Schedule
14A Information
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by
the Registrant (X
)
Filed
by
a Party other than the Registrant ( )
Check
the
appropriate box:
(
) Preliminary
Proxy Statement
(
) Confidential,
For use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
(X) Definitive
Proxy Statement
(
) Definitive
Additional Materials
(
) Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12
 |
|
WELLCARE HEALTH PLANS,
INC.
|
(Name
of
Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
(X) No
fee
required.
(
) Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per
unit
price or other underlying value of transaction computed pursuant to Exchange
Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state
how it was determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee
paid:
(
) Fee
paid previously with preliminary materials.
(
) Check
box
if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or
Schedule and the date of its filing.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed: April 28, 2006
8735
Henderson Road –
Renaissance Two –
Tampa,
Florida 33634 –
(813)
290-6200 –
www.wellcare.com
April
27,
2006
Dear
Shareholder:
You
are
cordially invited to attend the 2006 annual meeting of shareholders of WellCare
Health Plans, Inc. to be held on June 7, 2006, at 10:00 a.m. local time,
at our
corporate headquarters located at 8735 Henderson Road, Tampa, Florida 33634
in
the Renaissance Centre building.
At
the
meeting you will be asked to: (a) elect three class II directors to serve
until
the 2009 annual meeting; (b) ratify the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for fiscal year 2006;
and
(c) transact such other business as may properly come before the meeting
or any
adjournment or postponement of the meeting.
The
accompanying proxy statement provides a detailed description of these proposals.
We urge you to read the accompanying materials so that you may be informed
about
the business to be addressed at the annual meeting.
It
is
important that your shares be represented at the annual meeting. Accordingly,
we
ask you, whether or not you plan to attend the annual meeting, to complete,
sign
and date your proxy card and return it to us promptly in the enclosed envelope
or to otherwise vote in accordance with the instructions on your proxy card.
If
you attend the meeting, you may vote in person, even if you have previously
mailed in your proxy. However, if you hold your shares in a brokerage account
(“street name”), you will need to provide a proxy from the institution that
holds your shares reflecting stock ownership as of the record date to be
able to
vote by ballot at the meeting.
We
look
forward to seeing you at the meeting.
IF
YOU PLAN TO ATTEND THE MEETING:
Registration
and seating will begin at 10:00 a.m. local time on June 7, 2006. Shareholders
and their guests will be asked to sign-in and may be asked to present valid
picture identification. Shareholders holding stock in street name will need
to
obtain a proxy from the institution that holds their shares to evidence stock
ownership as of the record date.
|
Sincerely,
|
 |
|
Todd
S. Farha
|
|
President
and Chief Executive Officer
|
WELLCARE
HEALTH PLANS, INC.
8735
Henderson Road
Renaissance
Two
Tampa,
Florida 33634
Notice
of Annual Meeting of Shareholders
|
TIME
AND DATE
|
10:00
a.m. local time on June 7, 2006
|
|
PLACE
|
8735
Henderson Road
Renaissance
Centre
Tampa,
Florida 33634
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PURPOSE
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a. To
elect three class II members of the board of directors to serve
for
three-year terms;
b. To
ratify the appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for fiscal year 2006; and
c. To
transact such other business as may properly come before the meeting
or
any adjournment or postponement of the meeting.
|
|
RECORD
DATE
|
You
can vote if you were a shareholder of record at the close of business
on
April 20, 2006.
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|
PROXY
VOTING
|
It
is important that you vote your shares. You can vote your shares
by
completing and returning the proxy card sent to you. Please refer
to your
proxy card to determine if there are other voting options available
to
you. You can revoke a proxy at any time prior to its exercise at
the
meeting by following the instructions in the accompanying proxy
statement.
|
This
notice and the enclosed proxy statement and proxy card are first being mailed
to
our shareholders on or about April 28, 2006.
 |
|
Thaddeus
Bereday
|
|
Secretary
|
Tampa,
Florida
April
27,
2006
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WELLCARE
HEALTH PLANS, INC.
8735
Henderson Road
Renaissance
Two
Tampa,
Florida 33634
Proxy
Statement for Annual Meeting
To
Be Held June 7, 2006
This
proxy statement is being furnished to shareholders of WellCare Health Plans,
Inc., a Delaware corporation, in connection with the solicitation of proxies
by
our board of directors for use at our annual meeting of shareholders to be
held
on June 7, 2006, at 10:00 a.m., local time, at our corporate headquarters
located at 8735 Henderson Road, Tampa, Florida 33634 in the Renaissance Centre
building, and any adjournment or postponement of the meeting. This proxy
statement is dated April 27, 2006 and is first being mailed to shareholders
along with the related form of proxy on or about April 28, 2006.
What
is the purpose of the annual meeting?
At
the
annual meeting, shareholders will be asked to consider and vote upon two
proposals: (a) to elect three directors to serve as class II directors until
the
2009 annual meeting; (b) to ratify the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for fiscal year 2006;
and
(c) to transact such other business as may properly come before the meeting
or
any adjournment or postponement of the meeting. In addition, management will
report on our performance and respond to your questions.
Who
is entitled to vote at the meeting?
Only
shareholders of record at the close of business on April 20, 2006, the date
our
board of directors fixed as the record date for determining holders of issued
and outstanding shares of our common stock, par value $.01 per share, are
entitled to notice of and to vote at the annual meeting.
What
constitutes a quorum and why is one required?
The
presence at the meeting, in person or by proxy, of the holders of a majority
of
the aggregate voting power of our common stock issued and outstanding on the
record date will constitute a quorum for the transaction of business at the
annual meeting. A quorum is required by law for any action to be taken at the
annual meeting. As of the record date, there were 40,439,571 shares of common
stock issued and outstanding.
Abstentions
and broker non-votes are counted for purposes of determining the number of
shares considered to be present or represented at the meeting. A broker non-vote
occurs when a broker nominee, holding shares in street name for the beneficial
owner has not received voting instructions from the beneficial owner and does
not have discretionary authority to vote.
How
do I vote?
If
you
complete and properly sign and return the accompanying proxy card in time for
the meeting, it will be voted as you direct. If you are a registered shareholder
and attend the meeting, you may deliver your completed proxy card in person.
If
your shares are held by a broker in street name and you wish to vote at the
meeting in person or by proxy, you must obtain a proxy from your broker to
evidence your ownership and voting rights.
How
many votes do I have?
Each
share of common stock is entitled to one vote. The enclosed proxy card shows
the
number of shares of common stock that you are entitled to vote.
Can
I change my vote?
Unless
your proxy specifies otherwise, proxies will be voted: (a) FOR the election
of
the nominated directors; (b) FOR the ratification of Deloitte & Touche LLP
as our independent registered public accounting firm for fiscal year 2006;
and
(c) otherwise in the discretion of the proxy holders as to any other matter
that
may come before the annual meeting.
Any
shareholder who has given a proxy has the power to revoke such proxy at any
time
before it is voted either: (a) by filing a written revocation or a duly executed
proxy bearing a later date with Thaddeus Bereday, our secretary, at WellCare
Health Plans, Inc., 8735 Henderson Road, Renaissance Two, Tampa, Florida 33634;
(b) by appearing at the annual meeting and voting in person; or (c) by casting
another vote in the same manner as the original vote was cast. Attendance at
the
annual meeting will not in and of itself constitute the revocation of a proxy.
Voting by those present during the conduct of the annual meeting will be by
ballot.
How
will my votes be counted?
One
or
more inspectors of election appointed by our board of directors will count
and
tabulate all votes at the annual meeting.
What
vote is required to approve each proposal?
Election
of Three Directors.
The
affirmative vote of a plurality of the votes cast at the meeting is required
to
elect the three nominees. A properly executed proxy marked “WITHHOLD AUTHORITY”
with respect to the election of one or more nominees will not be voted with
respect to the nominee or nominees indicated, and, accordingly, will have no
affect on the outcome of the vote.
Ratification
of Appointment of Independent Registered Public Accounting
Firm.
The
affirmative vote of the holders of a majority of the voting power of the issued
and outstanding shares of common stock entitled to vote thereon, present and
voting, in person or represented by proxy at the annual meeting, is required
to
approve this proposal. Abstentions and broker non-votes will not be treated
as
voting on this proposal and, accordingly, will have no affect on the outcome
of
the vote.
We
will
post the results of the voting on our Internet site at www.wellcare.com.
Who
are the largest owners of your stock?
The
table
below sets forth certain information regarding beneficial owners known to us
as
of April 20, 2006 of more than 5% of our outstanding shares of common
stock.
|
|
Ownership
|
|
|
Name
and Address
|
Common Stock
|
Percent
|
|
TowerBrook
Investors L.P. (1)
430 Park Avenue
New York, NY 10022
|
5,158,784
|
12.8
|
|
Waddell
& Reed, Inc., et
al. (2)
6300 Lamar Avenue
Overland Park, KS 66202
|
4,268,500
|
10.6
|
|
Fred
Alger Management, Inc., et
al. (3)
111 Fifth Avenue
New York, NY 10003
|
2,112,000
|
5.2
|
(1) This
disclosure us based upon a Schedule 13D/A filed by TowerBrook Investors L.P.
(f/k/a Soros Private Equity Investors LP) (“TBI”) with the Securities and
Exchange Commission on April 6, 2006. TBI is a Delaware limited partnership.
Its
general partner is TCP General Partner L.P. (f/k/a SPEP General Partner LP),
a
Delaware limited partnership (“TCP GP”). An investment committee of TCP GP
exercises exclusive decision-making authority with regard to the acquisition
and
disposition of, and voting power with respect to, investments by TBI. TCP GP’s
general partner is TowerBrook Capital Partners LLC, a Delaware limited liability
company, whose controlling members are Neal Moszkowski, the chairman of our
board, and Ramez Sousou, who in such capacity may be deemed to have shared
voting and dispositive power over securities held for the account of TBI. Each
of Mr. Moszkowski and Mr. Sousou disclaim beneficial ownership of such
securities except to the extent of any pecuniary interest therein. The ownership
percentage is based on the number of shares of our common stock outstanding
as
of April 20, 2006.
(2) This
disclosure is based upon a Schedule 13G/A filed by Waddell & Reed, Inc.
(“WRI”) and other affiliated entities with the Securities and Exchange
Commission on February 1, 2006. WRI and the other affiliated entities reported
that the securities are beneficially owned by one or more open-end investment
companies or other managed accounts which are advised or sub-advised by Ivy
Investment Management Company (“IICO”), an investment advisory subsidiary of
Waddell & Reed Financial, Inc. (“WDR”) or Waddell & Reed Investment
Management Company (“WRIMCO”), an investment advisory subsidiary of WRI. WRI is
a broker-dealer and underwriting subsidiary of Waddell & Reed Financial
Services, Inc., a parent holding company (“WRFSI”). In turn, WRFSI is a
subsidiary of WDR, a publicly traded company. The investment advisory contracts
grant IICO and WRIMCO all investment and/or voting power over securities owned
by such advisory clients. The investment sub-advisory contracts grant IICO
and
WRIMCO investment power over securities owned by such sub-advisory clients
and,
in most cases, voting power. Any investment restriction of a sub-advisory
contract does not restrict investment discretion or power in a material manner.
The ownership percentage is based on the number of shares of our common stock
outstanding as of April 20, 2006.
(3) This
disclosure is based upon a Schedule 13G filed by Fred Alger Management, Inc.
and
Fred M. Alger III with the Securities and Exchange Commission on April 17,
2006.
The ownership percentage is based on the number of shares of our common stock
outstanding as of April 20, 2006.
How
much stock do your executive officers and directors own?
The
following table sets forth certain information with regard to the beneficial
ownership of our common stock as of the close of business on April 20, 2006
by:
(a) each director and nominee; (b) each of the current executive officers named
in the Summary Compensation Table; and (c) all directors, nominees and executive
officers (including two executive officers who are not named in the Summary
Compensation Table) as a group.
|
Name
|
Common
Stock
|
Percent
|
|
Todd
S. Farha
|
1,293,293
|
3.2
|
|
Andrew
Agwunobi, M.D. (2)
|
__
|
*
|
|
Regina
Herzlinger
|
53,914
|
*
|
|
Kevin
Hickey
|
43,438
|
*
|
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Alif
Hourani
|
43,372
|
*
|
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Glen
R. Johnson, M.D.
(2)
|
30,649
|
*
|
|
Ruben
Jose King-Shaw, Jr.
|
40,003
|
*
|
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Christian
P. Michalik
|
47,246
|
*
|
|
Neal
Moszkowski (1)
|
5,158,784
|
12.8
|
|
Jane
Swift
|
13,874
|
*
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Paul
Behrens
|
341,736
|
*
|
|
Ace
Hodgin, M.D.
|
24,660
|
*
|
|
Imtiaz
(“MT”) Sattaur
|
92,508
|
*
|
|
Heath
Schiesser
|
328,563
|
*
|
|
All
Directors, Nominees and Executive Officers as a Group (16
persons)
|
7,770,183
|
19.1
|
*
Less
than one percent
|
(1)
|
Represents
shares held by TowerBrook Investors L.P. in which Mr. Moszkowski
disclaims
any beneficial ownership except to the extent of any pecuniary interest
therein. See footnote (1) in the preceding table.
|
|
(2)
|
Dr.
Agwunobi is being nominated to our board and, if approved by our
shareholders, will join the board as of the date of the annual meeting.
Dr. Johnson will cease to be a member of our board at the expiration
of
his current term on the date of the annual
meeting.
|
How
is beneficial ownership determined?
