick & Struggles recommendations
were based on its general knowledge of our industry, the
then-current market for similar executives in similarly-sized
companies, and consideration of inducing Mr. Purkis to join
us out of retirement.
In setting 2009 compensation levels for the named executive
officers, the Compensation Committee took into account
pre-existing executive compensation, as set after considering
the information and compensation studies discussed above. The
committee also considered comparative compensation data provided
by Frederic W. Cook & Co. regarding levels of base,
incentive and equity compensation for executives in the
Companys
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proxy peer group used for stock return comparison
purposes pursuant to Securities and Exchange Commission
disclosure requirements. The companies included in the report
consisted of the following companies:
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Allion Healthcare
American Dental Partners
Bio-Imaging Technologies
Bio-Reference Labs
Cardionet
Computer Programs & Systems
eResearch Technology
Genoptix
IPC
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MEDTOX Scientific
Merge Healthcare
NightHawk Radiology Services
Omnicell
QuadraMed
SonoSite
U.S. Physical Therapy
Vital Images
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Fiscal 2009 compensation for Mr. Kolar, who joined the
Company on January 1, 2009, took into account the prior
compensation paid to our former general counsel, the
recommendations of Mr. Kill following his review of the
current market for experienced legal professionals and similar
executives in similarly-sized companies, and negotiations with
Mr. Kolar to induce him to join us from private practice.
The Compensation Committee approved its 2009 compensation
recommendations at a meeting held on February 3, 2009 for
each named executive officer other than Mr. Kolar. Mr.
Kolars compensation was approved in December 2008, prior
to his employment by the Company. As Dr. Caseys
service as the Companys Chief Executive Officer terminated
effective January 26, 2009, base compensation paid to
Dr. Casey as a named executive officer from January 1 to
January 26, 2009 represented a continuation of 2008 amounts. All
other amounts paid to Dr. Casey in fiscal 2009 were
provided under the terms of the Transition Agreement between the
Company and Dr. Casey. The compensation paid under the
Transition Agreement was determined on the basis of a report
produced by Frederic W. Cook & Co. regarding
compensation to be paid to Dr. Casey as the Companys
Chairman of the Board, and pursuant to negotiations between the
Company and Dr. Casey regarding post-employment
compensation terms of his prior employment agreement. The
Transition Agreement is more fully described under the heading
Executive Compensation Narrative Disclosure to
Summary Compensation and Grants of Plan-Based Awards
Tables Agreements with Sean Casey, M.D.
Elements
of Executive Compensation
The key elements of our executive compensation are as follows:
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Element
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Character
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Objectives
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Base Salary
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Short Term
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Helps ensure that compensation is commensurate with the role,
scope and complexity of each executives position relative
to other executives and employees.
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Incentive Cash Compensation
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Short to Mid-Term
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Varies based on the Companys attainment of annual
performance measures and individual objectives that are aligned
with the business strategy and stockholders interests.
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Equity-Based Compensation
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Long-Term
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Varies based on long-term stock price performance and aligns
with stockholders interests.
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In recommending and approving named executive officer
compensation, the Compensation Committee and the Board of
Directors review the total value of all elements of compensation
to seek to ensure an appropriate aggregate level of compensation
and an appropriate mix between long and short term elements, and
between base and variable, performance-linked elements.
14
Base
Salary
Base salary is intended to provide our named executive officers
with a fixed component of compensation for services performed
and to enable them to meet regular financial obligations.
As indicated above, in prior fiscal years the Compensation
Committee had recommended base salary levels for our named
executive officers based upon information provided by Hewitt
Associates and Heidrick & Struggles. In recommending
2009 base salary, the committee additionally considered
comparative company data provided by Frederic W.
Cook & Co. After considering existing base salary
levels, management recommendations regarding base salary
increases, and the additional data provided by Frederic W.
Cook & Co., the Compensation Committee determined not
to recommend any increase in base salary for Mr. Purkis,
Dr. Michel or Mr. Jennings, or for the Chief Executive
Officer position, to which Mr. Kill was appointed on
January 26, 2009, as the committee believed that executive
base salaries were appropriately set at or near the
50th percentile of the comparative data.
Mr. Kolars fiscal 2009 base salary was determined in
connection with his initial employment by the Company on
January 1, 2009, based upon the factors discussed above.
In connection with the new employment and independent physician
agreements entered into by the Company and Virtual Radiologic
Professionals, LLC (VRP), the Companys
affiliated medical practice, with Dr. Michel, effective
July 1, 2009, Dr. Michels compensation
arrangements were substantially amended. As a result of these
amendments, Dr. Michels base salary was increased
from $120,000 to $350,000, and his annual compensation for
services to VRP was reduced from $380,000 to $50,000. This
change in the mix and net amount of overall base compensation
was approved by the Compensation Committee to take into account
Dr. Michels increased duties as an executive officer
of the Company, including services rendered as a Company
executive to VRP, pursuant to the management and license
agreement between the Company and VRP, and in connection with
the increase in Dr. Michels incentive cash
compensation opportunity with the Company, discussed below.
Incentive
Cash Compensation
For fiscal 2009, the Compensation Committee approved
performance-based incentive cash compensation targets for our
named executive officers that were designed to promote
attainment of overall financial performance goals for the
Company, as well as individual objectives aligned with the
Companys 2009 business strategy. Target incentive cash
compensation amounts for 2009 were set at 50% of base salary for
each named executive officer other than Mr. Kill and
Dr. Michel. Mr. Kills 2009 incentive cash
compensation target was set at 60% of base salary upon his
promotion to the position of Chief Executive Officer.
Dr. Michels target annual incentive cash compensation
opportunity was initially set at $60,000, and was subsequently
increased to $100,000 in connection with his employment and
independent physician agreement changes effective July 1,
2009. These target amounts were set by the Compensation
Committee after considering the comparative data from
Hewitt & Associates, Heidrick & Struggles
and Frederic W. Cook & Co. and executive base salary
levels. Considering the overall terms of the incentive cash
compensation program, the committee believed that the target
compensation amounts provided meaningful incentives to advance
the interests of the Company and our stockholders. Pursuant to
the terms of his Transition Agreement with the Company,
Dr. Casey did not participate in the Companys 2009
incentive cash compensation program.
Under the terms of the Companys 2009 incentive cash
compensation program, payments to each named executive officer
could range from 0% to 200% of the target amount. Payment of the
incentives depended upon Company financial performance, as
measured by fiscal 2009 adjusted EBITDA, and, in the case of
each named executive officer other than Mr. Kill,
achievement relative to individual performance goals established
by Mr. Kill and intended to advance the Companys
overall business strategies. The Compensation Committee and the
Board retained discretion to adjust incentive cash compensation
targets and payments based upon the occurrence of extraordinary
events and other circumstances deemed relevant.
For purposes of the 2009 incentive cash compensation program,
adjusted EBITDA was defined as earnings before interest, taxes,
depreciation and amortization, and without regard to medical
malpractice reserves or the effects of physician and employee
non-cash stock-based compensation expense. The level of funding
available for 2009 incentive payments to named executive
officers was determined on a scale, ranging
15
from 0% of target incentive amounts at pre-incentive
compensation funding adjusted EBITDA of $21.4 million or
lower, scaling up to a maximum of 200% of target incentive
amounts at pre-incentive compensation funding adjusted EBITDA of
$31.3 million or higher.
Individual performance objectives for each named executive
officer other than Mr. Kill related to the following
initiatives: Mr. Purkis: capital expenditure controls,
accounts receivable collections, productivity and compensation
initiatives, and SG&A controls; Dr. Michel:
productivity and compensation initiatives, new service
introductions and medical practice leadership initiatives;
Mr. Jennings: deployment of the Companys proprietary
PACS technology, new technology licensing transactions,
technology cost reductions, software developments and platform
availability metrics; Mr. Kolar: contracting and business
development activities, governmental relations initiatives and
legal compliance related initiatives. Given Mr. Kills
overall responsibility for Company financial results and
execution of business strategy, Mr. Kills 2009
incentive cash compensation payout was determined solely on
adjusted EBITDA performance. The Companys adjusted EBITDA
performance targets were determined by the committee to be
achievable but aggressive goals, particularly in light of the
anticipated difficult economic environment, and the individual
performance objectives set by Mr. Kill were likewise
established to be achievable, but only with significant levels
of additional effort by the named executive officers.
The Companys reported 2009 adjusted EBITDA of
$27.6 million correlated to pre-incentive compensation
payment adjusted EBITDA of $30.4 million, funding the
incentive payment pool at 180% of target. As discussed above,
this level also determined Mr. Kills incentive cash
compensation payout reflected in the Summary Compensation Table.
For each other named executive officer, the Compensation
Committee reviewed the officers performance relative to
the individual performance goals, based upon information
provided by Mr. Kill, reporting his assessment of
individual performance relative to individual goals at 100% for
each of Mr. Purkis, Mr. Jennings, and Mr. Kolar,
and 84% for Dr. Michel, resulting in the payout reflected
in the Summary Compensation Table.
Equity-Based
Compensation
We issue equity-based compensation to our named executive
officers upon the commencement of their employment with us and
periodically as determined by our Compensation Committee. Prior
to fiscal 2009, all equity-based compensation had been granted
in the form of stock options because of the perceived value to
the option holder. In fiscal 2009, we began to provide equity
grants to our named executive officers and other management
employees as a mix of stock options and restricted stock,
principally to reduce the potential dilution impact of our
equity grant programs and to provide continued alignment with
stockholder interests in volatile stock price scenarios.
Restricted stock awards made to named executive officers in 2009
were in lieu of one half of the number of shares that would have
otherwise been granted as options, and were granted as one
fourth of the number of the replaced option shares as an
approximation of the relative value between the two award types.
We believe that the practice of granting equity awards to named
executive officers and other highly compensated employees helps
to align their interests with those of the Company and the
stockholders as a whole. Pursuant to our policies, equity grants
to named executive officers are recommended by the Compensation
Committee, and are subject to approval by our Board of
Directors. Exercise prices for all options granted to named
executive officers are set at fair market value, as determined
by the closing price of a share of the Companys common
stock on the date of Board approval of the grant.
