UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Schedule 14D-9
Solicitation/Recommendation
Statement under Section 14(d)(4)
of the Securities Exchange Act of 1934
I-TRAX,
INC.
(Name of Subject
Company)
I-TRAX,
INC.
(Names of Persons Filing
Statement)
COMMON
STOCK, PAR VALUE $0.001 PER SHARE
SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.001
PER SHARE
(Title of Class of
Securities)
COMMON
STOCK CUSIP 45069D203
CUSIP NUMBER NOT APPLICABLE TO SERIES A CONVERTIBLE
PREFERRED STOCK
(CUSIP Number of Class of
Securities)
Yuri
Rozenfeld, Esq.
Senior Vice President, General Counsel
and Secretary
I-trax, Inc.
4 Hillman
Drive, Suite 130
Chadds Ford, Pennsylvania 19317
(610) 459-2405
(Name, address, and telephone
number of person authorized to receive
notices and communications on behalf of the persons filing
statement)
WITH A
COPY TO:
Justin
P. Klein, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
215-665-8500
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o
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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TABLE OF CONTENTS
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Item 1.
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Subject
Company Information.
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The name of the subject company to which this
solicitation/recommendation statement on
Schedule 14D-9
(this
Statement
) relates is
I-trax,
Inc.
(
I-trax
),
a Delaware corporation. The principal executive offices of
I-trax
are
located at 4 Hillman Drive, Suite 130, Chadds Ford,
Pennsylvania 19317. The telephone number of the principal
executive offices of
I-trax
is
(610) 459-2405.
This Statement relates to shares of
I-trax
common stock, par value $0.001 per share (
Common
Shares
) and Series A Convertible Preferred Stock,
par value $0.001 per share (
Preferred Shares
and together with the Common Shares, the
Shares
). As of March 24, 2008, there
were 41,896,247 Common Shares and 217,126.3 Preferred Shares
issued and outstanding; 5,743,944 Common Shares reserved for
issuance upon exercise of outstanding stock options and
warrants; and 2,171,263 Common Shares reserved for issuance upon
conversion of outstanding Preferred Shares.
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Item 2.
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Identity
and Background of Filing Person.
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The name, business address and business telephone number of
I-trax
are
set forth in Item 1 above.
I-trax
is
the person filing this Statement and the subject company.
The
Offer
As disclosed in a tender offer statement on Schedule TO
filed by Putter Acquisition Sub, Inc.
(
Offeror
), a wholly owned subsidiary of
Walgreen Co. (
Walgreens
), with the Securities
and Exchange Commission (the
SEC
) on
March 28, 2008 (such Schedule TO, as amended or
supplemented from time to time hereafter being the
Schedule TO
), Walgreens, through
Offeror, is offering to purchase all of the issued and
outstanding Common Shares and Preferred Shares of
I-trax
for
$5.40 per Common Share (the
Common Offer
) and
$54.00 plus the Dividend Amount per Preferred Share (the
Preferred Offer
), in each case in cash,
without interest and less any required withholding taxes, upon
the terms and subject to the conditions set forth in the Offer
to Purchase, dated March 28, 2008 (as amended and
supplemented from time to time, the
Offer to
Purchase
), and in the related Letter of Transmittal
(which, together with any amendments or supplements to the Offer
to Purchase and the Letter of Transmittal, collectively
constitute the
Offers
). The
Dividend
Amount
applicable to a Preferred Share purchased in
the Preferred Offer means the product of (1)(A) the amount of
accrued and unpaid dividends on such Preferred Share at the time
the Offeror accepts shares tendered pursuant to the Preferred
Offer (the
Acceptance Time
) divided by
(B) $3.84, which amount is the average market price of the
Common Shares for the ten (10) consecutive trading days
prior to and including the date of the Merger Agreement and
(2) $5.40 in cash or such greater amount as may have been
paid to any holder of Common Shares in the Common Offer.
Offerors Offers are subject to the terms and conditions
set forth in the Offers. The Offer to Purchase and the Letter of
Transmittal are included as Exhibits (a)(1) and (a)(2) to this
Statement, respectively, and are incorporated herein by
reference.
The Offers are being made pursuant to an Agreement and Plan of
Merger, dated March 14, 2008, by and among Walgreens,
Offeror and
I-trax
(the
Merger Agreement
). A copy of the Merger
Agreement is filed as Exhibit (e)(1) to this Statement and is
incorporated herein by reference. As set forth in the Offer to
Purchase and set forth in the Schedule TO, the principal
executive offices of each of Walgreens and the Offeror are
located at 200 Wilmot Road, Deerfield, Illinois 60015.
The
Merger
The Merger Agreement provides that, at the Effective Time (as
defined below), Offeror will be merged with and into
I-trax
(the
Merger
). Following the Merger, the separate
corporate existence of Offeror will cease and
I-trax
will
continue as the surviving corporation and a wholly owned
subsidiary of Walgreens. The Merger Agreement further provides
that the closing of the Merger (the
Closing
)
will take place on a date to be specified by Walgreens and
I-trax
(the
Closing Date
), which will be no later than
the third business day after satisfaction or waiver of the
closing conditions set forth in the Merger Agreement. At the
Closing,
I-trax
will
cause the certificate of merger, in a form jointly prepared by
Walgreens and
I-trax
prior
to the Closing (the
Certificate of Merger
),
to be filed with the Secretary of State of the State of Delaware
and will make
2
all other filings or recordings required under the General
Corporation Law of the State of Delaware (the
DGCL
) to effect the Merger. The Merger will
become effective when such Certificate of Merger has been duly
filed or at such later date or time as may be agreed by
Walgreens and
I-trax
and
specified in the Certificate of Merger in accordance with the
DGCL (the effective time of the Merger being thereinafter
referred to as the
Effective Time
). By virtue
of the Merger and without any action on the part of the
I-trax
or
Offeror stockholders, at the Effective Time, each Share issued
and outstanding immediately prior to the Effective Time (other
than (a) any Shares directly owned by
I-trax
as
treasury stock or owned by Walgreens or Offeror (other than
shares held on behalf of third parties), and (b) Shares
held by a holder who has not voted in favor of or consented to
the Merger and who has properly demanded and perfected his right
to be paid the fair value of such Shares (
Appraisal
Shares
) in accordance with the provisions of the DGCL,
which Appraisal Shares will only be entitled to the rights
granted under the DGCL), will be cancelled and cease to exist,
and each holder of any such shares will cease to have any rights
except the right to receive the consideration discussed herein.
Each Common Share will automatically be converted into the right
to receive $5.40. Each Preferred Share will automatically be
converted into the right to receive $54.00 plus the applicable
Dividend Amount.
Offeror commenced the Offers on March 28,
2008. The Offers and withdrawal rights are currently
scheduled to expire at 12:00 midnight, New York City time, at
the end of Thursday, April 24, 2008, unless Offeror extends
it in accordance with the terms of the Offers.
Certain information provided by
I-trax
and
relating to the Offers, the full text of which has previously
been filed with the SEC as preliminary communications made
before commencement of the Offers, is available at
www.I-trax.com.
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Item 3.
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Past
Contacts, Transactions, Negotiations and Agreements.
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Except as set forth in this Item 3, or in the Information
Statement of
I-trax
attached to this Schedule as Annex I (the
Information Statement
) or as incorporated by
reference herein, as of the date hereof, there are no material
agreements, arrangements or understandings or any actual or
potential conflicts of interest between
I-trax
or
its affiliates and (i) its executive officers, directors or
affiliates; or (ii) Walgreens or Offeror or their
respective executive officers, directors or affiliates. The
Information Statement is being furnished to
I-traxs
stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the
Exchange
Act
), and
Rule 14f-1
promulgated under the Exchange Act, in connection with
Walgreens possible designation, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of
Directors of
I-trax
(the
I-trax
Board
) other than at a meeting of the stockholders of
I-trax.
The
Information Statement is incorporated herein by reference.
In considering the recommendation of the
I-trax
Board
with respect to the Offers and the Merger, you should be aware
that certain executive officers and directors of
I-trax
have
interests in the Offers and the Merger that are described below
and in the Information Statement and which are different from
those of stockholders generally. The I-trax Board was aware of
any such contracts, agreements, arrangements or understandings
and considered them along with other matters described in
Item 4 below.
Walgreens
Confidentiality
Agreement
In connection with the Merger Agreement, Walgreens and
I-trax
have
entered into a Confidentiality Agreement dated July 26,
2007, as amended on January 18, 2008 (the
Confidentiality Agreement
), pursuant to which
Walgreens and
I-trax
agreed, among other things, not to disclose the proprietary
information of the disclosing party to any third party other
than for the purpose of evaluating a possible transaction
between Walgreens and
I-trax.
In
addition, pursuant to the Confidentiality Agreement, Walgreens
agreed to not purchase
I-trax
stock
for nine months outside of the context of the proposed
acquisition. Each party also agreed to not solicit the
others employees for a year. The Confidentiality Agreement
is included as Exhibit (e)(2) to this Statement.
3
Merger
Agreement
Walgreens, Offeror and
I-trax
have
entered into the Merger Agreement. A summary of the terms of the
Offers and the Merger Agreement is incorporated herein by
reference to the sections of the Offer to Purchase entitled
The Terms of the Offers and Purpose of the
Offers; The Merger Agreement; Appraisal Rights; Going
Private Transactions; Plans for
I-trax.
Such summaries and descriptions are qualified in their
entirety by reference to the Merger Agreement, which is
incorporated herein by reference and included as Exhibit (e)(1)
to this Statement.
Directors
and Officers of
I-trax
Equity
Compensation Plans
At the Effective Time of the Merger, each outstanding equity
award, whether vested or unvested (each, an
I-trax
Equity Award
), under
I-traxs
2000 Equity Compensation Plan and Amended and Restated 2001
Equity Compensation Plan (collectively the
I-trax
Equity Plans
) will be cancelled and exchanged promptly
following the Effective Time for a cash payment from Walgreens
or
I-trax,
as the surviving corporation in the Merger. Subject to the terms
and conditions set forth in the Merger Agreement, the amount of
each cash payment will be equal to the difference between $5.40
and the exercise price of the applicable
I-trax
Equity Award, multiplied by the number of shares of Common
Shares that are subject to such
I-trax
Equity Award immediately prior to the Merger, without interest
and less any required withholding taxes. It is the intention of
the parties that following the Effective Time, no holder of any
I-trax
Equity Award or any participant in any
I-trax
Equity Plan or other employee benefit arrangement of
I-trax
shall
have any right thereunder to acquire any capital stock of
I-trax,
any
of its subsidiaries or the surviving corporation.
Each
I-trax
Equity Award in the form of an unvested stock option award shall
accelerate in connection with the transactions contemplated by
the Merger Agreement. The following table shows the total number
of unvested stock option awards held as of March 24, 2008
by each executive officer and director that are expected to
accelerate and become fully vested in connection with the
completion of the Merger. The options have exercise prices
between the ranges of $1.40 and $3.60. The intrinsic value of
the unvested options is based on the difference between the
exercise price of the unvested options and the closing stock
price of Common Shares on March 24, 2008 ($5.30).
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Total Number of
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Intrinsic Value of
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Unvested
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Unvested Options
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Name
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Options Held
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Accelerating
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Frank A. Martin
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70,833
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$
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156,541
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R. Dixon Thayer
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148,747
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$
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328,731
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Dr. Raymond J. Fabius
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122,658
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$
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310,910
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Bradley S. Wear
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125,000
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$
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256,250
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Peter Hotz
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65,667
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$
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135,434
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Yuri Rozenfeld
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42,666
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$
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82,477
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Haywood D. Cochrane, Jr.
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$
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Philip D. Green
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20,000
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$
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34,000
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Gail F. Lieberman
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40,000
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$
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68,000
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Gerald D. Mintz
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40,000
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$
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68,000
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David Nash, M.D.
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20,000
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$
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34,000
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Jack A. Smith
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$
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4
Transition
Compensation Plan
In order to promote a smooth transition under the Merger
Agreement, the Compensation Committee of the
I-trax
Board
approved and adopted a Transition Compensation Plan (the
Transition Plan
). The Transition Plan
provides transition compensation to certain key employees of
I-trax
upon
the consummation of the Merger. If the Merger or a change
in control (as defined in the plan) does not occur, the
Transition Plan will be cancelled. The Transition Plan provides
for the payment to certain employees of a transaction bonus and
a retention bonus. The transaction bonuses are only payable upon
closing of the Merger and require no additional service to
I-trax
subsequent to the Merger as a condition to the receipt of such
bonus. The transaction bonus amounts are as follows:
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Transaction
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Executive Officer
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Bonus
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Frank A. Martin
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$
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400,480
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Chairman
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R. Dixon Thayer
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193,120
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Chief Executive Officer
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Dr. Raymond J. Fabius
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180,710
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President and Chief Medical Officer
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Peter Hotz
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95,406
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Executive Vice President and Chief Operating Officer
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Bradley S. Wear
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72,000
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Senior Vice President and Chief Financial Officer
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Yuri Rozenfeld
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210,625
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Senior Vice President, General Counsel and Secretary
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A retention bonus may be awarded to certain employees for their
continued employment with
I-trax
for a
designated period of time following the Merger (the
Retention Period
). The Retention Period will
be included in an agreement between
I-trax
and
any participating employees. No portion of any retention bonus
will be paid if, prior to the end of the Retention Period, the
participating employee resigns or is terminated (for certain
specified reasons) from
I-trax.
Additionally, all retention bonuses awarded under the Transition
Plan are subject to the participating employees continued
compliance with any non-compete, non-solicitation,
confidentiality and non-disparagement requirements, if any, in
such participating employees employment agreement or
similar arrangement with
I-trax.
Employment
Agreements
I-trax has employment agreements with each of the executive
officers, which are described in the Information Statement. Each
executive officers employment agreement, other than
Mr. Wears, provides for the acceleration of stock
options upon a change in control. In addition,
Messrs. Martins and Thayers employment
agreements provide that a change in control constitutes good
reason for termination.
Director
and Officer Indemnification; Insurance
In connection with the Merger Agreement, Walgreens and
I-trax,
as
the surviving corporation in the Merger, will jointly and
severally indemnify and hold harmless (including advancement of
expenses) the current and former directors and officers of
I-trax
or
any of its subsidiaries with respect to actions occurring on or
prior to the Effective Time to the fullest extent permitted
under the DGCL. Walgreens will not amend or repeal the
indemnifications provisions of
I-traxs
Certificate of Incorporation and By-Laws in effect on the date
of the Merger Agreement for a period of six years after the
closing of the Merger.
I-trax,
as
the surviving company, must either (i) maintain, for six
years following the Merger, directors and officers
liability insurance policies on terms not materially less
favorable than
I-traxs
existing insurance coverage, subject to a cap on the premium
paid for such coverage equal to 300% of the last annual premium
paid by
I-trax
for
its existing coverage (the
Maximum Premium
),
or (ii) purchase tail insurance coverage that
provides coverage substantially equivalent to
I-traxs
existing directors and officers liability insurance
policies for a period of six years. If
I-traxs
existing insurance expires, is terminated or cancelled during
such six-year period or exceeds the Maximum Premium, the
Surviving Corporation shall obtain as much directors and
officers liability insurance coverage as can be obtained
for the remainder of such period for an annualized premium not
in excess of the Maximum Premium.
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Item 4.
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The
Solicitation or Recommendation.
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RECOMMENDATION
OF THE BOARD OF DIRECTORS
At a meeting held March 14, 2008, the
I-trax
Board: (1) resolved that the terms of the Merger Agreement
are fair to, and in the best interests of,
I-trax
and
I-traxs
stockholders, and declared it advisable to enter into the Merger
Agreement; (2) authorized the execution, delivery and
performance of the Merger Agreement; (3) approved,
authorized and adopted the transactions contemplated by the
Merger Agreement; (4) recommended acceptance of the Offers
and the adoption and approval of the Merger Agreement by the
I-trax
stockholders; and (5) took action to exempt the
transactions contemplated by the Merger Agreement from the
restrictions set forth in Section 203 of DGCL.
I-TRAXS
BOARD OF DIRECTORS, BY VOTE OF THE DIRECTORS ON MARCH 14, 2008,
RECOMMENDS THAT
I-TRAXS
STOCKHOLDERS ACCEPT THE OFFERS AND TENDER THEIR SHARES PURSUANT
TO THE OFFERS.
6
BACKGROUND
OF THE MERGER
I-traxs
management and the
I-trax
Board
have periodically assessed potential strategic opportunities to
acquire, be acquired by, or combine with other companies.
Before June 2006,
I-traxs
management had discussions with several potential strategic and
financial buyers. From June 2006 and through 2007,
I-trax
continued to hold discussions with a number of potential
acquisition targets as well as with various parties interested
in acquiring
I-trax.
In
connection with these discussions,
I-trax
originally engaged the investment banking firm of Bryant Park
Capital, Inc.
(Bryant Park Capital)
on
June 22, 2006 to assist
I-trax
in
its merger and acquisition-related activities. That engagement
was extended on January 1, 2007.
Beginning in June 2006,
I-trax
engaged in in-depth discussions with one potential strategic
acquirer, but the discussions ended in January 2007 because the
parties could not reach an agreement on price.
On July 9, 2007, Hal F. Rosenbluth, senior strategy
consultant for health care at Walgreens and co-founder and
chairman of Take Care Health Systems, contacted Frank A. Martin,
Chairman of
I-trax,
via
telephone to discuss how Take Care Health and
I-trax
could
work together. As a
follow-up
to
that telephone conversation, Messrs. Martin and Rosenbluth
met in person to further discuss how
I-traxs
and Take Care Healths services could be linked together.
Based on the progress of the discussions between
Messrs. Martin and Rosenbluth, Mr. Martin was invited
to attend Walgreens strategic planning meeting on July 25
and July 26, 2007 in North Dakota. The meeting was attended
by the following representatives of Walgreens:
Mr. Rosenbluth, Robert Zimmerman, Vice President and
current Chief Strategy Officer, John W. Gleeson, former Senior
Vice President and Chief Strategy Officer and Kim Rhodes, Chief
Strategist for Take Care Health. During the course of that
meeting, the participants discussed the potential opportunities
for
I-trax
and Walgreens to work together in the employer-sponsored
healthcare space. At that meeting, the parties also discussed
potential structure and implementation of such a relationship in
general terms and agreed to enter into a joint Confidentiality
Agreement, which was executed on or about August 3, 2007
and related to a possible acquisition of
I-trax
by
Walgreens.
At the same time, as part of its strategic mergers and
acquisitions plans,
I-trax
management, with the help of Bryant Park Capital, continued to
engage in discussions with several potential acquisition targets
in the health and wellness space, including discussions relating
to a potential merger with a publicly-traded company. The
discussions with the publicly-traded company continued until
September 2007, but were terminated shortly thereafter as the
parties could not agree on the consideration to be received by
the publicly-traded companys stockholders in the merger.
In addition, on July 27, 2007, Mr. Martin and R. Dixon
Thayer, Chief Executive Officer and Director of
I-trax,
along with representatives of Bryant Park Capital, met with a
private equity firm to explore a potential investment in
I-trax
to
raise funds to finance specific acquisitions
I-trax
was
then actively considering. The private equity firm indicated it
was not interested in making a significant investment in
I-trax
because of
I-traxs
high valuation.
On August 6, 2007, Walgreens began its due diligence
regarding the proposed acquisition in coordination with its
financial advisor.
On August 10, 2007, Mr. Martin, Raymond J.
Fabius, M.D.,
I-traxs
President and Chief Medical Officer, and Peter Hotz,
I-traxs
Chief Operating Officer, met with a representative from another
potential strategic acquiror to discuss that companys
potential interest in acquiring
I-trax.
The
meeting was held at the request of the potential acquiror.
Strategic discussions with Walgreens continued on August 15 and
August 27, 2007, when Mr. Martin and other
I-trax
executives met with Mr. Rosenbluth and Ms. Rhodes.
Among other things, discussions focused on
I-traxs
unique ability to deliver wellness and disease management
services utilizing
I-traxs
trusted clinicians at the workplace, as well as the ability of
the combined companies to substantially augment
I-traxs
onsite services through Walgreens retail business.
7
On August 29, 2007, Mr. Martin and other members of
I-trax
management had a telephone call with representatives of the
other potentially interested company during which
I-trax
presented its five-year strategic plan. The discussions were
terminated shortly thereafter as the parties could not agree on
a price range for acquisition of
I-trax.
On September 11, 2007, the management of
I-trax,
including Messrs. Martin, Thayer, Fabius and Hotz, with the
assistance of Bryant Park Capital, made management presentations
to representatives of Walgreens, including among others
Mr. Rosenbluth, Ms. Rhodes and Mark Vainisi, Director
- Merger & Acquisitions for Walgreens and Chris L.