For
purposes of the preceding table, “beneficial ownership” is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant
to which a person or group of persons is deemed to have “beneficial ownership”
of any common stock that such person or group has the right to acquire within
60
days after April 20, 2006. For purposes of computing the percentage of
outstanding common stock beneficially owned by each person named above, any
shares that such person has the right to acquire within 60 days after April
20,
2006, are deemed outstanding but such shares are not deemed to be outstanding
for purposes of computing the percentage ownership of any other person. Except
as otherwise noted, the person has sole voting and dispositive power with
respect to all of the shares of common stock shown as beneficially owned,
subject to community property laws, where applicable. The table below provides
additional detail regarding management’s securities ownership:
|
Included
|
Excluded
|
||||||
|
Name
|
Common
Stock
|
Unvested
Common
Stock
|
Vested
Stock Options
|
Stock
Options which Vest within
60 Days
|
Stock
Options which Vest in More
than 60 Days
|
Performance
Shares which Vest in More than
60 Days
|
|
|
Todd
S. Farha (1)
|
1,015,554
|
232,000
|
42,351
|
3,388
|
355,576
|
240,279
|
|
|
Andrew
Agwunobi, M.D.
|
__
|
__
|
__
|
__
|
__
|
__
|
|
|
Regina
Herzlinger
|
27,931
|
14,400
|
11,166
|
417
|
5,417
|
__
|
|
|
Kevin
Hickey
|
29,870
|
6,777
|
6,583
|
208
|
2,709
|
__
|
|
|
Alif
Hourani
|
22,181
|
14,400
|
6,583
|
208
|
2,709
|
__
|
|
|
Glen
R. Johnson, M.D.
|
989
|
___
|
27,758
|
1,902
|
20,497
|
__
|
|
|
Ruben
Jose King-Shaw, Jr.
|
10,681
|
14,400
|
14,714
|
208
|
2,709
|
__
|
|
|
Christian
P. Michalik
|
10,810
|
__
|
34,534
|
1,902
|
13,721
|
__
|
|
|
Neal
Moszkowski (2)
|
5,158,784
|
__
|
__
|
__
|
__
|
__
|
|
|
Jane
Swift
|
__
|
__
|
12,833
|
1,041
|
15,626
|
__
|
|
|
Paul
Behrens
|
153,813
|
183,349
|
4,235
|
339
|
11,657
|
__
|
|
|
Ace
Hodgin, M.D.
|
882
|
13,779
|
6,666
|
3,333
|
83,901
|
__
|
|
|
Imtiaz
(“MT”) Sattaur
|
2,147
|
16,359
|
68,270
|
5,732
|
102,476
|
__
|
|
|
Heath
Schiesser (3)
|
264,831
|
59,159
|
4,234
|
339
|
21,458
|
__
|
|
|
All
Directors, Nominees and Executive Officers as a Group (16
persons)
|
6,861,411
|
631,203
|
256,834
|
20,735
|
677,294
|
240,279
|
|
|
(1)
|
On
June 6, 2005, Mr. Farha was granted an award of shares of common
stock,
which vest on the three-year and five-year anniversaries of the grant
date
based upon our achievement of compounded annual percentage increases
in
diluted net income per share over three-year and five-year periods.
The
target number of performance shares to be issued in the aggregate
is
130,000 and the actual number of performance shares to be issued
shall be
between zero and 240,279 based upon our achievement of the performance
goals. For a more complete description of the terms of this performance
share award, see “Employment
Contracts and Termination of Employment
Arrangements”.
|
|
(2)
|
Mr.
Moszkowksi’s ownership is indirect and consists of 5,158,784 shares held
by TowerBrook Investors L.P. as described above. Mr. Moszkowski disclaims
beneficial ownership of these shares except to the extent of any
pecuniary
interest therein.
|
|
(3)
|
Mr.
Schiesser’s ownership consists of: (a) direct ownership of 90,477 shares,
of which 59,159 shares are unvested; and (b) indirect ownership of
233,513
shares held in trust for the benefit of his
children.
|
What
securities are authorized for issuance under your equity compensation plans?
The
following table includes the specified information as of December 31, 2005
for
all of our equity compensation plans which have been approved by our
shareholders and all of our equity compensation plans which have not been
approved by our shareholders.
|
Securities
Authorized for Issuance Under Equity Compensation
Plans
|
|||
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and
rights
|
Weighted-average
exercise price of outstanding options, warrants
and rights ($)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column
(a))
|
|
(a)
|
(b)
|
(c)
|
|
|
Equity
compensation plans approved by security holders(1)
|
1,674,194
|
30.23
|
2,558,154
|
|
Equity
compensation plans not approved by security holders(2)
|
1,160,002
|
8.45
|
__
|
|
Total
|
2,834,196
|
21.32
|
2,558,154
|
|
(1)
|
Equity
compensation plans approved by our shareholders prior to our initial
public offering include the WellCare Health Plans, Inc. 2004 Equity
Incentive Plan (the “2004 Equity Plan”) and the WellCare Health Plans,
Inc. 2005 Employee Stock Purchase Plan (the “ESPP”). The 2004 Equity Plan
was approved by our shareholders in June 2004 and the ESPP was approved
by
our shareholders in June 2005. As of December 31, 2005, there were
2,170,440 shares reserved for future issuance under the 2004 Equity
Plan
and 387,714 shares reserved for future issuance under the ESPP. The
total
number of shares of common stock subject to the granting of awards
under
our 2004 Equity Plan may be increased on January 1 of each year,
commencing on January 1, 2005 and ending on January 1, 2013, in an
amount
equal to the lesser of 3% of the number of shares of common stock
outstanding on each such date, 1,200,000 shares, or such lesser amount
determined by our board of directors. For 2005 there was no increase
in
shares of common stock under our 2004 Equity Plan. In addition to
options,
shares may be issued in restricted stock awards, performance awards
and
other stock-based awards under the 2004 Equity Plan.
|
|
|
(2)
|
Equity
compensation plans not approved by our shareholders include the WellCare
Holdings, LLC 2002 Employee Option Plan (the “2002 Plan”) and an aggregate
of fourteen stock option agreements (the “Non-Plan Grants”) entered into
with individuals prior to our initial public offering. The 2002 Plan
was
adopted by our board of directors in September 2002 and is administered
by
our compensation committee. Under the 2002 Plan, certain employees
were
granted non-qualified stock options to purchase shares of our common
stock
at an exercise price per share equal to the fair market value of
our stock
on the date of grant as determined by our board. Generally, option
awards
granted under the 2002 Plan vest as to 25% of the shares subject
to the
award on the anniversary of the date of grant, and as to 2.083% upon
the
end of each full calendar month thereafter, and expire on the tenth
anniversary of the date of grant. Subject to certain exemptions and
conditions, if a grantee ceases to be an employee of ours for any
reason
other than death, all of the grantee’s options that were exercisable on
the date of termination of employment will remain exercisable for
60 days
after the date of such termination. In the case of death, all of
the
grantee’s options that were exercisable on the date of death will remain
exercisable for a period of 180 days from such date. Unvested options
will
terminate upon a change in control. Options issued under the 2002
Plan may
not be sold, pledged, assigned, transferred or otherwise disposed
of other
than pursuant to applicable laws of descent and distribution or for
estate
planning purposes if approved by the board. The board generally has the
power and authority to amend or terminate the 2002 Plan at any time
without approval from our stockholders; however, no amendment may,
in any
material respect, adversely impair the rights of any grantee without
the
grantee’s written consent. No option awards have been granted under the
2002 Plan since June 2004 and no options remain available for future
issuance under this plan. The terms of the Non-Plan Grants are materially
similar to the terms of options granted under the 2002 Plan. Eleven
of the
Non-Plan Grants, exercisable for an aggregate of 60,173 shares of
common
stock, were issued to individuals other than our directors or executive
officers. The weighted average exercise price of those eleven outstanding
options is $5.51 per share. The vesting schedule of those eleven
Non-Plan
Grants is as follows: (a) three options, exercisable for an aggregate
of
24,394 shares, vested as to 25% after one year, and as to 2.083%
upon the
end of each full calendar month thereafter, (b) one option, exercisable
for 12,197 shares, vested in full on the later of December 31, 2003
or the
completion of the optionee’s consulting engagement, (c) two options,
exercisable for an aggregate of 10,165 shares, vested in full on
the grant
date, and (d) five options, exercisable for an aggregate of 13,417
shares,
vest as to 4.167% upon the end of each full calendar month following
the
grant date. In November 2004, our board of directors determined to
fully
accelerate the vesting of six out of the eight option grants listed
in
both subsections (a) and (d) above. The remaining three Non-Plan
Grants
were issued to our directors, as follows:
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•
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On
December 31, 2003, Mr. Michalik was granted options to purchase 40,657
shares at a per share exercise price of $6.47. These options expire
on
December 31, 2013, vested as to 25% of the shares subject thereto
on June
30, 2004, and vest as to 2.083% upon the end of each full calendar
month
thereafter.
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•
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On
February 6, 2004, Dr. Johnson was granted options to purchase 40,657
shares at a per share exercise price of $8.33. These options expire
on
February 6, 2014, vested as to 25% of the shares subject thereto
on
February 6, 2005, and vest as to 2.083% upon the end of each full
calendar
month thereafter.
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•
|
On
May 12, 2004, Mr. King-Shaw was granted options to purchase 8,131
shares
at a per share exercise price of $6.47. These options expire on May
12,
2014, and originally vested 20.833% of the shares subject thereto
on the
date of grant, and as to 4.167% of the shares subject thereto upon
the end
of each full calendar month following the grant date. In November
2004,
our board determined to accelerate the vesting of these options in
full.
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Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than ten percent of our common stock, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). Officers,
directors and greater than ten percent shareholders are required by the SEC
to
furnish us with copies of all Section 16(a) forms that they file.
Based
solely on our review of the copies of such forms, or written representations
from certain reporting persons that no reports on Form 5 or Form 4 were required
for those persons, we believe that all our officers, directors and greater
than
10% beneficial owners timely filed all such required forms with respect to
2005
transactions.
Corporate
Governance Guidelines
The
board
has developed and adopted corporate governance guidelines to promote the
functioning of the board and its committees. Among other things, the corporate
governance guidelines set forth criteria regarding board member selection and
qualification, establishment of committees and committee composition, executive
sessions, management succession and director compensation. The guidelines also
address the board’s expectations of each director in furtherance of the board’s
primary responsibility of exercising its business judgment in the best interests
of the company. In particular, the guidelines address meeting attendance and
participation, other directorships and access to independent advisors. The
corporate governance guidelines also require that the board conduct an annual
performance evaluation to determine whether it and its committees are
functioning effectively. The corporate governance guidelines are available
on
our Internet site at www.wellcare.com.
Presiding
Director
The
board
has designated Mr. Moszkowski, our chairman, to preside over executive sessions
of our outside (non-management and independent) directors. In addition, Mr.
Moszkowski has been designated the presiding director for purposes of receiving
communications from interested parties pursuant to the corporate governance
principles of the NYSE and from shareholders pursuant to rules of the SEC.
You
may express your concerns, whether such concerns relate to accounting-related
matters or otherwise, by contacting the presiding director through the
communication channels set forth in the section entitled “Communications
with Directors”
below.
Committees
of the Board of Directors
The
board
of directors has established an audit committee, a compensation committee and
a
nominating and corporate governance committee. The functions, responsibilities
and members of each of the committees are described briefly below. Each of
these
committees operates pursuant to a charter which is posted on our Internet site
at www.wellcare.com.
All
members of these committees are independent directors under our director
independence standards as set forth herein and the corporate governance rules
of
the NYSE. In addition, all members of our audit committee are independent
directors under the SEC rules for audit committees and are financially literate
under the NYSE corporate governance rules.
Our
three
standing committees are described below and the members of these committees
are
identified in the following table.
|
Director
|
Audit
Committee
|
Compensation
Committee
|
Nominating
& Corporate
Governance Committee
|
|
Regina
Herzlinger
|
X*
(chair)
|
||
|
Kevin
Hickey
|
X
|
||
|
Alif
Hourani
|
X
|
X
|
|
|
Christian
Michalik
|
X*
|
X
|
|
|
Neal
Moszkowski
|
X
(chair)
|
X
(chair)
|
|
|
Jane
Swift
|
X
|
* Dr.
Herzlinger and Mr. Michalik are our “audit committee financial experts” and have
accounting or related financial management expertise.
Audit
Committee:
The
audit committee of the board of directors appoints, compensates and oversees
the
engagement and provision of services by our independent registered public
accounting firm and pre-approves all audit, audit-related, tax and other
services conducted by our independent registered public accounting firm. The
audit committee also reviews the plans, results and fees of the audit engagement
and any independence issues with our independent registered public accounting
firm. The audit committee is also responsible for the oversight of the Trust
Program, our corporate ethics and compliance program, as more fully described
below. The audit committee charter is appended to this proxy statement and
is
available on our Internet site at www.wellcare.com
Compensation
Committee:
This
committee provides oversight and guidance for compensation and benefit programs
for our associates, reviews and approves the compensation, including base salary
and incentive awards and other significant terms of employment, for members
of
our senior management and reviews and make recommendations with respect to
incentive compensation plans, equity-based plans and board compensation. The
committee also reviews and recommends, from time to time, amendments to existing
compensation plans and establishment and implementation of new compensation
plans. The compensation committee also reviews and approves corporate goals
and
objectives relevant to our chief executive officer’s compensation, evaluates the
chief executive officer’s performance in light of those goals and objectives and
has sole authority to determine the chief executive officer’s compensation based
on this evaluation.