In fiscal 2009, Mr. Kill was awarded 40,000 shares of
restricted stock and options to purchase 100,000 shares of
stock in connection with his promotion to the position of Chief
Executive Officer and the committees consideration of his
existing equity holdings and the level of equity believed to be
appropriate to optimally align Mr. Kills long term
interests with those of the Company and our stockholders, taking
into account his increased responsibilities and comparative
position data. Additionally, Mr. Purkis and
Mr. Jennings were each awarded 15,000 shares of
restricted stock and options to purchase 37,500 shares of
stock after consideration of their respective holdings and
levels deemed appropriate for their positions by the committee
and comparative position data. Upon joining the Company,
Mr. Kolar was awarded options to purchase
16
80,000 shares of stock based upon negotiations and the
Committees determination of an appropriate level of equity
to induce Mr. Kolar to join the Company. In consideration
of his significant equity holdings as a Company founder, no
additional equity awards to Dr. Michel were recommended or
granted.
Equity
Ownership Guidelines
During fiscal 2009, the Company adopted equity ownership
guidelines for executive officers and directors as a means of
encouraging equity ownership among such individuals and thereby
further aligning their interests with those of the Company and
our stockholders. The guidelines provide that covered
individuals shall seek to accumulate, and thereafter maintain,
holdings of Company stock valued at or above $100,000, in the
case of non-employee directors, two times base salary, in the
case of the Chief Executive Officer, and base salary, in the
case of each other executive officer. The guidelines provide for
an accumulation goal of five years from initial election or
appointment, provide that unvested shares of restricted stock
(but not options) and other shares in which the individual has a
direct or indirect pecuniary interest are counted toward the
goal, and provide for regular monitoring and review of progress
by our Nominating and Corporate Governance Committee. In
February 2010, the Nominating and Corporate Governance Committee
reviewed progress toward the goals set forth in the guidelines
and determined sufficient progress or achievement by the covered
individuals.
Other
Compensation
We provide our executive officers with the same benefits as our
other full-time employees, including health insurance, life and
disability insurance, dental insurance, and a 401(k) retirement
plan, including a Company match. The Compensation Committee
periodically reviews the levels of benefits provided to
executive officers.
Severance
and Change in Control Payments
We have entered into employment agreements with each of our
named executive officers providing for certain payments
subsequent to, or in connection with, the termination of their
employment by us without cause or by the executive for good
reason, including in connection with any change in control of
the Company. These benefits are more fully described below under
Potential Payments Upon Termination or Change in
Control. We believe that this type of compensation
arrangement is necessary to allow us to be competitive in
recruiting and retaining top talent for executive officer
positions, and expect that we will continue to offer these
benefits to our named executive officers for the foreseeable
future.
Impact of
Tax and Accounting Treatment
We do not currently have a policy with respect to
Section 162(m) of the Internal Revenue Code. During the
year ended December 31, 2009, no compensation was paid to
any of the named executive officers that was non-deductible as a
result of the limitations imposed by Section 162(m).
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Board of Directors of Virtual
Radiologic Corporation has reviewed the Compensation Discussion
and Analysis contained in this proxy statement and has discussed
it with management. Based upon the Compensation Committees
own review, and the discussions with management, the
Compensation Committee has recommended to the full Board of
Directors that the Compensation Discussion and Analysis be
included in this proxy statement.
Compensation Committee of the Board of
Directors
Nabil N. El-Hage (Chair)
Richard J. Nigon
Kevin H. Roche
17
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth all compensation earned by each
of our named executive officers with respect to the years ended
December 31, 2009, 2008, and 2007.
|
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|
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|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
|
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Non-Equity
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|
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|
|
|
|
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Stock
|
|
Option
|
|
Incentive Plan
|
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All Other
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|
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Name and Principal Position
|
|
Year
|
|
Salary
|
|
Awards(2)
|
|
Awards(3)
|
|
Compensation(4)
|
|
Compensation(5)
|
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Total
|
|
Robert C. Kill
|
|
|
2009
|
|
|
$
|
411,932
|
|
|
$
|
335,600
|
|
|
$
|
436,999
|
|
|
$
|
453,109
|
|
|
$
|
8,355
|
|
|
$
|
1,645,995
|
|
President and Chief Executive Officer
|
|
|
2008
|
|
|
$
|
325,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
40,000
|
|
|
$
|
6,678
|
|
|
$
|
371,678
|
|
Officer(1)
|
|
|
2007
|
|
|
$
|
192,329
|
|
|
$
|
|
|
|
$
|
1,047,390
|
|
|
$
|
48,305
|
|
|
$
|
156,512
|
|
|
$
|
1,444,536
|
|
Leonard C. Purkis
|
|
|
2009
|
|
|
$
|
300,000
|
|
|
$
|
134,700
|
|
|
$
|
177,165
|
|
|
$
|
269,708
|
|
|
$
|
5,175
|
|
|
$
|
886,748
|
|
Chief Financial Officer(1)
|
|
|
2008
|
|
|
$
|
214,521
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|
|
$
|
|
|
|
$
|
1,264,047
|
|
|
$
|
35,000
|
|
|
$
|
2,481
|
|
|
$
|
1,516,049
|
|
Richard W. Jennings
|
|
|
2009
|
|
|
$
|
300,000
|
|
|
$
|
134,700
|
|
|
$
|
177,165
|
|
|
$
|
269,617
|
|
|
$
|
10,773
|
|
|
$
|
892,255
|
|
Chief Technology Officer
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|
|
2008
|
|
|
$
|
300,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
50,000
|
|
|
$
|
12,828
|
|
|
$
|
362,828
|
|
|
|
|
2007
|
|
|
$
|
224,384
|
|
|
$
|
|
|
|
$
|
672,692
|
|
|
$
|
70,377
|
|
|
$
|
6,533
|
|
|
$
|
973,986
|
|
Eduard Michel M.D., Ph.D.
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|
|
2009
|
|
|
$
|
235,945
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
120,829
|
|
|
$
|
328,085
|
|
|
$
|
684,859
|
|
Medical Director
|
|
|
2008
|
|
|
$
|
120,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,000
|
|
|
$
|
384,966
|
|
|
$
|
519,966
|
|
|
|
|
2007
|
|
|
$
|
120,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,600
|
|
|
$
|
384,788
|
|
|
$
|
520,388
|
|
Michael J. Kolar
|
|
|
2009
|
|
|
$
|
260,000
|
|
|
$
|
|
|
|
$
|
350,979
|
|
|
$
|
233,747
|
|
|
$
|
5,365
|
|
|
$
|
850,091
|
|
Vice President, General
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counsel and Secretary(1)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean O. Casey M.D.
|
|
|
2009
|
|
|
$
|
35,671
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
670,938
|
|
|
$
|
706,609
|
|
Former Chief Executive
|
|
|
2008
|
|
|
$
|
420,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,000
|
|
|
$
|
79,705
|
|
|
$
|
519,705
|
|
Officer(1)
|
|
|
2007
|
|
|
$
|
375,123
|
|
|
$
|
|
|
|
$
|
648,868
|
|
|
$
|
180,000
|
|
|
$
|
86,232
|
|
|
$
|
1,290,223
|
|
|
|
|
(1)
|
|
In January 2009, Dr. Casey resigned as Chief Executive
Officer, and Mr. Kill assumed the position of President and
Chief Executive Officer. Mr. Kill joined us as our
President and Chief Operating Officer in May 2007.
Mr. Purkis joined us as our Chief Financial Officer in
April 2008. Mr. Kolar joined us as our Vice President,
General Counsel and Secretary in January 2009.
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(2)
|
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Represents the aggregate grant date fair value computed in
accordance with FASB ASC Topic 718. The grant date fair value is
determined based on the closing sale price of our common stock
on the date of grant.
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|
(3)
|
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Represents the aggregate grant date fair value computed in
accordance with FASB ASC Topic 718. For information regarding
the key assumptions used in determining the fair value of
options granted, see Note 9 Stock-Based
Compensation to our Consolidated Financial Statements filed with
our Annual Report on
Form 10-K
for the year ended December 31, 2009.
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(4)
|
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These amounts represent payments under our 2009 management
incentive compensation plan, as confirmed and recommended by the
Compensation Committee and approved by the Board of Directors.
See the Compensation Discussion and Analysis for a more detailed
discussion of the plan.
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(5)
|
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The amounts shown in this column for 2009 include the following
with respect to each named executive officer
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|
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Tax
|
|
VRP Physician
|
|
VRP Tax
|
|
|
401(k)
|
|
Life Insurance
|
|
Preparation
|
|
Agreement
|
|
Conversion
|
Name
|
|
Match
|
|
Premiums
|
|
Fees
|
|
Compensation
|
|
Indemnity
|
|
Robert C. Kill
|
|
$
|
8,040
|
|
|
$
|
315
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Leonard C. Purkis
|
|
|
4,923
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard W. Jennings
|
|
|
10,521
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eduard Michel, M.D., Ph.D.
|
|
|
4,483
|
|
|
|
294
|
|
|
|
|
|
|
|
242,500
|
|
|
|
80,808
|
|
Michael J. Kolar
|
|
|
5,146
|
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean O. Casey, M.D.
|
|
|
1,476
|
|
|
|
26
|
|
|
|
15,431
|
|
|
|
3,901
|
|
|
|
191,705
|
|
In addition, the amounts shown for Dr. Casey include
$38,398 for his service as non-employee Chairman from
January 26, 2009 to April 1, 2009, and severance of
$420,000 following his service as Chairman
18
pursuant to the terms of his Transition Agreement with the
Company. See Executive Compensation Narrative
Disclosure to Summary Compensation and Grants of Plan-Based
Awards Tables Agreements with Sean
Casey, M.D.