Noble, Director of Acquisitions for Walgreens Health Services.
The discussion continued with emphasis on the strategic
opportunities that could present themselves to the combined
businesses.
Following the September 11, 2007 presentation, Walgreens
and its financial advisor continued to conduct due diligence
through the month of October. In October, in response to
Walgreens request for more in-depth due diligence
materials, representatives of
I-trax
advised representatives of Walgreens that, to advance the
acquisition discussions and expand the scope of
I-trax
information available to Walgreens for due diligence purposes,
Walgreens needed to provide
I-trax
with
a preliminary price range for the proposed acquisition.
Walgreens representatives requested more specific financial
information to help them arrive at that introductory price range.
On October 9, 2007, Mr. Martin and members of
I-traxs
financial advisor, Bryant Park Capital, presented financial and
operating information regarding
I-trax,
including
I-traxs
2007 and 2008 preliminary budget, high-level financial goals,
and business model and strategic plan, to Walgreens
financial advisor, Peter J. Solomon Company, L.P.
(PJSC)
at PJSCs offices in New York, New
York. Representatives of
I-trax
again
communicated to representatives of Walgreens that, to advance
the acquisition discussions and expand the scope of
I-trax
information available to Walgreens for due diligence purposes,
Walgreens needed to provide
I-trax
with
a preliminary price range for the proposed acquisition.
Walgreens representatives again requested more specific
financial information to help them arrive at that preliminary
price range.
In October 2007, concurrently with the discussions with
Walgreens and with the assistance of Bryant Park Capital,
I-traxs
management intensified its negotiations to acquire two health
and wellness providers.
I-trax
also
began to seek sources for the funding required to fund such
acquisitions. After detailed discussion with its senior secured
creditor, third party creditor, and a financial advisor that
specializes in raising equity capital,
I-traxs
management concluded that it could fund the acquisition of the
smaller of the two companies with existing cash flow and
additional borrowings under its existing senior secured credit
facility.
I-trax
would
require supplemental equity capital in the form of a private
investment in public equity
(PIPE)
transaction to fund the proposed acquisition of the second
company. On October 28, 2007, Mr. Martin first met
with a placement agent to discuss a PIPE transaction to raise
capital to be used in the execution of
I-traxs
acquisition strategy.
On October 29, 2007, representatives of
I-trax,
Bryant Park Capital and Walgreens financial
representatives met by conference telephone to discuss certain
due diligence matters.
On October 31, 2007, Walgreens financial advisor
contacted
I-traxs
financial advisors and requested additional detailed financial
information in order for Walgreens to be in a position to
suggest a preliminary acquisition price range and prepare an
indication of interest letter. After further discussions between
the parties, Walgreens financial advisor advised
Mr. Martin that Walgreens must undertake further strategic
analysis before it could propose an indication of interest that
would be acceptable to
I-trax.
During October and November 2007,
I-trax
and
its financial and legal advisors negotiated with Minute Men,
Incorporated to acquire Pro Fitness Health Solutions, LLC
(Pro Fitness)
, a provider of
employer-sponsored wellness and fitness programs. On
November 27, 2007,
I-trax
signed a definitive agreement to purchase Pro Fitness and, on
December 14, 2007,
I-trax
completed the acquisition of Pro Fitness.
During November and December 2007,
I-trax
and
its placement agent prepared to commence the PIPE offering to
finance the acquisition of the second health and wellness
target, which was being negotiated with the assistance of
I-traxs
financial and legal advisors.
I-trax
had
several meetings with potential investors
8
concerning the PIPE transaction and received an offer to raise
the desired amount in a PIPE offering. Because overall market
conditions worsened substantially in December, and the proposed
terms of the offering involved selling equity at a significant
discount to market price coupled with warrants to buy additional
shares of
I-trax
Common Shares, the
I-trax
Board
decided not to pursue the PIPE offering at the terms offered and
the PIPE transaction was postponed. The
I-trax
Board
also discussed whether
I-trax
might
secure better terms for the PIPE in January 2008.
On December 19, 2007, Mr. Vainisi called
Mr. Martin to inform him that Walgreens was prepared to
deliver an initial, non-binding indication of interest letter to
Mr. Martin and commence full due diligence. The letter
expressed interest in pursuing a transaction between
I-trax
and
Walgreens and included an initial indication of interest,
subject to due diligence, in the price range of $5.00 to $5.50
per share in cash for each share of
I-trax
Common Shares outstanding or underlying outstanding preferred
stock, equity awards and warrants. Mr. Martin shared the
letter with the
I-trax
Board, Messrs. Thayer and Fabius, Yuri Rozenfeld,
I-traxs
Senior Vice President and General Counsel, representatives of
Bryant Park Capital and representatives of Ballard Spahr
Andrews & Ingersoll, LLP (
Ballard
Spahr
),
I-traxs
corporate and securities counsel.
I-trax
ended
its efforts to complete the PIPE upon receipt of the letter from
Walgreens. In addition, as a result of the letter from
Walgreens,
I-trax
informed the second health and wellness target company that it
was postponing acquisition discussions.
On December 21, 2007, Messrs. Vainisi and Rosenbluth
and Ms. Rhodes met with Messrs. Martin and Rozenfeld
at
I-traxs
Chadds Ford, Pennsylvania headquarters to discuss the due
diligence process.
On December 28, 2007,
I-trax
received a preliminary due diligence request from Walgreens,
followed by a comprehensive list on January 3, 2008.
Beginning on December 28, 2007,
I-trax
worked to establish an electronic due diligence data room.
On January 11, 2008, the
I-trax
Board
met by conference telephone to review and discuss the Walgreens
indication of interest. At that meeting, representatives from
Bryant Park Capital made a presentation regarding the elements
of the financial analyses Bryant Park Capital would perform in
reviewing a finalized offer from Walgreens. A representative of
Ballard Spahr made a presentation on the
I-trax
Boards fiduciary duties when considering such proposals.
After discussion, the
I-trax
Board
established a special committee of the
I-trax
Board
(the
Special Committee
) consisting of Gail F.
Lieberman, Mr. Martin, Haywood D. Cochrane, Jr. and
Phillip D. Green, all but one of whom are independent directors,
to oversee the regular progress of the potential transaction
with Walgreens. The Special Committee adopted a charter that
provides that the Special Committee is responsible for exploring
the sale of I-trax, negotiating the terms of a sale transaction
and providing recommendation to the I-trax Board regarding such
transactions. The
I-trax
Board
discussed and confirmed the fact that, since the only
transaction then being considered by
I-trax
was
the sale of
I-trax
to a
third party and not to any member of management or any buyer
affiliated with management, the Walgreens acquisition did not
present any conflict among
I-traxs
management or directors, and that, therefore, the Special
Committee did not need to consist entirely of independent
directors.
On January 14, 2008, Dr. Fabius, Messrs. Thayer
and Hotz and Bradley S. Wear,
I-traxs
Senior Vice President and Chief Financial Officer, met with
representatives of Walgreens and Take Care Health, including
Mr. Rosenbluth. At the meeting, participants again focused
on general opportunities that should be available for the
combined business in the healthcare market and reviewed the
roles and responsibilities of the present
I-trax
management.
On January 17, 2008, the Special Committee met by
conference telephone. The status of the potential transaction
with Walgreens was discussed and the engagement of Bryant Park
Capital to render the fairness opinion in connection with the
proposed transaction was approved and the terms of Bryant Park
Capitals existing engagement were ratified and confirmed.
The Special Committee considered engaging another financial
advisor to deliver a fairness opinion, but decided upon Bryant
Park Capital based upon its knowledge of
I-trax
as a
result of the services Bryant Park Capital had previously
provided to
I-trax,
the
time that would be required for
I-traxs
management to educate another financial advisor about
I-trax,
and
the high quality of the services performed by Bryant Park
Capital for
I-trax
over
the years. In addition, the Special Committee
9
considered the time that would be required for I-traxs
management to educate another financial advisor and concluded
that any benefits of engaging another investment banker would be
outweighed by the delay and cost associated with procuring an
additional opinion.
On January 18, 2008,
I-trax
and
Walgreens signed an amendment to the Confidentiality Agreement
pursuant to which Walgreens agreed to not purchase
I-trax
stock
for nine months outside of the context of the proposed
acquisition. Each party also agreed to not solicit the
others employees for a year. On January 20, 2008,
Walgreens, its financial advisors, its tax advisors,
Kirkland & Ellis LLP
(Kirkland &
Ellis)
and Barnes & Thornburg LLP,
Walgreens outside counsels, began reviewing the materials
in the electronic due diligence room. Extensive due diligence
continued throughout the remainder of January, February and the
beginning of March. As diligence progressed through this period,
I-trax
and
its financial advisors communicated to Walgreens and its
financial advisor that
I-trax
would
not provide Walgreens any information that would correlate
specific clients with applicable revenues and margins because of
competitive concerns. During the course of due diligence,
I-trax
and
Walgreens representatives engaged in multiple conversations, and
I-trax
provided additional documentation and information regarding
I-traxs
business, employee benefits and regulatory matters, as they were
requested.
On January 27, 2008, the
I-trax
Board
met by conference telephone to discuss
I-traxs
2008 business plan,
I-traxs
five-year strategic plan, which was delivered to the directors
prior to the meeting, and the status of the Walgreens
transaction. A representative of Bryant Park Capital attended
the meeting. At that meeting, the
I-trax
Board
approved the proposed budget for 2008. Management also presented
to the Board its five-year strategic plan, which separately
analyzed I-traxs core business and certain proposed
initiatives. The five-year strategic plan materials delivered to
the
I-trax
Board included five-years of financial projections for
I-trax
under
certain scenarios that were prepared by management. I-trax
management and the
I-trax
Board
reviewed and discussed the risks and uncertainties associated
with the five-year strategic plan, including I-traxs
capacity to generate the projected level of growth in revenue
and improvement in margins in its core businesses, as well as
whether I-trax would be successful in raising the capital
required to implement the proposed initiatives on a timely basis
and at favorable terms. They also considered the potential
timing and final cost of certain acquisitions contemplated in
the five-year strategic plan, the risks and uncertainties
associated with entering certain new lines of business, the
potential impact on I-trax core businesses and proposed
initiatives from existing competitors and new entrants in these
markets, and the organizational challenges posed by a plan that
would require successful execution on a number of different
fronts. Also at that meeting, the
I-trax
Board
authorized the release of certain forward-looking strategic
information, including the financial projections, to Walgreens.
The financial projections delivered to Walgreens are discussed
in Item 8 of this Schedule. The 2008 budget approved by the
I-trax
Board
at the January 27th meeting and the five-year
strategic plan reviewed by the I-trax Board at that meeting were
also provided to Bryant Park Capital for the purposes of its
analysis of the financial terms of the proposed transaction.
On February 5, 2008, representatives from
I-trax,
Bryant Park Capital, Walgreens and PJSC met at Bryant Park
Capitals offices in New York. In addition, certain
Walgreens executives, and certain other financial, accounting
and tax advisors of Walgreens participated in the meeting
telephonically. At that meeting,
I-trax
presented its 2008 budget and five-year strategic plan in detail
and answered questions regarding the presentation.
On February 6, 2008, the Special Committee met by
conference telephone. At the meeting, the progress of the
negotiations with Walgreens was reviewed and the Special
Committee was updated on the status of Walgreens due
diligence review.
Later in the day on February 6, 2008, Kirkland &
Ellis provided a Merger Agreement draft to
I-trax
and
its representatives. The draft proposed a tender offer followed
by a merger transaction, extensive representations and
warranties of
I-trax
and
covenants of the parties.
I-trax
and
its legal and financial advisors discussed the draft of the
Merger Agreement over the next several days. Later that week, a
representative of Bryant Park Capital advised Mr. Vainisi
that in order for
I-trax
to
provide a meaningful and complete response to the draft,
I-trax
wanted more certainty as to the consideration Walgreens was
willing to offer in the proposed transaction.
10
On February 19, 2008, Mr. Vainisi called
Mr. Martin and indicated that, based on due diligence done
up to that point, Walgreens had narrowed the range of
consideration to $5.25 to $5.50 per share in cash for each share
of Common Shares outstanding or underlying outstanding preferred
stock, equity awards and warrants.
On February 20, 2008, the
I-trax
Board
met in person at the offices of Ballard Spahr. At that meeting,
a representative of Ballard Spahr gave a presentation
describing, in detail, the terms of the draft Merger Agreement.
Copies of the draft Merger Agreement were distributed to members
of the Board at the meeting. Representatives of Bryant Park
Capital presented to the
I-trax
Board
an analysis of the proposed financial terms of the transaction.
Bryant Park Capitals analysis was based upon financial
projections provided by
I-trax
management that reflected minor adjustments to those provided to
Walgreens and discussed in Item 8 of this Schedule. A
representative of Fox Rothschild LLP, counsel to certain members
of management, discussed executive compensation matters in
connection with the proposed transaction with Walgreens. The
I-trax
Board
analyzed in detail the positive and negative factors associated
with the Walgreens transaction and, as part of that analysis,
discussed in-depth the prospect of
I-trax
remaining an independent company.
Based upon the I-trax Boards positive response to the
$5.25 to $5.50 per share price range,
I-trax
began
providing sensitive financial data and client specific
information previously withheld because of competitive concerns.
On February 21, 2008,
I-trax
and
its representatives provided Walgreens and its representatives
with its comments on the draft Merger Agreement. On
February 26, 2008, representatives of the parties
legal advisors participated in a telephone conference call
regarding
I-traxs
comments on the draft Merger Agreement.
On February 29, 2008, the Special Committee met by
conference telephone. At the meeting, the Special Committee
discussed the status of the transaction with Walgreens and other
indications of interest in
I-trax
from
other parties. A representative of Ballard Spahr provided an
update on the status of the Merger Agreement negotiations.
Later in the day on February 29, 2008, Kirkland &
Ellis circulated a revised draft of the Merger Agreement.
I-trax
and
its legal and financial advisors discussed the draft of the
Merger Agreement over the next several days. Early the following
week, Mr. Martin relayed to Mr. Vainisi that in order
for
I-trax
to provide a meaningful and complete response to the revised
draft
I-trax
wanted more certainty as to the consideration Walgreens was
willing to offer in the proposed transaction.
During January, February and March 2008, certain members of
I-trax
management had discussions with parties that had expressed a
strategic interest in acquiring
I-trax
in
the past. In particular, on February 27, 2008,
Mr. Martin was approached by a party interested in
acquiring
I-trax
and
the occupational health division of a major hospital system.
Similarly, on March 5, 2008, representatives from another
company met with
I-trax
management at
I-traxs
Chadds Ford, Pennsylvania offices to discuss the companys
interest in acquiring
I-trax.
In
both cases, Mr. Martin told the potential acquiring party
that
I-trax
was in the midst of considering strategic alternatives and, as a
result, needed a prompt indication of the seriousness of the
potential acquiring party and the financial terms such party was
considering. Nothing has come of the inquiries to date.
On March 8, 2008, Mr. Vainisi called Mr. Martin
and indicated that Walgreens was willing to pay $5.40 per share
in cash for each share of
I-trax
Common Shares outstanding or underlying outstanding preferred
stock, equity awards and warrants. Mr. Vainisi also advised
Mr. Martin that Walgreens was in negotiations to acquire
Whole Health Management, Inc.,
(Whole Health)
a competitor of
I-trax.
On March 9, 2008,
I-trax
and
its representatives provided Walgreens and its representatives
with its comments on the revised draft Merger Agreement. On
March 11, 2008,
I-trax
and
its representatives and Walgreens and its representatives held a
conference call to discuss the remaining outstanding issues on
the draft Merger Agreement.
I-traxs
concerns regarding the pending Whole Health transaction were
also discussed, as well as methods of acquiring the Preferred
Shares, including by way of a tender offer.
Over the course of the next two days,
I-trax
and
its financial and legal advisors and Walgreens and its financial
and legal advisors met frequently by telephone to negotiate the
final terms of the Merger Agreement,
11
including the covenants of the parties in connection with
relevant approvals under applicable antitrust law, the
termination rights available to the parties and the termination
fee payable in certain termination events.
On March 12, 2008, the
I-trax
Board
met by conference telephone. Preceding that meeting, the then
current draft of the Merger Agreement along with a memorandum
documenting the significant terms of the Merger Agreement was
circulated to the members of the
I-trax
Board. At the meeting, a representative of Ballard Spahr gave an
overview of the terms of the Merger Agreement, including the
specific performance provision and termination fee payable to
I-trax
in
certain situations, discussed significant changes to the Merger
Agreement since the February 20, 2008
I-trax
Board
meeting, the mechanics of the tender offer and antitrust
considerations. A representative of Fox, Rothschild discussed
certain executive compensation matters in connection with the
proposed transaction with Walgreens, including the I-trax
Transition Compensation Plan. The members of the
I-trax
Board
were then polled regarding their position on the proposed
transaction and all members present indicated that they were
inclined, based on the information they currently had, to vote
in favor of the transaction.
On March 14, 2008, the
I-trax
Board
met by conference telephone. Preceding that meeting, the then
current draft of the Merger Agreement along with a memorandum
documenting the significant terms of the Merger Agreement was
circulated to the members of the
I-trax
Board. At the meeting, a representative of Ballard Spahr
highlighted the changes to the Merger Agreement since the
March 12, 2008
I-trax
Board
meeting, gave an update regarding antitrust considerations and
provided an overview of steps to be taken if a competing offer
were to be received subsequent to entering into the Merger
Agreement. Representatives of Bryant Park Capital then discussed
with the I-trax Board the financial terms of the proposed
transaction and rendered an oral opinion, subsequently confirmed
in writing, to the
I-trax
Board
that, based upon the and subject to the assumptions, procedures,
factors, qualifications and limitations to be set forth in its
written opinion, as of the date of the opinion, the Common
Shares price (i.e., $5.40 in cash) was fair, from a financial
point of view, to the holders of Common Shares other than
Walgreens and any of its affiliates.
At the conclusion of the March 14, 2008
I-trax
Board
meeting, the
I-trax
Board
approved the terms and provisions of the Merger Agreement,
including the tender offers, and recommended that the holders of
Common Shares and Preferred Shares accept the tender offers and,
if applicable, vote in favor of adoption of the Merger
Agreement. Two members of the
I-trax
Board
were not present at the meeting because they were traveling on
airplanes. However, both members were present at the
March 12th meeting, expressed to Messrs. Martin
and Rozenfeld their support of the transaction with Walgreens
prior to the meeting and reaffirmed their support following the
meeting. Subsequent to the
I-trax
Board
meeting, the parties executed the Merger Agreement. On
March 17, 2008, a press release announcing the transaction
was issued and both Walgreens and
I-trax
held
conference calls to discuss the transaction.
REASONS
FOR THE BOARDS RECOMMENDATION
Based on the following reasons, the Board determined to approve
the Merger Agreement, and the transactions contemplated by the
Merger Agreement, and to recommend that all holders of
I-trax
Common Shares accept the Common Offer and all holders of
Preferred Shares accept the Preferred Offer:
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the price offered to the
I-trax
stockholders represents a significant premium over the trading
price per share of Common Shares immediately before the
execution of the Merger Agreement and over the trading range of
Common Shares over the past three years;
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the price offered to the
I-trax
stockholders represents a high valuation of
I-trax
when
measured as a multiple of
I-traxs
historical and budgeted financial indicators;
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the uncertainty of
I-traxs
ability, as a micro-cap public company, to raise capital
required for
I-trax
to
execute on its five year strategic plan or to acquire other
companies using
I-traxs
equity securities;
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the challenges presented to
I-trax
in
remaining independent in light of increased competition from
larger companies with greater capital resources such as CVS
Caremark Corporation, Walmart Stores,
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12
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Inc. and Cerner, among others, the risks associated with the
slowing economy, and the expense of remaining a public company;
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the uncertainty associated with maintaining
I-traxs
valuation multiples in light of large institutional
investors reduced interest in the stocks of micro-cap
public companies;
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Walgreens desire to enter into the workplace medical,
pharmacy, wellness and disease management services businesses,
as evidenced by its agreement to purchase Whole Health
Management, a competitor of
I-trax;
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the opinion of Bryant Park Capital, as more fully described in
this Item 4 of this Statement under the heading
Opinion of Bryant Park Capital, that based upon and
subject to the assumptions, procedures, factors, qualifications
and limitations set forth therein, as of the date of such
opinion, the Common Offer price is fair, from a financial point
of view, to the holders of Common Shares other than Walgreens
and any of its affiliates;
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the structure of the transaction as first step tender offers,
followed by a Merger, which may serve to shorten the time period
between signing the Merger Agreement and closing the
transaction, thus enabling
I-traxs
stockholders to receive the transaction consideration at the
earliest possible time;
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the assessment that the terms of the Merger Agreement are fair
and balanced for each party;
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the likelihood that the Offers and the Merger transaction will
be consummated, including the reasonableness of the conditions
to the Offers and the closing of the transaction;
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the enhanced ability of
I-trax
to
grow its integrated workplace medical, pharmacy, wellness,
fitness, and disease management services following acquisition
by Walgreens, with the assistance of Walgreens financial
strength and support, and through integration with Take Care
Health, Walgreens retail clinic business;
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the complementary nature of the businesses of
I-trax
and
Take Care Health and the ability of the combined businesses to
grow utilizing their assets, technologies and
capabilities; and
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the ability of
I-trax,
Walgreens and Take Care Health to combine the strengths of the
companies geographic reach, sales, service and support
teams.
