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 27, 2007
8735
Henderson Road –
Tampa,
Florida 33634 –
(813)
290-6200 –
www.wellcare.com
April
26,
2007
Dear
Shareholder:
You
are
cordially invited to attend the 2007 annual meeting of shareholders of WellCare
Health Plans, Inc. to be held on June 12, 2007, 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 two class III directors to serve
until
the 2010 annual meeting; (b) ratify the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for fiscal year 2007;
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.
You
could save us money by voting through the internet or by telephone. 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, or
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 12, 2007. 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 | ||
| Chairman and Chief Executive Officer |
WELLCARE
HEALTH PLANS, INC.
8735
Henderson Road
Tampa,
Florida 33634
Notice
of Annual Meeting of Shareholders
|
TIME
AND DATE
|
10:00
a.m. local time on June 12, 2007.
|
|
PLACE
|
8735
Henderson Road
Renaissance
Centre
Tampa,
Florida 33634
|
|
PURPOSE
|
a. To
elect two class III 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 2007; 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 17, 2007.
|
|
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. Most shareholders
have the option of voting through the internet or by telephone.
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 27, 2007.
| Sincerely, | ||
 |
||
| Thaddeus Bereday | ||
| Secretary |
Tampa,
Florida
April
26,
2007
|
Page
|
|
WELLCARE
HEALTH PLANS, INC.
8735
Henderson Road
Tampa,
Florida 33634
Proxy
Statement for Annual Meeting
To
Be Held June 12, 2007
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 12, 2007, 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 26, 2007 and is first being mailed to shareholders
along with the related form of proxy on or about April 27, 2007.
If
you
share the same last name with other shareholders living in your household,
you
may receive only one copy of our proxy statement and 2006 annual report.
Please
see the section entitled “Multiple
Shareholders Having the Same Address”
at
the
end of this proxy for more information on this important initiative to reduce
printing and mailing costs.
You
may
help us to reduce printing and mailing costs further by opting to receive
future
proxy materials by e-mail. Please see the response to the question “Can
I
access the proxy materials on the internet?”
for
more information on electronic delivery of proxy materials.
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 two directors to serve as class III directors until
the
2010 annual meeting; and (b) to ratify the appointment of Deloitte & Touche
LLP as our independent registered public accounting firm for fiscal year
2007.
You will also be asked to vote on 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 17, 2007, 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 41,195,205 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.
Can
I vote by telephone or electronically?
You
may
vote by telephone or electronically through the internet by following the
instructions included on your proxy card. We encourage you to vote by telephone
or through the internet because such votes are less costly for us to collect
and
tally. The deadline for voting by telephone or through the internet is 1:00
a.m., Central Time, on June 12, 2007.
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 2007;
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, 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 will count and tabulate all votes at the annual
meeting.
What
vote is required to approve each proposal?
Election
of Directors.
The
affirmative vote of a plurality of the votes cast at the meeting is required
to
elect the 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 website at www.wellcare.com.
Can
I access the proxy materials on the internet?
The
notice of annual meeting, proxy statement and 2006 annual report are available
on our website at www.wellcare.com.
Instead
of receiving future copies of these materials by mail, most shareholders
can
elect to receive an e-mail that will provide electronic links to them. Opting
to
receive your proxy materials online will save us the cost of producing and
mailing documents to your home or business.
If
you
are a shareholder of record you can enroll in the electronic proxy delivery
service electronically by going to www.investorvote.com.
If you
hold your shares in a brokerage account, you may also have the opportunity
to
receive copies of these documents electronically. Please check the information
provided in the proxy materials mailed to you by your bank or broker regarding
the availability of this service.
Who
are the largest owners of your stock?
The
table
below sets forth certain information regarding beneficial owners known to
us as
of April 5, 2007 of more than 5% of our outstanding shares of common stock.