Grants of
Plan-Based Awards
The following table sets forth grants made to our named
executive officers under both equity and non-equity incentive
plans during the 2009 fiscal year.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Grant
|
|
|
|
|
Payouts Under
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Date Fair
|
|
|
|
|
Non-Equity
Incentive Plan
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Value of Stock
|
|
|
Grant
|
|
Awards(1)
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
and Option
|
Name
|
|
Date(2)
|
|
Target
|
|
Maximum
|
|
Units (#)(2)
|
|
Options (#)(2)
|
|
Awards
|
|
Awards(3)
|
|
Robert C. Kill
|
|
|
1/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
8.39
|
|
|
$
|
436,999
|
|
|
|
|
1/26/09
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
335,600
|
|
|
|
|
|
|
|
$
|
252,000
|
|
|
$
|
504,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard C. Purkis
|
|
|
2/3/09
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
37,500
|
|
|
$
|
8.98
|
|
|
$
|
177,165
|
|
|
|
|
2/3/09
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
$
|
134,700
|
|
Richard W. Jennings
|
|
|
2/3/09
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
37,500
|
|
|
$
|
8.98
|
|
|
$
|
177,165
|
|
|
|
|
2/3/09
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
$
|
134,700
|
|
Eduard Michel, M.D., Ph.D.(4)
|
|
|
|
|
|
$
|
80,000
|
|
|
$
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kolar
|
|
|
1/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
$
|
8.48
|
|
|
$
|
350,979
|
|
|
|
|
|
|
|
$
|
130,000
|
|
|
$
|
260,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean O. Casey, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts disclosed in this column represent the target and
maximum amounts of cash incentive compensation payable to our
named executive officers under our 2009 management incentive
compensation plan, as approved by our Board of Directors on
February 3, 2009. Target payments were based upon each
executive officers employment agreement, and were set at
60% of base salary for Mr. Kill, $60,000 for
Dr. Michel, which amount was subsequently increased to
$100,000, effective July 1, 2009, and 50% of base salary
for each other named executive officer. Additional information
regarding our 2009 management incentive compensation plan is
included above in Compensation Discussion and
Analysis Elements of Executive
Compensation Incentive Cash Compensation.
Amounts earned under the 2009 incentive compensation plan were
paid in January 2010 following approval of the Board of
Directors.
|
|
(2)
|
|
Stock options and restricted stock awards are granted under our
Amended and Restated Equity Incentive Plan and vest in equal
annual increments on each of the first four anniversaries of the
date of grant.
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(3)
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Valuation of option awards is based on the grant date fair value
of the awards computed in accordance with FASB ASC Topic 718 and
does not reflect whether the grantee has actually realized a
financial benefit from the award. For information regarding the
key assumptions used in determining the fair value of options
granted, see Note 9 Stock-Based Compensation to
our Consolidated Financial Statements filed with our Annual
Report on
Form 10-K
for the year ended December 31, 2009. The grant date fair
value of stock awards is determined based on the closing sale
price of our common stock on the date of grant.
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(4)
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Reflects prorated incentive potential based upon
Dr. Michels July 1, 2009 employment agreement
and his prior agreement. See Executive
Compensation Narrative Disclosure to Summary
Compensation and Grants of Plan-Based Awards Tables
Employment Agreement and Physician Agreement with Eduard
Michel, M.D., Ph.D.
|
Narrative
Disclosure to Summary Compensation and Grants of Plan-Based
Awards Tables
Employment
Agreement and Physician Agreement with Eduard Michel, M.D.,
Ph.D.
On July 30, 2009, we entered into an employment agreement
with Dr. Eduard Michel, our Medical Director, having an
effective date of July 1, 2009. The new employment
agreement provides for an annual
19
base salary of $350,000, subject to increase at the discretion
of our Board, and a target annual incentive cash compensation
opportunity of $100,000, subject to the terms and conditions of
the Companys annual incentive compensation plans as
approved by the Board. On the same date, Dr. Michel also
entered into an Independent Physician Agreement with VRP
providing him with annual compensation of $50,000 for his
services to VRP. Dr. Michels prior agreement with the
Company provided for an annual base salary of $120,000 and an
annual incentive compensation opportunity, at target, of
$60,000, and his prior agreement with VRP provided him with
annual compensation of $380,000. The revised compensation terms
contained in the new agreements are intended to reflect
Dr. Michels increased duties as an executive officer
of the Company, including services rendered as a Company
executive to VRP, pursuant to the management and license
agreement between the entities.
Dr. Michels employment agreement with the Company
provides for a three-year term with automatic renewal for
subsequent one-year terms thereafter, unless earlier terminated
or unless notice of non-renewal is provided. Pursuant to the
employment agreement, Dr. Michel is entitled to certain
post-termination benefits as described below under
Potential Payments Upon Termination or Change in
Control. Dr. Michels agreement also provides
for customary confidentiality and invention assignment
provisions, and prohibitions on customer or employee
solicitation and competition during the term of the agreement
and for a period of two years thereafter.
Employment
Agreements with Certain Other Named Executive
Officers
On July 30, 2009, we also entered into new employment
agreements with each of Mr. Kill, Mr. Purkis,
Mr. Jennings, and Mr. Kolar. These new employment
agreements are in substantially the same form and contain the
terms and conditions described above with respect to
Dr. Michels new form of agreement, other than
compensation amounts. In entering into these agreements we did
not alter the compensation payable to any of these other
executive officers, and the term of each of these new agreements
remains the same as each individual officers prior
agreement with us. Under the terms of these agreements, base
salaries and target annual incentive compensation (expressed as
a percentage of base salary) for each named executive officer
are as follows: Mr. Kill $420,000, 60%;
Mr. Purkis $300,000, 50%;
Mr. Jennings $300,000, 50% and
Mr. Kolar $260,000, 50%. Under each agreement,
the level of base salary is subject to increase at the
discretion of our Board, and the level of target annual
incentive compensation is subject to the terms and conditions of
the Companys annual incentive compensation plans as
approved by the Board.
Agreements
with Sean Casey, M.D.
We entered into an employment agreement with Dr. Casey
effective as of October 1, 2007, pursuant to which
Dr. Casey served as our Chief Executive Officer. This
agreement governed the term of Dr. Caseys employment
with us as Chief Executive Officer until his resignation on
January 26, 2009 and concurrent termination of his
employment agreement. Under the employment agreement,
Dr. Casey was entitled to an annual base salary of
$420,000, which could be increased at the Boards
discretion, and an annual incentive compensation target of up to
50% of his base salary, or such greater percentage as provided
in an annual incentive compensation plan approved by our Board
of Directors. Dr. Casey was additionally entitled to
request that we pay half the cost of purchasing both
(i) disability insurance for Dr. Casey, which insures
continuing compensation at a rate of one-half of his base salary
for the duration of any long-term disability, and (ii) a
$1 million life insurance policy, which would be payable to
Dr. Caseys designated beneficiary in the event of his
death during the term of the agreement.
VRP entered into an amended and restated physician agreement
with Dr. Casey effective as of September 13, 2007,
pursuant to which Dr. Casey served as the President and
principal executive officer of VRP and provided radiology
interpretation and consultation services at VRPs request.
Under the agreement, Dr. Casey was entitled to $67,000 of
base compensation, an additional amount of up to $10,000 per
year for radiologic interpretations performed, and reimbursement
of up to $250 per month for expenses incurred by him in
connection with his provision of services under the agreement.
20
In connection with his resignation in January 2009,
Dr. Casey entered into a Transition Agreement with us,
which modified certain prospective terms of his former
employment agreement, and called for certain payments in
satisfaction of certain terms of the former employment
agreement. The Transition Agreement provided, among other
things, that (i) Dr. Casey would be entitled to be
paid a total of $20,000 in lieu of any other incentive
compensation Dr. Casey may have been entitled to for fiscal
2008, (ii) monthly payments for his services as a director
and non-executive Chairman of the Board in the aggregate amount
of $210,000 per year, which payments were made to Dr. Casey
through March 2010, (iii) Dr. Caseys outstanding
options at the time of his resignation as our Chief Executive
Officer would continue to vest and be exercisable during his
service as a director, (iv) Dr. Casey would be
entitled to a severance payment of $420,000, payable in twelve
consecutive monthly installments, upon his termination as the
Chairman of the Board for various reasons, including the
Companys failure to nominate him for re-election to the
Board; (v) the Company would indemnify Dr. Casey for
certain liabilities related to his transition of ownership of
the Companys affiliated medical practices to
Dr. Michel, and (vi) VRP must maintain medical
malpractice insurance for the benefit of Dr. Casey, which
covers conduct that occurred as a result of radiological
services rendered during the term of his service to VRP, with
minimum coverage of $1 million per claim and
$3 million in the aggregate annually for a period of at
least seven years after termination of Dr. Caseys
physician agreement. Dr. Casey is also subject to
non-compete and non-solicitation obligations following his
service as Chairman.
On April 1, 2009, the Board of Directors determined not to
nominate Dr. Casey for re-election as a director and
determined to end Dr. Caseys service as Chairman,
based upon the recommendations of the Nominating and Corporate
Governance Committee and considerations of board size, board
relationships and functionality, board composition and the
desire to have Mr. Kill elected as a director. Resulting
payments to Dr. Casey are discussed below under
Potential Payments Upon Termination or Change in
Control.
Outstanding
Equity Awards at Fiscal Year-End
The table below reflects all outstanding equity awards made to
each of the named executive officers that are outstanding at
December 31, 2009.
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Option Awards
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Stock Awards
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Number of
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Number of
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Securities
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Securities
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Number of
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Market
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Underlying
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Underlying
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Shares of
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Value of
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Unexercised
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Unexercised
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Stock that
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Shares
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Options
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Options
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Option
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Option
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have Not
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that have
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Name
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Grant Date
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Exercisable
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Unexercisable
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Exercise Price
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Expiration Date
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Vested
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Not Vested
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Robert C. Kill
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5/29/07
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(1)
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100,000
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100,000
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$
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12.00
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4/30/2017
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11/14/07
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(2)
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12,500
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12,500
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$
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17.00
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11/14/2014
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|
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1/26/09
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(2)
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100,000
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$
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8.39
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01/26/2019
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1/26/09
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(2)
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40,000
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$
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510,400
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Leonard C. Purkis
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4/14/08
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(2)
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40,000
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120,000
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$
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16.54
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4/14/2018
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|
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2/3/09
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(2)
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37,500
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$
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8.98
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2/3/2019
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2/3/09
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(2)
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15,000
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$
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191,400
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Richard W. Jennings
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4/12/07
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(3)
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65,000
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65,000
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$
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12.00
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3/31/2017
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11/14/07
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(2)
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7,500
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7,500
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$
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17.00
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11/14/2014
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2/3/09
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(2)
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37,500
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$
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8.98
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2/3/2019
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2/3/09
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(2)
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15,000
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$
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191,400
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Eduard Michel, M.D., Ph.D.