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Although each of the foregoing reasons was considered important
in determining whether to recommend the Merger Agreement to the
I-trax
stockholders, the most compelling reasons for such
recommendation are the significant premium offered to
I-traxs
stockholders, Bryant Park Capitals fairness opinion and
the challenges presented to
I-trax
in
remaining independent and executing its five year strategic
plan, including increased competition.
The
I-trax
Board also considered the terms of the Merger Agreement,
including the right of
I-trax
to
consider and negotiate other potential unsolicited acquisition
proposals, the right of
I-trax
to
receive a termination fee of $10,000,000 from Walgreens in
certain circumstances where the Merger Agreement could be
terminated and the possible effects of the provisions regarding
the termination fee of $8,200,000 that might be payable by
I-trax
in
certain circumstances where the Merger Agreement could be
terminated.
The
I-trax
Board also evaluated and discussed the following risks that
might arise:
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the risk that the proposed transaction would not gain the
required regulatory approvals or that the minimum conditions of
the Offers would not be met;
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the risk that the potential benefits sought in the Offers and
the Merger transaction would not be fully realized; and
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the potential severance payments that could be triggered by the
termination of employment of
I-trax
executives.
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The
I-trax
Board believes that the foregoing risks are outweighed by the
potential benefits of the Offers and the Merger to the
I-trax
stockholders. The
I-trax
Board
also considered various alternatives to the Offers
13
and Merger transaction with Walgreens, including remaining
independent and executing
I-traxs
five year strategic plan, and determined that the proposed
transaction with Walgreens represents the best potential
opportunity for
I-trax
and
its stockholders.
OPINION
OF BRYANT PARK CAPITAL
Bryant Park Capital was asked to render an opinion to the
I-trax
Board
as to the fairness, from a financial point of view, of the
Common Offer price to holders of the Common Shares other than
Walgreens and any of its affiliates. On March 14, 2008,
Bryant Park Capital delivered its oral opinion to the
I-trax
Board, which was subsequently confirmed in writing, that, as of
the date of its opinion, and subject to and based upon the
assumptions made, matters considered, procedures followed and
qualifications and limitations on the review undertaken as set
forth in its opinion, the Common Offer price was fair, from a
financial point of view, to holders of the Common Shares other
than Walgreens and any of its affiliates.
Bryant Park Capital is an investment banking firm that is
regularly engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, competitive
biddings and valuations for corporate and other businesses. In
the ordinary course of business, Bryant Park Capital, its
affiliates, directors and officers may at any time invest on a
principal basis or in funds that invest, hold long or short
positions, trade or otherwise structure and effect transactions,
for its own account or the account of its customers or clients,
in the equity or debt securities of
I-trax
or
Walgreens.
The full text of Bryant Park Capitals written opinion,
dated as of March 14, 2008, is attached as Annex II to
this Statement and sets forth the assumptions made, procedures
followed, matters considered and limits on the review undertaken
by Bryant Park Capital. The summary of Bryant Park
Capitals written opinion set forth in this Statement is
qualified in its entirety by reference to the full text of the
opinion.
YOU ARE URGED TO READ THE OPINION CAREFULLY AND IN
ITS ENTIRETY.
In reading the discussion of the fairness opinion set forth
below, you should be aware that Bryant Park Capitals
opinion:
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was provided solely to
I-trax
Board
in connection with and for the purposes of its evaluation of the
Merger and the Common Offer, which Bryant Park Capital referred
to in its opinion as the transaction;
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does not constitute a recommendation to
I-trax
stockholders or any other person as to how to vote or act on any
matter relating to the transaction or the Preferred Offer or as
to the fairness, from a financial point of view, of the
Preferred Offer; and
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does not constitute a recommendation to the
I-trax
Board
in connection with the transaction.
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In connection with rendering its opinion, Bryant Park Capital,
among other things:
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reviewed certain publicly available financial statements of and
other business and financial information of
I-trax;
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reviewed certain internal financial statements and other
financial and operating data concerning
I-trax;
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reviewed certain financial projections prepared by the
management of
I-trax
and
reviewed by the
I-trax
Board;
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discussed the past and current operations and financial
condition and the prospects of
I-trax
with
senior executives of
I-trax;
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reviewed the reported prices and the historical trading activity
of the Common Shares;
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compared certain financial information of
I-trax
with
similar, publicly-available information for certain
publicly-traded companies that Bryant Park Capital deemed
relevant;
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reviewed the financial terms, to the extent publicly available,
of certain transactions comparable to the transaction;
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participated in discussions and negotiations among
representatives of
I-trax
and
Walgreens and their advisers;
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reviewed a draft of the Merger Agreement dated March 14,
2008 and certain related documents; and
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performed other examinations and analyses and considered other
factors that Bryant Park Capital deemed appropriate.
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For the purposes of its analysis and opinion, Bryant Park
Capital assumed and relied upon, without assuming any
responsibility for independent verification of, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to, discussed with or
reviewed by or for Bryant Park Capital, and Bryant Park Capital
assumed no liability therefor. For purposes of rendering its
opinion, members of management of
I-trax
provided Bryant Park Capital with certain financial projections
prepared by management of
I-trax
(the
Financial Projections
), and discussed with
Bryant Park Capital various uncertainties and risks relating to
I-traxs
future operations and prospects. With the consent of the
I-trax
Board, Bryant Park Capital assumed that the Financial
Projections were reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of
the management of
I-trax
of
the future financial performance and the future competitive,
operating and regulatory environments of
I-trax.
Bryant Park Capital expressed no view as to such Financial
Projections, or the assumptions on which they were based.
In addition, Bryant Park Capital assumed with the consent of the
I-trax
Board
that the definitive form of the Merger Agreement would be
substantially identical to the last draft reviewed by Bryant
Park Capital, that the representations and warranties of each
party contained in the Merger Agreement are true and correct,
that each party will perform all of the covenants and agreements
required to be performed by it under the Merger Agreement and
that the Common Offer and the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement
without waiver, amendment or delay in the satisfaction of any
terms or conditions. Bryant Park Capital further assumed that
all governmental, regulatory or other consents, approvals and
releases necessary for the consummation of the Merger will be
obtained without any material delay, limitation, restriction or
condition that would have an adverse effect on
I-trax
or
consummation of the transaction or that would materially reduce
the benefits of the transaction. Bryant Park Capital is not a
legal, tax, regulatory or actuarial advisor. Bryant Park Capital
is a financial advisor only and has relied upon, without
independent verification, the assessment of Walgreens and
I-trax
and
their respective legal, tax, regulatory or actuarial advisors
with respect to such matters.
Bryant Park Capital has not made or assumed any responsibility
for making any independent valuation or appraisal of the assets
or liabilities of
I-trax,
Bryant Park Capital has not been furnished with any such
appraisals, nor has Bryant Park Capital evaluated the solvency
or fair value of
I-trax
under
any state or federal laws relating to bankruptcy, insolvency or
similar matters. Bryant Park Capitals opinion was
necessarily based on economic, market and other conditions as in
effect on, and the information made available to Bryant Park
Capital as of, the date of such opinion. Events occurring after
March 14, 2008 may affect the opinion of Bryant Park
Capital and the assumptions used in preparing it, and Bryant
Park Capital did not assume any obligation to update, revise or
reaffirm its opinion.
In receiving Bryant Park Capitals oral fairness opinion on
March 14, 2008, the
I-trax
Board
was aware of and consented to the assumptions and other matters
discussed above.
Summary
of Analyses
The following is a summary of the material analyses performed by
Bryant Park Capital and presented to the
I-trax
Board
in connection with rendering its fairness opinion. These
analyses included:
(1) a review of the historical trading activity of the
Common Shares;
(2) an analysis of public companies that Bryant Park
Capital deemed comparable to
I-trax;
(3) an analysis of selected precedent transactions; and
(4) a discounted cash flow analysis.
15
Some of the financial analyses summarized below include summary
data and information presented in tabular format. In order to
understand fully the financial analyses, the summary data and
tables must be read together with the full text of the analyses.
Considering the summary data and tables alone could create a
misleading or incomplete view of Bryant Park Capitals
financial analyses.
Historical Share Price Performance
With respect to historical trading prices for the Common Shares,
Bryant Park Capital reviewed the trading prices during the
one-year and three-year periods prior to March 14; and the
average closing prices for the ten trading days, twenty trading
days, six months and one year periods prior to March 14.
Bryant Park Capital observed that the highest closing price for
the Common Shares during the three-year period prior to March 14
was $4.68 and that the Common Offer price represented a 15.4%
premium to that price. Bryant Park Capital observed that the
premiums implied by the Common Offer price with respect to each
of these price indicators and the premiums implied for
comparable price indicators derived by Bryant Park Capital from
a review of selected all-cash acquisition transactions of
publicly-traded companies from January 1, 2005 to
March 13, 2008 having an equity consideration of
$150 $350 million, which are referred to as
comparable cash transactions (as reported by Capital IQ, a
provider of information and software solutions to financial
institutions, advisory firms and corporations, and filings with
the Securities and Exchange Commission), were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Premium
|
|
|
|
|
(Discount) for
|
|
|
|
|
Comparable Cash
|
|
Premium of Common Offer Price to
I-traxs
|
|
|
Transactions
|
|
|
Stock price one day prior
|
|
|
38.8
|
%
|
|
|
31.1
|
%
|
Stock price one week prior
|
|
|
38.5
|
%
|
|
|
30.8
|
%
|
Stock price one month prior
|
|
|
54.3
|
%
|
|
|
32.2
|
%
|
10
trading-day
average
|
|
|
40.4
|
%
|
|
|
35.1
|
%
|
20
trading-day
average
|
|
|
39.6
|
%
|
|
|
35.9
|
%
|
6 month average
|
|
|
49.6
|
%
|
|
|
28.6
|
%
|
One year average
|
|
|
42.0
|
%
|
|
|
19.5
|
%
|
52 week low
|
|
|
84.3
|
%
|
|
|
68.0
|
%
|
52 week high
|
|
|
15.4
|
%
|
|
|
(8.3
|
%)
|
Comparable Public Companies Analysis
Using publicly available information, Bryant Park Capital
reviewed the financial, operating, and stock market data of the
following selected publicly traded corporations in the
healthcare industry:
|
|
|
|
|
AMN Healthcare Services, Inc.
|
|
|
|
Cross Country Healthcare, Inc.
|
|
|
|
Healthextras, Inc.
|
|
|
|
Healthways, Inc.
|
|
|
|
Health Fitness Corp.
|
|
|
|
Longs Drug Stores Corp.
|
|
|
|
RehabCare Group, Inc.
|
Bryant Park Capital compared enterprise values of the selected
companies, calculated as equity value based on closing stock
prices on March 13, 2008, plus debt, less cash and other
adjustments, as a multiple of the latest twelve months (actual),
2008 (estimated) and 2009 (estimated) revenues and earnings
before interest, taxes, depreciation and amortization, excluding
both one-time gains and charges and stock-based compensation
expense
(Adjusted EBITDA)
. Estimated
financial information for
I-trax
was
based on financial projections provided to Bryant Park Capital
by the management of
I-trax,
and
estimated financial information for the selected companies was
based on publicly available research analysts estimates
and forecasts, that, where appropriate, were adjusted to reflect
a calendar year end. To the initial per share equity range
implied for the selected companies Bryant Park Capital added a
change of control premium of 30% to 45%, which was
16
derived from its review of the comparable cash transactions.
This analysis indicated the following implied per share equity
reference range for
I-trax,
as
compared to the Common Offer price:
|
|
|
Implied Per Share
|
|
Common
|
Equity Reference Range
|
|
Offer Price
|
|
$1.57 $2.83
|
|
$5.40
|
Bryant Park Capital noted that none of the selected public
companies are identical to
I-trax.
Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such
results and involves complex considerations and judgments
regarding differences in financial and operating characteristics
of the selected public companies and other factors that could
affect
I-traxs
public valuation and that of the selected public companies.
Precedent Transactions Analysis
Using publicly available information, Bryant Park Capital
reviewed the transaction multiples of the following fourteen
selected transactions in the healthcare industry:
|
|
|
ACQUIROR
|
|
TARGET
|
|
SXC Health Solutions Corp.
|
|
National Medical Health Card Systems, Inc.
|
Inverness Medical Innovations Inc.
|
|
Matria Healthcare Inc.
|
Medical Staffing Network Programs Inc.
|
|
AMR Pro Nurse
|
Amerigroup Tennessee Inc.
|
|
Memphis Managed Care Corporation
|
The Carlyle Group
|
|
Manor Care Inc.
|
Aetna Inc.
|
|
Schaller Anderson Incorporated
|
Medical Staffing Network Holdings Inc.
|
|
Intelistaff Healthcare, Inc.
|
Angelo, Gordon & Co.
|
|
National Home Health Care Corp.
|
CVS Caremark Corp.
|
|
Caremark Rx Inc.
|
Rehabcare Group Inc.
|
|
Symphony Health Services LLC
|
Matria Healthcare Inc.
|
|
CorSolutions Medical, Inc.
|
Janus Reed & Partners Plc
|
|
Reed Health Group plc
|
Coventry Health Care Inc.
|
|
First Health Group Corp.
|
Healthextras Inc.
|
|
Managed Healthcare Systems, Inc.
|
Bryant Park Capital compared enterprise values implied for each
target company in the selected transactions as a multiple of its
revenues and its Adjusted EBITDA in the latest twelve months
prior to announcement of the acquisition and, to the extent such
information was publicly available, forecasts of such amounts
with respect to the twelve months following announcement of the
acquisition. Bryant Park Capital also observed the premiums
implied in the selected transactions to the targets
one-day
prior, one-week prior and one-month prior closing prices. Bryant
Park Capital then applied a range of selected multiples and
premiums derived from the selected transactions to the
corresponding estimated financial information for
I-trax
for
calendar years 2007 (actual), 2008 (estimated) and 2009
(estimated) and the
one-day
prior, one-week prior and one-month prior closing prices of
Common Shares, respectively. The analysis was based on
discussions with, and financial projections provided to Bryant
Park Capital by, the management of
I-trax,
including a discussion of uncertainties and risks relating to
I-traxs
future operations and prospects. All multiples for the selected
transactions were based on publicly available financial
information. This analysis indicated the following implied per
share equity reference range for
I-trax,
as
compared to the Common Offer price:
|
|
|
Implied Per Share
|
|
Common
|
Equity Reference Range
|
|
Offer Price
|
|
$3.37 $3.66
|
|
$5.40
|
Discounted Cash Flow Analysis
Bryant Park Capital performed a discounted cash flow analysis of
I-trax
to
calculate the estimated present value of the stand-alone,
un-levered, after-tax free cash flows that
I-trax
could
generate from fiscal year 2008 through fiscal year 2012 based on
financial projections provided by the management of
I-trax.
Bryant Park
17
Capital calculated ranges of estimated terminal values for
I-trax
by
applying multiples of adjusted EBITDA ranging from 10.5x to
12.5x to
I-traxs
fiscal year 2012 estimated Adjusted EBITDA. The present value of
the after-tax free cash flows and terminal values were
calculated using discount rates ranging from 20% to 23% for
I-traxs
core businesses and from 40% to 45% for certain new business
initiatives, as separately addressed in the Financial
Projections, reflecting the risks and uncertainties associated
with each category of projections, as discussed with
I-trax
management and the
I-trax
Board
at its meeting on January 27, 2008. This analysis indicated
the following implied per share equity reference range for
I-trax,
as
compared to the Common Offer price:
|
|
|
Implied Per Share
|
|
Common
|
Equity Reference Range
|
|
Offer Price
|
|
$4.28 $5.90
|
|
$5.40
|
While discounted cash flow analysis is a widely used valuation
methodology, it necessarily relies on numerous assumptions,
including growth rates for assets and earnings, terminal values
and discount rates. Thus, it is not necessarily indicative of
I-traxs
actual, present or future value or results, which may be
significantly more or less favorable than suggested by such
analysis.
Conclusion
Bryant Park Capital noted that the merger and acquisition
transaction environment varies over time because of
macroeconomic factors such as interest rate and equity market
fluctuations and microeconomic factors such as industry results
and growth expectations. Bryant Park Capital also noted that no
company or transaction reviewed was identical to the proposed
transaction and that, accordingly, these analyses involve
complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that
would affect the acquisition values in the comparable
transactions, including the size and demographic and economic
characteristics of the markets of each company and the
competitive environment in which it operates.
Bryant Park Capital was not asked to pass upon, and expressed no
opinion with respect to, the fairness of the transaction or the
Preferred Offer to, or any consideration received in connection
therewith by, the holders of any class of securities other than
the Common Shares, creditors or other constituencies of
I-trax,
nor
as to the fairness of the amount or nature of any compensation
to be paid or payable to any officer, director or employee of
any party to the transaction or the Preferred Offer, or their
affiliates, or any class of such persons, whether relative to
the benefits to stockholders of
I-trax
or
otherwise. Bryant Park Capitals opinion does not address
the relative merits of the transaction or the Preferred Offer as
compared to any other alternative business transaction, or other
alternatives, or whether or not such alternatives could be
achieved or are available. Bryant Park Capital expressed no
opinion as to the price at which securities of
I-trax
may
trade at any time in the future.
The opinion of Bryant Park Capital was reviewed and approved by
an opinion committee of Bryant Park Capital. The preparation of
a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to
the particular circumstances and, therefore, is not necessarily
susceptible to partial analysis or summary description.
Selecting portions of the analysis or the summary set forth
above, without considering the analysis as a whole, could create
an incomplete view of the processes underlying the opinion of
Bryant Park Capital. In arriving at its fairness determination,
Bryant Park Capital considered the results of all these
constituent analyses and did not attribute any particular weight
to any particular factor or analysis considered by it; rather,
Bryant Park Capital made its determination as to fairness on the
basis of its experience and professional judgment after
considering the results of all such analyses. Certain of Bryant
Park Capitals analyses are based upon financial
projections and are not necessarily indicative of actual future
results, which may be significantly more or less favorable than
suggested by such analyses, and are subject to various
uncertainties and risks relating to
I-traxs
future operations and prospects that management of
I-trax
discussed with Bryant Park Capital. The foregoing summary does
not purport to be a complete description of the analyses
performed by Bryant Park Capital. Additionally, analyses
relating to the value of businesses or securities are not
appraisals. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.
18
The decision to recommend to
I-traxs
stockholders that they accept the Offers was solely that of the
I-trax
Board. The opinion of Bryant Park Capital was provided solely to
the
I-trax
Board and does not constitute an opinion or recommendation as to
how any holder of securities of
I-trax,
or
any other person, should vote or act with respect to the
transaction. No limitations were imposed by the
I-trax
Board
on Bryant Park Capital with respect to the investigations made
or procedures followed by it in rendering its opinion.
Bryant Park Capital has acted as financial advisor to the
I-trax
Board
in connection with the transaction, pursuant to its engagement
letter dated January 1, 2007, has been paid retainer fees
of $10,000 per month, and, subject to consummation of the
transaction, will be paid an additional fee equal to 1.25% of
the total amount paid or payable, directly or indirectly, to
I-trax
or
its stockholders in the transaction, less an allowance of
$60,000 for retainer fees previously paid. Pursuant to an
engagement letter dated January 24, 2008, Bryant Park
Capital was also paid separate fees of $175,000 in connection
with the rendering of its opinion, the payment of which was not
contingent upon the views expressed therein or upon consummation
of the transaction.
I-trax
also
agreed to indemnify Bryant Park Capital and related persons
against liabilities, including liabilities under federal
securities laws that arise out of the engagement of Bryant Park
Capital, and expenses in connection with its engagement. In the
two years prior to the date of the Merger Agreement, Bryant Park
Capital has provided financial advisory services to
I-trax
and
has received fees in connection with the provision of such
services.