The
ownership percentage is based on the number of shares reported by the applicable
beneficial owner and the number of shares of our common stock outstanding
as of
April 5, 2007.
|
|
Ownership
|
||||||
|
Name
and Address
|
Common
Stock
|
|
|
Percent
(%)
|
|
||
|
Barclays
Global Investors, et
al.(1)
45
Fremont Street
San
Francisco, CA 94105
|
|
|
3,101,450
|
|
|
7.5
|
|
|
State
Street Bank and Trust Company,
et al.(2)
225
Franklin Street
Boston,
MA 02110
|
|
|
2,210,509
|
|
|
5.4
|
|
|
Waddell
& Reed, Inc., et
al.
(3)
6300
Lamar Avenue
Overland
Park, KS 66202
|
|
|
2,137,400
|
|
|
5.2
|
|
|
(1)
|
This
disclosure is based upon a Schedule 13G filed by Barclays Global
Investors, N.A. (“Barclays”) and other affiliated entities with the
Securities and Exchange Commission on January 23, 2007. Barclays
and the
other affiliated entities reported sole voting and dispositive
power as of
December 31, 2006 as follows: (i) Barclays Global Investors, N.A.,
sole
voting power as to 2,438,646 shares and sole dispositive power
as to
2,798,588 shares; (ii) Barclays Global Fund Advisors, sole voting
power
and sole dispositive power as to 168,587 shares; (iii) Barclays
Global
Investors, Ltd., sole voting and dispositive power as to 134,275
shares;
and (iv) Barclays Global Investors Japan Trust and Banking Company
Limited
and Barclays Global Investors Japan Limited, sole voting and dispositive
power as to no shares.
|
|
(2)
|
This
disclosure is based upon a Schedule 13G filed by State
Street Bank and Trust Company,
acting in various fiduciary capacities (“State Street”) with the
Securities and Exchange Commission on February 13, 2007. State
Street and
other affiliated entities reported sole voting and dispositive
power as of
December 31, 2006 as follows: (i) State Street Bank and Trust Company
sole
voting power and shared dispositive power as to 2,210,509; and
(ii) State
Street Bank and Trust Company, Trustee sole voting power and shared
dispositive power as to 2,210,509
shares.
|
|
(3)
|
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 9, 2007. 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.
|
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 5, 2007
by:
(a) each director and nominee; (b) each of the 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 (1)
|
|
Percent
|
||||
|
Todd
Farha
|
1,064,854
|
|
|
2.6
|
|
||
|
Regina
Herzlinger
|
|
|
62,914
|
|
|
*
|
|
|
Kevin
Hickey
|
|
|
43,104
|
|
|
*
|
|
|
Alif
Hourani
|
|
|
22,622
|
|
|
*
|
|
|
Ruben
King-Shaw, Jr.
|
|
|
25,497
|
|
|
*
|
|
|
Christian
Michalik
|
|
|
88,900
|
|
|
*
|
|
|
Neal
Moszkowski
|
|
|
78,094
|
|
|
*
|
|
|
Jane
Swift
|
|
|
16,624
|
|
|
*
|
|
|
Paul
Behrens
|
|
|
295,561
|
|
|
*
|
|
|
Thaddeus
Bereday
|
|
|
158,306
|
|
|
*
|
|
|
Ace
Hodgin(2)
|
|
|
882
|
|
|
*
|
|
|
Imtiaz
Sattaur(3)
|
|
|
148,869
|
|
|
*
|
|
|
All
Directors, Nominees and Executive Officers as a Group (14
persons)
|
|
|
2,054,514
|
|
|
4.9
|
|
*
Less
than one percent
| (1) |
Several
of our officers and directors hold their shares in brokerage accounts
where there may be a loan balance from time to time that is secured
by all
of the assets in the account, including shares of our stock. Accordingly,
even though there may be substantial assets in the account, the shares
of
our stock in these accounts could technically be sold in a margin
sale.
|
| (2) |
Dr.