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7/1/06
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(4)
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16,667
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$
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12.00
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4/18/2013
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Michael J. Kolar
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1/1/09
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(2)
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80,000
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$
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8.48
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1/1/2019
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Sean O. Casey, M.D.
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11/14/07
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100,000
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$
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17.00
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11/14/2014
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(1)
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This award vests ratably in four annual installments on May 31
of each of 2008, 2009, 2010, and 2011.
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(2)
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These awards vest ratably in four annual installments on each of
the first four anniversaries of the date of grant.
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(3)
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This award vests ratably in four annual installments on March 31
of each of 2008, 2009, 2010, and 2011.
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(4)
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This award vested ratably in three annual installments on July 1
of each of 2007, 2008, and 2009.
|
21
Option
Exercises and Stock Vested
During the year ended December 31, 2009, there were no
options exercised by any of our named executive officers and
none of the restricted stock awarded to our named executive
officers became vested.
Potential
Payments Upon Termination or Change in Control
Employment
Agreements with Named Executive Officers other than
Dr. Casey
Pursuant to the terms of the employment agreements that we
entered into with and Mr. Kill, Dr. Michel,
Mr. Jennings, Mr. Purkis and Mr. Kolar in July
2009 and that are currently in effect, in the event that
Messrs. Kill, Jennings, Purkis, Kolar
and/or
Dr. Michels employment is terminated by the executive
for good reason or by us without cause (as each is defined in
the agreement) other than in connection with a change in
control, the executive will be entitled to the following
severance benefits: (i) a pro rata portion of the annual
incentive compensation amount for the year in which termination
occurs (at the time that annual incentive payments are paid to
other senior executives), (ii) continuation of base salary
for 12 months, (iii) a lump sum payment equal to 12
times the monthly premium amount that we would have been
required to pay for group life insurance and group long term
disability had the executive continued to be employed by us, and
(iv) subject to the executives continued co-payment
of premiums, continued participation for 12 months in the
Companys group medical
and/or
dental plans, or payment of the Company portion of all premiums
under such plans if participation is not feasible.
In the event that Messrs. Kill, Jennings, Purkis, Kolar
and/or
Dr. Michels employment is terminated by the executive
for good reason or by us without cause (as each is defined in
the agreement) in connection with a change in control the
executive will be entitled to the following severance benefits:
(i) a lump sum payment equal to the sum of
(a) 12 months of base salary, (b) 60%, in the
case of Mr. Kill, 29%, in the case of Dr. Michel, and
50%, in the case of Messrs. Jennings, Purkis and Kolar, of
the executives base salary, as compensation for the
cancellation of the executives incentive compensation
opportunity, (c) 12 times the monthly premium amount that
we would have been required to pay for group life insurance and
group long term disability had the executive continued to be
employed by us, and (ii) subject to the executives
continued co-payment of premiums, continued participation for
12 months in the Companys group medical
and/or
dental plans, or payment of the Company portion of all premiums
under such plans if participation is not feasible.
The employment agreements with each of Messrs. Kill,
Jennings, Purkis and Kolar and Dr. Michel additionally
provide that all equity awards granted to such individuals will
vest immediately upon a change of control, as defined therein.
Messrs. Kill, Jennings, Purkis and Kolar and
Dr. Michel are all subject to non-compete and non-solicit
obligations during the term of the employment and for two years
thereafter pursuant to the terms of their employment agreement.
Upon termination for any reason, including the circumstances
discussed above, Messrs. Kill, Jennings, Purkis and Kolar
and Dr. Michel would each be entitled to (i) any
unpaid base salary through the date of termination,
(ii) any unpaid incentive compensation earned with respect
to any fiscal year ending on or preceding the date of
termination, and (iii) reimbursement for any unreimbursed
expenses.
If the aggregate payments to Mr. Kill, Dr. Michel,
Mr. Jennings, Mr. Purkis or Mr. Kolar under their
employment agreement or otherwise in connection with any change
of control of the Company would subject to the executive officer
to an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended, then the aggregate payments to the
executive officer would be reduced to the greatest amount that
could be paid without triggering the excise tax on the executive
officer, but only if such reduction would result in a greater
after tax amount paid to the executive officer.
Transition
Agreement with Sean Casey, M.D.
Under our Transition Agreement with Sean Casey, M.D., our
former Chairman and Chief Executive Officer, Dr. Casey was
to serve as the non-executive Chairman of the Board for a period
of one year following the date of the Transition Agreement,
which term was to renew for additional one year periods. As
discussed above, the Board of Directors determined to end
Dr. Caseys service as Chairman effective as of
April 1,
22
2009. Because Dr. Caseys service as Chairman of the
Board was terminated due to the Boards decision not to
nominate him for re-election to the Board of Directors,
Dr. Casey became entitled to a severance payment of
$420,000, payable in monthly installments over a period of
12 months following the determination, and a minimum of
$10,036 and a maximum of $20,073 in the form of continued
benefits.
Potential
Payments to Named Executive Officers
Assuming that a termination without cause had occurred on
December 31, 2009, Messrs. Kill, Jennings, Purkis and
Kolar and Dr. Michel would be entitled to receive the
amounts set forth in the following table, under the applicable
circumstances set forth below. The following table does not
include any accrued and unpaid base salary, incentive
compensation or unreimbursed expenses to which the executives
also would be entitled.
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|
|
|
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|
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In Connection with
|
|
Other than in Connection with
|
|
|
|
|
Change in Control
|
|
Change in Control
|
|
|
|
|
|
|
|
|
Termination by
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|
|
|
|
|
|
us without
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|
|
|
|
Termination
|
|
Cause or
|
|
|
|
|
|
|
Due to
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|
by NEO
|
|
|
|
|
|
|
Death or
|
|
with Good
|
|
|
Name and Description of Benefit
|
|
|
|
Disability
|
|
Reason
|
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|
|
Robert C. Kill
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|
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|
Base Salary Payment/Continuation
|
|
$
|
420,000
|
|
|
$
|
|
|
|
$
|
420,000
|
|
|
|
|
|
Payment of Pro-rata Portion of 2009 Incentive Compensation(1)
|
|
|
|
|
|
|
453,109
|
|
|
|
453,109
|
|
|
|
|
|
Payment of 2009 Target Incentive Compensation
|
|
|
252,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of Equity Award Acceleration(2)
|
|
|
1,023,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Payment of Life and Disability Insurance Premium
|
|
|
5,684
|
|
|
|
|
|
|
|
5,684
|
|
|
|
|
|
Value of Continuation of Medical and/or Dental Plan Coverage
|
|
|
9,612
|
|
|
|
|
|
|
|
9,612
|
|
|
|
|
|
Leonard C. Purkis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary Payment/Continuation
|
|
$
|
300,000
|
|
|
$
|
|
|
|
$
|
300,000
|
|
|
|
|
|
Payment of Pro-rata Portion of 2009 Incentive Compensation(1)
|
|
|
|
|
|
|
269,708
|
|
|
|
269,708
|
|
|
|
|
|
Payment of 2009 Target Incentive Compensation
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of Equity Award Acceleration(2)
|
|
|
333,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Payment of Life and Disability Insurance Premium
|
|
|
924
|
|
|
|
|
|
|
|
924
|
|
|
|
|
|
Value of Continuation of Medical and/or Dental Plan Coverage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard W. Jennings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary Payment/Continuation
|
|
$
|
300,000
|
|
|
$
|
|
|
|
$
|
300,000
|
|
|
|
|
|
Payment of Pro-rata Portion of 2009 Incentive Compensation(1)
|
|
|
|
|
|
|
269,617
|
|
|
|
269,617
|
|
|
|
|
|
Payment of 2009 Target Incentive Compensation
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of Equity Award Acceleration(2)
|
|
|
382,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Payment of Life and Disability Insurance Premium
|
|
|
924
|
|
|
|
|
|
|
|
924
|
|
|
|
|
|
Value of Continuation of Medical and/or Dental Plan Coverage
|
|
|
9,612
|
|
|
|
|
|
|
|
9,612
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Connection with
|
|
Other than in Connection with
|
|
|
|
|
Change in Control
|
|
Change in Control
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
us without
|
|
|
|
|
|
|
Termination
|
|
Cause or
|
|
|
|
|
|
|
Due to
|
|
by NEO
|
|
|
|
|
|
|
Death or
|
|
with Good
|
|
|
Name and Description of Benefit
|
|
|
|
Disability
|
|
Reason
|
|
|
|
Eduard Michel, M.D., Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary Payment/Continuation
|
|
$
|
350,000
|
|
|
$
|
|
|
|
$
|
350,000
|
|
|
|
|
|
Payment of Pro-rata Portion of 2009 Incentive Compensation(1)
|
|
|
|
|
|
|
120,829
|
|
|
|
120,829
|
|
|
|
|
|
Payment of 2009 Target Incentive Compensation
|
|
|
80,000
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
Market Value of Equity Award Acceleration(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Payment of Life and Disability Insurance Premium
|
|
|
5,486
|
|
|
|
|
|
|
|
5,486
|
|
|
|
|
|
Value of Continuation of Medical and/or Dental Plan Coverage
|
|
|
9,612
|
|
|
|
|
|
|
|
9,612
|
|
|
|
|
|
Michael J. Kolar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary Payment/Continuation
|
|
$
|
260,000
|
|
|
$
|
|
|
|
$
|
260,000
|
|
|
|
|
|
Payment of Pro-rata Portion of 2009 Incentive Compensation(1)
|
|
|
|
|
|
|
233,747
|
|
|
|
233,747
|
|
|
|
|
|
Payment of 2009 Target Incentive Compensation
|
|
|
130,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of Equity Award Acceleration(2)
|
|
|
342,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Payment of Life and Disability Insurance Premium
|
|
|
2,955
|
|
|
|
|
|
|
|
2,955
|
|
|
|
|
|
Value of Continuation of Medical and/or Dental Plan Coverage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Based on fiscal 2009 adjusted EBITDA and individual performance.