INTENT TO
TENDER
After reasonable inquiry and to
I-traxs
knowledge, all of
I-traxs
executive officers and directors currently intend to tender,
pursuant to the Offers, all shares of Common Shares and
Preferred Shares they hold of record or own beneficially, other
than shares, if any, held by them that, if tendered, could cause
them to incur liability under Section 16(b) of the Exchange
Act.
|
|
Item 5.
|
Person/Assets,
Retained, Employed, Compensated or Used.
|
Pursuant to an engagement letter dated January 1, 2007,
I-trax
formally retained Bryant Park Capital to act as its financial
advisor in connection with a sale of
I-trax,
among other matters. Pursuant to an engagement letter dated
January 24, 2008, Bryant Park Capital was engaged to render
an opinion to the
I-trax
Board
regarding the fairness, from a financial point of view, of the
consideration to be received by the holders of Common Shares in
the Offers and the Merger, together and not separately. A
summary of the terms of the agreements between
I-trax
and
Bryant Park Capital appears on page 14 of this Statement
under Item 4. The Solicitation or
Recommendation-Opinion of Bryant Park Capital.
A summary of the material provisions of the agreements between
Walgreens and StockTrans, Inc., in its capacity as Depositary
for the Offers, and between Walgreens and D.F. King &
Co., Inc., in its capacity as Information Agent for the Offers,
is included in Section 16 Fees and
Expenses of the Offer to Purchase and is incorporated
herein by reference.
Except as set forth above, neither
I-trax
nor
any person acting on its behalf has or currently intends to
employ, retain or compensate any person to make solicitations or
recommendations to the stockholders of
I-trax
on
its behalf with respect to the Offers, except that such
solicitations or recommendations may be made by directors,
officers or employees of
I-trax,
for
whose services no additional compensation will be paid.
|
|
Item 6.
|
Interest
in Securities of the Subject Company.
|
No transactions in the Common Shares have been effected during
the past 60 days by
I-trax
or
any of its subsidiaries or, to the best of
I-traxs
knowledge, by any executive officer, director or affiliate of
I-trax.
|
|
Item 7.
|
Purposes
of the Transaction and Plans or Proposals.
|
Except as described in this Statement,
I-trax
is
not currently undertaking or engaged in any negotiations in
response to the Offers that relate to (1) a tender offer or
other acquisition of
I-traxs
securities by
I-trax,
any
subsidiary of
I-trax,
or
any other person; (2) an extraordinary transaction, such as
a merger, reorganization or
19
liquidation, involving
I-trax
or
any subsidiary of
I-trax;
(3) a purchase, sale or transfer of a material amount of
assets of
I-trax
or
any subsidiary of
I-trax;
or
(4) any material change in the present dividend rate or
policy, or indebtedness or capitalization of
I-trax.
Except as described in this Statement, there are no
transactions, resolutions of
I-traxs
Board, agreements in principle, or signed contracts entered into
in response to the Offers that relate to one or more of the
events referred to in the preceding paragraph.
|
|
Item 8.
|
Additional
Information.
|
State
Takeover Laws
Required
Vote of Stockholders
Pursuant to Section 253 of the General Corporation Law of
the State of Delaware (as amended, the
DGCL
),
if Walgreens becomes the owner of 90% or more of each of the
outstanding Common Shares and Preferred Shares as a result of
the Offers, Walgreens will be able to effect the Merger without
the approval of
I-traxs
stockholders. However, if Walgreens is able to acquire more than
80%, but less than 90%, of the outstanding Common Shares,
I-trax
has
granted Walgreens an irrevocable and assignable option (the
Top-Up
Option
) to purchase the number of Common Shares equal
to the lowest number of shares that, when added to the shares
obtained upon acceptance of the Common Offer, would give
Walgreens ownership of 90% of the Common Shares on a fully
diluted basis. The obligation of
I-trax
to
issue shares pursuant to the
Top-Up
Option is subject to compliance with applicable regulatory
requirements. If, through the acceptance of the Offers and the
exercise of the
Top-Up
Option, Walgreens is not the holder of at least 90% of the
shares of each of the Common Shares and Preferred Shares, a
meeting of stockholders will be required to approve the Merger.
The affirmative vote of at least a majority of the total
outstanding voting power of the
I-trax
would
be required to approve the Merger. If Walgreens consummates the
Offers by acquiring at least a majority of the total voting
power of the outstanding shares of
I-trax
entitled to vote, Walgreens will be able to approve the Merger
without the vote of any other stockholder.
Appraisal
Rights
No appraisal rights are available in connection with the Offers.
However, if the Merger is consummated, holders of Common Shares
and Preferred Shares who have not tendered their shares in the
Offers or voted in favor of the Merger (if a vote of
stockholders is taken) will have certain rights under the DGCL
to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their shares. Holders of shares who
perfect those rights by complying with the procedures set forth
in Section 262 of the DGCL will have the fair value of
their shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) determined by the
Delaware Court of Chancery and will be entitled to receive a
cash payment equal to such fair value from the surviving
corporation in the Merger. In addition, such dissenting holders
of shares would be entitled to receive payment of a fair rate of
interest from the date of consummation of the Merger on the
amount determined to be the fair value of their shares. If any
holder of Common Shares or Preferred Shares who demands
appraisal under Section 262 of the DGCL fails to perfect,
or effectively withdraws or loses her, his or its right to
appraisal as provided in the DGCL, the shares of such
stockholder will be converted into the right to receive the
price per share paid in the Merger in accordance with the Merger
Agreement. A stockholder may withdraw a demand for appraisal by
delivering to
I-trax
a
written withdrawal of the demand for appraisal within
60 days of the effective date of the Merger or such later
date as approved in writing by
I-trax,
as
the surviving company.
The foregoing summary is not intended to be complete and is
qualified in its entirety by reference to Section 262 of
the DGCL, the text of which is set forth in Annex III
hereto and incorporated by reference herein.
20
Interested
Stockholder Transaction
I-trax
is
incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL prevents an
interested stockholder (generally a person who owns
or has the right to acquire 15% or more of a corporations
outstanding voting stock, or an affiliate or associate thereof)
from engaging in a business combination (defined to
include mergers, consolidations and certain other transactions)
with a Delaware corporation for a period of three years
following the date such person became an interested stockholder
unless, among other things, prior to such date, the board of
directors of the corporation approved either the business
combination or the transaction in which the interested
stockholder became an interested stockholder. At a meeting held
March 14, 2008, the
I-trax
Board: (1) resolved that the terms of the Merger Agreement
are fair to, and in the best interests of,
I-trax
and
I-traxs
stockholders, and declared it advisable to enter into the Merger
Agreement; (2) authorized the execution, delivery and
performance of the Merger Agreement; (3) approved,
authorized and adopted the transactions contemplated by the
Merger Agreement; (4) recommended acceptance of the Offers and
the adoption and approval of the Merger Agreement by the
I-trax
stockholders; and (5) took action to exempt the
transactions contemplated by the Merger Agreement from the
restrictions set forth in Section 203 of DGCL. Accordingly,
Section 203 is inapplicable to the Offers and the Merger.
Antitrust
Issues
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR
Act
), certain acquisitions may not be consummated
until certain information and documentary material have been
furnished to the Federal Trade Commission (the
FTC
) and the Antitrust Division of the
U.S. Department of Justice (the
Antitrust
Division
) and certain waiting period requirements have
been satisfied. These requirements apply to I-trax by virtue of
the acquisition of Shares pursuant to the Offers.
Under the HSR Act, the purchase of Shares in the Offers may not
be completed until the expiration of a 15-calendar-day waiting
period following the filing of certain required information and
documentary material concerning the Offers with the FTC and the
Antitrust Division, unless the waiting period is otherwise
terminated or extended by the FTC and the Antitrust Division.
Both Walgreens and I-trax will file Premerger Notification and
Report Forms under the HSR Act with the FTC and the Antitrust
Division in connection with the purchase of Shares in the
Offers, and the required waiting period with respect to the
Offers will expire on the fifteenth day following the
Walgreens filing, unless earlier terminated by the FTC and
the Antitrust Division or unless Walgreens receives a request
for additional information or documentary material (known as a
Second Request
) prior to that time. If,
within the 15-calendar-day waiting period, either the FTC or the
Antitrust Division issues a Second Request to Walgreens, the
waiting period with respect to the Offers would be extended for
an additional period of ten calendar days following the date on
which Walgreens substantially complies with that request. If the
15-calendar-day waiting period expires on a Saturday, Sunday or
legal holiday, then the period is extended until the end of the
next calendar day that is not a Saturday, Sunday or legal public
holiday. Only one 10-calendar-day extension of the waiting
period pursuant to a Second Request is authorized by the HSR Act
rules. After that time, the waiting period could be extended
only by court order. The FTC or the Antitrust Division may
terminate the additional 10-calendar-day extension of the
waiting period before its expiration. In practice, complying
with a Second Request can take a significant period of time.
Although I-trax is also required to file certain information and
documentary material with the FTC and the Antitrust Division in
connection with the Offers, neither I-traxs failure to
make those filings nor I-trax s failure to substantially
comply with a Second Request issued by the FTC or the Antitrust
Division will extend the waiting period with respect to the
purchase of Shares in the Offers.
At any time before or after Offerors purchase of Shares,
the FTC or the Antitrust Division could take any action under
the antitrust laws that it either considers necessary or
desirable in the public interest, including seeking to enjoin
the purchase of Shares in the Offers and the Merger, the
divestiture of Shares purchased in the Offers or the divestiture
of substantial assets of Walgreens, Offeror, I-trax or any of
their respective subsidiaries or affiliates. Private parties as
well as state attorneys general also may bring legal actions
under the antitrust laws under certain circumstances.
21
There can be no assurance that a challenge to the Offers and the
Merger on antitrust grounds will not be made, or, if such
challenge is made, what the result will be.
Projected
Financial Information
The senior management of I-trax does not as a matter of course
make public projections as to future performance or earnings
beyond the current fiscal year and is especially wary of making
projections for extended periods due to the unpredictability of
the underlying assumptions and estimates. However, certain
financial targets prepared by senior management in connection
with a five-year strategic business plan developed by I-trax
management in February 2008 were made available to Walgreens in
connection with Walgreens evaluation of a possible
transaction with I-trax prior to entering into the Merger
Agreement. The projections set forth in the projected Income
Statement, Selected Balance Sheet Items and Selected Cash Flow
items for both the core I-trax business and the I-trax business
assuming the successful execution of certain new strategic
initiatives that were provided to Walgreens are reproduced in
their entirety below.
I-traxs financial projections reflect numerous estimates
and assumptions with respect to industry performance, general
business, economic, regulatory, market and financial conditions
and other future events, as well as matters specific to
I-traxs business, all of which are difficult to predict
and many of which are beyond I-traxs control. The risks
and uncertainties associated with the five-year strategic plan
include I-traxs capacity to generate the projected level
of growth in revenue and improvement in margins in its core
businesses, as well as whether I-trax would be successful in
raising the capital required to implement the proposed
initiatives on a timely basis and at favorable terms. Other
considerations include the potential timing and final cost of
certain acquisitions contemplated in the five-year strategic
plan, the risks and uncertainties associated with entering
certain new lines of business, the potential impact on
I-traxs core businesses and proposed initiatives from
existing competitors and new entrants in these markets, and the
organizational challenges posed by a plan that would require
successful execution on a number of different fronts.
These financial projections are subjective in many respects and
thus are susceptible to multiple interpretations and periodic
revisions based on actual experience and business developments.
As such, these financial projections constitute forward-looking
information and are subject to risks and uncertainties that
could cause actual results to differ materially from the results
forecasted in such projections, including the various risks set
forth in I-traxs periodic reports. There can be no
assurance that the projected results will be realized or that
actual results will not be significantly higher or lower than
projected. The financial projections cover five years and such
information by its nature becomes less reliable with each
successive year.
There can be no assurance that the announcement of the Offers
and the Merger will not cause customers of I-trax to delay or
cancel purchases of I-traxs services pending the
consummation of the Offers and the Merger or the clarification
of Walgreens intentions with respect to the conduct of
I-traxs business thereafter. Any such delay or
cancellation of customer sales is likely to adversely affect the
ability of I-trax to achieve the results reflected in such
financial projections. Further, the financial projections do not
take into account the effect of any failure of the Offers or the
Merger to occur and should not be viewed as accurate or
continuing in that context.
The financial targets were not prepared with a view toward
public disclosure or toward complying with generally accepted
accounting principles, the published guidelines of the
Securities and Exchange Commission regarding projections or the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of
prospective financial information. The financial targets
included below were prepared by, and are the responsibility of,
I-traxs management. Neither I-traxs independent
registered public accounting firm, nor any other independent
accountants, have compiled, examined or performed any procedures
with respect to the financial projections included below, nor
have they expressed any opinion or any other form of assurance
on such information or its achievability, and they assume no
responsibility for, and disclaim any association with, the
financial projections. The financial targets do not take into
account any circumstances or events occurring after the date
they were prepared.
The inclusion of the financial projections herein will not be
deemed an admission or representation by I-trax or Walgreens
that they are viewed by I-trax or Walgreens as material
information of I-trax, and in fact I-
22
trax views the financial projections as non-material because of
the inherent risks and uncertainties associated with such long
range forecasts.
The summary of these financial forecasts prepared by I-trax
management is not being included to influence your decision
whether to tender your shares, but because these forecasts were
made available by I-trax to representatives of Walgreens and
Bryant Park Capital. Readers of this Schedule are cautioned not
to place undue reliance on the financial targets set forth
below. No one has made or makes any representation to any
shareholder regarding the information included in these
projections.
I-trax
Core Business Projections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
180,962
|
|
|
$
|
213,855
|
|
|
$
|
252,733
|
|
|
$
|
298,686
|
|
|
$
|
353,002
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating Exp.
|
|
|
138,055
|
|
|
|
161,735
|
|
|
|
190,014
|
|
|
|
224,595
|
|
|
|
265,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$
|
42,907
|
|
|
$
|
52,120
|
|
|
$
|
62,719
|
|
|
$
|
74,091
|
|
|
$
|
87,527
|
|
SG&A
|
|
|
34,206
|
|
|
|
37,739
|
|
|
|
41,503
|
|
|
|
45,283
|
|
|
|
49,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
8,701
|
|
|
$
|
14,381
|
|
|
$
|
21,216
|
|
|
$
|
28,808
|
|
|
$
|
38,122
|
|
Depreciation
|
|
|
3,790
|
|
|
|
4,357
|
|
|
|
3,715
|
|
|
|
3,816
|
|
|
|
4,173
|
|
Intangible Amort.
|
|
|
2,105
|
|
|
|
2,105
|
|
|
|
2,105
|
|
|
|
2,105
|
|
|
|
2,105
|
|
Amort. of Transaction Fees
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
$
|
2,707
|
|
|
$
|
7,820
|
|
|
$
|
15,296
|
|
|
$
|
22,787
|
|
|
$
|
31,744
|
|
Additional Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock comp. exp. incl. in SG&A
|
|
|
1,750
|
|
|
|
2,000
|
|
|
|
2,250
|
|
|
|
2,500
|
|
|
|
2,750
|
|
Cash EBITDA
|
|
$
|
10,451
|
|
|
$
|
16,381
|
|
|
$
|
23,466
|
|
|
$
|
31,308
|
|
|
$
|
40,872
|
|
Y/Y Revenue Growth
|
|
|
26.7
|
%
|
|
|
18.2
|
%
|
|
|
18.2
|
%
|
|
|
18.2
|
%
|
|
|
18.2
|
%
|
Cost of Goods Sold as % of Revenues
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Op. Exp. as % of Revenues
|
|
|
76.3
|
%
|
|
|
75.6
|
%
|
|
|
75.2
|
%
|
|
|
75.2
|
%
|
|
|
75.2
|
%
|
Gross Margin
|
|
|
23.7
|
%
|
|
|
24.4
|
%
|
|
|
24.8
|
%
|
|
|
24.8
|
%
|
|
|
24.8
|
%
|
SG&A as % of Revenues
|
|
|
18.9
|
%
|
|
|
17.6
|
%
|
|
|
16.4
|
%
|
|
|
15.2
|
%
|
|
|
14.0
|
%
|
SG&A Growth as % of Revenue Growth
|
|
|
56.9
|
%
|
|
|
56.8
|
%
|
|
|
54.9
|
%
|
|
|
50.1
|
%
|
|
|
50.1
|
%
|
EBITDA Margin
|
|
|
4.8
|
%
|
|
|
6.7
|
%
|
|
|
8.4
|
%
|
|
|
9.6
|
%
|
|
|
10.8
|
%
|
Cash EBITDA Margin
|
|
|
5.8
|
%
|
|
|
7.7
|
%
|
|
|
9.3
|
%
|
|
|
10.5
|
%
|
|
|
11.6
|
%
|
Selected Balance Sheet Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable, Net
|
|
|
28,447
|
|
|
|
33,562
|
|
|
|
39,643
|
|
|
|
46,826
|
|
|
|
55,312
|
|
Inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
13,251
|
|
|
|
15,525
|
|
|
|
18,210
|
|
|
|
21,498
|
|
|
|
25,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Working Capital
|
|
|
15,195
|
|
|
|
18,037
|
|
|
|
21,433
|
|
|
|
25,328
|
|
|
|
29,931
|
|
Selected Cash Flow Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Working Capital
|
|
|
(5,167
|
)
|
|
|
2,842
|
|
|
|
3,396
|
|
|
|
3,895
|
|
|
|
4,603
|
|
CapEx
|
|
|
4,139
|
|
|
|
3,523
|
|
|
|
3,923
|
|
|
|
4,323
|
|
|
|
4,723
|
|
Acquisition CapEx
|
|
|
0
|
|
|
|
380
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
23
I-trax
Projections Assuming Successful Execution of New
Initiatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
218,952
|
|
|
$
|
374,528
|
|
|
$
|
517,229
|
|
|
$
|
662,863
|
|
|
$
|
832,463
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
18,648
|
|
|
|
58,608
|
|
|
|
103,896
|
|
|
|
154,512
|
|
Direct Operating Exp.
|
|
|
166,798
|
|
|
|
265,304
|
|
|
|
333,404
|
|
|
|
402,399
|
|
|
|
484,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$
|
52,154
|
|
|
$
|
90,576
|
|
|
$
|
125,217
|
|
|
$
|
156,568
|
|
|
$
|
193,753
|
|
SG&A
|
|
|
39,388
|
|
|
|
52,988
|
|
|
|
72,412
|
|
|
|
92,801
|
|
|
|
116,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
12,766
|
|
|
$
|
37,588
|
|
|
$
|
52,805
|
|
|
$
|
63,767
|
|
|
$
|
77,208
|
|
Depreciation
|
|
|
4,122
|
|
|
|
5,203
|
|
|
|
4,906
|
|
|
|
5,285
|
|
|
|
5,790
|
|
Intangible Amort.
|
|
|
2,853
|
|
|
|
3,964
|
|
|
|
4,436
|
|
|
|
5,044
|
|
|
|
5,854
|
|
Amort. of Transaction Fees
|
|
|
100
|
|
|
|
231
|
|
|
|
231
|
|
|
|
231
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
$
|
5,691
|
|
|
$
|
28,190
|
|
|
$
|
43,231
|
|
|
$
|
53,208
|
|
|
$
|
65,333
|
|
Additional Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock comp. exp. incl. in SG&A
|
|
|
1,750
|
|
|
|
2,000
|
|
|
|
2,250
|
|
|
|
2,500
|
|
|
|
2,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash EBITDA
|
|
$
|
14,516
|
|
|
$
|
39,588
|
|
|
$
|
55,055
|
|
|
$
|
66,267
|
|
|
$
|
79,958
|
|
Y/Y Revenue Growth
|
|
|
53.3
|
%
|
|
|
71.1
|
%
|
|
|
38.1
|
%
|
|
|
28.2
|
%
|
|
|
25.6
|
%
|
Cost of Goods Sold as % of Revenues
|
|
|
0.0
|
%
|
|
|
5.0
|
%
|
|
|
11.3
|
%
|
|
|
15.7
|
%
|
|
|
18.6
|
%
|
Op. Exp. as % of Revs
|
|
|
76.2
|
%
|
|
|
70.8
|
%
|
|
|
64.5
|
%
|
|
|
60.7
|
%
|
|
|
58.2
|
%
|
Gross Margin
|
|
|
23.8
|
%
|
|
|
24.2
|
%
|
|
|
24.2
|
%
|
|
|
23.6
|
%
|
|
|
23.3
|
%
|
SG&A as % of Revenues
|
|
|
18.0
|
%
|
|
|
14.1
|
%
|
|
|
14.0
|
%
|
|
|
14.0
|
%
|
|
|
14.0
|
%
|
SG&A Growth as % of Revenue Growth
|
|
|
61.3
|
%
|
|
|
48.6
|
%
|
|
|
96.2
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
EBITDA Margin
|
|
|
5.8
|
%
|
|
|
10.0
|
%
|
|
|
10.2
|
%
|
|
|
9.6
|
%
|
|
|
9.3
|
%
|
Cash EBITDA Margin
|
|
|
6.6
|
%
|
|
|
10.6
|
%
|
|
|
10.6
|
%
|
|
|
10.0
|
%
|
|
|
9.6
|
%
|
Selected Balance Sheet Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable, Net
|
|
|
34,346
|
|
|
|
47,990
|
|
|
|
60,210
|
|
|
|
72,855
|
|
|
|
87,776
|
|
Inventory
|
|
|
|
|
|
|
1,750
|
|
|
|
5,500
|
|
|
|
9,750
|
|
|
|
14,500
|
|
Accounts Payable
|
|
|
15,392
|
|
|
|
26,222
|
|
|
|
33,955
|
|
|
|
41,624
|
|
|
|
50,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Working Capital
|
|
|
18,954
|
|
|
|
23,518
|
|
|
|
31,755
|
|
|
|
40,981
|
|
|
|
51,576
|
|
Selected Cash Flow Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Working Capital
|
|
|
(5,263
|
)
|
|
|
4,564
|
|
|
|
8,237
|
|
|
|
9,226
|
|
|
|
10,595
|
|
CapEx
|
|
|
4,979
|
|
|
|
4,823
|
|
|
|
5,373
|
|
|
|
5,923
|
|
|
|
6,523
|
|
Acquisition CapEx
|
|
|
45,756
|
|
|
|
12,380
|
|
|
|
9,000
|
|
|
|
18,000
|
|
|
|
18,000
|
|
Available Net Operating Losses
|
|
|
11,202
|
|
|
|
858
|
|
|
|
858
|
|
|
|
858
|
|
|
|
858
|
|
24
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
(a)(1)
|
|
|
Offer to Purchase, dated March 28, 2008 (incorporated
herein by reference to Exhibit (a)(1)(A) to the
Schedule TO).
|
|
(a)(2)
|
|
|
Form of Letter of Transmittal (incorporated herein by reference
to Exhibit (a)(1)(B) to the Schedule TO).
|
|
(a)(3)
|
|
|
Form of Notice of Guaranteed Delivery (incorporated herein by
reference to Exhibit (a)(1)(C) to the Schedule TO).
|
|
(a)(4)
|
|
|
Form of Guidelines for Certification of Taxpayer Identification
Number (TIN) on Substitute
Form W-9
(incorporated herein by reference to Exhibit (a)(1)(F) to the
Schedule TO).