Hodgin ceased employment with us effective December 31,
2006.
|
| (3) |
Mr.
Sattaur ceased employment with us effective April 6,
2007.
|
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, as amended
(the “Exchange Act”), 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 5, 2007. 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 5, 2007, are deemed outstanding but such shares are not
deemed to be outstanding for purposes of computing the percentage ownership
of
any other person. Each 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 that Vest within 60 Days
|
Stock
Options that Vest in More than 60 Days
|
Performance
Shares that Vest in More than 60 Days
|
|||||||||||||
|
Todd
Farha
|
750,786
|
|
|
228,000
|
|
|
82,680
|
|
|
3,388
|
|
|
515,247
|
|
|
240,279(1)
|
|
||
|
Regina
Herzlinger
|
|
|
38,095
|
|
|
4,236
|
|
|
20,166
|
|
|
417
|
|
|
2,917
|
|
|
-
|
|
|
Kevin
Hickey
|
|
|
30,063
|
|
|
-
|
|
|
12,833
|
|
|
208
|
|
|
1,459
|
|
|
-
|
|
|
Alif
Hourani
|
|
|
5,345
|
|
|
4,236
|
|
|
12,833
|
|
|
208
|
|
|
1,459
|
|
|
-
|
|
|
Ruben
King-Shaw, Jr.
|
|
|
15,845
|
|
|
4,236
|
|
|
5,208
|
|
|
208
|
|
|
1,459
|
|
|
-
|
|
|
Christian
Michalik
|
|
|
43,050
|
|
|
-
|
|
|
43,948
|
|
|
1,902
|
|
|
2,307
|
|
|
-
|
|
|
Neal
Moszkowski
|
|
|
78,094
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Jane
Swift
|
|
|
-
|
|
|
-
|
|
|
15,583
|
|
|
1,041
|
|
|
9,376
|
|
|
-
|
|
|
Paul
Behrens
|
|
|
196,804
|
|
|
73,498
|
|
|
24,920
|
|
|
339
|
|
|
40,469
|
|
|
-
|
|
|
Thaddeus
Bereday
|
|
|
122,130
|
|
|
7,373
|
|
|
27,710
|
|
|
1,093
|
|
|
27,542
|
|
|
-
|
|
|
Ace
Hodgin(2)
|
|
|
882
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Imtiaz
Sattaur(3)
|
|
|
4,981
|
|
|
16,889
|
|
|
121,268
|
|
|
5,731
|
|
|
82,198
|
|
|
-
|
|
|
All
Directors, Nominees and Executive Officers as a Group (14
persons)
|
|
|
1,289,855
|
|
|
373,491
|
|
|
376,633
|
|
|
14,535
|
|
|
776,194
|
|
|
-
|
|
| (1) |
On
June
6, 2005, Mr. Farha was granted an award of common stock which vests
on
June 6, 2008 and June 6, 2010 based upon the achievement of compounded
annual percentage increases in diluted net income per share (“EPS”) over
three-year and five-year periods. The target number of shares to
be issued
in the aggregate is 130,000 with the actual number of shares to
be issued
being between zero and 240,279.
|
| (2) |
Dr.
Hodgin
ceased employment with us effective December 31,
2006.
|
| (3) |
Mr.
Sattaur ceased employment with us effective April 6, 2007. According
to
their terms, all unvested equity awards were forfeited as of the
date Mr.
Sattaur’s employment ceased.
|
ELECTION
OF DIRECTORS
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 Farha, Robert Graham,
Regina Herzlinger, Kevin Hickey, Alif Hourani, Ruben King-Shaw, Jr., Christian
Michalik, Neal Moszkowski and Jane Swift. Ms. Swift will cease to be a member
of
our board at the expiration of her current term as a class III director on
the
date of the 2007 annual shareholders meeting.