|
|
(2)
|
|
The value of the automatic acceleration of the vesting of
unvested stock options held by a named executive officer is
based on the difference between: (i) the market price of
the shares of our common stock underlying the unvested stock
options by such officer as of December 31, 2009 ($12.76),
and (ii) the exercise price of the options.
|
|
|
|
The value of the automatic acceleration of the vesting of
restricted stock held by a named executive officer is based on:
(i) the number of unvested shares of restricted stock held
by such officer as of December 31, 2009, multiplied by
(ii) the market price of our common stock on
December 31, 2009 ($12.76).
|
24
Director
Compensation
The following table sets forth all compensation earned by each
of our non-employee directors during the year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name(1)
|
|
Fees Earned or Paid in Cash
|
|
Stock Awards(2)
|
|
Total
|
|
Nabil N. El-Hage
|
|
$
|
65,500
|
|
|
$
|
29,996
|
|
|
$
|
95,496
|
|
Richard J. Nigon
|
|
$
|
67,750
|
|
|
$
|
29,996
|
|
|
$
|
97,746
|
|
Andrew P. Hertzmark
|
|
$
|
47,000
|
|
|
$
|
29,996
|
|
|
$
|
76,996
|
|
Mark E. Jennings
|
|
$
|
47,000
|
|
|
$
|
29,996
|
|
|
$
|
76,996
|
|
David L. Schlotterbeck
|
|
$
|
49,000
|
|
|
$
|
|
|
|
$
|
49,000
|
|
Brian F. Sullivan
|
|
$
|
62,500
|
|
|
$
|
|
|
|
$
|
62,500
|
|
Kevin H. Roche
|
|
$
|
55,750
|
|
|
$
|
|
|
|
$
|
55,750
|
|
|
|
|
(1)
|
|
Mr. Kill and Dr. Michel are not included in this table
because they were employees of our Company during 2009 and thus
received no compensation for their services as directors. The
compensation they received as employees is shown in the Summary
Compensation Table. Dr. Casey is not included in this table
because he was an employee of our Company for a portion of 2009
and the compensation he received as an employee and for his
services as a director after the termination of his employment
is shown in the Summary Compensation Table.
|
|
(2)
|
|
Represents the aggregate grant date fair value computed in
accordance with FASB ASC Topic 718. The grant date fair value is
determined based on the closing sale price of our common stock
on the date of grant.
|
Narrative
Disclosure to the Director Compensation Table
We currently pay our non-employee directors an annual fee of
$35,000, and each non-employee member of our Board of Directors
is also paid a fee of $1,000 for each board and committee
meeting that they attend. The chairman of the Audit Committee is
paid an additional annual fee of $10,000 and each member of the
Audit Committee, other than the chairman, is paid an annual fee
of $5,000. The chairman of the Compensation Committee is paid an
additional annual fee of $7,500 and each member of the
Compensation Committee, other than the chairman, is paid an
additional annual fee of $3,750. The chairman of our Nominating
and Corporate Governance Committee is paid an annual fee of
$2,500.
Prior to May 7, 2009, each non-employee director also
received a non-incentive option grant to purchase
30,000 shares of our common stock, vesting evenly over a
three year period from the date of grant, upon their initial
appointment to the Board of Directors. On May 7, 2009, our
Board of Directors approved modifications to our equity grant
program for our non-employee directors, based upon a review of
our non-employee director compensation program by our
Compensation Committee and the committees resulting
recommendations. Under the modified program, non-employee
directors are granted shares of restricted stock having a grant
date value of $50,000 upon their initial election or appointment
to the board, with vesting occurring on the first anniversary of
the directors initial election or appointment, assuming
continued service as a director through that date. Additionally,
non-employee directors are granted annual awards of restricted
shares having a grant date value of $30,000, beginning with the
first annual meeting following the first anniversary of the
directors initial appointment or election and at each
annual meeting thereafter, with vesting occurring on the earlier
of the first anniversary of the grant date or the next annual
meeting, assuming continued service as a director through such
date.
We reimburse all members of our Board of Directors for
out-of-pocket expenses incurred by them in connection with
attending meetings, including coach-class air travel.
As employees of our Company, Mr. Kill and Dr. Michel
do not receive separate compensation for their service on the
Board of Directors.
25
Risk
Considerations
We believe that risks arising from our compensation policies and
practices for our employees are not reasonably likely to have a
material adverse effect on our Company and that our executive
incentive compensation arrangements do not encourage our
executives to take unnecessary or excessive risks that could
threaten the value of our Company. As a matter of best practice,
we will continue to monitor our executive compensation program
to ensure that it continues to align the interest of our
executives with those of our long-term stockholders while
avoiding unnecessary or excessive risk.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Director
Independence
Our Board of Directors reviews at least annually the
independence of each director. During these reviews, our Board
of Directors considers transactions and relationships between
each director (and his immediate family and affiliates) and our
Company and our management to determine whether any such
transactions or relationships are inconsistent with a
determination that the director was independent. This review is
based primarily on responses of the directors to questions in a
directors and officers questionnaire regarding
employment, business, familial, compensation and other
relationships with our Company and our management.
Our Board of Directors has determined that Richard J. Nigon,
Nabil N. El-Hage, David L. Schlotterbeck, Brian F. Sullivan and
Kevin H. Roche are independent as such term is defined under the
Securities Exchange Act of 1934, as amended, and the rules of
the Nasdaq Global Market. Each of our Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee is entirely comprised of independent directors.
Related
Person Relationships and Transactions
Our Board of Directors recognizes that related person
transactions can present potential or actual conflicts of
interest, and may appear to be motivated by interests other than
the best interests of our Company and our stockholders.
Notwithstanding these considerations, our Board of Directors
recognizes that there are situations where such transactions may
be in the best interests of our Company and our stockholders.
Accordingly, the Board of Directors has adopted a written
policy, whereby the Audit Committee is given the authority to
review, approve and ratify related person transactions prior to
the effectiveness or consummation of the transaction. If it is
not practicable for the Audit Committee to review and approve a
related person transaction prior to its effectiveness, the Audit
Committee may do so at its next meeting. If a related person
transaction arises in between Audit Committee meetings, either
our General Counsel or our Chief Financial Officer may present
the transaction to the chairman of the Audit Committe, who may
approve the transaction, subject to the ratification of the
Audit Committee at its next meeting. In addition, any related
person transaction previously approved by the Audit Committee or
otherwise already existing that is ongoing in nature is to be
annually reviewed by the Audit Committee to ensure that such
transaction has been conducted in accordance with the previous
approval granted by the Audit Committee, if any, and that all
required disclosures regarding such transaction are made.
Under our policy, a related person transaction is any
transaction, arrangement or relationship, or any series of
similar transactions, arrangements or relationships in which our
Company was or is to be a participant, and a related person had
or will have a direct or indirect material interest. Related
person transactions specifically include purchases of goods or
services by or from the related party or entities in which the
related party has a material interest, indebtedness, guarantees
of indebtedness, and employment by our Company of a related
person. The Board of Directors has determined that interests
arising only from (a) the related persons position as
a director of another corporation or organization that is a
party to the transaction, and / or (b) from the
direct or indirect ownership by the related person and all other
related persons in the aggregate of less than a 10% equity
interest (other than a general partnership interest) in another
entity which is a party to the transaction generally do not
constitute material interests.
26
A related person transaction is considered approved or ratified
under our policy if it is authorized by the Audit Committee in
accordance with the standards set forth in the policy after full
disclosure of the related persons interests in the
transaction. As appropriate for the circumstances, the Audit
Committee shall review all related person transactions,
regardless of amount, and consider (i) the related
persons relationship to our Company and interest in the
transaction (as an approximate dollar value, without regard to
profit or loss); (ii) the approximate total dollar value
involved in the related person transaction; (iii) whether
the transaction was undertaken in the ordinary course of
business of our Company; (iv) whether the transaction with
the related person is proposed to be, or was, entered into on
terms no less favorable to our Company than terms that could
have been reached with an unrelated third party; (v) the
terms on which the related person offers the products or
services involved in the transaction to unrelated parties;
(vi) the purpose of, and the potential benefits to our
Company of, the transaction; (vii) whether disclosure of
the related person transaction is required under
Item 404(a) of
Regulation S-K;
and (viii) any other information regarding the transaction
or the related person in the context of the proposed transaction
that would be material to investors in light of the
circumstances of the particular transaction.
The Audit Committee will review all relevant information
available to it about each related person transaction. The Audit
Committee may approve or ratify the transaction only if the
Audit Committee determines that, under all of the circumstances,
the transaction is in the best interests of our Company and its
stockholders. The Audit Committee may, in its sole discretion,
impose such conditions as it deems appropriate on our Company or
the related person in connection with approval of each related
person transaction.
The Audit Committee has reviewed and approved each of the
transactions described below.
Management,
License and Service Agreements with Affiliated Medical
Practices
The Company provides radiologic interpretations for emergency
and routine care coverage to radiology practices, hospitals,
clinics and diagnostic imaging centers primarily located within
the United States. In this Certain Relationships and
Related Transactions and Director Independence section of
this proxy statement, the Company is sometimes referred to as
vRad.
Virtual Radiologic Professionals, LLC (VRP) is the
Companys affiliated physician-owned medical practice that
contracts with independent contractor physicians for the
provision of their services to fulfill customer contracts held
by vRad or the Professional Corporations, consisting
of Virtual Radiologic Professionals of California, P.A., Virtual
Radiologic Professionals of Illinois, S.C., Virtual Radiologic
Professionals of Michigan, P.C., Virtual Radiologic
Professionals of Minnesota, P.A., Virtual Radiologic
Professionals of New York, P.A. and Virtual Radiologic
Professionals of Texas, P.A. VRP and the Professional
Corporations are collectively referred to as the
Affiliated Medical Practices.
Prior to February 10, 2009, VRP was owned by four
individuals, including Dr. Casey (as a majority owner and
managing member) and Dr. Michel, and each of the
Professional Corporations was owned and controlled solely by
Dr. Casey. Effective February 10, 2009, VRP and each
of the Professional Corporations became wholly owned and
controlled by Dr. Michel.