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(a)(5)
|
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees (incorporated herein by
reference to Exhibit (a)(1)(D) to the Schedule TO).
|
|
(a)(6)
|
|
|
Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
(incorporated herein by reference to Exhibit (a)(1)(E) to the
Schedule TO).
|
|
(a)(7)
|
|
|
Letter to Stockholders of
I-trax,
dated March 28, 2008.*
|
|
(a)(8)
|
|
|
Press Release issued by Walgreens, dated March 17, 2008
(incorporated herein by reference to Exhibit 99.1 to
Walgreens Current Report on
Form 8-K,
filed on March 17, 2008).
|
|
(a)(9)
|
|
|
Form of Summary Advertisement published in the
Wall Street
Journal
on March 28, 2008 (incorporated herein by
reference to Exhibit (a)(5)(C) to the Schedule TO).
|
|
(a)(10)
|
|
|
Fairness Opinion of Bryant Park Capital to
I-trax
Board
of Directors, dated March 14, 2008 (included as
Annex II to this Statement).*
|
|
(a)(11)
|
|
|
The Information Statement of
I-trax
(included as Annex I to this Statement).*
|
|
(e)(1)
|
|
|
Agreement and Plan of Merger, dated March 14, 2008, among
Walgreens, Offeror and
I-trax
(incorporated herein by reference to Exhibit 2.1 to the
Current Report on
Form 8-K
filed by Walgreen Co. on March 17, 2008).
|
|
(e)(2)
|
|
|
Confidentiality Agreement, dated as of July 26, 2007, as
amended January 18, 2008, by and between Walgreens and
I-trax
(incorporated herein by reference to Exhibit (d)(2) to the
Schedule TO).
|
|
(e)(3)
|
|
|
Amended and Restated Employment Agreement effective as of
December 17, 2007, between
I-trax,
Inc.
and Frank A. Martin (incorporated herein by reference to
Exhibit 10.2 to
I-trax,
Inc.s Current Report on
Form 8-K,
filed on December 20, 2007).
|
|
(e)(4)
|
|
|
Amended and Restated Employment Agreement dated
December 17, 2007, between
I-trax,
Inc.
and R. Dixon Thayer (incorporated herein by reference to
Exhibit 10.3 to
I-trax,
Inc.s Current Report on
Form 8-K,
filed on December 20, 2007).
|
|
(e)(5)
|
|
|
Amended and Restated Employment Agreement effective as of
May 14, 2007, between
I-trax,
Inc.
and David R. Bock (incorporated herein by reference to
Exhibit 10.1 to
I-trax,
Inc.s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007, filed August 9,
2007).
|
|
(e)(6)
|
|
|
Employment Agreement dated November 17, 2004, between
I-trax,
Inc.
and Yuri Rozenfeld (incorporated herein by reference to
Exhibit 10.2 to
I-trax,
Inc.s Current Report on
Form 8-K,
filed on November 22, 2004).
|
|
(e)(7)
|
|
|
Amendment to Employment Agreement effective as of July 5,
2005, between
I-trax,
Inc.
and Yuri Rozenfeld (incorporated herein by reference to
Exhibit 10.3 to
I-trax,
Inc.s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2005, filed August 15,
2005).
|
|
(e)(8)
|
|
|
Employment Agreement entered into on April 15, 2005,
between
I-trax,
Inc.
and Raymond J. Fabius (incorporated herein by reference to
Exhibit 10.1 to
I-trax,
Inc.s Quarterly Report on
Form 10-Q,
filed on May 16, 2005).
|
|
(e)(9)
|
|
|
Employment Agreement entered into on September 1, 2007,
between
I-trax,
Inc.
and Bradley S. Wear (incorporated herein by reference to
Exhibit 10.1 to
I-trax,
Inc.s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007, filed on
November 9, 2007).
|
25
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
(e)(10)
|
|
|
Amended and Restated Employment Agreement dated March 3,
2008, between
I-trax,
Inc.
and Peter Hotz (incorporated herein by reference to
Exhibit 10.1 to
I-trax,
Inc.s Current Report on
Form 8-K,
filed March 4, 2008).
|
|
(e)(11)
|
|
|
I-trax
Transition Compensation Plan.
|
|
|
|
*
|
|
Included with copy of
Schedule 14D-9
mailed to stockholders.
|
Annexes
Annex I Information Statement
Annex II Fairness Opinion of
Bryant Park Capital
Annex III Delaware General
Corporation Law Provision Governing Appraisal Rights
26
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
I-TRAX, INC.
Name: Yuri Rozenfeld
|
|
|
|
Title:
|
Senior Vice President, General Counsel and
Secretary
|
Date: March 28, 2008
27
Annex I
I-TRAX,
INC.
4 Hillman Drive, Suite 130
Chadds Ford, Pennsylvania 19317
INFORMATION
STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1
THEREUNDER
GENERAL
This information statement (the
Information
Statement
) is being mailed on or after March 28,
2008 as part of the Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9
)
of
I-trax,
Inc., a Delaware corporation
(I-trax)
,
relating to the tender offers being made by Putter Acquisition
Sub, Inc.
(Offeror)
, a Delaware corporation
and wholly-owned subsidiary of Walgreen Co., an Illinois
corporation
(Walgreens)
. Capitalized terms
used and not otherwise defined herein shall have the meaning
otherwise assigned in the
Schedule 14D-9.
You are receiving this Information Statement in connection with
the possible election of persons designated by Walgreens to a
majority of seats on the Board of Directors of
I-trax
(the
Board of Directors
or the
Board
). Voting proxies regarding outstanding
shares of common stock, par value $0.001 per share (the
Common Shares
) and Series A Convertible
Preferred Stock, par value $0.001 per share (the
Preferred Shares
and together with the Common
Shares, the
Shares
) are not being solicited
from any stockholder in connection with this Information
Statement. You are urged to read this Information Statement
carefully. You are not, however, required to take any action in
connection with this Information Statement.
On March 14, 2008,
I-trax,
Walgreens and Offeror entered in an Agreement and Plan of Merger
(the
Merger Agreement
) pursuant to which
Offeror is offering to purchase all of the Common Shares and the
Preferred Shares of
I-trax,
Inc., a Delaware corporation
(
I-trax
),
for $5.40 per Common Share (the
Common Offer
)
and $54.00 plus the Dividend Amount per Preferred Share (the
Preferred Offer
), in each case in cash,
without interest and less any required withholding taxes, upon
the terms and subject to the conditions set forth in the Offer
to Purchase, dated March 28, 2008 (the
Offer to
Purchase
), and in the related Letter of Transmittal
(which, together with any amendments or supplements to the Offer
to Purchase and the Letter of Transmittal, collectively
constitute the
Offers
). The
Dividend
Amount
applicable to a Preferred Share purchased in
the Preferred Offer means the product of (1)(A) the amount of
accrued and unpaid dividends on such Preferred Share at the time
the Offeror accepts shares tendered pursuant to the Preferred
Offer (the
Acceptance Time
) divided by
(B) $3.84, which amount is the average market price of the
Common Shares for the ten (10) consecutive trading days
prior to and including the date of the Merger Agreement and
(2) $5.40 in cash or such greater amount as may have been
paid to any holder of Common Shares in the Common Offer.
Offerors Offers are subject to the terms and conditions
set forth in the Offer to Purchase. Offeror commenced the Offers
on March 28, 2008. The Offers and withdrawal rights are
currently scheduled to expire at 12:00 midnight, New York City
time, at the end of Thursday, April 24, 2008, unless
Offeror extends it in accordance with the terms of the Offers.
Following the completion of the Offers and subject to the
satisfaction or waiver of certain conditions set forth in the
Merger Agreement, Offeror will merge with and into
I-trax
and
the surviving company will continue as a wholly owned subsidiary
of Walgreens (the
Merger
).
I-1
The Merger Agreement requires
I-trax
to
cause Walgreens designees to be elected to
I-traxs
Board of Directors under certain circumstances described below.
This Information Statement is being mailed to you in accordance
with Section 14(f) of the Securities Exchange Act of 1934,
as amended (the
Exchange Act
), and
Rule 14f-1
promulgated thereunder. The information set forth herein
supplements certain information set forth in the
Schedule 14D-9.
All information contained in this Information Statement
concerning Walgreens, Offeror and the Walgreens Designees (as
defined below) has been furnished to
I-trax
by
Walgreens and
I-trax
assumes no responsibility for the accuracy of any such
information.
THIS
SCHEDULE IS BEING PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES
I-TRAX IS NOT ASKING STOCKHOLDERS FOR A PROXY AND
STOCKHOLDERS ARE REQUESTED NOT TO SEND I-TRAX A PROXY.
I-2
WALGREENS
DESIGNEES
Subject to the terms of the Merger Agreement, from the time
Offeror accepts Shares tendered pursuant to the Offers (the
Acceptance Time
), provided Offeror has
accepted for payment shares representing a majority of the total
outstanding voting power of
I-trax
on a
fully diluted basis, Walgreens shall be entitled to designate
the number of directors, rounded up to the next whole number, on
I-traxs
Board of Directors that equals the product of the total number
of directors on the
I-trax
Board
(giving effect to the election of any additional directors
pursuant to Walgreens designation rights as described in
this paragraph) and the percentage that the voting power of
Common Shares and Preferred Shares beneficially owned by
Walgreens and Offeror (including shares of Common Shares and
Preferred Shares accepted for payment or exchange) bears to the
total voting power of the outstanding shares of Common Shares
and Preferred Shares. Subject to applicable law,
I-trax
shall
promptly take all action necessary to enable Walgreens
designees to be elected or appointed to the
I-trax
Board, including increasing the number of directors, and seeking
and accepting resignations of incumbent directors. At such time,
I-trax
will
also take all actions necessary to cause individuals designated
by Walgreens to constitute the number of members (rounding up
where appropriate) on each committee of the
I-trax
Board
and each board of directors of each
I-trax
subsidiary that represents substantially the same percentage as
such individuals represent on the
I-trax
Board, in each case only to the extent permitted by applicable
law. Notwithstanding the foregoing, Walgreens and Offeror shall
use their respective commercially reasonable efforts to ensure
that the
I-trax
Board
has at least two members who are not affiliates, representatives
or designees of Walgreens or Offeror, and who were either
directors prior to the date of the Merger Agreement (the
Continuing Directors
) or are successors of
any Continuing Director who is not an affiliate, representative
or designee of Walgreens or Offeror and who were recommended or
elected to succeed such Continuing Director by a majority of
Continuing Directors. If there is only one Continuing Director
in office for any reason, the
I-trax
Board
shall be entitled to appoint a person designated by the
remaining Continuing Director who is not an officer or employee
of
I-trax
or
any of its subsidiaries to fill such vacancy who shall be deemed
to be a Continuing Director for all purposes of the Merger
Agreement. If no Continuing Directors then remain in office, the
other directors of
I-trax
then
in office shall use commercially reasonable efforts to designate
two persons to fill such vacancies who are not officers or
employees or affiliates of
I-trax,
Walgreens or Acquisition Sub or any of their respective
subsidiaries and such persons shall be deemed to be Continuing
Directors for all purposes of the Merger Agreement.
Following the election or appointment of Walgreens
designees and until the effective time of the Merger, the
approval of a majority of the Continuing Directors shall be
required to authorize any termination of the Merger Agreement by
I-trax,
any
amendment of the Merger Agreement requiring action by the
I-trax
Board
of Directors, any extension of time for performance of, or
waiver of, any obligation or action under the Merger Agreement
by Walgreens or Offeror, any waiver of
I-traxs
rights under the Merger Agreement, any amendment of the
certificate of incorporation or bylaws of
I-trax,
and
making any other determination with respect to any action to be
taken or not to be taken by or on behalf of
I-trax
relating to the Merger Agreement or the transactions
contemplated thereby.
Walgreens has informed
I-trax
that
its designees (the
Walgreens Designees
) will
be selected by Walgreens from among the individuals listed below:
Robert G. Zimmerman.
Mr. Zimmerman,
age 55, joined Walgreens in 2001 as Divisional Vice
President of Walgreens Health Initiatives and became Vice
President of Walgreens and Vice President and Chief
Administration and Finance Officer of Walgreens Health
Initiatives in 2006.
Dana I. Green.
Mrs. Green, age 57,
joined Walgreens in 2000 as Vice President and served as Senior
Vice President from 2004 to 2005. In 2005, Mrs. Green
became Senior Vice President, General Counsel and Corporate
Secretary of Walgreens.
Allan M. Resnick.
Mr. Resnick,
age 61, joined Walgreens in 1998 as Divisional Vice
President and also began serving as Assistant Secretary in 1989.
I-3
Walgreens has informed
I-trax
that
each Walgreens Designee has consented to serve as a director of
I-trax
if
appointed or elected. None of the Walgreens Designees currently
is a director of, or holds any positions with,
I-trax.
Walgreens has advised
I-trax
that,
to the best of their knowledge, none of the Walgreens Designees
or any of their affiliates beneficially owns any equity
securities or rights to acquire any such securities of
I-trax
nor
has any such person been involved in any transaction with
I-trax
or
any of its directors, executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations
of the Securities and Exchange Commission (the
SEC
) other than with respect to transactions
among Walgreens, Offeror and
I-trax
that
have been described in the Schedule TO filed by Walgreens
and Offeror with the SEC on March 28, 2008 or the
Schedule 14D-9.
In addition, Walgreens has informed
I-trax
that
none of the individuals listed above has, during the past five
years, (i) been convicted in a criminal proceeding or
(ii) been a party to any judicial or administrative
proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting
activities subject to, U.S. federal or state securities
laws, or a finding of any violation of U.S. federal or
state securities laws.
I-4
COMMON
STOCK
As of March 24, 2008, there were 41,896,247 Common
Shares issued and outstanding. If an
I-trax
stockholders meeting is held, each Common Share would be
entitled to one vote for the election of
I-trax
directors.
SERIES A
CONVERTIBLE PREFERRED STOCK
As of March 24, 2008, there were 217,126.3 Preferred Shares
issued and outstanding. Each Preferred Share converts into
10 shares of Common Shares, and, if a stockholders meeting
is held, the holders of Preferred Shares would be entitled to
vote on an as converted basis for the election of
I-trax
directors at such meeting. Common Shares and Preferred Shares
are the only classes of voting securities of
I-trax
that
would be entitled to vote at a stockholders meeting if one were
held.
DIRECTORS
AND EXECUTIVE OFFICERS OF I-TRAX
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Haywood D. Cochrane, Jr.
|
|
|
59
|
|
|
Vice-Chairman and Director
|
Raymond J. Fabius, M.D.
|
|
|
54
|
|
|
President, Chief Medical Officer and Director
|
Philip D. Green
|
|
|
57
|
|
|
Director
|
Gail F. Lieberman
|
|
|
64
|
|
|
Director
|
Frank A. Martin
|
|
|
57
|
|
|
Chairman and Director
|
Gerald D. Mintz
|
|
|
55
|
|
|
Director
|
David Nash, M.D.
|
|
|
52
|
|
|
Director
|
Jack A. Smith
|
|
|
72
|
|
|
Director
|
R. Dixon Thayer
|
|
|
56
|
|
|
Chief Executive Officer and Director
|
Peter Hotz
|
|
|
47
|
|
|
Executive Vice President and Chief Operating Officer
|
Bradley S. Wear
|
|
|
49
|
|
|
Senior Vice President and Chief Financial Officer
|
Yuri Rozenfeld
|
|
|
39
|
|
|
Senior Vice President, General Counsel and Secretary
|
Haywood D. Cochrane, Jr.,
has been a director and
Vice Chairman of
I-trax
since
March 2004. Mr. Cochrane joined
I-trax
as a
director and Vice Chairman when
I-trax
acquired Meridian Occupational Healthcare Associates, Inc.,
which did business as CHD Meridian Healthcare, on March 19,
2004. Mr. Cochrane was the Chief Executive Officer and a
director of CHD Meridian Healthcare from February 1997 until it
was acquired by
I-trax.
From
June 1989 until joining CHD Meridian Healthcare,
Mr. Cochrane served in various executive capacities at
Laboratory Corporation of America, National Health Laboratories,
Inc. and Allied Clinical Laboratories, Inc.
Raymond J. Fabius, M.D., C.P.E., FACPE
has been a
director since May 2006 and the President and Chief Medical
Officer of
I-trax
since
May 2005. Previously, Dr. Fabius served as global medical
leader at General Electric Co., where he oversaw an ambulatory
network of over 200
on-site
clinics in 29 countries and Puerto Rico. From 2000 to 2002,
Dr. Fabius served as senior medical director for Aetna
e.Health Activities, providing clinical leadership for
Aetnas website, InteliHealth, and the companys data
warehouse subsidiary, US Quality Algorithms. Prior to 2000,
Dr. Fabius served Aetna US Healthcare as corporate medical
director for national accounts and corporate medical director
for utilization management, disease management, and quality
improvement.
Philip D. Green
has been a director of
I-trax
since
February 2001. Mr. Green is the President, Strategic
Business Initiatives, at the University of Pittsburgh Medical
Center. From June 2004 to June 30, 2006, Mr. Green
served as a partner in the Health Practice at Gardner
Carton & Douglas LLP, a leading health law practice
firm. Mr. Green was the founding principal of the
Washington, D.C. law firm of Green, Stewart,
Farber & Anderson, P.C., founded in 1989, until
it merged with Akin, Gump, Strauss, Hauer & Feld, LLP
in
I-5
July 2000. While in private practice, Mr. Green represented
major teaching hospitals, integrated healthcare delivery systems
and a number of public and private for-profit healthcare
companies in the areas of healthcare law and corporate planning
and transactions. Mr. Green is a director of Allscripts
Healthcare Solutions, Inc.