Nominating
and Corporate Governance Committee: The
nominating and corporate governance committee is responsible for developing
our
corporate governance guidelines and for recommending those guidelines to the
board for adoption. The committee is also responsible for periodically reviewing
the composition of the full board to determine whether additional board members
with different qualifications or areas of expertise are needed and making
recommendations to the board regarding the size, composition and functions
of
board committees. The committee identifies and reviews the qualifications of
new
director nominees consistent with selection criteria established by the board
and recommends the slate of nominee for inclusion in the proxy statement. The
committee’s process for selecting nominees to the board is described in more
detail under “Nominating
Committee Process for Selecting Nominees to the Board”
below.
The committee is also responsible for conducting the periodic evaluation of
the
performance of the board and its committees and for considering questions of
independence and possible conflicts of interest of members of the board and
executive officers.
Number
of Meetings and Attendance
During
2005, the board of directors held five meetings, the audit committee held four
meetings, the compensation committee held three meetings and the nominating
and
corporate governance committee held one meeting. In addition to its formal
meetings, the audit committee participates in quarterly conference calls with
management to review our earnings releases. In addition, in 2005 the chairperson
of the audit committee conducted monthly meetings with our internal auditors
to
evaluate our internal financial controls and related matters. During 2005,
each
of the incumbent directors attended at least 75% of the meetings of the board
of
directors and 75% of the meetings of any committees upon which he or she served
that occurred while such director was a member of the board and such committees.
Mr.
Farha
was the only member of our board who attended our 2005 annual shareholders
meeting.
Director
Independence
Our
corporate governance guidelines provide that a majority of the members of our
board must meet the criteria of independence as required by the listing
standards of the NYSE. In addition, each member of the audit committee,
compensation committee and nominating and corporate governance committee must
be
independent. No director qualifies as independent unless the board determines
that the director has no direct or indirect material relationship with the
company. The board reviews the independence of its members by requiring that
each member complete disclosure and independence questionnaires and by
considering all transactions and relationships between each director or any
member of his or her immediate family and the company and its subsidiaries,
including those reported under “Certain
Relationships and Related Transactions”
below.
The purpose of this review is to determine whether any such relationships or
transactions were inconsistent with a determination that the director is
independent. In making independence determinations, the board applies the
following standards, in addition to any other relevant facts and circumstances:
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•
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A
director, who is, or has been within the last three years, an employee
of
the company or any subsidiary, or whose immediate family member is,
or has
been within the last three years, an executive officer of the company,
is
not independent until three years after the end of such employment
relationship;
|
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•
|
A
director who has received, or has an immediate family member who
has
received, more than $100,000 per year in direct compensation from
the
company or any subsidiary, other than director and committee fees
and
pension or other forms of deferred compensation for prior service
(provided such compensation is not contingent in any way on continued
service), is not independent until three years after he or she ceases
to
receive more than $100,000 per year in such compensation;
|
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•
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A
director or an immediate family member, who is a current partner
of the
firm that is the internal or external auditor of the company or any
subsidiary; a director who is a current employee of such a firm;
a
director who has an immediate family member who is a current employee
of
such firm and who participates in the firm’s audit, assurance or tax
compliance (but not tax planning) practice; or a director or an immediate
family member who was, within the last three years (but no longer
is) a
partner or employee of such a firm and personally worked on the company’s
audit within that time, is not independent;
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•
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A
director or an immediate family member who is or has been within
the last
three years, employed as an executive officer of another company
where any
of our present executives at the same time serves or served on that
company’s compensation committee is not independent until three years
after the end of such service or the employment relationship; and
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•
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A
director who, or whose immediate family member, is a current executive
officer of a company that has made payments to, or received payments
from,
our company or any of our subsidiaries for property or services in
an
amount which, in any of the last three fiscal years, exceeds the
greater
of $1 million or 2% of such other company’s consolidated gross revenues,
is not independent until three years after such payments fall below
such
threshold.
|
In
addition, the Securities Exchange Act of 1934, as amended, and the rules of
the
NYSE impose additional independence and qualification standards on our audit
committee members. Under these standards, each audit committee member, in
addition to meeting the definition of independence applicable to all
non-employee directors, is prohibited from having any direct or indirect
financial relationship with the company, and cannot be an “affiliate” of the
company or any subsidiary of the company. The board has determined that each
member of the audit committee satisfies these additional standards.
Under
the
standards set forth above, the board has determined that seven of its members,
including each of the members of the audit committee, the compensation committee
and the nominating and corporate governance committee, are independent as of
the
date of this proxy statement. The board determined that Messrs. Hourani,
Michalik and Moszkowski, Drs. Johnson and Herzlinger and Ms. Swift are
independent based on the fact that none of them has any relationship with us
other than as a director and as a holder of our common stock. Additionally,
the
board considered Mr. Hickey’s prior position as the chief executive officer of
IntelliClaim, a company to which we paid $218,675 in 2004. In addition, the
board considered that as of January 2005, Mr. Hickey no longer served as an
officer or director of IntelliClaim. Based on this review, our board concluded
that this relationship fits within our categorical standards of independence
and
that this relationship does not impair Mr. Hickey’s independence. As a result,
our board affirmatively determined that Mr. Hickey is independent.
Directors’
Compensation
Meeting
Fees and Annual Retainers.
With
the exception of Mr. Moszkowski, we pay each non-employee member of our board
an
annual director’s fee of $25,000 for attending meetings of the board and
committee meetings. Mr. Moszkowski does not receive an annual retainer nor
is he
paid for his attendance at board or committee meetings. Mr. Farha does not
receive any additional compensation for his service as a member of the board.
Stock
Options.
In July
2005, we granted to each non-employee member of our board, other than Mr.
Moszkowski, an option to purchase 4,500 shares of our common stock, vested
immediately at a per share exercise price of $36.45. All of these option grants
have five year terms. We may, in our discretion, grant additional stock options
and other equity awards to our directors from time to time.
Our
directors do not receive regular awards of stock options under a plan or
otherwise.
Perquisites
and Other Benefits.
We also
pay all reasonable expenses incurred by directors for attending meetings, pay
for certain director continuing education programs and related expenses and
maintain directors and officers liability insurance. We do not provide a
retirement plan or other perquisites for our directors.
Consulting
Agreement with Mr. King-Shaw.
In
November 2003, we entered into a consulting agreement with Mr. King-Shaw
pursuant to which Mr. King-Shaw oversaw certain governmental and regulatory
issues for us. On April 27, 2005, we terminated this consulting agreement.
Under
this agreement, we paid Mr. King-Shaw a per
diem
rate or,
in some case, an hourly rate, plus travel and related expenses. In 2004 and
2005, we paid $35,000 and $5,000 respectively to Mr. King-Shaw under this
agreement. In addition, in May 2004, in consideration of services rendered
under
this consulting agreement, we awarded Mr. King-Shaw options to acquire 8,131
shares of our common stock at an exercise price of $6.47. These options expire
on May 12, 2014, and originally vested as to 20.833% of the shares subject
thereto upon the date of grant, and as to 4.167% of the shares subject thereto
upon the end of each full calendar month following the grant date. In November
2004, our board determined to accelerate the vesting of these options in full.
Under the NYSE corporate governance rules, our board determined that the
compensation paid to Mr. King-Shaw in 2004 renders Mr. King-Shaw not independent
under our independence standards.
Nominating
and Corporate Governance Committee’s Process for Selecting Nominees to the Board
The
nominating and corporate governance committee considers candidates for board
membership who are suggested by its members and other board members, as well
as
by management, shareholders and other interested parties. The committee may
also
retain a third-party search firm to identify candidates from time to time upon
request of the committee or the board. Shareholders can recommend a prospective
nominee for the board by writing to our corporate secretary at the company’s
corporate headquarters and providing the information required by our bylaws,
along with whatever additional supporting material the shareholder considers
appropriate.
The
assessment of a nominee’s qualification for board membership should include,
among other things, the following criteria:
|
•
|
The
diversity, age, background and experience of the
candidate;
|
|
•
|
The
personal qualities and characteristics, accomplishments and reputation
in
the business community of the candidate;
|
|
•
|
The
knowledge and contacts of the candidate in the communities in which
we
conduct business and in our business industry or other industries
relevant
to our business;
|
|
•
|
The
ability and expertise of the candidate in various activities deemed
appropriate by the board; and
|
|
•
|
The
fit of the candidate’s skills, experience and personality with those of
other directors in maintaining an effective, collegial and responsive
board.
|
The
initial determination to seek a board candidate is usually based on the need
for
additional board members to fill vacancies or to expand the size of the board,
although the decision can also be based on the need for certain skill sets
or
qualifications, such as financial expertise. The committee’s process for
identifying and evaluating nominees for director is the same no matter who
makes
the recommendation.
Once
the
committee has determined, in consultation with other board members if
appropriate, that additional consideration of a candidate is warranted, the
committee may, or it may request third parties to, gather additional information
about the prospective candidate’s background, experience and independence.
Following review of this information, if the committee determines it is
appropriate to proceed, the committee or other members of the board will
generally interview the prospective candidate. The committee then evaluates
the
prospective nominee against the standards and qualifications set forth above
and
such other relevant factors that the committee or the board deems appropriate,
including the current composition of the board and the candidate’s personal
qualities, skills and characteristics.
Following
this evaluation, if the committee believes that the prospective candidate is
qualified for nomination, generally the committee will make a recommendation
to
the full board, and the full board will make the final determination whether
the
candidate should be nominated to the board.
The
Trust Program
Due
to
the increasingly complex ethical and legal questions facing all participants
in
the healthcare industry, we have unified our corporate ethics and compliance
policies by implementing a comprehensive corporate ethics and compliance
program, called the Trust Program. The Trust Program covers all aspects of
our
company and is designed to assist us with conducting our business in accordance
with applicable federal and state laws and high standards of business ethics.
The Trust Program applies to members of our board, our associates, including
our
chief executive officer, chief financial officer and our principal accounting
officer or controller and, in some cases, our business partners and independent
contractors. The Trust Program contains the following elements:
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•
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written
standards of conduct;
|
|
•
|
designation
of a corporate compliance officer and compliance
committee;
|
|
•
|
effective
training and education;
|
|
•
|
effective
lines for reporting and communication;
|
|
•
|
enforcement
of standards through disciplinary guidelines and
actions;
|
|
•
|
internal
monitoring and auditing; and
|
|
•
|
prompt
response to detected offenses and development of corrective action
plans.
|
We
maintain and update training and monitoring programs to educate our directors,
associates, business partners and independent contractors on the legal and
regulatory requirements of their respective duties and positions and to detect
possible violations. To help ensure compliance with the Trust Program, we also
conduct regular, periodic compliance audits by internal and external auditors
and compliance staff who have expertise in federal and state healthcare laws
and
regulations.
The
Trust
Program contains a whistleblower policy which sets forth the steps an associate
should take if he or she has a question about the application of the program.
The whistleblower policy contained in the Trust Program also sets forth the
audit committee’s procedures for the receipt, retention and treatment of
complaints received from associates regarding accounting, internal accounting
controls or auditing matters as required by the Sarbanes-Oxley Act of 2002.
The
full
text of the Trust Program is available on our Internet site at www.wellcare.com.
We
intend to disclose future amendments to, or waivers from, the provisions of
the
Trust Program, if any, made with respect to any of our directors and executive
officers on our Internet site.
Communications
with Directors
You
may
communicate with Mr. Moszkowski, the presiding director, non-management members
of our board as a group, the full board or any member of the board, including
Dr. Herzlinger, our audit committee chairperson, by writing to:
Compliance
Department
WellCare
Health Plans, Inc.
8735
Henderson Road, Renaissance Two
Tampa,
FL
33634
All
such
communications will be treated confidentially. Communications should clearly
identify whether your concern is directed to the presiding director,
non-management members of our board as a group, the full board or any individual
member of the board, the issue being raised, the name of the party initiating
the communication and contact information for potential follow-up. Concerns
regarding accounting and financial reporting, internal accounting controls
and
auditing matters should be addressed to our audit committee chairperson, Dr.
Herzlinger.
These
communications will initially be received by our chief compliance officer who
will log, track and summarize the matters raised in the communication before
forwarding it to the appropriate board member or group. The chief compliance
officer has been authorized by the presiding director, the non-management
members of our board as a group, the full board and our audit committee
chairperson to oversee, investigate, follow-up and report to the board or any
members thereof as necessary on all complaints or concerns raised through these
processes.
Our
certificate of incorporation provides for a board of directors divided into
three classes, as nearly equal in number as the then total number of directors
constituting the entire board permits, with the term of office of one class
expiring each year at the annual meeting of shareholders. Each class of
directors is elected for a term of three years.
The
board
of directors presently consists of nine persons: Todd S. Farha, Regina
Herzlinger, Kevin Hickey, Alif Hourani, Glen Johnson, M.D., Ruben Jose
King-Shaw, Jr., Christian P. Michalik, Neal Moszkowski and Jane Swift. Dr.
Andrew Agwunobi is being nominated to our board and, if approved by our
shareholders, will join the board as of the date of the annual meeting. Dr.
Johnson will cease to be a member of our board at the expiration of his current
term on the date of the annual meeting.
The
board
of directors proposes that Dr. Andrew Agwunobi and Messrs. Ruben Jose King-Shaw,
Jr. and Christian P. Michalik, be elected to serve as class II directors for
terms of three years and until the election and qualification of their
successors. Unless a shareholder WITHHOLDS AUTHORITY, the holders of proxies
representing shares of common stock will vote FOR the election of Dr. Andrew
Agwunobi and Messrs. Ruben Jose King-Shaw, Jr. and Christian P. Michalik as
class II directors. The board of directors has no reason to believe that any
nominee will decline or be unable to serve as a director. However, if a nominee
shall be unavailable for any reason, then the proxies may be voted for the
election of such person as may be recommended by the board of directors.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
“FOR”
THE ELECTION OF DR. ANDREW AGWUNOBI, RUBEN JOSE KING-SHAW, JR.