The relationships among vRad and the Affiliated Medical
Practices are governed by management, licensing and professional
services agreements. Pursuant to a professional and management
services agreement and license between vRad and VRP, vRad
provides all of the management services necessary for the
operations of VRP and licenses vRads technology
infrastructure to VRP for use by our affiliated radiologists.
VRP provides physician services to fulfill vRads customer
contracts. vRad pays VRP a service fee which is intended to
cover the cost of physician compensation paid to its
radiologists and a portion of the costs of malpractice
insurance. The fee rate is established by agreement between vRad
and VRP with consideration for the fair market value of
VRPs use of vRads systems, technology infrastructure
and management services.
Pursuant to management services agreements between vRad and each
of the Professional Corporations, vRad provides all of the
management services necessary for the operations of each of the
Professional Corporations and licenses vRads technology
infrastructure to each of the Professional Corporations. In
consideration of these services, each of the Professional
Corporations pays vRad a management and license fee.
27
In addition, each of the Professional Corporations has
contracted with VRP for the provision of physician services to
fulfill customer contracts held by the Professional Corporation
and pays VRP a fee intended to cover the cost of physician
compensation paid to our affiliated radiologists and a portion
of the costs of malpractice insurance.
The management of vRad was involved significantly in the design
and creation of the Affiliated Medical Practices and, with the
exception of rendering medical judgments, controls their
continuing operations through rights contained in management
service agreements, including the unilateral right to appoint a
successor owner of the Affiliated Medical Practices under
certain circumstances (which provisions were amended on
April 30, 2009), to reset the management fee on an annual
basis and to restrict the distribution of any accumulated
earnings to the equity owners of the Affiliated Medical
Practices. The management service agreements that exist between
the entities are perpetual agreements that are not cancellable
by the owner of the Affiliated Medical Practices other than for
gross negligence, fraud or other illegal acts by vRad, and they
were not intended to cause a party other than vRad to bear any
economic risk or reward. The management fees contained in these
agreements are generally evaluated on an annual basis, for
purposes of resetting vRads financial interests in the
Affiliated Medical Practices, and to ensure that no party other
than vRad bears any economic risk or reward.
Tax
Indemnification Payments
Effective January 1, 2009, the equity holders of VRP agreed
to a change in the taxation status of VRP from partnership
taxation to corporate taxation at the request of the Company.
Although the structure of VRP is not intended to cause a party
other than vRad to bear any economic risk or receive any
economic reward, the tax status conversion resulted in non-cash,
taxable income recognition by Dr. Casey and
Dr. Michel. To compensate them for the personal tax
liability incurred, the Company provided tax indemnity and
related
gross-up
payments to Dr. Casey and Dr. Michel in the amount of
$191,705 and $80,808, respectively
Investor
Rights Agreement
We are a party to an investor rights agreement with Generation
Partners, who previously held shares of our Series A
Preferred Stock, which shares of Series A Preferred Stock
were converted into shares of our common stock upon the
completion of our initial public offering in November 2007.
Under the terms of the investor rights agreement, we have, among
other things, agreed to effect up to two registered offerings
upon request from the holders of at least 50% of the registrable
stock then outstanding; agreed to effect up to one registered
offering on
Form S-3
per six-month period upon request from the holders of at least
50% of the registrable stock; and granted incidental or
piggyback registration rights with respect to any
registrable securities held by any party to the investor rights
agreement.
Our obligation to effect any demand for registration by
Generation Partners is subject to certain conditions, including
that the registrable securities to be included in any such
registration have an anticipated aggregate offering price in
excess of $2.5 million in the case of any demand for
registration on
Form S-1
and $500,000 in the case of any demand for registration on
Form S-3.
In connection with any registration effected pursuant to the
terms of the investor rights agreement, we will be required to
pay for all of the fees and expenses incurred in connection with
such registration, including registration fees, filing fees and
printing expenses as well as expenses relating to the marketing
and promotional efforts for the offering as requested by the
managing underwriter. However, the underwriting discounts and
commissions payable in respect of registrable securities will
not be borne by us. We have also agreed to indemnify
stockholders, including the holders of registrable securities,
in any registration effected pursuant to the terms of the
investor rights agreement and certain other persons associated
with any such registration, in each case on the terms specified
in the investor rights agreement and which include an indemnity
against certain liabilities under the Securities Act of 1933, as
amended. Substantially all of the other operative provisions of
the investor rights agreement terminated upon the completion of
our initial public offering.
28
Executive
and Director Compensation
Please see Director Compensation and Executive
Compensation for information regarding the compensation of
our directors and executive officers and for information
regarding employment, consulting, transition, and other
agreements we have entered into with our current and former
directors and executive officers.
PROPOSAL 2
RATIFYING DELOITTE & TOUCHE LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Selection
of Independent Registered Public Accounting Firm
Our Audit Committee has appointed Deloitte & Touche
LLP as our independent registered public accounting firm for the
year ending on December 31, 2010. Deloitte &
Touche replaced PricewaterhouseCoopers LLP in its capacity as
our outside auditing firm effective as of February 23, 2009.
While stockholder approval of Deloitte & Touche
LLPs appointment is not required by law, our Board of
Directors believes that is in stockholders best interests
to submit the matter for ratification at the Annual Meeting. If
the stockholders do not ratify the appointment of
Deloitte & Touche LLP, the Audit Committee will
reconsider its selection, but will have no obligation to
terminate the appointment.
Representatives of Deloitte & Touche LLP are
anticipated to be present at the Annual Meeting, and will have
an opportunity to make a statement and will be able to answer
appropriate questions.
The Board
of Directors recommends that stockholders vote
FOR
the ratification of Deloitte & Touche LLP as
our independent registered public accounting firm.
Dismissal
of Prior Independent Registered Public Accounting Firm
On February 23, 2009, we dismissed PricewaterhouseCoopers
LLP as our independent registered public accounting firm. The
decision to dismiss PricewaterhouseCoopers LLP was approved by
our Audit Committee. The reports of PricewaterhouseCoopers LLP
on our consolidated financial statements for our fiscal years
ended December 31, 2008 and 2007 did not contain any
adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting
principle.
During our fiscal years ended December 31, 2008 and 2007
and through February 23, 2009, (i) there were no
disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved
to the satisfaction of PricewaterhouseCoopers LLP, would have
caused PricewaterhouseCoopers LLP to make reference to the
subject matter of the disagreement in connection with its
reports for such years, and (ii) except as disclosed in the
next paragraph, there were no reportable events, as
defined in Item 304(a)(1)(v) of
Regulation S-K
of the SEC.
In connection with the preparation of our consolidated financial
statements for the year ended December 31, 2005 and our
financial statements for certain interim quarterly periods in
2006, management determined three material weaknesses existed in
the Companys internal controls over financial reporting
because the Company lacked a sufficient complement of accounting
personnel with an appropriate level of knowledge to account for
certain complex, non-routine transactions, including
non-employee stock-based compensation, variable interests and
preferred stock financing transactions. Our management
subsequently took steps to address these material weaknesses and
improve its internal controls over financial reporting,
including the hiring and training of additional experienced
financial personnel and the implementation of additional
internal control policies and procedures, and, as of
June 30, 2007, had determined that the previously
identified material weaknesses were remediated.
29
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Audit,
Audit-Related, Tax and Other Fees
Effective February 23, 2009, Deloitte & Touche
LLP was ratified as our independent registered public accounting
firm. Prior to 2009, we did not engage Deloitte &
Touche LLP for any audit, tax or other engagements. The
following table sets forth the aggregate fees for professional
services billed to us by Deloitte & Touche LLP, for
the year ended December 31, 2009.
|
|
|
|
|
Fee Category
|
|
2009
|
|
|
Audit Fees
|
|
$
|
389,100
|
|
Audit-Related Fees
|
|
$
|
|
|
Tax Fees
|
|
$
|
|
|
All Other Fees
|
|
$
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
389,100
|
|
Audit Fees.
Consists of fees billed to us for
professional services performed by Deloitte & Touche
LLP for the audit of the Companys annual financial
statements and review of financial statements included in the
Companys
Form 10-Q
filings for the year ended December 31, 2009, and services
that are normally provided in connection with statutory and
regulatory filings.
The following table sets forth the aggregate fees for
professional services billed to us by PricewaterhouseCoopers LLP
for the year ended December 31, 2008, our previous
independent registered public accounting firm for fiscal 2008.
|
|
|
|
|
Fee Category
|
|
2008
|
|
|
Audit Fees
|
|
$
|
550,406
|
|
Audit-Related Fees
|
|
$
|
68,000
|
|
Tax Fees
|
|
$
|
22,000
|
|
All Other Fees
|
|
$
|
2,462
|
|
|
|
|
|
|
Total Fees
|
|
$
|
642,868
|
|
Audit Fees.
Consists of fees billed to us for
professional services performed by PricewaterhouseCoopers LLP
for the audit of the Companys annual financial statements
and review of financial statements included in the
Companys
Form 10-Q
filings for the year ended December 31, 2008, and services
that are normally provided in connection with statutory and
regulatory filings.
Audit-Related Fees.
Consists of fees billed by
PricewaterhouseCoopers LLP to us for assurance and related
services that are reasonably related to the performance of the
audit or review of our consolidated financial statements and are
not reported under Audit Fees. There services also
include consultations concerning financial accounting and
reporting standards.
Tax Fees.
Consists of fees billed by
PricewaterhouseCoopers LLP for services related to the
establishment of vRad Professional Insurance, Ltd., a
wholly-owned subsidiary of our Company that was formed as an
exempted company in the Cayman Islands with limited liability.
All Other Fees.
Consists of fees billed by
PricewaterhouseCoopers LLP to us for subscriptions to
audit-related software.
Audit
Committee Pre-Approval Policy
The Audit Committee has adopted a policy whereby it pre-approves
appropriate funding for payment of (a) compensation to our
independent accountants for the purpose of rendering audit and
non-audit services, (b) compensation to any advisors
engaged by the Audit Committee and (c) ordinary
administrative expenses necessary to carry out its duties. The
Audit Committee may delegate pre-approval authority to any
member of the Audit Committee; provided that such member shall
present any pre-approval decisions to the Audit Committee at its
next scheduled meeting.