Gail F. Lieberman
has been a director of
I-trax
since
August 2004. Ms. Lieberman is managing partner of Rudder
Capital LLC, a mergers and acquisitions advisory and consulting
firm serving middle market companies in the services sector. She
oversees buy-side, sell-side, consulting and recruiting
assignments for business information and services, financial,
media and consumer companies. From 1996 to 1999,
Ms. Lieberman served as chief financial officer of the
Financial and Professional Publishing Group, a division of The
Thomson Corporation, a public information services company. From
1994 to 1996, Ms. Lieberman was vice president, managing
director and chief financial officer of Moody Investors
Services, Inc. In addition, Ms. Lieberman spent
11 years with Scali, McCabe, Sloves, Inc., a global
advertising agency, serving as executive vice president and
chief financial officer. Ms. Lieberman was a director of
Breeze-Eastern Corp.
(f/k/a
Transtechnology, Inc.) until September 2007 where she continues
to advise the Board.
Frank A. Martin
has been a director and Chairman of
I-trax
since
September 2000. Mr. Martin also served as the Chief
Executive Officer of
I-trax
from
September 2000 until February 2005. In addition to serving as
I-traxs
Chairman, Mr. Martin is actively engaged in
I-traxs
strategic business development, stockholder relations and key
client relationships. Mr. Martin founded, and has been a
managing director of, The Nantucket Group, LLC, a healthcare
venture capital firm specializing in investing in early stage
healthcare service and technology companies since December 1998.
Mr. Martin served as the Chief Executive Officer and
director of EduNeering, Inc., an electronic knowledge management
company, from April 1999 to April 2000. In November 1992,
Mr. Martin founded Physician Dispensing Systems, Inc., or
PDS, a healthcare information technology company that developed
pharmaceutical software for physicians offices.
Mr. Martin sold PDS to Allscripts Healthcare Solutions,
Inc. in December 1996 and then joined its board of directors on
which he served until 1998.
Gerald D. Mintz
has been a director of
I-trax
since
May 2005. Mr. Mintz is the Chief Executive Officer of
Strategic Financial Solutions, LLC, providing software and
information solutions for investment professionals in the asset
management industry. Prior to joining Strategic Financial
Solutions in September 2005, Mr. Mintz served as President,
Executive Programs, for Gartner, Inc., a global leader in IT
research and advisory services. From 2002 to 2004,
Mr. Mintz served as Executive Vice President and Global
Head of Enterprise Solutions for Reuters, a global provider of
news and information for the financial services sector. From
1999 to 2002, Mr. Mintz was Chairman and Chief Executive
Officer of FAME Information Services, a software and information
solutions provider to the financial and energy markets. For the
six years prior to that, Mr. Mintz managed several
businesses within Thomson Financial, a division of the Thomson
Corporation.
David Nash, M.D., M.B.A., FACP,
has been a director
of
I-trax
since February 2003. He is The Dr. Raymond C. and Doris N.
Grandon Professor and Chairman of the Department of Health
Policy at Jefferson Medical College of Thomas Jefferson
University in Philadelphia. Jefferson is one of a handful of
medical schools in the nation with an endowed professorship in
health policy. From 1996 to 2003, Dr. Nash served as the
first Associate Dean for Health Policy at Jefferson Medical
College. Repeatedly named by Modern Healthcare to the top 100
most powerful persons in healthcare list, his national
activities include appointment to the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO) Advisory
Committee on Performance Measurement, the CIGNA Physician
Advisory Committee, membership on the Board of Directors of the
Disease Management Association of America (DMAA), and Chair of
an NQF Technical Advisory Panel four key national
groups focusing on quality measurement and improvement.
Dr. Nash is a director of InforMedix, Inc.
Jack A. Smith
has been a director since January
2006. Mr. Smith is President of SMAT,
Incorporated, a consulting company specializing in consumer
services. He has broad experience as an owner and senior
executive in the retail industry. Mr. Smith founded The
Sports Authority, Inc., a national sporting goods chain, in 1987
where he served as Chief Executive Officer until September 1998
and as Chairman until April 1999. From 1982 until 1987,
Mr. Smith served as Chief Operating Officer of
Hermans Sporting Goods. Prior to Hermans,
Mr. Smith served in executive management positions with
other major retailers including Sears &
I-6
Roebuck, Montgomery Ward, Jefferson Stores, and Diana Shops.
Mr. Smith is a director of Darden Restaurants, Inc. and
Carrols Restaurant Group, Inc.
R. Dixon Thayer
has been a director of
I-trax
since
April 2003 and Chief Executive Officer since February 2005.
Mr. Thayer is the founder and senior partner of ab3
Resources, Inc., a strategic consulting and business development
company. Prior to joining
I-trax
as
Chief Executive Officer, Mr. Thayer served as President,
Chief Executive Officer and director of GreenLeaf Auto
Recyclers, LLC, a company ab3 Resources, Inc. acquired from Ford
Motor Company. From 1999 to 2002, Mr. Thayer served as
Executive Director of Global New Business Operations for Ford
Motor Company in partnership with Cardinal Investment Partners
and others. In this capacity, Mr. Thayer led corporate
initiatives to develop, acquire and grow next
generation aftermarket service businesses to help
transform Ford into a global relationship-based consumer
products and services company. From 1998 to 1999,
Mr. Thayer served as President and Chief Executive Officer
of Provant Consulting Companies, where he helped lead the merger
and integration of several independent consultancies and
training companies into one of the largest publicly traded
companies of its type. From 1996 to 1998, Mr. Thayer served
as President of Sunbeams International Division and was an
original member of the turnaround team that restructured the
company. From 1995 to 1996, Mr. Thayer was a Senior Vice
President of AFH Research, Development, Engineering &
Global Growth for Kimberly Clark Corporation and was a key
architect of the merger between Scott Paper and Kimberly Clark.
From 1992 to 1995, Mr. Thayer was Vice President AFH Europe
at Scott Paper Company where he also served as Chief Operating
Officer of the European division.
Peter M. Hotz
has been the Executive Vice President and
Chief Operating Officer since March 3, 2008. From July 2006
until March 2008, Mr. Hotz has served as Senior Vice
President Marketing & Account Development
for
I-trax.
From June 1997 to July 2006, Mr. Hotz served as the
President and Chief Executive Officer of Continuum Health
Management Solutions, a provider of employee health management
services.
Bradley S. Wear
has been the Senior Vice President and
Chief Financial Officer since September 2007. From 2003 until
April 2007, Mr. Wear served as the Chief Financial Officer
of Qualifacts Systems, Inc., a provider of software solutions
for the behavioral health and human services market. From 1996
until 2003, Mr. Wear served as the Chief Financial Officer
of digiChart, Inc., a medical records technology company. There
are no family relationships among directors and executive
officers.
Yuri Rozenfeld
has been the General Counsel of
I-trax
since
July 2000, Secretary of
I-trax
since
March 2002 and Senior Vice President since May 2006. From April
1997 to July 2000, Mr. Rozenfeld was an associate in the
Business and Finance Group at Ballard Spahr Andrews &
Ingersoll, LLP, where he represented small- and mid-cap public
companies and venture capital funds in a broad range of
corporate matters, including stock and asset acquisitions,
mergers, venture capital investments, venture fund formations,
partnership and limited liability company matters and securities
law matters. From 1995 to April 1997, Mr. Rozenfeld was an
associate specializing in product liability litigation with
Riker, Danzig, Scherer, Hyland & Perretti LLP.
Board of
Directors Meetings
The board of directors of
I-trax
held
six meetings during 2007. Each director while serving in 2007
attended more than 75% of the aggregate of the total number of
meetings of the board and the total number of meetings held by
the committees of the board of which he or she is a member.
The board has determined that Ms. Lieberman, Dr. Nash
and each of Messrs. Green, Mintz and Smith are independent,
as defined in Section 121(A), as in effect on
March 14, 2008, of the American Stock Exchange, or AMEX
listing standards. As required by the AMEX listing standards,
the independent directors meet at least annually in executive
session without the non-independent directors and management.
I-7
Board
of Directors Committees
The board of directors has a compensation committee, an audit
committee, and a nominating and corporate governance committee.
All members of the board, however, participate in the
consideration of director nominees.
Compensation
Committee
The compensation committee is primarily responsible for
determining the compensation payable to the officers and key
employees of
I-trax
and
recommending to the board additions, deletions and alterations
with respect to the various employee benefit plans and other
fringe benefits provided by
I-trax.
The
committee also is primarily responsible for administering
I-traxs
equity compensation plans, recommending equity grants to the
board at large with regard to
I-traxs
key employees and non-employee directors, and determining the
terms and conditions on which grants are made. Committee
members, however, may not participate in decisions pertaining to
his or her compensation or benefits in his or her capacity as a
director of
I-trax.
The compensation committee, subject to prior consent of the
board, may engage independent compensation consultants and
outside legal counsel and routinely holds executive sessions
without management. The chairman of the compensation committee
leads the committee and sets meeting agendas.
I-traxs
Chairman and Chief Executive Officer give performance
assessments and compensation recommendations for each executive
officer of
I-trax
(other than themselves). The Chairman, the Chief Executive
Officer, the Secretary and the Vice President Human
Resources generally attend compensation committee meetings, but
none are present for executive session or any discussion of
their own compensation. The compensation committee receives from
time to time data and analyses from independent compensation
consultants who evaluate
I-traxs
compensation program against industry and peer group norms.
The compensation committee is governed by a charter, a copy of
which is posted on
I-traxs
website at
www.i-trax.com
and is available in print to any
stockholder on request.
The compensation committee consists of two members
Mr. Green, chairman, and Ms. Lieberman. The board has
determined that each of Mr. Green and Ms. Lieberman is
independent, as defined in Section 121(A), as in effect on
March 14, 2008, of the AMEX listing standards.
The compensation committee held six meetings in 2007.
Audit
Committee
The audit committee is primarily responsible for appointing,
overseeing the qualifications, performance and independence of,
and pre-approving the services performed by
I-traxs
independent auditors as well as overseeing the integrity of
I-traxs
financial statements and reviewing and evaluating
I-traxs
accounting principles and reporting practices. The audit
committee is also responsible for monitoring
I-traxs
system of internal accounting controls. The audit committee is
governed by a charter, a copy of which is posted on
I-traxs
website at
www.i-trax.com
and is available in print to
any stockholder on request.
The audit committee consists of three members
Ms. Lieberman, chairperson, and Messrs. Mintz and
Smith. The board has determined that Ms. Lieberman and each
of Messrs. Mintz and Smith are audit committee financial
experts who meet the Securities and Exchange Commissions
criteria for financial experts and each is financially
sophisticated for the purposes of the AMEX listing standards.
The board has also determined that each of Ms. Lieberman
and Messrs. Mintz and Smith is independent, as defined in
Section 121(A), as in effect on March 14, 2008, of
AMEX listing standards and Rule 10A 3 promulgated under the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
The audit committee held six meetings in 2007.
I-8
Nominating
and Corporate Governance Committee
The nominating and corporate governance committee is primarily
responsible for: identifying individuals qualified to become
board members and recommending such individuals to the board;
and reviewing and overseeing the corporate governance
guidelines, policies and procedures developed by management and
approved, as applicable, by the board. The committee considers
candidates for board membership suggested by other directors and
management. The committee may retain a search firm to assist in
identifying director candidates. In selecting nominees for
director, the committee considers a number of factors, including
but not limited to:
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whether a candidate has business and industry experience that is
relevant to
I-trax,
including recent experience at the senior management level of a
company at least as large or larger than
I-trax;
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the candidates ability to work constructively with
I-traxs
management and other directors;
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the candidates ability to represent interests of the
stockholders;
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the candidates independence from management and freedom
from potential conflicts of interest with
I-trax;
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the candidates reputation, integrity, judgment, skill,
leadership ability, interpersonal skills, honesty and moral
values;
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the candidates financial literacy;
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|
the candidates availability, including the number of other
boards on which the candidate serves, and his or her ability to
dedicate sufficient time and energy to his or her board duties;
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legal and regulatory concerns; and
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whether the candidate contributes to the range of talent, skills
and expertise appropriate for enhancing the boards
diversity, overall composition and effectiveness.
|
Members of the committee and the board may also request
additional information about and interview the potential nominee.
The committee will also consider recommendations of nominees for
director received from stockholders at least 120 days prior
to the anniversary date of
I-traxs
annual meeting of stockholders for the previous year. In
evaluating nominations received from stockholders, the board
will apply the criteria and follow the process described above.
The nominating and corporate governance committee consists of
two members Dr. Nash and Mr. Green. Each
of Dr. Nash and Mr. Green is independent, as defined
in Section 121(A), as in effect on March 14, 2008, of
the AMEX listing standards.
The committee did not hold a separate meeting in 2007. Members
of the committee participated in other board meetings concerning
director nomination and corporate governance issues and
recommended to the board a course of action at those meetings on
these matters. The nominating and corporate governance committee
is governed by a charter, a copy of which is posted on
I-traxs
website at www.i-trax.com and is available in print to any
stockholder on request.
Code
of Conduct
I-trax
has a
Code of Conduct that is applicable to all employees of
I-trax,
including
I-traxs
principal executive officer, the principal financial officer and
the principal accounting officer. The Code of Conduct is
designed to deter wrongdoing and promote ethical conduct, full
and accurate reporting in
I-traxs
SEC filings, compliance with applicable law, as well as other
matters. A copy of the Code of Conduct is available on
I-traxs
website at www.i-trax.com.
I-9
Compensation
of Directors
Board:
Effective May 2005, independent
directors receive an annual retainer of $20,000, a fee of $1,500
for in person meetings and $250 per hour of each telephone
meeting, and every two years a grant of options to acquire
20,000 shares of common stock that vests over two years.
Directors are reimbursed for out-of-pocket expenses incurred in
connection with attending board and committee meetings.
Audit Committee:
The chairperson of the
audit committee receives an annual retainer of $10,000, and each
member of the audit committee also receives $1,500 for each
quarterly meeting and every two years a grant of options to
acquire 20,000 shares of common stock that vests over two
years.
Compensation Committee:
The chairperson
of the compensation committee receives an annual retainer of
$5,000.
Summary
Director Compensation Table
The following table summarizes compensation paid by
I-trax
to
non-employee directors during 2007.
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Fees Earned or Paid
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Option Awards
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All Other
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Name
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in Cash ($)
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($)(1)(2)
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Compensation ($)
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Total ($)
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Haywood D. Cochrane, Jr.
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$
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26,000
|
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$
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26,000
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Philip D. Green
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$
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31,750
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$
|
11,777.00
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$
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43,527.00
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Gail F. Lieberman
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$
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48,000
|
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$
|
18,395.00
|
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$
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66,395.00
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Gerald D. Mintz
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$
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33,000
|
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$
|
23,529.00
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|
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$
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56,529.00
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David Nash, M.D.
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$
|
26,000
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$
|
11,764.00
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$
|
37,764.00
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Jack A. Smith
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$
|
32,500
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$
|
35,693.00
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$
|
68,193.00
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(1)
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Represents value of option awards vested in 2007 calculated in
accordance with the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123
(revised 2004),
Share-Based Payment
(SFAS
123R)
, and charged to
I-traxs
operations in 2007. For further details, including
I-traxs
assumptions in calculating the fair value, please see
Note 1,
Summary of Significant Accounting Policies
,
and Note 11,
Share Based Compensation
, to
I-traxs
financial statements included in
I-traxs
Annual Report on
Form 10-K
for the period ended December 31, 2007 filed on
March 17, 2008.
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(2)
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The named directors hold options to acquire shares of common
stock as follows: Mr. Cochrane
300,000 shares; Mr. Green
102,880 shares; Ms. Lieberman
80,000 shares; Mr. Mintz
80,000 shares; Dr. Nash 60,000; and
Mr. Smith 40,000 shares.
Mr. Cochranes options were received in connection
with his services as an executive officer of
I-trax.
These options remain outstanding and continue to vest in
consideration of Mr. Cochranes continued service as a
director of
I-trax.
In
accordance with the fair value recognition provisions of
SFAS 123R, for 2007, $90,477 in share-based compensation
expense was recognized for option awards that Mr. Cochrane
had previously received in connection with his services as an
executive officer of
I-trax.
In
addition, pursuant to the terms of his original employment
agreement, Mr. Cochrane received $8,377 in medical and
dental benefits from
I-trax
in
2007.
|
Stockholder
Access to Directors
Stockholders who wish to communicate with directors should do so
by writing to the Secretary,
I-trax,
Inc., 4 Hillman Drive, Suite 130, Chadds Ford, Pennsylvania
19317. Under that process, the Secretary of
I-trax
reviews all such correspondence and regularly forwards to the
board a summary of all such correspondence and copies of all
correspondence that, in the opinion of the Secretary, deals with
the functions of the board or its committees or that he
otherwise determines requires their attention. Directors may at
any time review a log of all correspondence received by
I-trax
that
is addressed to members of the board and request copies of any
such correspondence. Concerns relating to accounting, internal
controls or auditing matters will be brought to the attention of
I-traxs
audit committee.
I-10
Director
Attendance at Annual Stockholders Meeting
I-trax
encourages all of its directors to attend
I-traxs
annual meeting of stockholders. All of the individuals then
serving as directors attended
I-traxs
2007 annual meeting of stockholders.
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Committee.
I-traxs
compensation committee consists of Philip D. Green and Gail F.
Lieberman. The committee determines executive officers
salaries, bonuses and other compensation, and administers
I-traxs
2000 Equity Compensation Plan and Amended and Restated 2001
Equity Compensation Plan.
Compensation Policy.
The overall
compensation program for the named executive officers has been
designed and is administered to ensure that employee
compensation promotes superior job performance and the
achievement of business goals and objectives, while taking into
consideration the competitiveness of executive pay to a
comparable peer group.
The main policy objective of compensation for
I-traxs
executive officers is to increase stockholder value over the
long term. The compensation committee believes that this can
best be accomplished by an executive compensation program that
incorporates three key elements:
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Base salaries sufficient to attract, retain and motivate key
executives and provide competitive compensation opportunities.
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Annual bonus and incentive programs that provide opportunity for
significant increases in compensation based on meeting or
exceeding pre-determined performance targets.
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Substantial long-term compensation to reward increases in the
stockholder value of
I-trax.
|
In the judgment of the compensation committee,
I-trax
performed well in 2007, confirming that the compensation program
is supporting
I-traxs
growth objectives.
Compensation Study.
In July 2006,
I-trax
engaged Mercer Human Resource Consulting to evaluate the
compensation practices of
I-traxs
peer group. The peer group consists of 14 companies in the
healthcare services/facilities sector with one year revenue
growth of ten percent or more. The results of the compensation
study were presented to
I-traxs
board in August 2006. The results of the compensation study were
referenced by the compensation committee in establishing 2007
and 2008 base salaries and target bonuses for 2006 and 2007.
Base Salary.
Base salaries for 2007
were established for Frank A. Martin, Chairman, R. Dixon Thayer,
Chief Executive Officer, David R. Bock, then Chief Financial
Officer, and Yuri Rozenfeld, General Counsel, at approximately
the midpoint of the peer group in the compensation study for
their respective positions, adjusted based on internal equity
considerations. The base salaries of Dr. Raymond J. Fabius,
President, and Bradley S. Wear, who joined
I-trax
as
Chief Financial Officer on September 1, 2007, were
established under the terms of their respective employment
agreements. In addition, in April 2007,
I-trax
adopted an Executive Paid-Time-Off Policy (the
Policy
). Under the Policy, the named
executive officers agreed to convert their right to all accrued
paid-time-off into a one time permanent pay adjustment of fifty
percent of the applicable named executive officers accrued
paid-time-off value. This resulted in further increases in base
salaries of approximately $11,000 to $11,500 for
Messrs. Thayer and Martin and Dr. Fabius, $9,600 for
Mr. Bock, and $8,600 for Mr. Rozenfeld.
For 2008, the compensation committee determined the base salary
for Messrs. Martin and Thayer and the base salary of other
named executive officers was set based on the recommendations to
the compensation committee by Messrs. Martin and Thayer. On
average, 2008 base salaries increased by approximately
three percent over 2007 levels.
Annual Bonus.
Named executive officers
and certain other key personnel of
I-trax
are
eligible for bonuses after the end of each fiscal year. The
compensation committee determines bonuses for
Messrs. Martin
I-11
and Thayer. Bonuses for these officers are linked to target
earnings before interest, taxes, depreciation, and amortization,
or EBITDA, and such executives individual goals. Bonuses
for other named executive officers, excluding Dr. Fabius,
are recommended by Messrs. Martin and Thayer and are also
linked to
I-traxs
EBITDA and such executives individual goals.