The
board
of directors proposes that Alif Hourani and Neal Moszkowski be elected to
serve
as class III 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 Alif Hourani and Neal Moszkowski as class III 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. Following the 2007 annual shareholders
meeting, we will have a vacancy in class III of our board of directors. The
nominating and corporate governance committee and management are currently
assessing the need for and possible candidates to fill this vacancy. However,
we
cannot provide any assurance as to when, or if, this vacancy will be filled.
Proxies cannot be voted for more than the two nominees named
herein.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
“FOR”
THE ELECTION OF ALIF HOURANI AND NEAL MOSZKOWSKI
Certain
Information Regarding Our Directors
The
following is certain information regarding our directors and their ages as
of
April 26, 2007:
Nominees
Alif
A. Hourani
(age 54)
has
been
a member of our board of directors since August 2003. Since 1997, Mr. Hourani
has served as Chairman and Chief Executive Officer, currently as Executive
Chairman, 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, 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 serves as a director of the Kansas Heart Hospital.
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 41)
has
been
a member of our board of directors since May 2002, serving as chairman from
May
2002 through October 2006. 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 Partners LLC, 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 serves as a director of Bluefly,
Inc.,
Integra LifeSciences Holdings Corporation, JetBlue Airways Corporation and
Spheris, Inc. as well as several privately-held companies. Mr. Moszkowski
received his undergraduate degree from Amherst College and his masters of
business administration from the Graduate School of Business of Stanford
University.
Directors
continuing in office
Todd
S. Farha
(age 38)
has served as our president and chief executive officer and as a member of
our
board of directors since May 2002. Mr. Farha was also named chairman of the
board in October 2006. 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 1996 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 and 1996, 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.
D.
Robert Graham
(age 70)
has been a member of our board since April 2007. Senator Graham is currently
focused on founding a political and civic leadership center at the University
of
Florida and the University of Miami. From September 2005 until June 2006,
Senator Graham served a one-year term as a senior Fellow at Harvard University’s
John F. Kennedy School of Government. From January 1987 to December 2005,
he
served in the United States Senate. From January 1979 to December 1987 Senator
Graham was the Governor of the State of Florida. Senator Graham received
his
bachelor’s degree from the University of Florida and his law degree from Harvard
Law School.
Regina
E. Herzlinger
(age 63)
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 serves
as a
director of several privately-held companies. Dr. Herzlinger received her
undergraduate degree from Massachusetts Institute of Technology and her
doctorate from Harvard Business School.
Kevin
F. Hickey
(age 55)
has
been
a member of our board of directors since November 2002. Mr. Hickey has served
as
President of D2Hawkeye, Inc., a medical 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 also serves as a director of Healthaxis Inc., a technology and business
process services firm for the health benefits industry, as well as several
privately-held companies. Mr. Hickey received his undergraduate degree from
Harvard University, a masters in health services administration from the
University of Michigan and a juris doctorate from Loyola College of
Law.
Ruben
Jose King-Shaw, Jr.
(age 45)
has
been
a member of our board of directors since August 2003. Since July 2006, Mr.
King-Shaw has served as Chairman and
Chief
Executive Officer
of Mansa
Equity Partners Inc., a private equity investment and advisory firm specializing
in the health care sector. From October 2004 until June 2006, Mr. King-Shaw
was
a partner of Pine Creek Healthcare Capital, LLC and from February 2004 until
February 2005, he served as President of United Biosource. 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 serves as a director
of
several privately-held companies. Mr. King-Shaw received his undergraduate
degree from Cornell University and a masters of business administration from
Florida International University.
Christian
P. Michalik
(age 38)
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. Previously he 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 serves as a director of
several privately-held companies.
Mr.
Michalik received his undergraduate degree from Yale University and his masters
of business administration from Harvard Business School.
Director
whose term expires at annual meeting
Jane
M. Swift
(age 42)
has
been
a member of our board of directors since November 2004. Since January 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 serves as a director of Suburban Propane
Partners, L.P., as well as several privately-held companies and organizations.