AND
CHRISTIAN
P. MICHALIK
Certain
Information Regarding Our Directors
The
following is certain information regarding our directors and their ages as
of
April 20, 2006:
Nominees
Andrew
Agwunobi, M.D.
(age 40)
is a nominee to our board of directors. Since January 2006, Dr. Agwunobi has
been the Chief Operating Officer of St. Joseph Health System, a 14-hospital
nonprofit, Catholic healthcare system with hospitals in California, Texas and
New Mexico. From June 2003 until January 2006, Dr. Agwunobi served as President
and Chief Executive Officer of Grady Health System in Atlanta, Georgia, the
largest public hospital-based health system in the southeast. From June 2001
until June 2003, Dr. Agwunobi served, initially, as Chief Operating Officer
and,
later, as President and Chief Executive Officer of South Fulton Medical Center,
a 395-bed acute care hospital in East Point, Georgia. From 1999 to 2001, Dr.
Agwunobi practiced as an urgent-care pediatrician at Palo Alto Medical Center
in
California while earning his masters in business administration from Stanford
Graduate School of Business. Dr. Agwunobi has also practiced at Quality of
Life
Health Services, a multi-specialty practice located in Gadsen, Alabama, and
Harvard Vanguard Medical Associates, a 500+ physician multi-practice group
in
Boston, Massachusetts. Dr. Agwunobi graduated as a pediatrician from Howard
University Hospital in Washington, D.C. in 1995.
Ruben
Jose King-Shaw, Jr.
(age 44)
has been a member of our board of directors since August 2003. Since February
2004, Mr. King-Shaw has served as the President of UBC Solutions Corporation,
a
provider of science- and evidence-based services and information to the
pharmaceutical and life sciences industries. Mr. King-Shaw served as Senior
Advisor to the Secretary of the Department of the Treasury from January 2003
to
June 2003. From July 2001 to April 2003, Mr. King-Shaw served as Chief Operating
Officer and Deputy Administrator of the federal government’s Centers for
Medicare & Medicaid Services. Prior to that, from January 1999 to July 2001,
he served as Secretary of the Agency for Health Care Administration of the
State
of Florida. Mr. King-Shaw received his undergraduate degree from Cornell
University and a masters of business administration from Florida International
University.
Christian
P. Michalik
(age 37)
has been a member of our board of directors since May 2002. Since July 2004,
Mr.
Michalik has served as Managing Director of Kinderhook Industries, a private
equity investment firm, and prior to that was a partner in Soros Private Equity
Partners LLC, the private equity investment business of Soros Fund Management
LLC, from January 1999 through December 2003. From 1997 to 1998, Mr. Michalik
was an investment manager with Capital Resource Partners, a private equity
investment firm. From 1995 to 1996, Mr. Michalik was an associate at Colony
Capital, a real estate investment firm. Mr. Michalik currently serves as
chairman of Nurse-on-Call, Inc. and NACT Telecommunications, Inc. and as a
director of NIT Group, Inc., Longevity Holdings LLC and Media Solutions
Services, LLC. Mr. Michalik received his undergraduate degree from Yale
University and his masters of business administration from Harvard Business
School.
Directors
continuing in office
Todd
S. Farha
(age 37)
has served as our President and Chief Executive Officer and as a member of
our
board of directors since May 2002. From January 2000 to June 2001, Mr. Farha
served as Chief Executive Officer of Best Doctors, Inc., a provider of
information and referral services for patients suffering from critical
illnesses. In addition, from 1999 to 2004, Mr. Farha served as President and
Chief Executive Officer of a company he founded, Medical Technology Management
LLC, a provider of shared medical equipment and services for physicians and
hospitals. From August 1995 to November 1998, Mr. Farha served as Chief
Executive Officer of Oxford Specialty Management, a subsidiary of Oxford Health
Plans, Inc., a health care company, focusing on the management of acute clinical
conditions in six specialty areas. In 1995, Mr. Farha served in the Office
of
the Chief Executive Officer of Oxford Health Plans, Inc. Prior to that, from
1990 to 1993, he held various positions with Physician Corporation of America,
a
Florida-based health plan focused on Medicaid recipients. Mr. Farha received
his
undergraduate degree from Trinity University and a masters of business
administration from Harvard Business School. Mr. Farha is a cousin of Mr.
Hourani.
Regina
E. Herzlinger
(age 62)
has been a member of our board of directors since August 2003.
Dr. Herzlinger is the Nancy R. McPherson Professor of Business
Administration at the Harvard Business School and has been teaching at Harvard
since 1971. Dr. Herzlinger received her undergraduate degree from Massachusetts
Institute of Technology and her doctorate from Harvard Business School.
Kevin
F. Hickey
(age 54)
has been a member of our board of directors since November 2002. Mr. Hickey
has
served as President of D2Hawkeye, a data-mining company, since January 2006.
From October 1998 until January 2005, Mr. Hickey served as the Chairman and
Chief Executive Officer of IntelliClaim, Inc., a privately-held application
service provider that provides insurance payors with capabilities for enhancing
claim processing efficiency and productivity. From September 1997 until August
1998, Mr. Hickey was Executive Vice President of Operations and Technology
for
Oxford Health Plans, Inc. Mr. Hickey has also served as a director of the
American Association of Preferred Provider Organizations from 1999 until 2002;
a
director of First Health/HealtheSolutions, a privately-held company, since
1982;
a director of Benefit Management Group, a privately-held company, since 1997;
a
director of Healthaxis Inc., a technology and business process services firm
for
the health benefits industry, since 2001; and a director of HealthMarket, Inc.,
a consumer directed health plan, from 2002 until 2004. Mr. Hickey received
his
undergraduate degree from Harvard University, a masters in health services
administration from the University of Michigan and a juris doctor from Loyola
College of Law.
Alif
A. Hourani
(age 53)
has been a member of our board of directors since August 2003. Since 1997,
Mr.
Hourani has served as Chairman and Chief Executive Officer of Pulse Systems,
Inc., a practice management and clinical records software company. From 1987
to
1997, Mr. Hourani held various positions, including Chief Executive Officer
of
Physician Corporation of America/Data Systems, Senior Vice President of
Management Information Systems of Physician Corporation of America, and Manager
of Computer Engineering at the Wolf Creek Nuclear Operating Corporation. Mr.
Hourani received his undergraduate degree from the University of Lyon and his
masters of science degree and doctorate from the University of Strasbourg.
Mr.
Hourani is a cousin of Mr. Farha.
Neal
Moszkowski
(age 40)
has been the Chairman of our board of directors since May 2002. Since April
2005, Mr. Moszkowski has been Co-Chief Executive Officer of TowerBrook Capital
Partners LP, a private equity investment company. Prior to joining TowerBrook,
Mr. Moszkowski was Managing Director and Co-Head of Soros Private Equity, the
private equity investment business of Soros Fund Management LLC, where he served
since August 1998. From August 1993 to August 1998, Mr. Moszkowski worked for
Goldman, Sachs & Co. and affiliates, where he served as Vice President and
Executive Director in the Principal Investment Area. Mr. Moszkowski currently
serves as a director of Bluefly, Inc., an online discount apparel retailer,
Day
International Group, Inc., a producer and distributor of precision-engineered
products and JetBlue Airways Corporation, a passenger airline. Mr. Moszkowski
received his undergraduate degree from Amherst College and his masters of
business administration from the Graduate School of Business of Stanford
University.
Jane
Swift
(age 41)
has been a member of our board of directors since November 2004. Since January
1, 2006, Ms. Swift has been a principal in WNP Consulting, LLC, which provides
consulting services to early stage education companies. From May 2003 to January
2006, Ms. Swift was a General Partner of Arcadia Partners, a venture capital
firm focused exclusively on the for-profit education and training industry.
From
April 2001 until January 2003, Ms. Swift served as the Governor of
Massachusetts. Prior thereto, she served as the Lieutenant Governor of
Massachusetts from January 1999 until April 2001. Ms. Swift is a member of
the
board of directors of both Teachscape and the Brigham and Women’s
Hospital.
Director
whose term expires at annual meeting
Glen
R. Johnson, M.D.
(age 62)
has been a member of our board of directors since February 2004. Since May
1998,
Dr. Johnson has served as President and Chief Executive Officer of Community
Health Choice, Inc., a managed health care organization that provides healthcare
services to Medicaid members in the Houston, Texas area. Since March 2003,
Dr.
Johnson has also served as an expert consultant to the Texas State Board of
Medical Examiners, and since 1999 he has been a clinical associate professor
in
the Department of Family Medicine at Baylor College of Medicine in Houston.
From
1990 to October 1997, Dr. Johnson served as Senior Vice President for Medical
Affairs and as Corporate Chief Medical Officer of Physician Corporation of
America. Dr. Johnson is a delegate of the American Academy of Family Physicians
to the American Medical Association and is the former Vice President of The
American Academy of Family Physicians. Dr. Johnson received his undergraduate
degree and his doctorate from Howard University, and is a certified physician
executive.
Summary
Compensation Table
The
following summary compensation table sets forth the 2005, 2004 and 2003 cash
compensation and certain other components of the compensation earned or paid
to
Todd S. Farha, our president and chief executive officer, and the four most
highly compensated executive officers who were serving as such at the end of
2005.
|
Annual
Compensation
|
Long-Term
Compensation
|
||||||
|
Name
and Principal Position
|
Year
|
Salary
($)(1)
|
Bonus
($)(2)
|
Other
Annual Compensation
($) (3)
|
Restricted
Stock Awards
($) (4) (5)
|
Securities
Underlying
Options/SARs(#)
|
All
Other Compensation
($) (6)
|
|
Todd
S. Farha
|
2005
|
387,064
|
400,000
|
75,784
|
7,689,000
|
220,000
|
11,360
|
|
President
and Chief Executive
|
2004
|
311,538
|
718,920
|
59,782
|
475,680
|
81,315
|
6,014
|
|
Officer
|
2003
|
300,000
|
600,000
|
65,427
|
—
|
—
|
554
|
|
Paul
L. Behrens (7)
|
2005
|
275,000
|
165,000
|
1,079
|
400,036
|
8,100
|
3,000
|
|
Senior
Vice President and Chief
|
2004
|
285,577
|
182,838
|
2,586
|
71,352
|
8,131
|
6,000
|
|
Financial
Officer
|
2003
|
68,750
|
260,000
|
19,286
|
1,116,615
|
—
|
—
|
|
Ace
Hodgin, M.D. (7)
|
2005
|
250,385
|
180,000
|
—
|
500,003
|
38,900
|
2,800
|
|
Senior
Vice President and Chief
|
2004
|
103,942
|
68,830
|
13,419
|
71,352
|
80,000
|
—
|
|
Medical
Officer
|
2003
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Imtiaz
(“MT”) Sattaur (7)
|
2005
|
259,615
|
180,000
|
4,914
|
500,003
|
38,900
|
2,800
|
|
President,
Florida
|
2004
|
243,269
|
389,052
|
—
|
173,623
|
137,578
|
2,600
|
|
2003
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Heath
Schiesser
|
2005
|
259,615
|
165,000
|
—
|
400,036
|
17,900
|
2,800
|
|
Senior
Vice President,
|
2004
|
259,615
|
182,838
|
—
|
71,352
|
8,131
|
2,600
|
|
Marketing
& Sales and President, Prescription Drug Plans
|
2003
|
250,000
|
210,000
|
60,808
|
5,639
|
—
|
2,400
|
|
(1)
|
Represents
total salary earned by these executive officers and includes amounts
of
compensation deferred by these executive officers under our 401(k)
savings
plan. The amounts set forth in the table for 2004 are higher than
annual
base salaries as a result of an extra biweekly pay period in
2004.
|
||||||
|
(2)
|
Bonus
amounts generally represent payments earned for service in the year
prior
to the year of payment. Bonus amounts for 2004 include annual cash
bonuses, signing bonuses and bonuses in the form of vested restricted
stock.
|
||||||
|
(3)
|
The
total perquisites paid to the above listed executive officers who
received
perquisites during 2005, 2004 and 2003 are as follows:
|
||||||
|
Name
|
Year
|
Subsidized
Personal Travel
($)
|
Relocation
($)
|
Housing
& Auto Allowance
($)
|
Tax
Gross-Ups ($)
|
||
|
Todd
S. Farha
|
2005
|
—
|
—
|
47,706
|
28,078
|
||
|
2004
|
—
|
—
|
44,067
|
15,715
|
|||
|
2003
|
—
|
—
|
45,901
|
19,526
|
|||
|
Paul
L. Behrens
|
2005
|
—
|
—
|
—
|
1,079
|
||
|
2004
|
—
|
—
|
—
|
2,586
|
|||
|
2003
|
—
|
12,088
|
—
|
7,198
|
|||
|
Ace
Hodgin, M.D.
|
2005
|
—
|
—
|
—
|
—
|
||
|
2004
|
—
|
13,419
|
—
|
—
|
|||
|
2003
|
—
|
—
|
—
|
—
|
|||
|
Imtiaz
(“MT”) Sattaur
|
2005
|
3,276
|
—
|
—
|
1,638
|
||
|
2004
|
—
|
—
|
—
|
—
|
|||
|
2003
|
—
|
—
|
—
|
—
|
|||
|
Heath
Schiesser
|
2005
|
—
|
—
|
—
|
—
|
||
|
2004
|
—
|
—
|
—
|
—
|
|||
|
2003
|
—
|
42,138
|
—
|
18,670
|
|||
|
(4)
|
The
following table shows the total number and value of unvested restricted
stock held by each named executive officer as of December 31, 2005.