Each of the named executive officers received a bonus for 2007
because
I-trax
achieved its target EBITDA and the applicable named executive
officer achieved his goals. With the exception of the bonus
awarded to Dr. Fabius, which was fixed, as set in
Dr. Fabiuss employment agreement, all bonuses were
discretionary. Messrs. Thayers, Wears and
Rozenfelds bonuses equaled approximately 50, 40 and
30 percent of base salary received in 2007, respectively,
with Mr. Wears bonus prorated to his start date of
September 1, 2007. Dr. Fabiuss bonus was
$125,000 and Mr. Martins bonus was $108,175.
Stock Options.
Under
I-traxs
equity compensation plans, stock options may be granted to
I-traxs
executive officers. Executives generally receive stock
incentives through initial grants at the time of hire and
periodic additional grants. The compensation committee
determines the number of stock options to be granted based on an
executive officers job responsibilities and individual
performance evaluation. This approach is designed to encourage
the creation of long-term stockholder value, to align the
interests of stockholders and management, and to maximize
stockholder returns over the long term.
Each named executive officer was considered for a stock option
grant in August 2007, but upon discussions with the compensation
committee, Messrs. Martin, Thayer and Bock and
Dr. Fabius volunteered to forgo the stock option grants to
which they were entitled. Mr. Rozenfeld received a stock
option grant equal to 30 percent of his base salary.
Mr. Rozenfelds stock option grant was established at
the approximate midpoint of the compensation study.
Mr. Wear received a stock option grant to acquire
125,000 shares of Common Shares under the terms of his
employment agreement.
The board of directors selected August as an appropriate point
in the annual compensation cycle to consider and act on stock
option grants. The board felt that August allowed the company to
tie the grants to mid-year assessments, which emphasizes that
the awards are to motivate future performance rather than to
reward past performance. The number of shares covered by the
stock option grant for each named executive officer who did not
volunteer to forego an option grant was determined with
reference to the applicable officers base salary.
Deductibility of Compensation.
Under
Internal Revenue Code Section 162(m), a company generally
may not deduct compensation in excess of $1,000,000 paid to the
Chief Executive Officer and the other four most highly
compensated officers. Certain performance based
compensation is not included in compensation for purposes
of the limit. The current structure of
I-traxs
executive compensation does not give rise to Section 162(m)
concerns. The compensation committee will continue to assess the
impact of Section 162(m) on its compensation practices.
COMPENSATION
COMMITTEE REPORT
The compensation committee has reviewed the Compensation
Discussion and Analysis and discussed that analysis with
management. Based on its review and discussions with management,
the committee recommended to the board of directors that the
Compensation Discussion and Analysis be included in this
Information Statement. This report is provided by the following
independent directors, who comprise the committee:
Members of the Compensation Committee:
Philip D. Green, Chairman
Gail F. Lieberman
I-12
Summary
Compensation Table
The following table sets forth the compensation earned by the
following individuals: any person serving as
I-traxs
Chief Executive Officer or Chief Financial Officer during 2007
and the three other most highly compensated executive officers
of
I-trax
who were serving as such as of December 31, 2007.
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Stock
|
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Option
|
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All Other
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Salary
|
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Bonus
|
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Awards
|
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Awards
|
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Compensation
|
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Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
R. Dixon Thayer
|
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2007
|
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$
|
363,022
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|
|
$
|
181,511
|
|
|
|
|
|
|
$
|
225,077
|
|
|
$
|
5,260
|
|
|
$
|
774,870
|
|
Chief Executive Officer
|
|
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2006
|
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|
$
|
300,000
|
|
|
$
|
100,000
|
|
|
$
|
79,600
|
|
|
$
|
151,542
|
|
|
$
|
700
|
|
|
$
|
631,843
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|
Frank A. Martin
|
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|
2007
|
|
|
$
|
276,349
|
|
|
$
|
108,175
|
|
|
|
|
|
|
$
|
63,773
|
|
|
$
|
3,395
|
|
|
$
|
451,692
|
|
Chairman
|
|
|
2006
|
|
|
$
|
250,000
|
|
|
$
|
125,000
|
|
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|
|
|
|
$
|
41,089
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|
|
$
|
3,448
|
|
|
$
|
419,537
|
|
Raymond J. Fabius, M.D.
|
|
|
2007
|
|
|
$
|
348,249
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|
|
$
|
125,000
|
|
|
|
|
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$
|
187,784
|
|
|
$
|
5,537
|
|
|
$
|
666,570
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|
President and Chief
|
|
|
2006
|
|
|
$
|
302,405
|
|
|
$
|
75,000
|
|
|
$
|
53,730
|
|
|
$
|
140,726
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|
|
$
|
5,604
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$
|
577,465
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|
Medical Officer
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
Yuri Rozenfeld
|
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|
2007
|
|
|
$
|
206,418
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$
|
61,925
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$
|
46,732
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|
|
$
|
4,641
|
|
|
$
|
319,716
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|
Senior Vice President,
|
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2006
|
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|
$
|
195,000
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|
|
$
|
58,500
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|
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$
|
45,395
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|
|
$
|
3,140
|
|
|
$
|
302,035
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|
General Counsel and Secretary
|
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|
|
|
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|
Bradley S. Wear
|
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|
2007
|
|
|
$
|
77,538
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|
|
$
|
31,015
|
|
|
|
|
|
|
$
|
25,122
|
|
|
$
|
66
|
|
|
$
|
133,741
|
|
Senior Vice President and Chief Financial Officer(4)
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David R. Bock
|
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|
2007
|
|
|
$
|
257,028
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|
|
|
|
(6)
|
|
|
|
|
|
$
|
134,820
|
|
|
$
|
7,336
|
|
|
$
|
399,184
|
|
Former Executive Vice
|
|
|
2006
|
|
|
$
|
250,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
$
|
151,627
|
|
|
$
|
5,990
|
|
|
$
|
507,617
|
|
President and Chief Financial Officer(5)
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
|
|
Bonus consists of cash bonuses earned in the fiscal
year identified. See Compensation Discussion and
Analysis section of this 2007 Proxy Statement above.
|
|
(2)
|
|
Represents value of option awards vested in 2006 calculated in
accordance with the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004),
Share-Based Payment
, and charged to
I
-
traxs operations in 2007. For further details,
including
I-traxs
assumptions in calculating the fair value, please see
Note 1,
Summary of Significant Accounting Policies
,
and Note 11,
Share Based Compensation
, to
I-traxs
financial statements included in
I-traxs
Annual Report on
Form 10-K
for the period ended December 31, 2007 filed on
March 17, 2008.
|
|
(3)
|
|
All other compensation includes
I-traxs
401(k) match and group term life insurance premiums.
|
|
(4)
|
|
Mr. Wear became the Chief Financial Officer of
I-trax
effective September 1, 2007.
|
|
(5)
|
|
Mr. Bock stepped down as the Chief Financial Officer of
I-trax
effective September 1, 2007.
|
|
(6)
|
|
Mr. Bocks bonus for 2007 performance was not yet
determined as of March 28, 2008. Mr. Bocks bonus
is expected to be determined by March 30, 2008 (in
accordance with the terms of his separation agreement) and will
be disclosed in a Current Report on
Form 8-K
once determined.
|
I-13
Grants
of Plan-Based Awards
The following table lists, for each of the named executive
officers, information about plan-based awards granted during
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: Number
|
|
|
Exercise or Base
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
of Securities
|
|
|
Price of Option
|
|
|
Value of Stock
|
|
|
|
|
|
|
Underlying
|
|
|
Awards
|
|
|
and Option
|
|
Name
|
|
Grant Date(1)
|
|
|
Options (#)(1)
|
|
|
($ / Sh)(2)
|
|
|
Awards
|
|
|
R. Dixon Thayer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank A. Martin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond J. Fabius, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuri Rozenfeld
|
|
|
8/13/2007
|
|
|
|
23,166
|
|
|
$
|
3.60
|
|
|
$
|
48,151
|
|
Bradley S. Wear
|
|
|
9/10/2007
|
|
|
|
125,000
|
|
|
$
|
3.25
|
|
|
$
|
234,000
|
|
David R. Bock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The options vest in three equal installments on each of the
first, second, and third anniversaries of the grant date.
|
|
(2)
|
|
The exercise price equals the closing price of Common Shares on
the date of grant.
|
I-14
Outstanding
Equity Awards at Fiscal Year-End
The following table lists information concerning the stock
option grants held by each of the named executive officers at
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
|
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
Name
|
|
Grant Date(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
|
Date
|
|
|
R. Dixon Thayer
|
|
|
5/9/2003
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
1.51
|
|
|
|
5/8/2013
|
|
|
|
|
2/14/2005
|
|
|
|
304,078
|
|
|
|
25,000
|
|
|
$
|
1.41
|
|
|
|
2/13/2015
|
|
|
|
|
2/14/2005
|
|
|
|
70,922
|
|
|
|
|
|
|
$
|
1.40
|
|
|
|
2/13/2015
|
|
|
|
|
8/9/2006
|
|
|
|
74,373
|
|
|
|
148,747
|
|
|
$
|
3.09
|
|
|
|
8/8/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank A. Martin
|
|
|
4/10/2001
|
|
|
|
70,000
|
|
|
|
|
|
|
$
|
2.75
|
|
|
|
4/9/2011
|
|
|
|
|
12/23/2002
|
|
|
|
1,750
|
|
|
|
|
|
|
$
|
3.00
|
|
|
|
12/22/2012
|
|
|
|
|
5/9/2003
|
|
|
|
100,000
|
|
|
|
|
|
|
$
|
1.51
|
|
|
|
5/8/2013
|
|
|
|
|
8/9/2006
|
|
|
|
35,417
|
|
|
|
70,833
|
|
|
$
|
3.09
|
|
|
|
8/8/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond J. Fabius, M.D.
|
|
|
5/17/2005
|
|
|
|
137,978
|
|
|
|
19,716
|
|
|
$
|
1.40
|
|
|
|
5/16/2015
|
|
|
|
|
5/17/2005
|
|
|
|
212,018
|
|
|
|
30,288
|
|
|
$
|
1.56
|
|
|
|
5/16/2015
|
|
|
|
|
8/9/2006
|
|
|
|
48,827
|
|
|
|
97,653
|
|
|
$
|
3.09
|
|
|
|
8/8/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuri Rozenfeld
|
|
|
4/10/2001
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
2.75
|
|
|
|
4/9/2011
|
|
|
|
|
12/23/2002
|
|
|
|
1,300
|
|
|
|
|
|
|
$
|
3.00
|
|
|
|
12/22/2012
|
|
|
|
|
1/4/2002
|
|
|
|
10,000
|
|
|
|
|
|
|
$
|
6.25
|
|
|
|
1/3/2012
|
|
|
|
|
5/9/2003
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
1.51
|
|
|
|
5/8/2013
|
|
|
|
|
2/2/2005
|
|
|
|
36,664
|
|
|
|
3,336
|
|
|
$
|
1.40
|
|
|
|
2/1/2015
|
|
|
|
|
2/2/2005
|
|
|
|
60,000
|
|
|
|
|
|
|
$
|
1.40
|
|
|
|
2/1/2015
|
|
|
|
|
8/9/2006
|
|
|
|
9,750
|
|
|
|
19,500
|
|
|
$
|
3.09
|
|
|
|
8/8/2016
|
|
|
|
|
8/14/2007
|
|
|
|
|
|
|
|
23,166
|
|
|
$
|
3.60
|
|
|
|
8/13/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley S. Wear
|
|
|
9/11/2007
|
|
|
|
|
|
|
|
125,000
|
|
|
$
|
3.25
|
|
|
|
9/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Bock
|
|
|
5/9/2003
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
1.51
|
|
|
|
5/8/2013
|
|
|
|
|
2/2/2005
|
|
|
|
400,000
|
|
|
|
|
|
|
$
|
1.40
|
|
|
|
2/2/2015
|
|
|
|
|
8/9/2006
|
|
|
|
35,417
|
|
|
|
70,833
|
|
|
$
|
3.09
|
|
|
|
8/8/2016
|
|
|
|
|
(1)
|
|
The options vest in three equal installments on each of the
first, second, and third anniversaries of the grant date.
|
Option
Exercises and Stock Vested
None of the named executive officers exercised options to
acquire common stock during fiscal 2007. In addition, none of
the named executive officers held restricted stock that vested
during fiscal 2007.
Employment
Agreements with Named Executive Officers
I-trax
and
its affiliated entities are parties to employment agreements
with each of the named executive officers. The employment
agreements are described in detail under Potential
Payments upon Termination or Change in Control section
below.
Potential
Payments upon Termination and Change in Control
The table below quantifies, to the extent practicable, the
payments that would be received by the applicable named
executive officer (except for Mr. Bock, who ceased being an
executive officer of
I-trax
on
I-15
September 1, 2007 and whose employment terminated on
January 2, 2008) if such officers employment was
terminated as of December 31, 2007. Accordingly, all
calculations are based on amounts earned by the applicable named
executive officer through December 31, 2007. The actual
amounts to be paid can only be determined at the time of the
applicable named executive officer is separated from
I-trax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Change
|
|
|
After Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Control
|
|
|
in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
w/o Cause or
|
|
|
w/o Cause or
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
for Good
|
|
|
for Good
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
in
|
|
Name
|
|
Benefit(1)(2)
|
|
Reason
|
|
|
Reason
|
|
|
Termination
|
|
|
Death
|
|
|
Disability
|
|
|
Control
|
|
|
R. Dixon Thayer(3)
|
|
Salary
|
|
$
|
772,479
|
|
|
$
|
772,479
|
|
|
|
|
|
|
$
|
32,187
|
|
|
$
|
32,187
|
|
|
$
|
772,479
|
|
|
|
Bonus
|
|
$
|
331,511
|
|
|
$
|
331,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
331,511
|
|
|
|
Medical and
dental
|
|
$
|
32,029
|
|
|
$
|
32,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,029
|
|
|
|
Stock options
acceleration
|
|
|
53,500
|
|
|
|
53,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank A. Martin
|
|
Salary
|
|
$
|
572,114
|
|
|
$
|
572,114
|
|
|
|
|
|
|
$
|
23,838
|
|
|
$
|
23,838
|
|
|
$
|
572,114
|
|
|
|
Bonus
|
|
$
|
233,175
|
|
|
$
|
233,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
233,175
|
|
|
|
Medical and
dental
|
|
$
|
23,056
|
|
|
$
|
23,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,056
|
|
|
|
Stock options
acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond J. Fabius, M.D.(4)
|
|
Salary
|
|
$
|
772,839
|
|
|
$
|
772,839
|
|
|
|
|
|
|
$
|
30,118
|
|
|
$
|
30,118
|
|
|
|
|
|
|
|
Bonus
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and
dental
|
|
$
|
26,348
|
|
|
$
|
26,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
acceleration
|
|
|
102,662
|
|
|
|
102,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuri Rozenfeld
|
|
Salary
|
|
$
|
210,625
|
|
|
$
|
210,625
|
|
|
|
|
|
|
|
17,552
|
|
|
|
17,552
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and
dental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley S. Wear
|
|
Salary
|
|
$
|
240,000
|
|
|
$
|
240,000
|
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and
dental
|
|
$
|
14,065
|
|
|
$
|
14,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts reported with respect to Medical and dental
benefits represent an estimate of COBRA payments that
I-trax
is
obligated to reimburse the named executive officer.
|
|
(2)
|
|
The employment agreement with each named executive officer
specifies that options to acquire Common Shares granted to such
executive and covered by the employment agreement will
accelerate upon a change in control of
I-trax.
This
provision does not apply to options not specifically addressed
in the employment agreement. Accordingly, amounts reported with
respect to Stock options acceleration represent the
difference between the exercise price of the options subject to
acceleration and the December 31, 2007 closing price for
Common Shares, multiplied by the number of options subject to
acceleration.
|
|
(3)
|
|
If Mr. Thayer dies or is disabled while on company business
or performing his duties under his employment agreement,
Mr. Thayers termination benefits will be as provided
upon termination w/out cause or for good reason. Under
Mr. Thayers employment agreement, a change in control
constitutes good reason.
|
|
(4)
|
|
If any payment made to Dr. Fabius is deemed an excess
parachute payment within the meaning of Section 280G
of the Internal Revenue Code,
I-trax
must
pay Dr. Fabius a gross up payment to compensate
Dr. Fabius for the amount of the applicable taxes. However,
a termination of Dr. Fabiuss employment in
|
I-16
|
|
|
|
|
connection with a change in control at December 31, 2007
would not trigger an excess parachute payment.
|
The amounts in the table above represent the payments that each
of the named executive officers would receive under his existing
employment agreements in the event of termination of such named
executive officers employment under several different
circumstances. Other than the benefits they are entitled to
receive pursuant to their employment agreements, the named
executive officers are only entitled to receive benefits
provided on a non-discriminatory basis to salaried employees
generally upon termination of employment or change in control.
Set forth below is a description of the named executive
officers employment agreements.
R. Dixon
Thayer and Frank A. Martin
On December 17, 2007,
I-trax
entered into amended and restated employment agreements with
Mr. Thayer and Mr. Martin. Each agreement continues in
effect until terminated in accordance with the provisions of the
agreement. Mr. Thayers 2007 base salary under the
agreement is $386,239. Mr. Martins 2007 base salary
under the agreement is $286,057. The compensation committee
increased Messrs. Thayers and Martins base
salary to $397,826 and $294,639, respectively, effective
April 1, 2008. Messrs. Thayer and Martin also receive
an annual bonus as established by
I-traxs
compensation committee. Under the terms of the original
agreement
I-trax
entered into with Mr. Thayer on February 15, 2005,
Mr. Thayer received a grant of options to acquire
400,000 shares of
I-trax
common stock, the vesting of which will accelerate in the event
of a change in control of
I-trax.
I-trax
may
terminate each executives employment with or without cause
at any time, and each executive may terminate his employment
upon 90 days notice or upon shorter notice for good
reason. Good reason includes the failure by
I-trax
to
continue the applicable executive in his position, material
diminution of his responsibilities, duties or authority,
assignment to him of duties inconsistent with his position,
requiring him to be permanently based other than at his current
location, or change in control of
I-trax.
If Mr. Thayers or Mr. Martins employment
is terminated without cause or for good reason,
I-trax
will
pay to the applicable executive severance equal to two
years salary, payable over two years, an amount equal to
two times the average bonus paid to such executive for the most
recent two years and an amount equal to the amount the executive
would be required to pay to maintain full-time health benefits
under COBRA while receiving severance.
Messrs. Thayer and Martin have agreed not to compete
against
I-trax
for a
period of one year or while receiving severance, whichever is
longer, following the termination of executives
employment. Messrs. Thayer and Martin also agreed not to
use or disclose any confidential information of
I-trax
for
at least five years after the termination of such
executives employment.
Raymond
J. Fabius, M.D.
I-trax
entered into an employment agreement with Dr. Fabius on
April 15, 2005. The agreement is for an initial term of
three years and renews automatically for successive additional
terms of two years each. Dr. Fabiuss 2007 base salary
under the agreement was $361,419. The compensation committee
increased Dr. Fabiuss base salary to $372,262
effective April 15, 2008. Under the terms of the agreement,
Dr. Fabius received a grant of options to acquire
400,000 shares of
I-trax
common stock, the vesting of which will accelerate in the event
of a change in control of
I-trax.
I-trax
may
terminate Dr. Fabiuss employment with or without
cause at any time, and Dr. Fabius may terminate his
employment upon 60 days notice or upon shorter notice
for good reason. Good reason includes the failure by
I-trax
to
continue Dr. Fabius in his position, material diminution of
his responsibilities, duties or authority, assignment to him of
duties inconsistent with his position or requiring him to be
permanently based other than at his current location.
If Dr. Fabiuss employment is terminated without cause
or for good reason,
I-trax
will
pay Dr. Fabius severance equal to two years salary,
payable over two years, plus an additional amount equal to two
times the average bonus received by Dr. Fabius during the
immediately preceding two years, and an amount equal to the
I-17
amount the executive would be required to pay to maintain
full-time health benefits under COBRA while receiving severance.
Dr. Fabius has agreed not to compete against
I-trax
for a
period of one year or while receiving severance, whichever is
longer, following the expiration of the initial term or renewal
term, even if the actual employment is terminated prior to such
expiration. Dr. Fabius also agreed not to use or disclose
any confidential information of
I-trax
for
at least five years after the expiration of the original term or
additional term, even if the actual employment is terminated
prior to such expiration.
Yuri
Rozenfeld
On November 17, 2004,
I-trax
entered into employment agreements with Mr. Rozenfeld. The
agreement is for an initial term of three years and renews
automatically for an additional terms of two years.