30
AUDIT
COMMITTEE REPORT
The Audit Committee of the Board of Directors is responsible for
assisting the Board in monitoring the integrity of our financial
statements, our compliance with legal and regulatory
requirements, and the independence and performance of our
external auditors.
Our financial statements for the year ended December 31,
2009, were audited by Deloitte & Touche LLP
independent registered public accounting firm.
As part of its activities, the Audit Committee has:
1. Reviewed and discussed with management our audited
financial statements;
2. Discussed with the independent registered public
accounting firm the matters required to be discussed under
Statement on Auditing Standards No. 61 (Communications
with Audit Committees), Statement of Auditing Standards
No. 99 (Consideration of Fraud in a Financial Statement
Audit)
, and under SEC rules, U.S. Public Company
Accounting Oversight Board rules and the rules of the Nasdaq
Global Market;
3. Received the written disclosures and letter from the
independent registered public accounting firm required by
applicable requirements of the Public Company Accounting
Oversight Board regarding the independent registered public
accounting firms communications with the Audit Committee
concerning independence; and
4. Discussed with the independent registered public
accounting firm their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that our audited
financial statements for the year ended December 31, 2009,
be included in our Annual Report on
Form 10-K
filed with the SEC.
Audit Committee of the Board of Directors of
Virtual Radiologic Corporation
Richard J. Nigon (Chair)
Nabil N. El-Hage
Brian F. Sullivan
PROPOSAL 3
STOCKHOLDER PROPOSAL CONCERNING A MAJORITY VOTE STANDARD
FOR THE ELECTION OF DIRECTORS
We have received the following proposal from Dr. Sean
Casey, 3920 N. Ocean Drive, 2A, Singer Island,
Florida, 33404. Dr. Caseys beneficial ownership of
our common stock is set forth under the heading Security
Ownership of Certain Beneficial Owners and Management. We are
not responsible for the contents of the stockholder proposal or
supporting statement, both of which are quoted verbatim in
italics below, including the underlining and bold text.
Proposal
and Supporting Statement of Stockholder Proponent
RESOLVED: That the shareholders of Virtual
Radiologic Corporation (Company) hereby request that
the Board of Directors initiate the appropriate process to amend
the Companys governance documents (certificate of
incorporation or bylaws) to provide that director nominees shall
be elected by the affirmative vote of the majority of votes cast
at an annual meeting of shareholders with a plurality vote
standard retained for contested director elections, that is,
when the number of director nominees exceeds the number of board
seats.
31
SUPPORTING STATEMENT: Our Company presently uses
the plurality vote standard to elect directors. This proposal
requests that the Board initiate a change in the Companys
vote standard to provide that director nominees must receive a
majority of the vote cast in order to be elected or re-elected
to the Board.
I believe that a majority vote standard in director elections
would give shareholders a more meaningful role in the election
process. This standard is particularly well-suited for the vast
majority of director elections in which only board nominated
candidates are on the ballot.
Under the Companys current standard, a nominee in
a director election can be elected with as little as a single
affirmative vote, even if a substantial majority of the votes
cast are withheld from that nominee. The proposed
majority vote standard would require that a director receive a
majority of the votes cast in order to be elected to the
Board.
Leading proxy advisory firms typically support majority vote
proposals. In response to strong shareholder support for a
majority vote standard in director elections, an increasing
number of the nations leading companies, including Intel,
Dell, General Electric, Motorola, Hewlett-Packard, Morgan
Stanley, Wal-Mart, Home Depot, and Pfizer, have adopted a
majority vote standard in company bylaws or articles of
incorporation. Additionally, these companies have adopted
director resignation policies in their bylaws or corporate
governance policies to address post-election issues related to
the status of director nominees that fail to win election. Other
companies have responded only partially to the call for change
by simply adopting
post-election
director resignation policies that set procedures for addressing
the status of director nominees that receive more
withhold votes than for votes. At the
time of this proposal submission, our Company and its board had
not taken either action. Less than one-third of the S&P
500 companies still use this straight plurality standard
(plurality without a director resignation policy).
The critical first step in establishing a meaningful majority
vote policy is the adoption of a majority vote standard. With a
majority vote standard in place, the board can then consider
action on developing post-election procedures to address the
status of directors that fail to win election. A majority vote
standard combined with a post-election director resignation
policy would establish a meaningful right for shareholders to
elect directors, and reserve for the board an important
post-election role in addressing the status of an unelected
director.
As a founder of the Company, I urge your support for this
important director election reform.
Our
Statement in Opposition to Stockholder Proposal
After consideration of the subject matter of this stockholder
proposal, our Board of Directors unanimously recommends a vote
AGAINST this proposal. Our Board has arrived at this
recommendation following a study of the issue by our Nominating
and Corporate Governance Committee and the full Board that
concluded that our existing policies provide our stockholders
with a meaningful role in the director election process, and
therefore effectively address the concerns reflected by the
proponent.
Our directors are currently elected by a plurality
vote, which means that, with respect to the number of available
board seats, the nominees who receive the greatest number of
votes are elected. The plurality vote standard is the default
standard under the corporate laws of Delaware (our state of
incorporation) and many public companies incorporated in
Delaware and elsewhere rely upon the standard for very valid
corporate reasons, including the avoidance of failed board
elections and resulting board vacancies (which could impact
compliance with board independence requirements under applicable
stock exchange rules) and the potential for holdover
incumbent directors.
We believe that our stockholders have a history of electing
strong and independent boards under our existing plurality
standard. This stockholder proposal asks our Board to amend our
governing documents to change this standard in uncontested
elections to a majority vote standard. We believe the plurality
vote standard continues to be the best standard for electing our
directors, particularly in light of our stockholder base that
includes two principal stockholders that collectively own
greater than 50% of our common stock.
32
Moreover, the Board believes that we already have a strong
corporate governance process designed to identify and propose
director nominees who will serve the best interests of our
stockholders. Director nominees are evaluated and recommended
for election by the Nominating and Corporate Governance
Committee, which is comprised solely of independent directors.
In recommending nominees, the committee considers a variety of
factors as outlined in this proxy statement. We also have
published in this proxy statement information on how
stockholders and other interested parties can communicate their
views on potential nominees or other matters with the Board.
Thus, the Board believes that current Board policies provide an
appropriate mechanism for electing an effective Board of
Directors committed to delivering long-term stockholder value,
and for allowing meaningful stockholder input into the process.
In reviewing the proposal, we have also considered our
historical election results. Since we became a publicly traded
company, no director nominee has ever received a greater number
of votes withheld from his election than votes for his election.
Therefore, the voting requirement that has been proposed would
not have ever affected the outcome of our election process. In
the event that a director nominee should ever receive a greater
number of withhold votes, it is the intention of our
Board to consider the reasons for the vote, and take any
appropriate actions under the circumstances. As we believe that
our stockholders have a history of electing highly qualified
directors under our current nomination and election process, we
believe a change to a majority voting requirement is not
necessary to improve our corporate governance practices.
Finally, we have closely monitored the ongoing dialogue over the
last several years among publicly traded corporations,
institutional stockholders, corporate governance activists and
corporate law experts about potential changes in the standard of
voting for directors. It is anticipated that this ongoing
dialogue will result in the development and refinement of best
practices related to voting for the election of directors and
may result in alternative proposals for modifying the current
system of plurality voting and related statutory changes. Given
that the examination of this complex issue and the development
and refinement of best practices remains in progress, the Board
believes that taking the action suggested in this proposal at
this time would be premature. The Board of Directors has been,
and will continue to be, engaged in a process to fully monitor
and evaluate the progress of this dialogue and will actively
consider whether changes to the current voting system are
appropriate and in the best interests of our stockholders.
The Board of Directors recommends that stockholders vote
AGAINST
the adoption of this stockholder proposal.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates information regarding the
beneficial ownership of our common stock as of March 22,
2010 by:
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each person, or group of affiliated persons, who is known by us
to beneficially own 5% or more of our common stock;
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each member of our Board of Directors;
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each of our named executive officers; and
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all of our directors and executive officers as a group.
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We have determined beneficial ownership in accordance with the
rules of the SEC. These rules generally attribute beneficial
ownership of securities to persons who possess sole or shared
voting power or investment power with respect to those
securities. In addition, these rules include shares of common
stock issuable pursuant to the exercise of stock options or
warrants or conversion of convertible notes that are either
immediately exercisable or convertible or exercisable or
convertible within 60 days of March 22, 2010. These
shares are deemed to be outstanding and beneficially owned by
the person holding those options or warrants for the purpose of
computing the percentage ownership of that person, but they are
not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless otherwise
indicated, the
33
persons or entities identified in this table have sole voting
and dispositive authority with respect to all shares shown as
beneficially owned by them.
The number of shares owned and percentage of ownership in the
following table is based on 16,235,624 shares of common
stock outstanding on March 22, 2010.
Except as otherwise indicated below, the address for each
stockholder listed below is
c/o Virtual
Radiologic Corporation, 11995 Singletree Lane, Suite 500,
Eden Prairie, Minnesota 55344.
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Number of
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Shares
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Percent of
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Beneficially
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Outstanding
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Name and Address of Beneficial Owner
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Owned
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Shares
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5% or More Stockholders:(1)
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Generation Funds(2)
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4,130,700
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25.4
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%
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Sean O. Casey, M.D.(3)
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3,919,271
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24.0
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%
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Royce & Associates, LLC(4)
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824,956
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5.1
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%
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Directors and Executive Officers:
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Robert C. Kill(5)
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249,111
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1.5
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%
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Leonard C. Purkis(6)
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144,550
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*
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Richard W. Jennings(7)
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162,550
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1.0
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%
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Eduard Michel, M.D., Ph.D.(8)
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998,359
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6.1
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%
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Michael J. Kolar(9)
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49,383
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*
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Nabil N. El-Hage(10)
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34,742
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*
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Andrew P. Hertzmark(11)
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33,492
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*
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Mark E. Jennings(12)
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4,164,192
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25.6
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%
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Richard J. Nigon(10)
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34,742
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*
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David L. Schlotterbeck(13)
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10,000
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*
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Brian F. Sullivan(13)
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19,566
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*
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Kevin H. Roche(13)
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10,000
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*
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All current directors and executive officers as a group
(12 persons)(14)
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5,910,687
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35.3
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%
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*
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Less than one percent
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(1)
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Dr. Michel also holds greater than five percent of our
outstanding shares of common stock.