The
value of this award as reflected in the table below is based on the
closing price of our common stock on December 31, 2005 of
$40.85.
|
|
Name
|
Date
of Award
|
#
of shares Awarded
|
#
of shares unvested as of
December 31, 2005
|
Unvested
value as ofDecember
31, 2005 ($)
|
|
Todd
S. Farha
|
6/6/05
|
220,000
|
220,000
|
8,987,000
|
|
3/15/05
|
20,000
|
16,000
|
653,600
|
|
|
Paul
L. Behrens
|
3/15/05
|
3,000
|
2,400
|
98,040
|
|
9/30/03
|
458,572
|
200,626
|
8,195,572
|
|
|
Ace
Hodgin, M.D.
|
3/15/05
|
3,000
|
2,400
|
98,040
|
|
Imtiaz
(“MT”) Sattaur
|
3/15/05
|
7,300
|
5,840
|
238,564
|
|
Heath
Schiesser
|
3/15/05
|
3,000
|
2,400
|
98,040
|
|
5/30/03
|
458,572
|
76,435
|
3,122,370
|
|
•
|
The
June 6, 2005 award of restricted stock to Mr. Farha vests 25% annually
from the second through fifth anniversary of the grant date. The
vesting
of this restricted stock award will accelerate in certain circumstances
as
described in “Employment
Contracts and Termination of Employment Arrangements”
below.
|
|
|
•
|
The
March 15, 2005 awards of restricted stock to each of the above-named
executive officers vest 20% on the date of grant and 20% on each
of the
next four anniversaries of the date of grant. These awards were a
component of the officers’ 2004 bonus. The grants would immediately vest
in full upon the termination of the recipient’s employment by the company
without cause, or by the recipient for good reason, within twelve
months
of a change of control of the company. Dividends, if any are declared,
will be paid on the restricted shares.
|
|
|
•
|
The
September 30, 2003 award of restricted stock to Mr. Behrens vests
over a
four-year period at a rate of 25% on September 15, 2004 and 2.0833%
upon
the end of each full calendar month thereafter. The grant would
immediately vest in full upon the termination of the officer’s employment
by us without cause, or by the officer for good reason, following
a change
of control of the company. Dividends, if any are declared, will be
paid on
the restricted shares.
|
|
|
•
|
The
May 30, 2003 award of restricted stock to Mr. Schiesser vests over
a
four-year period at a rate of 2.0833% upon the end of each full calendar
month commencing on August 1, 2002. The grant would immediately vest
in
full upon the termination of the officer’s employment by us without cause,
or by the officer for good reason, within six months of a change
of
control of the company. Dividends, if any are declared, will be paid
on
the restricted shares.
|
|
(5)
|
The
2005 restricted stock awards to Messrs. Behrens, Sattaur and Schiesser
and
Dr. Hodgin were granted on March 13, 2006 as a component of the officers’
2005 bonuses. These awards vest 20% on each of the next five anniversaries
of the date of grant and would immediately vest in full upon the
termination of the recipient’s employment by the company without cause, or
by the recipient for good reason, within twelve months of a change
of
control of the company. Dividends, if any are declared, will be paid
on
the restricted shares.
|
|
(6)
|
All
Other Compensation amounts represent company matching contributions
to the
401(k) savings plan and premiums paid for certain life and disability
insurance policies as set forth below:
|
|
Name
|
Year
|
Life
($)
|
Disability
($)
|
401(k)
Match ($)
|
|
Todd
S. Farha
|
2005
|
5,146
|
3,414
|
2,800
|
|
2004
|
—
|
3,414
|
2,600
|
|
|
2003
|
—
|
—
|
554
|
|
|
Paul
L. Behrens
|
2005
|
—
|
3,000
|
—
|
|
2004
|
—
|
6,000
|
—
|
|
|
2003
|
—
|
—
|
—
|
|
|
Ace
Hodgin, M.D.
|
2005
|
—
|
—
|
2,800
|
|
2004
|
—
|
—
|
—
|
|
|
2003
|
—
|
—
|
—
|
|
|
Imtiaz
(“MT”) Sattaur
|
2005
|
—
|
—
|
2,800
|
|
2004
|
—
|
—
|
2,600
|
|
|
2003
|
—
|
—
|
—
|
|
|
Heath
Schiesser
|
2005
|
—
|
—
|
2,800
|
|
2004
|
—
|
—
|
2,600
|
|
|
2003
|
—
|
—
|
2,400
|
|
(7)
|
Messrs.
Behrens and Sattaur and Dr. Hodgin commenced employment with us in
September 2003, January 2004 and July 2004,
respectively
|
Options
Granted in 2005
The
following table sets forth certain information regarding stock options granted
in 2005 to the five individuals named in the Summary Compensation Table. In
addition, in accordance with the rules of the SEC, the table also shows the
present value, as of the date of grant, of the options under the option pricing
model discussed below. It should be noted that this pricing model is only one
method of valuing options, and our use of the model should not be interpreted
as
an endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the common stock over the exercise price
at the time of exercise.
|
Name
|
#
of Securities Underlying Options
Granted (#)
|
%
of Total Options Granted to Employees
in
Fiscal Year
|
Exercise
Price Per Share
($/share)
($)
(3)
|
Expiration
Date
|
Grant
Date Present
Value
($) (4)
|
|
Todd
S. Farha (1)
|
220,000
|
21.78
|
34.95
|
06/06/12
|
3,306,600
|
|
Paul
L. Behrens (2)
|
8,100
|
0.80
|
36.45
|
07/27/12
|
128,466
|
|
Ace
Hodgin, M.D. (2)
|
38,900
|
3.85
|
36.45
|
07/27/12
|
616,954
|
|
Imtiaz
(“MT”) Sattaur (2)
|
38,900
|
3.85
|
36.45
|
07/27/12
|
616,954
|
|
Heath
Schiesser (2)
|
17,900
|
1.77
|
36.45
|
07/27/12
|
283,894
|
|
(1)
|
The
options awarded to Mr. Farha are nonqualified stock options, vest
50% on
the second anniversary of the grant date and an additional 25%
on each of
the third and fourth anniversaries of the grant date and have a
seven year
term. The vesting of the options will accelerate in certain circumstances
as described in “Employment
Contracts and Termination of Employment Arrangements”
below.
|
|
(2)
|
The
options awarded to Messrs. Behrens, Sattaur and Schiesser and Dr.
Hodgin
are nonqualified stock options, vest 20% on each anniversary of
the grant
date and have seven year terms. The vesting of the options will
accelerate
in full, and remain exercisable for 180 days thereafter, in the
event of
termination of employment as a result of death, disability or retirement,
by the officer for good reason or by us without cause within 12
months
after a change of control. The option will expire and be forfeited
upon
termination of employment by us with cause.
|
|
(3)
|
Exercise
price is the fair market value of the common stock on the date
of grant.
|
|
(4)
|
The
amounts shown are based on a modified Black-Scholes option pricing
model
which uses certain assumptions to estimate the value of employee
stock
options. The material assumptions used for the grants in the table
above
are: an expected term of 4.5 years from the date of grant; 0% dividend
yield; expected volatility of 46.4%; and risk-free interest rates
of 3.73%
for the June 6, 2005 grant and 4.09% for the July 27, 2005 grants.
|
Aggregated
Option Exercises in 2005 and Option Values at December 31, 2005
The
following table indicates, for each of the five individuals named in the
Executive Compensation Table herein, the number of shares covered by both
exercisable and nonexercisable stock options as of December 31, 2005, and the
values for “in-the-money” options which represent the excess of the closing
market price of our common stock at December 31, 2005, over the exercise price
of any such existing stock options.
|
Name
|
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
($)
|
Number
of Securities
Underlying
Unexercised
Options
at December 31, 2005 (#)
|
Value(1)
of Unexercised In-The-Money Options at
December
31, 2005($)
|
||
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
|
Todd
S. Farha
|
__
|
__
|
37,269
|
264,046
|
1,211,988
|
2,730,376
|
|
Paul
L. Behrens
|
__
|
__
|
3,727
|
12,504
|
121,202
|
178,858
|
|
Ace
Hodgin, M.D.
|
25,000
|
607,508
|
1,666
|
92,234
|
36,236
|
1,331,175
|
|
Imtiaz
(“MT”) Sattaur
|
__
|
__
|
59,672
|
116,806
|
1,793,348
|
2,375,049
|
|
Heath
Schiesser
|
__
|
__
|
3,727
|
22,304
|
121,202
|
221,978
|
|
(1)
These
values are based on $40.85 per share, the closing price of the shares
underlying the options on December 31, 2005, less the exercise price,
multiplied by the number of options
|
||||||
Repricing
of Options
In
December 2005, the compensation committee of our board of directors approved
an
amendment to an August 2004 grant of stock options to Dr. Hodgin to increase
the
exercise price per share of all unvested, unexercised options from $17.00 to
$19.10, the fair market value of our common stock on the date of grant. The
amendment was effected in order to avoid certain negative tax consequences
under
the deferred compensation provisions of the American Jobs Creation Act. The
re-pricing had the effect of reducing the amount of net compensation that Dr.
Hodgin will receive upon exercise of the options.
|
Name
|
Date
|
Number
of Securities Underlying Options/SARS Repriced
or Amended (#)
|
Market
Price of Stock At Time of Repricing or
Amendment ($)
|
Exercise
Price At Time Of Repricing Or
Amendment ($)
|
New
Exercise Price
($)
|
Length
of Original Option Term Remaining At Date of
Repricing or Option
|
|
Ace
Hodgin, M.D.
|
12/30/05
|
55,000
|
40.85
|
17.00
|
19.10
|
8.67
years
|
Employment
Contracts and Termination of Employment Arrangements
Todd
S.
Farha serves as our chief executive officer, president and a member of our
board
of directors pursuant to an amended and restated employment agreement dated
June
6, 2005. The agreement has an initial term of five years, commencing on June
6,
2005, and will automatically renew at the end of the initial term and each
additional term for an additional one-year period unless either party notifies
the other that the term will not be extended. Under the agreement, Mr. Farha
is
entitled to an annual salary of $400,000, subject to annual review and potential
increase by our board of directors. In addition, Mr. Farha is eligible to
receive an annual cash bonus, based upon the satisfaction of performance
criteria to be established annually by our compensation committee. If Mr.
Farha’s employment is terminated by us without cause or by Mr. Farha for good
reason, then Mr. Farha will be entitled to continue to receive his base salary
for 12 months, or 24 months if the termination occurs after a change of control.
He will also be entitled to receive an amount equal to his target bonus for
the
year in which the termination occurs, payable one year after the date of
termination, as well as continuation of benefits for 12 months following
termination. We would also be obligated to make additional payments to Mr.
Farha
if he were to incur any excise taxes pursuant to Section 4999 of the Internal
Revenue Code on account of the benefits and payments provided under the
agreement or otherwise. The additional payments would be in an amount such
that,
after taking into account all applicable federal, state and local taxes
applicable to such additional payments, Mr. Farha would be able to retain from
such additional payments an amount equal to the excise taxes that are imposed.
Mr. Farha has agreed not to compete with us during the term of his employment
and for one year thereafter, except that if Mr. Farha’s employment terminates
because we notify him that the term of his agreement will not be renewed, the
non-competition covenant will not apply following the term unless we elect
to
continue to pay him his base salary during that period.
In
addition, in June 2005, in connection with amending and restating his employment
agreement, the compensation committee granted Mr. Farha the following equity
awards:
|
(i)
|
Non-Qualified
Stock Options. Mr.
Farha was granted an option to acquire, at an exercise price of $34.95
per
share, 220,000 shares of our common stock, which vests 50% on the
second
anniversary of the grant date and an additional 25% on each of the
third
and fourth anniversaries of the grant date. The vesting of Mr. Farha’s
options will accelerate in full, and remain exercisable for one-year
thereafter, in the event of the termination (a) of Mr. Farha’s employment
or service with us as a result of his death, disability or retirement,
or
(b) of Mr. Farha’s employment or service with us (or successor thereto) by
Mr. Farha for good reason or by the Company (or successor thereto)
without
cause within 24 months after a change in control. Absent a change
in
control, in the event of the termination of Mr. Farha’s employment or
service with us by Mr. Farha for good reason or by us without cause,
the
vesting of Mr. Farha’s option grant will accelerate on a pro rata basis
based on the number of months elapsed from the grant date, and will
remain
exercisable for one-year thereafter. Mr. Farha’s option grant will expire
and be forfeited upon the termination by us for cause of Mr. Farha’s
employment or service with us. Any unexercised portion of Mr. Farha’s
option grant will automatically terminate and become null and void
on the
seventh anniversary of the grant date.
|
|
(ii)
|
Restricted
Stock Award.
Mr. Farha was granted an award of 220,000 shares of restricted stock
which
vests 25% annually from the second through fifth anniversary of the
grant
date.
The vesting of Mr. Farha’s restricted stock award will accelerate in full
in the event of the termination (a) of Mr. Farha’s employment or service
with us as a result of his death, disability or retirement, or (b)
of Mr.
Farha’s employment or service with us (or successor thereto) by Mr. Farha
for good reason or by us (or successor thereto) without cause, within
24
months after a change in control. Absent a change in control, in
the event
of the termination of Mr. Farha’s employment or service with us by Mr.
Farha for good reason or by us without cause, the vesting of Mr.
Farha’s
restricted stock award will accelerate on a pro rata basis based
on the
number of months elapsed from the grant date.
|
|
(iii)
|
Performance
Share Award.