Mr. Rozenfelds 2007 base salary under the agreement
was $210,625. The compensation committee increased
Mr. Rozenfelds base salary to $216,944 effective
April 1, 2008. Under the terms of the agreement,
Mr. Rozenfeld received a grant of options to acquire
60,000 shares of
I-trax
common stock, the vesting of which will accelerate in the event
of a change in control of
I-trax.
I-trax
may
terminate Mr. Rozenfelds employment with or without
cause at any time, and Mr. Rozenfeld may terminate his
employment upon 90 days notice or upon shorter notice
for good reason. Good reason includes the failure by
I-trax
to
continue Mr. Rozenfeld in his executive position, material
diminution of his responsibilities, duties or authority,
assignment to him of duties inconsistent with his position or
requiring him to be permanently based other than at each
executives current location.
If either executives employment is terminated without
cause or for good reason,
I-trax
will
pay to Mr. Rozenfeld severance equal to one years
salary, payable over one year.
Mr. Rozenfeld has agreed not to compete against
I-trax
for a
period of one year following the expiration of the initial term
or renewal term, even if the actual employment is terminated
prior to such expiration. Mr. Rozenfeld has also agreed not
to use or disclose any confidential information of
I-trax
for
at least five years after the expiration of the original term or
additional term, even if the actual employment is terminated
prior to such expiration.
Bradley
S. Wear and Peter M. Hotz
I-trax
entered into employment agreement with Mr. Wear on
September 1, 2007 and into amended and restated employment
agreement with Mr. Hotz on March 3, 2008. Each
agreement is for an initial term of three years and renews
automatically for successive additional terms of one year each.
Messrs. Wears and Hotzs base salary under the
applicable agreement is $240,000. The compensation committee
increased Mr. Wears base salary to $243,600 effective
April 1, 2008. Under the terms of Mr. Wears
agreement, Mr. Wear received a grant of options to acquire
125,000 shares of
I-trax
common stock.
I-trax
may
terminate each executives employment with or without cause
at any time, and each executive may terminate his employment
upon 90 days notice or upon shorter notice for good
reason. Good reason includes the failure by
I-trax
to
continue the applicable executive in his executive position or
requiring him to be permanently based other than at each
executives current location.
If either executives employment is terminated without
cause or for good reason,
I-trax
will
pay to the applicable executive severance equal to one
years salary, payable over one year, and an amount equal
to the amount the executive would be required to pay to maintain
full-time health benefits under COBRA while receiving severance.
Each executive has agreed not to compete against
I-trax
for a
period of one year following the expiration of the initial term
or renewal term, even if the actual employment is terminated
prior to such expiration. Each executive has also agreed not to
use or disclose any confidential information of
I-trax
for
at least five years after the expiration of the original term or
additional term, even if the actual employment is terminated
prior to such expiration.
I-18
Mr. Hotz was not described in the table above because he
was not a named executive officer of
I-trax
for
2007.
David
R. Bock
On May 29, 2007,
I-trax
entered into an amended and restated employment agreement with
Mr. Bock. The agreement provided for a term of employment
expiring on the later of August 31, 2007 and 30 days
after delivery of notice of termination by either
I-trax
or
Mr. Bock. Mr. Bocks 2007 base salary under the
agreement was $259,616.
Mr. Bock has agreed not to compete against
I-trax
for a
period of one year following the expiration of his employment.
Mr. Bock has also agreed not to use or disclose any
confidential information of
I-trax
for
at least five years after the expiration of his employment.
Mr. Bock ceased being an executive officer on
September 1, 2007 and ceased being an employee on
January 2, 2008. On January 2, 2008, Mr. Bock
entered into a separation agreement with
I-trax
that
(i) reconfirms his severance of $125,000;
(ii) provides for the acceleration and extension of the
exercise period of stock options exercisable into 70,833 Common
Shares at a price per share of $3.09; (iii) provides for
the maintenance of full-time health benefits under COBRA for
Mr. Bock for a period of six months at a cost of
approximately $6,500; and (iv) provides for the payment of
a bonus for Mr. Bocks 2007 performance on or about
March 30, 2008, the amount of which is to be determined.
The intrinsic value of the accelerated options, based on the
closing price of I-traxs Common Shares on January 2,
2008 ($3.53) is approximately $31,167.
Accrued
Pay and Regular Retirement Benefits
In addition to the benefits described above, the named executive
officers are also entitled to certain payments and benefits upon
termination of employment that are provided on a
non-discriminatory basis to salaried employees generally upon
termination of employment. These include life insurance benefits
and distributions of plan balances under
I-traxs
401(k) plan.
Similarly, except as described above, upon termination of
employment, a named executive officers options are subject
to the terms applicable to all recipients of such awards under
I-traxs
applicable plans. Except as described above,
I-trax
is
not obligated to provide any special accelerated vesting of
options held by the named executive officers.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of
I-traxs
compensation committee are Philip D. Green (chairman) and Gail
F. Lieberman. No executive officer of
I-trax
has
served as a director or member of the compensation committee (or
other committee serving an equivalent function) of any other
entity whose executive officers served as a director or member
of the compensation committee of
I-trax.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
There were no related party transactions subject to disclosure
in this Information Statement. The board of directors, at its
annual meeting, reviews the independence of each director and
considers and approves, if so determined, all related party
transactions.
AUDIT
COMMITTEE REPORT
The audit committee appoints the accounting firm to be retained
to audit the companys financial statements and, once
retained, consults with and reviews recommendations made by the
accounting firm with respect to financial statements, financial
records, and financial controls of the company.
Accordingly, the audit committee has (a) reviewed and
discussed the audited financial statements with management;
(b) discussed with McGladrey & Pullen, LLP, the
companys independent auditors, the matters
I-19
required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees);
(c) received the written disclosures and the letter from
McGladrey & Pullen, LLP required by Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees); and (d) discussed with
McGladrey & Pullen, LLP its independence from
management and the company, including the matters in the written
disclosures required by the Independence Standards Board. The
audit committee also discussed with McGladrey &
Pullen, LLP the overall scope and plans for its audit. The audit
committee met with management and McGladrey & Pullen,
LLP to discuss the results of the auditors examinations,
their evaluations of the companys internal controls, and
the overall quality of the companys financial reporting.
In reliance on the review and discussions referred to above, the
audit committee recommended to the board of directors that the
audited financial statements be included in the companys
Annual Report on
Form 10-K
for the year ended December 31, 2007.
This report of the audit committee does not constitute
soliciting material and should not be deemed filed or
incorporated by reference into any other
I-trax
filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent that
I-trax
specifically incorporates this report by reference therein.
Members of the Audit Committee:
Gail F. Lieberman, Chairperson
Gerald D. Mintz
Jack A. Smith
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
I-traxs
board members, executive officers and persons who hold more than
10% of
I-traxs
outstanding common stock are subject to the reporting
requirements of Section 16(a) of the Securities Exchange
Act, which require them to file reports with respect to their
common stock ownership and their transactions in common stock.
Based upon the copies of Section 16(a) reports that
I-trax
received from such persons for their 2007 fiscal year
transactions in Common Shares and their common stock holdings
and the written representations received from one or more of
these persons that no annual Form 5 reports were required
to be filed by them for the 2007 fiscal year,
I-trax
believes that all reporting requirements under
Section 16(a) for such fiscal year were met in a timely
manner by
I-traxs
executive officers, board members and greater than 10%
stockholders.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The table below sets forth, as of March 24, 2008, the
number of shares and percentage of common stock beneficially
owned by:
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our Chief Executive Officer, current Chief Financial Officer,
former Chief Financial Officer and three other most highly
compensated executive officers based on compensation earned
during 2007;
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each director;
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all directors and executive officers as a group; and
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each person who is known by
I-trax
to
beneficially own 5% or more of
I-traxs
outstanding Common Shares.
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Beneficial ownership was determined in accordance with
Rule 13d-3
under the Exchange Act. Under this rule, certain shares may be
deemed to be beneficially owned by more than one person (if, for
example, persons share the power to vote or the power to dispose
of the shares). In addition, a person is deemed to beneficially
own certain shares if the person has the right to acquire the
shares, such as upon exercise of options or warrants, within
60 days of March 24, 2008, the date as of which the
information is provided. In computing the percentage ownership
of any person, the amount of shares includes the amount of
shares beneficially owned by such person (and only such person)
by reason of any acquisition rights. As a result, the percentage
I-20
of outstanding shares of any person as shown in the following
table does not necessarily reflect the persons actual
voting power at any particular date.
To
I-traxs
knowledge, except as indicated in the footnotes to this table
and under applicable community property laws, the persons named
in the table have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
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Convertible
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Common
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Securities
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Stock
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Exercisable
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Beneficially
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Within
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Percent of
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Executive Officers and Directors*
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Owned
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60 Days**
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Total
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Class
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Frank A. Martin
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830,707
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450,778
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1,281,485
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3.03
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%
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R. Dixon Thayer
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45,300
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514,373
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559,673
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1.32
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%
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Raymond J. Fabius, M.D.
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147,916
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448,827
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596,743
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1.41
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%
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David R. Bock
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119,693
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475,417
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595,110
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1.40
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%
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Haywood D. Cochrane, Jr.
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236,626
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306,893
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543,519
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1.29
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%
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Yuri Rozenfeld(1)
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53,894
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208,550
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262,444
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***
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Philip D. Green
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17,800
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82,880
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100,680
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***
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Gerald D. Mintz
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12,000
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40,000
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52,000
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***
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Jack A. Smith
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8,000
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40,000
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48,000
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***
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Gail F. Lieberman
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40,000
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40,000
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***
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David Nash, M.D.
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40,000
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40,000
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***
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Bradley S. Wear
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***
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All executive officers and directors as a group (12 persons)
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1,367,043
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2,195,634
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3,562,677
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8.08
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Convertible
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Common
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Securities
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Stock
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Exercisable
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Beneficially
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Within
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Percent of
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5% Stockholders
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Owned
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60 Days
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Total
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Class
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FMR LLC(2)
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4,042,079
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4,042,079
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9.65
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%
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Pequot Capital Management, Inc.(3)
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3,144,606
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3,144,606
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7.51
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%
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Ashford Capital Management Inc.(4)
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3,127,900
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3,127,900
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7.47
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%
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*
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Executive officers and directors of
I-trax
can
be reached at
I-trax,
Inc., 4 Hillman Drive, Suite 130, Chadds Ford, Pennsylvania
19317.
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**
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Includes shares of common stock issuable upon exercise or
conversion of options, warrants or Series A Convertible
Preferred Stock.
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***
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Less than 1% of the outstanding shares of common stock.
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(1)
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Mr. Rozenfeld is a partner of The Spartan Group Limited
Partnership
(Spartan)
, an owner of
6,000 shares. Mr. Rozenfeld has shared voting and
shared dispositive power with respect to the shares held by
Spartan. Mr. Rozenfeld may be deemed to have beneficial
ownership of the shares held by Spartan. Mr. Rozenfeld
disclaims beneficial ownership of the shares held by Spartan,
except to the extent of his pecuniary interest in Spartan.
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(2)
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Pursuant to a Schedule 13G filed on February 14, 2008,
consists of shares beneficially owned by FMR LLC
(
FMR
) as of December 31, 2007 as a
result of acting as investment adviser to various investment
companies registered under Section 8 of the Investment
Company Act of 1940 (the ownership of one investment company,
Fidelity Small Cap Stock Fund, amounted to
2,273,463 shares) and includes 4,042,079 shares to
which FMR has sole voting power and dispositive power. The
Schedule 13G was filed jointly by FMR and Edward C. Johnson
3d. Edward C. Johnson 3d is Chairman of FMR. Members of
Mr. Johnsons family are the predominant owners of
Series B shares of FMR, representing 49% of the voting
power of FMR and all Series B shareholders have entered into a
shareholders voting agreement under which all
Series B shares will be voted in accordance with the
majority vote of Series B shares. As
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I-21
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such, members of Mr. Johnsons family may be deemed to
be members of a controlling group with respect to FMR. The
amounts beneficially owned by FMR include 1,848,607 shares
beneficially owned by Fidelity Management & Research
Company, an investment adviser registered under Section 203
of the Investment Advisers Act of 1940 and a wholly-owned
subsidiary of FMR; and 466,700 shares beneficially owned by
Pyramis Global Advisors Trust Company, a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, and an
indirect wholly-owned subsidiary of FMR.
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(3)
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Pequot Capital Management, Inc.
(Pequot
Capital)
is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 and has
sole voting and dispositive power with respect to the shares it
beneficially owns. The address for Pequot Capital is 500 Nyala
Farm Road, Westport, Connecticut 06880. (Based on
Schedule 13G/A filed by Pequot Capital Management with the
SEC on February 12, 2008.)
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(4)
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Ashford Capital Management, Inc.
(Ashford
Capital)
is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 and has
sole voting and dispositive power with respect to the shares it
beneficially owns. The address for Ashford Capital is 1
Walkers Mill Road, P.O. Box 4172, Wilmington,
Delaware 19807. (Based on Schedule 13G/A filed by Ashford
Capital with the SEC on February 14, 2008.)
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I-22
Annex II
March 14, 2008
The Board of Directors
I-trax,
Inc.
4 Hillman Drive, Suite 130
Chadds Ford, PA 19317
Members of the Board:
We understand that
I-trax,
Inc.
(I-trax
or the Company), Walgreen Co. (the
Purchaser), and Putter Acquisition Sub, Inc., a
wholly-owned subsidiary of Walgreen Co. (Acquisition
Sub), propose to enter into an Agreement and Plan of
Merger, to be dated as of March 14, 2008 (the Merger
Agreement), which provides, among other things, for
(i) the commencement by Acquisition Sub of a tender offer
(the Common Stock Tender Offer) for all outstanding
shares (the Common Shares) of the Companys
common stock, par value $0,001 per share (the Company
Common Stock) for $5.40 per share in cash (the
Common Stock Offer Price), (ii) the
commencement by Acquisition Sub of a tender offer (the
Preferred Stock Tender Offer) for all the
outstanding shares of the Companys Series A
Convertible Preferred Stock, par value $0,001 per share (the
Preferred Shares) for $54.00 plus the Dividend
Amount (as defined in the Merger Agreement) per share in cash
(the Preferred Stock Offer Price), and
(iii) the subsequent merger (the Merger) of
Acquisition Sub with and into the Company. The Merger and the
Common Stock Tender Offer are collectively referred to herein as
the Transaction. Pursuant to the Merger, each
outstanding Common Share and Preferred Share not acquired in the
Common Stock Tender Offer or Preferred Stock Tender Offer, other
than Common Shares or Preferred Shares held in treasury or held
by Acquisition Sub or the Purchaser or as to which
dissenters rights have been perfected, will be converted
into the right to receive the Common Stock Offer Price and the
Preferred Stock Offer Price, respectively. The terms and
conditions of the Transaction and the Preferred Stock Tender
Offer are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether, as of the date
hereof, the Common Stock Offer Price is fair, from a financial
point of view, to holders of the Common Shares other than the
Purchaser and any of its affiliates.
In connection with rendering our opinion, we have, among other
things:
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(i)
|
reviewed certain publicly available financial statements of and
other business and financial information concerning the Company;
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(ii)
|
reviewed certain internal financial statements and other
financial and operating data of the Company;
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(iii)
|
reviewed certain financial projections prepared by the
management of the Company and reviewed by the Board of Directors
of the Company;
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(iv)
|
discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
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(v)
|
reviewed the reported prices and the historical trading activity
of the Company Common Stock;
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II-1
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(vi)
|
compared certain financial information of the Company with
similar, publicly-available information for certain
publicly-traded companies that we deemed relevant;
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(vii)
|
reviewed the financial terms, to the extent publicly available,
of certain transactions comparable to the Transaction;
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(viii)
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participated in discussions and negotiations among
representatives of the Company and the Purchaser and their
advisers;
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(ix)
|
reviewed a draft of the Merger Agreement dated March 14,
2008, and certain related documents; and
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(x)
|
performed other examinations and analyses and considered other
factors that we deemed appropriate.
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For purposes of our analysis and opinion, we have assumed and
relied upon, without assuming any responsibility for independent
verification of, the accuracy and completeness of the
information that was publicly available or supplied or otherwise
made available to, discussed with, or reviewed by or for us, and
we assume no liability therefor. For purposes of rendering our
opinion, members of management of the Company have provided us
with certain financial projections prepared by management of the
Company (the Financial Projections), and discussed
with us various uncertainties and risks relating to the
Companys future operations and prospects. With your
consent, we have assumed that the Financial Projections were
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the management
of the Company of the future financial performance and the
future competitive, operating and regulatory environments of the
Company. We express no view as to such Financial Projections, or
the assumptions on which they are based.
In addition, we have assumed, with your consent, that the
definitive form of the Merger Agreement will be substantially
identical to the last draft we reviewed, that the
representations and warranties of each party contained in the
Merger Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be
performed by it under the Merger Agreement and that the
Transaction will be consummated in accordance with the terms set
forth in the Merger Agreement without waiver, amendment or delay
in the satisfaction of any terms or conditions. We have further
assumed that all governmental, regulatory or other consents,
approvals and releases necessary for the consummation of the
Transaction will be obtained without any material delay,
limitation, restriction or condition that would have an adverse
effect on the Company or consummation of the Transaction or that
would materially reduce the benefits of the Transaction. We are
not legal, tax, regulatory or actuarial advisors. We are
financial advisors only and have relied upon, without
independent verification, the assessment of the Purchaser and
the Company and their respective legal, tax, regulatory or
actuarial advisors with respect to such matters.
We have not made, or assumed any responsibility for making any
independent valuation or appraisal of the assets or liabilities
of the Company, nor have we been furnished with any such
appraisals, nor have we evaluated the solvency or fair value of
the Company under any state or federal laws relating to
bankruptcy, insolvency or similar matters. Our opinion is
necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof may affect
this opinion and the assumptions used in preparing it, and we do
not assume any obligation to update, revise or reaffirm this
opinion.
We have acted as financial advisor to the Board of Directors of
the Company in connection with the Transaction, have received
fees from the Company for services we have rendered to date and
will receive a further fee for our services, a substantial
portion of which is contingent upon the closing of the Merger.
We have also received a fee in connection with the rendering of
this opinion, the payment of which was not contingent upon the
views expressed herein or upon consummation of the Transaction.
In addition, the Company has agreed to indemnify us for certain
liabilities that may arise in connection with our engagement,
including liabilities under the federal securities laws. In the
two years prior to the date hereof, we have provided financial
advisory services to the Company and have received fees in
connection with such services.
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We have not been asked to pass upon, and express no opinion with
respect to, the fairness of the Transaction or the Preferred
Stock Tender Offer to, or any consideration received in
connection therewith by, the holders of any class of securities
other than the Company Common Stock, creditors or other
constituencies of the Company, nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any officer, director or employee of any party to the
Transaction or the Preferred Stock Tender Offer, or their
affiliates, or any class of such persons, whether relative to
the benefits to shareholders of the Company or otherwise. Our
opinion does not address the relative merits of the Transaction
or the Preferred Stock Tender Offer as compared to any other
alternative business transaction, or other alternatives, or
whether or not such alternatives could be achieved or are
available. We express no opinion as to the price at which
securities of the Company may trade at any time in the future.
This opinion has been reviewed and approved by an opinion
committee of Bryant Park Capital. It is understood that this
opinion is for the information of the Board of Directors of the
Company only and may not be used for any other purpose or
disclosed, referred to, or communicated (in whole or in part) to
any third party for any purpose whatsoever except with our prior
written consent; except that a copy of this opinion in its
entirety may be included in the Companys
Solicitation/Recommendation Statement on
Schedule 14D-9
in connection with the Common Stock Tender Offer, provided this
opinion is reproduced in full and any description or summary of
this opinion and the related analysis is in a form acceptable to
us and our counsel. We express no opinion or recommendation as
to how any holder of securities of the Company, or any other
person, should vote or act with respect to the Transaction or
the Preferred Stock Tender Offer or as to the fairness, from a
financial point of view, of the Preferred Stock Tender Offer.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Common Stock Offer Price is fair,
from a financial point of view, to holders of the Common Shares
other than the Purchaser and any of its affiliates.
Very truly yours,
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/s/
Bryant
Park Capital, Inc.
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Bryant Park Capital, Inc.
II-3
Annex III
§ 262.
Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a
III-1
provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section,
shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any
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stockholder who has not commenced an appraisal proceeding or
joined that proceeding as a named party shall have the right to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such
III-3
stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by
certificates upon the surrender to the corporation of the
certificates representing such stock. The Courts decree
may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however, that this provision shall not affect the
right of any stockholder who has not commenced an appraisal
proceeding or joined that proceeding as a named party to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation within
60 days after the effective date of the merger or
consolidation, as set forth in subsection (e) of this
section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
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