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(2)
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According to a Schedule 13G/A filed with the SEC on
February 12, 2010, Generation Capital Partners II LP,
Generation Capital Partners VRC LP, and Generation Members
Fund II LP (collectively referred to as the
Generation Funds), beneficially own 2,708,686,
1,156,914, and 265,100 shares, respectively. Mark E.
Jennings and John Hawkins each may be deemed to control each of
the Generation Funds and therefore may be deemed to beneficially
own all 4,130,700 shares collectively owned by the
Generation Funds. Each of these individuals disclaims beneficial
ownership of all shares of our common stock that the Generation
Funds may be deemed to beneficially own. The address of
Generation Funds is One Greenwich Office Park Greenwich, CT
06831.
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(3)
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Based upon a Schedule 13G/A filed with the SEC on
February 12, 2010. Includes options exercisable for
100,000 shares of common stock within 60 days of
March 22, 2010 and 378,415 shares that are held by
trusts for the benefit of Dr. Caseys children.
Dr. Caseys address, as indicated in his schedule
13G/A, is 121 S. 8th Street, Suite 800,
Minneapolis, MN, 55402.
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(4)
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Based upon a Schedule 13G filed on January 26, 2010.
The address of Royce & Associates LLC as indicated in
the Schedule 13G is 745 Fifth Avenue, New York, NY, 10151.
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(5)
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Includes options exercisable for 137,500 shares of common
stock within 60 days of March 22, 2010, and
91,611 shares subject to transferability restrictions and
potential forfeiture under the terms of restricted stock grants.
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(6)
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Includes options exercisable for 89,375 shares of common
stock within 60 days of March 22, 2010,
44,425 shares subject to transferability restrictions and
potential forfeiture under the terms of restricted stock grants,
and 7,000 shares held by a trust for the benefit of
Mr. Purkis wife.
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34
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(7)
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Includes options exercisable for 114,375 shares of common
stock within 60 days of March 22, 2010 and
44,425 shares subject to transferability restrictions and
potential forfeiture under the terms of restricted stock grants.
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(8)
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Includes options exercisable for 16,667 shares of common
stock within 60 days of March 22, 2010 and
100,000 shares that are held by a trust for the benefit of
Dr. Michels children.
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(9)
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Consists of options exercisable for 20,000 shares of common
stock within 60 days of March 22, 2010 and
29,383 shares subject to transferability restrictions and
potential forfeiture under the terms of a restricted stock grant.
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(10)
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Consists of options exercisable for 31,250 shares of common
stock within 60 days of March 22, 2010 and
3,492 shares subject to transferability restrictions and
potential forfeiture under the terms of a restricted stock grant.
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(11)
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Consists of options exercisable for 30,000 shares of common
stock within 60 days of March 22, 2010 and
3,492 shares subject to transferability restrictions and
potential forfeiture under the terms of a restricted stock grant.
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(12)
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Consists of options exercisable for 30,000 shares of common
stock exercisable within 60 days of March 22, 2010,
3,492 shares subject to transferability restrictions and
potential forfeiture under the terms of a restricted stock
grant, and 4,130,700 shares of common stock beneficially
owned by the Generation Funds. Mr. Jennings disclaims
beneficial ownership of all shares that may be deemed to be
beneficially owned by the Generation Funds.
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(13)
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Includes or consists of options exercisable for
10,000 shares of common stock within 60 days of
March 22, 2010.
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(14)
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Includes options exercisable for 530,417 shares of common
stock within 60 days of March 22, 2010 and
223,812 shares subject to transferability restrictions and
potential forfeiture under the terms of restricted stock grants.
Also includes the 4,130,700 shares of common stock
beneficially owned by the Generation Funds, as to which
Mr. Jennings disclaims beneficial ownership.
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OTHER
MATTERS
The Board of Directors is not aware of any other matters that
will be brought before the Annual Meeting. If any matters are
properly brought forth for consideration at the Annual Meeting,
the enclosed proxy card provides that the persons named therein
as proxies will have discretionary authority to vote upon such
matters.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors, executive officers and
beneficial owners of greater than 10% of a registered class of
our equity securities to file reports with the SEC and the
Nasdaq Global Market reporting their ownership of our common
stock and changes in such ownership. Directors, executive
officers and greater than 10% stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a)
reports they file. To our knowledge, based solely on a review of
the copies of these reports furnished to us since the beginning
of fiscal 2009 and written representations from our current
directors and executive officers that no other reports were
required, all such reports were timely filed, except for the
following:
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Dr. Sean Casey was late filing a report on Form 4 for
30 sale transactions that took place on October 27,
2009 the transactions were subsequently filed on two
separate reports on Form 4 on October 30, 2009.
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Dr. Sean Casey filed an amended report on Form 4 on
August 5, 2009 for 27 sale transactions, including seven
sale transactions that took place three business days earlier,
on July 31, 2009. The initial report on Form 4 that
Dr. Casey filed for these sale transactions on
August 4, 2009 had incorrect transaction codes in
Table I, Item 3, reporting the sales as purchases.
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35
AVAILABILITY
OF
FORM 10-K
AND ANNUAL REPORT TO STOCKHOLDERS
SEC rules require us to provide an Annual Report to stockholders
who receive this proxy statement. We will also provide copies of
the Annual Report to brokers, dealers, banks, voting trustees
and their nominees for the benefit of their beneficial owners of
record.
Additional copies of this proxy statement, along with copies
of our Annual Report on
Form 10-K
for the year ended December 31, 2009 (not including
exhibits or documents incorporated by reference), are available
without charge to stockholders upon written or oral request to
Investor Relations, Virtual Radiologic Corporation, 11995
Singletree Lane, Suite 500, Eden Prairie, MN 55344 or toll
free at
1-866-532-7424.
We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith file reports, proxy and information statements and
other information with the SEC. Such reports, proxy and
information statements and other information we file can be
inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. at prescribed rates. You can contact the
SEC at
1-800-SEC-0330
for additional information about these facilities. The SEC
maintains a web site that contains reports, proxy and
information statements and other information filed with the SEC.
This web site can be accessed at
http://www.sec.gov
.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC rules governing delivery of certain corporate documents
to our stockholders state that we may deliver one copy of a
proxy statement, annual report or prospectus to an address
shared by two or more stockholders. This
householding of materials provides us with a
significant cost savings. We have therefore provided one copy of
this proxy statement and one copy of our annual report to each
address, unless we have received explicit instructions to
provide more than one copy. Once you have received notice from
your broker that they will be householding materials to your
address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and would prefer
to receive a separate proxy statement or annual report, or if
you are receiving multiple copies of either document and wish to
receive only one, please notify your broker. We will deliver
promptly upon written or oral request a separate copy of our
annual report
and/or
proxy
statement to a stockholder at a shared address to which a single
copy of either document was delivered. For copies of either or
both documents, stockholders should write to Investor Relations,
Virtual Radiologic Corporation, 11995 Singletree Lane,
Suite 500, Eden Prairie, MN 55344, (952)-595-1100.
Your Vote
is Important!
Please mark, sign and date the enclosed proxy card as soon as
possible, and return it in the pre-addressed envelope that we
have provided.
By Order of the Board of Directors
Robert C. Kill
Chairman of the Board, President and
Chief Executive Officer
36
VIRTUAL RADIOLOGIC CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 13, 2010
9:30 a.m. (Local Time)
Virtual Radiologic Corporation Headquarters
11995 Singletree Lane
Eden Prairie, MN 55344
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VIRTUAL RADIOLOGIC CORPORATION
11995 Singletree Lane, Suite 500
Eden Prairie, MN 55344
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proxy
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This proxy is solicited by the Board of Directors for use at the Annual Meeting on Thursday, May 13, 2010.
The shares of stock held of record by the undersigned on March 22, 2010 will be voted as you
specify on the reverse side.
If no choice is specified, the proxy will be voted FOR the nominees for director named in
Proposal
1, FOR Proposal 2, and AGAINST Proposal 3.
By signing this proxy, you revoke all prior proxies and appoint Robert C. Kill and Michael J. Kolar
and each of them with full power of substitution, to vote your shares on the matters shown on the
reverse side and any other matters which may properly come before the Annual Meeting and all
adjournments.
See reverse for voting instructions.
XXXXXXXX
ADDRESS BLOCK
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
ò
Please detach here
ò
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The Board of Directors Recommends a Vote
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FOR all nominees for director in Proposal 1 and FOR Proposal 2,
and AGAINST Proposal 3.
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1.
Election of directors:
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01 Nabil N. El-Hage
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03 Brian F. Sullivan
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02 Richard J. Nigon
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(Instructions: To withhold authority to vote for any
indicated nominee,
write the number(s) of the nominee(s) in
the box provided to the right.)
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2.
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Ratification of Deloitte & Touche LLP as our registered independent public accounting firm
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3.
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Approval of stockholder proposal requesting the adoption of a majority vote standard in the
election of directors.
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4.
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In their discretion, the proxies are authorized to vote upon such other business as may
properly come before the meeting.
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o
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Vote FOR
all nominees
(except as marked)
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o
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Vote WITHHELD
from all nominees
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o
For
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o
Against
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o
Abstain
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o
For
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o
Against
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o
Abstain
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR
THE NOMINEES FOR DIRECTOR NAMED IN
PROPOSAL 1,
FOR
THE APPROVAL OF PROPOSAL 2,
AND
AGAINST
THE APPROVAL OF PROPOSAL 3.
Address Change? Mark Box
o
Indicate changes below:
Date
Signature(s) in Box
Please sign exactly as your name(s) appears
on Proxy. If held in joint tenancy, all
persons should sign. Trustees,
administrators, etc., should include title
and authority. Corporations should provide
full name of corporation and title of
authorized officer signing the Proxy.
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