Mr. Farha was granted an award of shares of common stock which vest
on the
three-year and five-year anniversaries of the grant date based upon
our
achievement of compounded annual percentage increases in diluted
net
income per share (“EPS”) over three-year and five-year periods. The
three-year period is measured from January 1, 2005 through December
31,
2007. The five-year period is measured from January 1, 2005 through
December 31, 2009. Achievement of goals under Mr. Farha’s performance
award will be measured against cumulative EPS over the three-year
and
five-year periods, respectively, with “target”, “threshold” and “maximum”
awards to be based on annual EPS growth. The target number of performance
shares to be issued in the aggregate is 130,000 and the actual number
of
performance shares to be issued shall be between zero and 240,279
based
upon our achievement of the performance goals. 50% of the shares
pursuant
to the performance award will be available for issuance on the first
vesting date based on our achievement of the cumulative EPS goals
for the
first three-year period. Any portion of the 50% not issued on the
first
vesting date will be available for issuance on the second vesting
date
(together with the remaining 50%) based on achievement of the cumulative
EPS goals for the full five-year period. The vesting of Mr. Farha’s
performance awards will accelerate in full in the event of (a) the
termination of Mr. Farha’s employment or service with us as a result of
his death, disability or retirement, or (b) a change in control.
Absent a
change in control, in the event of the termination of Mr. Farha’s
employment or service with us by Mr. Farha for good reason or by
us
without cause, the vesting of Mr. Farha’s performance award will
accelerate on a pro rata basis based on the number of months elapsed
from
the grant date as compared to the 60-month term (or, if termination
occurs
after the first vesting date, as compared to the remaining 24-month
term).
|
Paul
Behrens serves as our senior vice president and chief financial officer and
Heath Schiesser serves as our senior vice president, marketing & sales and
president, prescription drug plans, pursuant to employment agreements with
us,
dated September 15, 2003 and November 18, 2002, respectively. Each agreement
has
an initial term of three years, and will automatically renew for successive
additional one-year periods thereafter unless either party notifies the other
that the term will not be extended. Under the agreements, Mr. Behrens is
entitled to an annual salary of $275,000 and Mr. Schiesser is entitled to an
annual salary of $250,000, in each case subject to annual review and potential
increase by our board of directors. In August 2005, the board increased Mr.
Schiesser’s base salary to $275,000. In addition, each is eligible to receive an
annual potential bonus, payable in the form of cash or equity, based upon the
satisfaction of performance criteria to be established annually by our
compensation committee. If the employment of either of these executives is
terminated by us without cause, or by the executive for good reason, the
executive will be entitled to continue to receive his base salary and benefits
for 12 months following the date of termination. In addition, in the case of
Mr.
Schiesser, if the termination occurs within six months after a change of control
has occurred or a definitive agreement providing for a change of control has
been signed, or if a definitive agreement providing for a change of control
is
signed within six months after the date of termination, he would also be
entitled to receive an amount equal to his expected potential bonus payable
for
the 12-month period following the termination. Each of the executives has agreed
not to compete with us during the term of his employment and for one year
thereafter.
Pursuant
to an offer letter to Mr. Sattaur, dated December 5, 2003, Mr. Sattaur agreed
to
serve as our senior vice president, national Medicare programs with an initial
annual base salary of $250,000 and a bonus award potential of up to 50% of
his
base salary. Pursuant to the offer letter, Mr. Sattaur was awarded stock options
and a sign-on bonus of $100,000. Mr. Sattaur also entered into our standard
confidentiality, restrictive covenant and repayment of sign-on bonus agreements.
In April 2004, Mr. Sattaur was promoted to president, Florida and, in August
2005, Mr. Sattaur’s annual base salary was increased to $275,000.
Pursuant
to an offer letter to Dr. Hodgin, dated June 15, 2004, Dr. Hodgin agreed to
serve as our senior vice president and chief medical officer with an initial
annual base salary of $235,000 and a bonus award potential of up to 40% of
his
base salary. Pursuant to the offer letter, Dr. Hodgin was awarded 80,000 stock
options. Dr. Hodgin also entered into our standard confidentiality and
restrictive covenant agreements. In August 2005, Dr. Hodgin’s base salary was
increased to $275,000. In the event Dr. Hodgin’s employment is terminated by us
without cause, Dr. Hodgin will be entitled to receive continued payment of
his
base salary for a period of six months.
Compensation
Committee Interlocks and Insider Participation
No
member
of the compensation committee serves as a member of the board of directors
or
compensation committee of any other entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee.
Certain
Relationships and Related Transactions
IntelliClaim.
In
March
2003, we entered into an agreement with IntelliClaim, Inc., pursuant to which
we
license software and obtain maintenance, support and related services, from
IntelliClaim. Mr. Hickey, a member of our board of directors, was the
chairman and chief executive officer of IntelliClaim until January 2005. In
2004, we paid $218,675 in the aggregate to IntelliClaim under this agreement.
As
of January 2005, Mr. Hickey no longer served as an officer or director of
IntelliClaim.
Consulting
Agreement with Mr. King-Shaw. In
November 2003, we entered into a consulting agreement with Mr. King-Shaw, one
of
our directors, as more fully described above under “Directors’
Compensation.”
This
agreement was terminated in April 2005
Indemnification
Agreements. We
have
entered into indemnification agreements with our directors and some of our
executive officers in addition to the indemnification that is provided for
in
our certificate of incorporation and bylaws. These agreements, among other
things, provide for the indemnification of our directors and officers for
expenses specified in the agreements, including attorneys’ fees, judgments,
fines and settlement amounts incurred by any of these persons in any action
or
proceeding arising out of these persons’ services as a director or officer for
us, any of our subsidiaries or any other entity to which the person provides
services at our request.
The
compensation committee of the board of directors is comprised of three
independent members of the board of directors, as defined by the applicable
rules of the NYSE, the SEC and the Internal Revenue Code. The compensation
committee was established in February 2004. The compensation committee oversaw
the establishment of the 2005 compensation for the chief executive officer
and
other members of the company’s senior management, including the executive
officers named herein.
Role
of the Compensation Committee
The
compensation committee is governed by a charter which is available on the
company’s website at www.wellcare.com.
As more
fully described in the charter, the primary purposes of the compensation
committee are (i) to discharge the board’s responsibilities relating to
compensation of the company’s directors and executive officers and (ii) to
review and recommend to the board compensation plans, policies and benefit
programs.
Compensation
Philosophy
The
company’s compensation programs and policies are designed to provide incentives
that are geared to deliver value to the company’s shareholders and that attract
and retain individuals of outstanding ability in key positions. Specifically,
our compensation programs focus on:
|
•
|
Pay
for Performance:
Our philosophy is that an individual’s compensation should reflect his or
her individual performance, the performance of his or her department
or
area of responsibility and the performance of the company as
a
whole.
|
|
•
|
Competitive
Pay:
We believe that the company’s overall compensation should be competitive
with other companies of comparable size, complexity and quality.
|
|
•
|
Alignment
with Company Goals:
We have strived to design the company’s compensation programs to support
both the short-term and long-term financial, operating and other
goals of
the company.
|
|
•
|
Culture
of Ownership:
We believe that senior management’s compensation should include long-term
incentives that encourage performance that builds long-term value
for both
the company and its shareholders and fosters a culture of
ownership.
|
Components
of Compensation Program
The
compensation packages for the company’s executives were designed with the goal
of setting total compensation at levels that reflect both personal and
organizational performance. Each executive’s total compensation opportunity was
also determined in consideration of the executive’s experience, level and scope
of responsibility within the company and individual performance. Most of the
company’s executive officers have either employment agreements or offer letters
that establish base salary and potential bonus opportunities and that were
entered into following arm’s length negotiations with the respective executive
officers. In determining salaries, potential bonuses and equity awards, the
committee also considered the recommendations of the chief executive officer
(except in the case of his own compensation).
|
•
|
Salaries:
In determining the compensation for each of the company’s executive
officers, the compensation committee considered such factors as
existing
contractual commitments, compensation opportunities perceived to
be
necessary to attract and retain executive officers, individual
performance
and the importance of each executive’s contribution to the company’s
current and future success. The process of establishing base salaries
is a
subjective process that utilizes no specific weighting or formula
of the
aforementioned factors in determining executive’s salaries. The 2005
salaries of certain of our executive officers are shown in the
Summary
Compensation Table herein.
|
|
•
|
Annual
Potential Bonuses:
The compensation committee considers potential bonus compensation
to be a
motivational method of encouraging and rewarding outstanding individual
performance as well as the overall performance of the company.
Potential
bonus payments are based primarily on: (i) the company’s overall
performance; (ii) the performance of the individual; and (iii)
the
recommendation of the chief executive officer. The committee believes
that
the bonus-to-salary ratios are sufficiently high to provide meaningful
incentives to accomplish the objective of incenting and appropriately
rewarding the executives for exceptional performance. As with salary,
potential bonuses are not based upon formulas or other specific
criteria.
The Summary Compensation Table herein reflects the bonuses paid
in 2006 to
certain of our executive officers for work performed in 2005.
|
|
•
|
Equity
Awards:
The committee believes that equity awards to its executive officers
are a
highly motivational method of encouraging and rewarding individual
performance and the company’s performance as a whole while at the same
time aligning such executive’s interests with those of the company’s
shareholders. After reviewing each executive’s total compensation as well
as the value of restricted stock previously acquired by the executives
through a combination of purchases and awards and considering
recommendations of the chief executive officer, the compensation
committee
awarded stock options in 2005 to the company’s executive officers as
indicated in the Stock Option Grant table herein. Further, as indicated
in
the Summary Compensation Table, in early 2006, the committee granted
shares of restricted stock to each of the officers named in such
table as
a component of such officers’ 2005 bonuses. In order to allow the
company’s executives to achieve a degree of liquidity with respect to
their equity awards, the committee has approved the use by the
executives,
including the chief executive officer, of trading plans under Rule
10b5-1
of the Securities Exchange Act of 1934, as amended.
|
|
•
|
Retirement
Vehicles:
The company maintains a 401(k) savings plan which permits associates,
including our executives, to defer a portion of their eligible
compensation, subject to the statutorily prescribed annual limit.
The
company makes matching contributions on behalf of all participants
who
have elected to make deferrals to the 401(k) plan in an amount
determined
annually by us.
|
Compensation
of Chief Executive Officer
In
determining Mr. Farha’s 2005 compensation, the committee considered his
compensation levels since he first joined the company as chief executive officer
in November 2002. In addition, the committee considered the compensation of
comparable positions at peer companies as well as the company’s financial
performance. In early 2005, the committee reviewed chief executive officer
compensation of peer companies and Mr. Farha’s 2004 goals against his
performance as well as the performance of the company as a whole and determined
that for 2005 his base salary should be increased to $400,000 and awarded him
a
bonus for his 2004 performance in the amount of $600,000.
In
addition to reviewing Mr. Farha’s compensation at the beginning of 2005, in June
2005 Mr. Farha’s employment agreement reached its initial three year term. In
connection with negotiating a new employment arrangement with Mr. Farha, the
committee retained a consulting firm to assist it in evaluating Mr. Farha’s
compensation relative to chief executive officers of peer companies and relative
to Mr. Farha’s own performance and qualifications. After working with its
consultants as well as Mr. Farha’s own compensation specialists, the committee
determined that it was appropriate to enter into a new five year employment
agreement with Mr. Farha, the terms of which remained substantially unchanged
from his prior employment contract. The committee also considered Mr. Farha’s
equity holdings, the majority of which vested in July 2005 and determined to
grant Mr. Farha the following equity awards:
|
•
|
Stock
Options:
Non-qualified stock options to acquire, at an exercise price of
$34.95 per
share, 220,000 shares of the company’s common stock, which vest 50% on the
second anniversary of the grant date and an additional 25% on each
of the
third and fourth anniversaries of the grant date.
|
|
•
|
Restricted
Stock:
220,000 shares of restricted stock, which vests 25% annually from
the
second through fifth anniversary of the grant date.
|
|
•
|
Performance
Shares:
Performance shares which vest on the three-year and five-year
anniversaries of the grant date based upon the company’s achievement of
compounded annual percentage increases in earnings per share, or
EPS, over
three-year and five-year periods. Achievement of goals under Mr.
Farha’s
performance award will be measured against cumulative EPS over
the
three-year and five-year periods, respectively, with “target”, “threshold”
and “maximum” awards to be based on annual EPS growth. The target number
of performance shares to be issued in the aggregate is 130,000
and the
actual number of performance shares to be issued shall be between
zero and
240,279 based upon the company’s achievement of the performance
goals.
|
The
committee believes that the compensation paid to Mr. Farha in 2005, as reflected
in this proxy statement, and the equity awards that were granted to Mr. Farha
in
2005 in connection with the renewal of his employment agreement, are appropriate
to incent and encourage an executive with Mr. Farha’s background and experience
to remain with the company as chief executive officer and to align his interests
with those of the company’s shareholders.
Tax
Limits on Executive Compensation
Section
162(m) of the Internal Revenue Code generally limits the deductibility of
compensation in excess of $1 million paid each year to a publicly-held company’s
chief executive officer and to its four most highly paid executive officers.
The
committee has reviewed the potential consequences for the company of Section
162(m). Although the company will be mindful of the limits imposed by Section
162(m), the company nevertheless reserves the right to structure the
compensation packages and awards in a manner that may exceed the limitation
on
deductions imposed by Section 162(m).
|
The Compensation Committee
|
| Neal Moszkowski (Chairman) |
| Alif Hourani |
| Kevin Hickey |
The
following graph compares the change in the cumulative total return on our common
stock for the period from July 1, 2004, the date shares of our common stock
began trading on the NYSE, to the change in the cumulative total return on
the
stocks included in the Standard & Poor’s 500 Stock Index and to a Peer Group
Index over the same period. The graph assumes an investment of $100 made in
our
common stock and each index on July 1, 2004. We did not pay any dividends during
the period reflected in the graph. Note that our common stock price performance
shown below should not be viewed as being indicative of future performance.
The
Peer
Group Index consists of the following companies: Aetna Inc., Amerigroup
Corporation, Centene Corporation, Coventry Health Care, Inc., HealthNet, Inc.,
Humana, Inc., Pacificare Health Systems, Inc., Sierra Health Services, Inc.,
United HealthGroup, Inc. and WellPoint Health Networks Inc.
|
|
7/1/2004
|
9/30/2004
|
12/31/2004
|
3/31/2005
|
6/30/2005
|
9/30/2005
|
12/31/2005
|
|
WellCare
Health Plans, Inc.
|
$100
|
$111
|
$191
|
$179
|
$209
|
$218
|
$240
|
|
S&P
500 Index
|
100
|
99
|
108
|
106
|
107
|
111
|
114
|
|
Peer
Group Index
|
100
|
113
|
140
|
155
|
172
|
185
|
201
|
The
information set forth above under the headings “Report of the Compensation
Committee”, “Report of the Audit Committee” and “Comparison of Cumulative Total
Returns” does not constitute soliciting material and should not be deemed filed
or incorporated by reference into any other of our filings under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent
the
filing specifically incorporates such information by reference therein.
The
role
of the audit committee is to assist the board of directors in fulfilling
its
oversight responsibilities for the financial reporting process, the system
of
internal control, the audit process and the company’s process for monitoring
compliance with laws and regulations. The committee operates pursuant to
a
charter that was adopted by the board of directors on February 11, 2004,
a copy
of which is appended to this proxy statement and is available on the company’s
website at www.wellcare.com. As set forth in the charter, management of the
company and the company’s independent auditor are responsible for planning or
conducting audits and determining that the company’s financial statements are
complete and accurate and are in accordance with principles generally accepted
in the United States of America. The independent auditors are accountable
to the
audit committee. The audit committee has the authority and responsibility
to
retain and terminate the company’s independent auditors.
In
performance of this oversight function, the committee has considered and
discussed the audited financial statements with management and the independent
auditors. The committee has also discussed with the independent auditors
the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication
with Audit Committees,
as
currently in effect. The committee has also discussed with management the
company’s internal controls and procedures and disclosure controls and
procedures relating to financial and other matters. Finally, the committee
has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees,
as
currently in effect, has considered whether the provision of non-audit services
by the independent auditors to the company is compatible with maintaining
the
auditors’ independence and has discussed with the auditors their independence.
The
members of the audit committee are advised by the independent auditors. The
independent auditors are experts in the fields of accounting and auditing,
including in respect of auditor independence. Members of the committee rely
without independent verification on the information provided to them and
on the
representations made by management and the independent auditors. Accordingly,
management is solely responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal control and procedures
designed to assure compliance with accounting standards and applicable laws
and
regulations. Furthermore, the audit committee’s considerations and discussions
referred to above do not assure that the audit of the company’s financial
statements has been carried out in accordance with generally accepted auditing
standards.
During
the fiscal year ended December 31, 2005, the committee fulfilled its duties
and
responsibilities generally as outlined in the charter. Specifically, the
committee, among other actions:
|
•
|
Reviewed
and discussed the company’s quarterly earnings press releases,
consolidated financial statements and related periodic reports
filed with
the Securities and Exchange Commission, with management and the
independent auditor;
|
|
•
|
Reviewed
with management, the independent auditor and the internal auditor
management’s assessment of the effectiveness of the company’s internal
control over financial reporting and the independent auditor’s opinion
about management’s assessment and the effectiveness of the company’s
internal control over financial reporting;
|
|
•
|
Reviewed
with the independent auditor, management and the internal auditor
the
audit scope and plan;
|
|
•
|
Conducted
reviews and evaluations of the effectiveness of the committee
and the
company’s audit function; and
|
|
•
|
Met
in periodic executive sessions with each of the independent auditor,
management and the internal
auditor.
|
Based
upon the reports and discussions described in this report, and subject to
the
limitations on the role and responsibilities of the committee referred to
above
and in the charter, the committee recommended to the board that the audited
financial statements be included in the company’s Annual Report on Form 10-K for
the year ended December 31, 2005, as filed with the Securities and Exchange
Commission. In addition, the committee has also approved the appointment
of
Deloitte & Touche LLP as the company’s independent registered public
accounting firm for the fiscal year ending December 31, 2006.
|
The
Audit Commitee
|
| Regina Herzlinger (Chairperson) |
| Christian Michalik |
| Jane Swift |
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
audit
committee has appointed the firm of Deloitte & Touche LLP (“Deloitte &
Touche”) as our independent registered public accounting firm for fiscal year
2006, and has directed that such appointment be submitted to our shareholders
for ratification at the annual meeting. Our organizational documents do not
require that our shareholders ratify the appointment of our independent
registered public accounting firm. We are submitting the appointment of Deloitte
& Touche to our shareholders for ratification because we believe it is a
matter of good corporate practice. In the event of a negative vote on such
ratification, the audit committee will reconsider its selection, but may
still
retain Deloitte& Touche. We anticipate that a representative of Deloitte
& Touche will be present at the annual meeting to respond to appropriate
questions and to make such statements as they may desire.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THIS
PROPOSAL.
2004
and 2005 Audit, Audit-Related, Tax and Other Fees
The
table
below presents fees for professional audit services rendered by Deloitte
&
Touche for the years ended December 31, 2004 and December 31, 2005 and fees
billed for other services rendered by Deloitte & Touche during those
periods.
|
Audit,
Audit-Related, Tax and Other Fees
|
|||||||
|
Services
|
2004
|
2005
|
|||||
|
Audit
|
$
|
1,273,800(1)
|
|
$
|
2,205,000(1)
|
|
|
|
Audit-related
|
280,000(2)
|
|
—
|
||||
|
Tax
|
—
|
—
|
|||||
|
Other
|
—
|
—
|
|||||
|
(1)
|
The
services billed by Deloitte & Touche for audit services in 2004 and
2005 include services rendered for the audit of our annual consolidated
financial statements, audit of the effectiveness of internal
controls over
financial reporting and the review of the financial statements
included in
our Form 10-Qs. This amount also includes fees billed for audit
services
related to audited annual and periodic statutory financial statements
filed with regulatory agencies, regulatory reviews and examinations
and
securities registration statements. The 2004 amount includes
$215,600 for
audit services which was not previously included in the 2005
proxy
statement.
|
|
(2)
|
The
services billed by Deloitte & Touche for audit-related services in
2004 include services related to Sarbanes-Oxley 404 readiness
assistance.
|
Audit
and Non-Audit Services Pre-Approval Policy
Deloitte
& Touche was our independent registered public accounting firm for the year
ended December 31, 2005, and has been selected by our audit committee to
be our
independent registered public accounting firm for the year ending December
31,
2006. The audit committee has adopted an Audit and Non-Audit Services
Pre-Approval Policy which is designed to assure that the services performed
for
us by the independent registered public accounting firm do not impair their
independence from the company. This policy sets for guidelines and procedures
the audit committee must follow when retaining the independent registered
public
accounting firm to perform audit, audit-related, tax and other services.
The
policy provides detailed descriptions of the types of services which may
be
provided under these four categories and also sets for a list of services
that
the independent registered public accounting firm may not perform for us.
Prior
to
engagement, the audit committee pre-approves the services and fees of the
independent registered public accounting firm within each of the above
categories. During the year, it may become necessary to engage the independent
registered public accounting firm for additional services not previously
contemplated as part of the engagement. In those instances, the Audit and
Non-Audit Services Pre-Approval Policy requires that the audit committee
specifically approve the services prior to the independent registered public
accounting firm’s commencement of those additional services. Under the Audit and
Non-Audit Services Pre-Approval Policy the audit committee may delegate the
ability to pre-approve audit and non-audit services to one or more of its
members provided the delegate reports any pre-approval decision to the audit
committee at its next scheduled meeting. As of the date hereof, the audit
committee has not delegated its ability to pre-approve audit services. The
policy does not provide for a de
minimus
exception to the pre-approval requirements. Accordingly, all of the 2004
and
2005 fees described above were pre-approved by the full audit committee in
accordance with the Audit and Non-Audit Services Pre-Approval Policy.
Shareholder
Proposals
In
order
to be considered for inclusion in our proxy statement and form of proxy relating
to the 2007 annual meeting of shareholders, pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, all shareholder proposals must be received
by
our secretary at our principal offices in Tampa, Florida, on or before December
29, 2006. In addition, under our bylaws, any shareholder proposal for
consideration at the 2007 annual meeting of shareholders submitted outside
the
processes of Rule 14a-8 of the Securities Exchange Act of 1934, including
any
shareholder nominations for the board of directors, will be untimely unless
it
is received by our secretary not less than 90 days nor more than 120 days
prior
to the date of the anniversary of the previous year’s meeting and is otherwise
in compliance with the requirements set forth in our bylaws. Since our 2006
annual meeting is being held on June 7, 2006, we must receive written notice
of
a shareholder proposal submitted other than pursuant to Rule 14A-8 by March
17,
2007, and no earlier than February 15, 2007.
Multiple
Shareholders Having the Same Address
If
you
and other residents at your mailing address own shares of common stock, your
broker or bank may have sent you a notice that your household will receive
only
one annual report and one proxy statement from each company in which you
hold
stock through that broker or bank. This practice of sending only one copy
of the
proxy materials is known as “householding.” Householding saves us expense by
permitting us to reduce printing and mailing costs. If you did not respond
that
you did not want to participate in householding, you were deemed to have
consented to the process. Your broker will send one copy of our annual report
and proxy statement to your address. If you hold your shares in street name,
you
may revoke your consent to householding at any time by notifying your broker.
If
you are a registered holder, you may revoke your consent to householding
by
sending your name to Computershare Trust Company, N.A. c/o Computershare,
Inc.,
P.O. Box 43023, Providence, RI 02940-3023, telephone number (816) 843-4299.
The
revocation of your consent to householding will be effective 30 days following
its receipt. If you or a member of your household who owns shares of our
common
stock did not receive a copy of our annual report or proxy statement, you
may
request one by writing to Investor Relations Department, WellCare Health
Plans,
Inc., 8735 Henderson Road, Renaissance Two, Tampa, Florida 33634, or by calling
(813) 865-1284. The company’s 2005 Annual Report to Shareholders, 2005 Annual
Report on Form 10-K and this proxy statement are also available on the Internet
site at
www.wellcare.com.
Solicitation
All
costs
and expenses associated with soliciting proxies will be borne by us. In addition
to the use of the mails, proxies may be solicited by the directors, officers
and
our associates by personal interview, telephone or telegram. Such directors,
officers and associates will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Arrangements will also be made with custodians, nominees
and fiduciaries for the forwarding of solicitation material to the beneficial
owners of our common stock held of record by such persons, and we will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses incurred in connection therewith. We have not retained a proxy
solicitor to assist in the solicitation of proxies for this meeting.
As
of the
date of this proxy statement, the board of directors is not aware of any
other
business or matters to be presented for consideration at the meeting other
than
as set forth in the notice of meeting attached to this proxy statement. However,
if any other business shall come before the meeting or any adjournment or
postponement thereof and be voted upon, the enclosed proxy shall be deemed
to
confer discretionary authority on the individuals named to vote the shares
represented by such proxy as to any such matters.
We
will provide without charge to each beneficial holder of our common stock
on the
record date, upon the written request of any such person, a copy of our 2005
Annual Report to Shareholders and Annual Report on Form 10-K (without exhibits)
for the fiscal year ended December 31, 2005, as filed with the SEC. We will
also
provide to any person without charge, upon request, a copy of our Trust Program,
our corporate governance guidelines and our board committee charters. Any
such
requests should be made in writing to the Investor Relations Department,
WellCare Health Plans, Inc., 8735 Henderson Road, Renaissance Two, Tampa,
Florida 33634. A copy of these documents and our other SEC filings are also
available on the Internet at www.wellcare.com.
We intend to disclose future amendments to, or waivers from, the provisions
of
the Trust Program, if any, made with respect to any of our directors and
executive officers on our Internet site.
Audit
Committee Charter
Purpose
The
principal purposes of the audit committee of the board of directors of
WellCare
Health Plans, Inc. (the “Corporation”)
are to
(A) assist the board of directors in the oversight of (i) the integrity
of the
financial statements of the Corporation, (ii) the compliance by the Corporation
with legal and regulatory requirements, (iii) the qualification and independence
of the Corporation’s independent auditors, and (iv) the performance of the
Corporation’s internal audit function and independent auditors, and (B) prepare
an audit committee report as required by the Securities and Exchange
Commission
to be included in the Corporation’s annual proxy statement.
While
the
audit committee has the responsibilities and powers set forth in this
Charter,
its function is one of oversight, and it is not the duty of the committee
to
plan or conduct audits or to determine that the Corporation’s financial
statements are complete and accurate and are in accordance with accounting
principles generally accepted in the United States of America. The planning
and
conduct of the audit is the responsibility of the independent auditor
and the
financial statements are the responsibility of management. Except as
otherwise
provided herein, it is not the duty of the audit committee to conduct
investigations or to assure compliance with laws and regulations and
the
Corporation’s internal policies.
Authority
The
audit
committee has authority to conduct or authorize investigations into any
matters
within its scope of responsibility. It shall be directly responsible
for:
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The
appointment, compensation, retention and oversight of the work
of any
registered public accounting firm employed by the organization
for the
purpose of preparing or issuing an audit report or performing
other audit,
review or attest services for the Corporation, and such firm
shall report
directly to the audit committee.
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The
resolution of any disagreements between management and the
auditor
regarding financial reporting.
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Seeking
any information it requires from employees—all of whom are directed to
cooperate with the committee’s requests—or external
parties.
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Meeting
with the Corporation’s officers, independent auditors, or outside counsel,
as necessary.
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The
audit
committee may form, and where legally permissible may delegate authority
to,
subcommittees when the committee deems it appropriate or desirable.
The
committee shall have the sole authority, to the extent it deems necessary
or
appropriate, to retain and engage advisers, including any independent
counsel,
accountants, or others, to advise the committee or assist in the conduct
of an
investigation, and shall have the sole authority to approve the advisers’ fees
and other retention terms.
The
committee shall have the sole authority to, and shall, review and pre-approve,
either pursuant to a policy adopted by the committee or through a separate
pre-approval by the committee, any engagement of the Corporation’s independent
auditor to provide any audit services and/or any permitted non-audit
services to
the Corporation that are not prohibited by law. The committee shall have
the
ability to delegate the authority to pre-approve audit and non-audit
services to
one or more designated members of the committee. If such authority is
delegated,
the delegated member(s) of the committee shall report to the full committee,
at
the next committee meeting, all items pre-approved by the designated
member(s).
The
committee shall advise the Corporation of the funding requirements necessary
to
pay (i) the auditors for the purpose of rendering the audit report or
performing
other audit, review or attest services, (ii) any other advisers employed
by the
committee, and (iii) ordinary administrative expenses of the committee
that are
necessary or appropriate in carrying out its duties.
Composition
and Qualification
The
audit
committee will consist of at least three members of the board of directors.
The
board or its nominating committee will appoint committee members and
the
committee chair. Committee members may be removed or replaced by the
board of
directors.
Each
committee member will be both independent of management and financially
literate
pursuant to the applicable rules and regulations of the federal securities
laws
and the New York Stock Exchange, all as in effect from time to time and
as
interpreted by the board in its business judgment. At least one member
shall be
designated as an “audit committee financial expert,” as defined by applicable
regulations of the Securities and Exchange Commission, and at least one
member
shall have accounting or related financial management expertise (which
member
may also be the audit committee financial expert). Because of the committee’s
demanding role and responsibilities, and the time commitment of each
attendant
to committee membership, no member of the committee, including the chairman,
shall serve on the audit committee of more than two other public companies
at
any one time, including the Corporation’s audit committee
unless
it is determined, based on the individual facts, that such other service
will
not interfere with service on the Board.
To
ensure
independence and to otherwise avoid any potential conflicts of interest,
members
of the committee may not (other than fees and equity received as compensation
for serving as a director) accept or receive, directly or indirectly,
any
consulting, advisory or other compensatory fee from the Corporation or
any of
its subsidiaries or be an affiliated person of the Corporation or any
of its
subsidiaries.
Meetings
The
committee will meet at least four times a year, with authority to convene
additional meetings, as circumstances require. All committee members
are
expected to attend each meeting, in person or via tele- or video-conference.
The
committee will invite members of management, auditors or others to attend
meetings and provide pertinent information, as necessary. It will hold
private
meetings with auditors (see below) and executive sessions. Meeting agendas
will be prepared and provided in advance to members, along with appropriate
briefing materials. Minutes will be prepared.
Responsibilities
The
committee will carry out the following responsibilities:
Financial
Statements
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Review
significant accounting and reporting issues, including complex
or unusual
transactions and highly judgmental areas, and recent professional
and
regulatory pronouncements, and understand their impact on
the financial
statements. The committee shall review regular reports from
the
independent auditor on the critical policies and practices
of the
Corporation, and all alternative treatments of financial
information
within generally accepted accounting principles that have
been discussed
with management.
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Review
with the independent auditors the results of the audit, any
audit problems
or difficulties encountered and management’s response to such problems or
difficulties, including any restrictions on the scope of
the independent
auditor’s activities or on access to requested information, and any
significant disagreements with management. Such review may
also include a
discussion of:
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any
accounting adjustments that were noted or proposed by the
independent
auditor but were passed (as immaterial or otherwise);
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any
communications between the independent auditor and its national
office
respecting auditing or accounting issues presented by the
engagement;
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any
“management” or “internal control” letters issued, or proposed to be
issued, by the independent auditor to the Corporation;
and
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the
responsibilities, budget and staffing of the internal audit
function.
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The
committee shall review and discuss earnings press releases
(paying
particular attention to any use of “pro forma” or “adjusted” non-GAAP
information), as well as financial information and earnings
guidance
provided to analysts and rating agencies.
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The
committee shall review with management and the independent
auditors the
annual audited financial statements and disclosures under
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
prior to the filing of the Corporation’s Annual Report on Form 10-K,
including their judgment about the quality, not just the
acceptability, of
accounting principles, the reasonableness of significant
judgments, and
the clarity of the disclosures in the financial statements.
Also, the
committee shall discuss the results of the annual audit and
any other
matters required to be communicated to the committee by the
independent
auditors under generally accepted auditing standards.
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The
committee shall review the interim financial statements and
disclosures
under Management’s Discussion and Analysis of Financial Condition and
Results of Operations with management and the independent
auditors prior
to the filing of the Corporation’s Quarterly Report on Form 10-Q. Also,
the committee shall discuss the results of the quarterly
review and any
other matters required to be communicated to the committee
by the
independent auditors under generally accepted auditing standards.
The
chair of the committee may represent the entire committee
for the purposes
of this review.
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In
connection with the committee’s review of the Corporation’s annual audited
and/or quarterly unaudited financial statements, the committee
shall
review and discuss the following:
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Major
issues regarding accounting principles and financial statement
presentations, including any significant changes in the Corporation’s
selection or application of accounting principles, and any
major issues as
to the adequacy of the Corporation’s internal controls and any special
audit steps adopted in light of material control
deficiencies.
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Analyses
prepared by management and/or the independent auditor setting
forth
significant financial reporting issues and judgments made
in connection
with the preparation of the financial statements, including
analyses of
the effects of alternative generally accepted accounting
principle methods
on the financial statements.
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The
effect of regulatory and accounting initiatives, as well
as off-balance
sheet structures, on the Corporation’s financial statements.
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Review
the following matters with the independent auditor (such
matters shall be
timely reported to the committee by the independent
auditor):
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All
critical accounting policies and practices to be used;
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All
alternative treatments of financial information within generally
accepted
accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures
and treatments,
and the preferred treatment of the auditor; and
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Other
material written communications between the auditor and management,
including any management letter or schedule of unadjusted
differences.
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Internal
Control
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Consider
the effectiveness of the Corporation’s internal control system, including
information technology security and control.
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Understand
the scope of internal and independent auditors’ review of internal control
over financial reporting, and obtain reports on significant
findings and
recommendations, together with management’s
responses.
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Internal
Audit
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Review
with management and the chief audit executive the charter,
plans,
activities, staffing, and organizational structure of the internal
audit
function.
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Ensure
there are no unjustified restrictions or limitations, and review
and
concur in the appointment, replacement, or dismissal of the
chief audit
executive.
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Review
the effectiveness of the internal audit function.
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On
a regular basis, meet separately with the chief audit executive
to discuss
any matters that the committee or internal audit believes should
be
discussed privately.
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Review
management’s annual report on internal control over financial reporting
prior to the Corporation’s inclusion of such annual report in the
Corporation’s Annual Report on Form 10-K.
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Review
the independent auditor’s attestation report regarding management’s
assessment of the Corporation’s internal control over financial reporting
prior to the inclusion of such attestation report in the Corporation’s
Annual Report on Form 10-K.
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Review
with management any changes in the Corporation’s internal control over
financial reporting that occurred during the most recently
completed
fiscal quarter that have materially affected, or are reasonably
likely to
materially affect, the Corporation’s internal control over financial
reporting.
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Review
any significant deficiencies or material weaknesses identified
in the
Corporation’s internal control over financial reporting, and any special
steps taken as a result thereof.
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Independent
Auditors
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Review
the independent auditors’ proposed audit scope and approach, including
coordination of audit effort with internal audit.
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Review
the performance of the independent auditors, and exercise final
approval
on the appointment or discharge of the auditors.
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Review
and confirm the independence of the independent auditors by
obtaining
statements from the auditors on relationships between the auditors
and the
Corporation, including non-audit services, and discussing the
relationships with the auditors.
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Review
a report by the independent auditors describing the auditors’ internal
quality control procedures, and any material issues raised
by the most
recent internal quality control review, or peer review, of
the firm, or by
any inquiry or investigation by governmental or professional
authorities,
within the preceding five years, respecting one or more independent
auditors carried out by the firm, and any steps taken to deal
with any
such issues.
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Discuss
with the independent auditor the matters required to be discussed
by
Statement on Auditing Standards No. 61, as amended, relating
to the
conduct of the audit.
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Request
a representation letter from the Corporation’s independent auditor prior
to the commencement of the audit engagement confirming that
(i) the lead
(or coordinating) audit partner and the reviewing audit partner
have not
performed audit services for the Corporation for more than
five (5)
consecutive years, and (ii) if either of such persons performed
audit
services for the Corporation for five (5) consecutive years,
the last year
of such period was more than five (5) years ago.
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Consider
whether, in order to assure continuing auditor independence,
it is
appropriate to adopt a policy of rotating the lead audit partner
or even
the independent auditing firm itself on a regular
basis.
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Set
clear hiring policies for employees or former employees of
the independent
auditors.
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On
a regular basis, meet separately with the independent auditors
to discuss
any matters that the committee or auditors believe should be
discussed
privately.
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Compliance
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Review
the effectiveness of the system for monitoring compliance with
laws and
regulations and the results of management’s investigation and follow-up
(including disciplinary action) of any instances of
noncompliance.
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The
committee shall establish and periodically review procedures
for the
receipt, retention, and treatment of complaints received by
the issuer
regarding accounting, internal accounting controls, or auditing
matters,
and the confidential, anonymous submission by employees of
the issuer
regarding questionable accounting or auditing matters.
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Review
the findings of any examinations by regulatory agencies, and
any auditor
observations.
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Review
the process for communicating the code of conduct to the Corporation’s
personnel, and for monitoring compliance
therewith.
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Obtain
regular updates from management and the Corporation’s legal counsel
regarding compliance matters.
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Reporting
Responsibilities
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Regularly
report to the board of directors about committee activities,
issues, and
related recommendations.
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Provide
an open avenue of communication between internal audit, the
independent
auditors, and the board of directors.
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Report
annually to the shareholders, describing the committee’s composition,
responsibilities and how they were discharged, and any other
information
required by rule, including approval of non-audit
services.
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Review
any other reports the Corporation issues that relate to committee
responsibilities.
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Other
Responsibilities
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On
a regular basis, meet separately with management to discuss
any matters
that the committee or management believe should be discussed
privately.
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Perform
other activities related to this charter as requested by the
board of
directors. Institute and oversee special investigations as
needed.
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Discuss
the Corporation’s policies with respect to risk assessment and risk
management, including the Corporation’s major financial risk exposures and
the steps management has taken to monitor and control such
exposures.
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Review
and assess the adequacy of the committee charter annually,
requesting
board approval for proposed changes, and ensure appropriate
disclosure as
may be required by law or regulation.
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Confirm
annually that all responsibilities outlined in this charter
have been
carried out.
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Evaluate
the committee’s and individual members’ performance on an annual basis,
and report on such review and evaluation to the board of
directors.
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Disclosure
Publish
this charter to the Corporation’s website.
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[
] Mark this box with an X if you have made changes to your
name or address details above.
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Annual
Meeting Proxy Card
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A.
Election of Directors
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The
Board of Directors recommends a vote FOR items 1 and 2. UNLESS
THE
STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR
ITEMS 1 AND
2.
1.
Election of Directors.
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Nominees
for Class II Directors:
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01
- Andrew Agwunobi, M.D.
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For
Withhold
[
] [ ]
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02
- Ruben Jose King-Shaw, Jr.
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For
Withhold
[
] [ ]
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03
- Christian P. Michalik
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For
Withhold
[
] [ ]
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B.
Issues
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The
Board of Directors recommends a vote FOR the following
proposal.
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2.
Ratification of Deloitte & Touche LLP as independent registered public
accounting firm for fiscal year 2006.
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For
Against Abstain
[
] [
] [
]
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3.
As such proxies may in their discretion determine in respect
of any other
business properly to come before said meeting (the Board of
Directors
knowing of no such other business).
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C.
Authorized Signatures - Sign Here - This section must be completed
for
your instructions to be executed.
(Please
sign in the same form as name appears hereon. Executors and
other
fiduciaries should indicate their titles. If signed on behalf
of a
corporation, give title of officer signing.)
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Signature
1 - Please keep signature within the box
_______________________________________
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Signature
2 - Please keep signature within the box
______________________________________
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Date
(mm/dd/yyyy)
_______________
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Proxy
- WellCare Health Plans, Inc.
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PROXY
FOR 2006 ANNUAL MEETING ON JUNE 7, 2006
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Todd S. Farha, Chief Executive
Officer, and
Thaddeus Bereday, Secretary, and each of them, attorneys with
full power
of substitution, to vote as directed on the reverse side all
shares of
Common Stock of WellCare Health Plans, Inc. registered in the
name of the
undersigned, or which the undersigned may be entitled to vote,
at the 2006
Annual Meeting to be held at 8735 Henderson Road, Renaissance
Centre,
Tampa, Florida 33634, on June 7, 2006, at 10:00 a.m. and at
any
adjournment or postponement thereof.
(Continued
and to be voted on reverse side.)
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