Ms. Swift received her undergraduate degree from Trinity
College.
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 board and each of its committees have conducted
such evaluations for each of the last three years. The corporate governance
guidelines are available on our website at www.wellcare.com.
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 New York Stock Exchange, Inc. (“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. The purpose of this review is to determine
whether any such relationships or transactions are 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:
| • |
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;
|
| • |
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;
|
| • |
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;
|
| • |
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
|
| • |
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 Exchange Act
and the NYSE rules 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
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 six 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, Senator Graham, Dr. 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. Similarly,
the
board determined that Drs. Johnson and Agwunobi were independent while they
served as members of the board during 2006. Additionally, the board considered
Mr. Hickey’s position as the president of D2Hawkeye, Inc., a company with which
we recently entered into a services contract pursuant to which D2Hawkeye,
Inc.
will develop an internet-based portal for certain of our health care providers.
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 nor is it a “related person transaction” as that term
is defined under Regulation S-K of the Exchange Act. As a result, our board
affirmatively determined that Mr. Hickey is independent. The board determined
that Mr. King-Shaw is not independent because he provided certain consulting
services for us during 2004 for which we paid him compensation valued in
excess
of $100,000 and that Mr. Farha is not independent based on his service as
one of
our executive officers.
Number
of Meetings and Attendance
During
2006, the board of directors held five meetings, the audit committee held
four
meetings, the compensation committee held five meetings and the nominating
and
corporate governance committee held two meetings. In addition to its formal
meetings, the audit committee participates in quarterly conference calls
with
management to review our earnings releases. During 2006, 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 2006 annual shareholders meeting.
Presiding
Director
The
board
has designated Mr. Moszkowski to preside over executive sessions of our
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 rules of the NYSE
and
from shareholders pursuant to rules of the Securities and Exchange Commission
(“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 website
at
www.wellcare.com.
All
members of these committees are independent directors under our director
independence standards as described 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
|
|
|
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,”
as defined in the Exchange Act, and have accounting or related
financial
management expertise.
|
Audit
Committee
The
principal purpose of the audit committee is to assist the board of directors
in
the oversight of the integrity of our financial statements. The audit committee
also 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. Further, the audit committee 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.
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
the board and its 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 nominees for inclusion
in
the proxy statement. The committee’s process for selecting nominees to the board
is described in more detail below under “Nominating
and Corporate Governance Committee’s Process for Selecting Nominees to the
Board.”
The
committee is also responsible for overseeing 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.
Compensation
Committee
Overview
of compensation committee responsibilities: Under
its
charter, the compensation committee provides oversight and guidance for
compensation and benefit programs for our associates, executive officers
and
board of directors, reviews and approves the compensation, including base
salary
and incentive awards and other significant terms of employment, for our
executive officers and reviews and make recommendations with respect to
incentive compensation plans, equity-based plans and board compensation.
The
committee reviews and discusses the compensation discussion and analysis
(“CD&A”) with management and makes a recommendation to the board for
inclusion of the CD&A in the company’s proxy statement. 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.
Under
its
charter, the committee has the authority to obtain advice and assistance
from
any officer or employee of the company or from any outside legal expert or
other
advisor. Pursuant to this authority, the compensation committee engaged Watson
Wyatt Worldwide, or Watson Wyatt, as its compensation consultant. The committee
may also, where legally permissible, delegate authority to subcommittees
or to
employees when the committee deems it appropriate. Pursuant to this authority,
the committee has delegated limited authority to the chief executive officer
to
make awards of restricted shares and stock options to certain employees.
This
delegated authority is described in further detail under “Compensation
Discussion and Analysis -Equity Award Process.”
Process
for determining director and executive compensation: The
company’s annual review process for our executive officers takes place during
the first quarter of each year, with year-end bonuses, equity awards and
base
salary increases taking effect in the middle of March of each year. During
the
annual review process, our chief executive officer and the committee review
corporate, departmental and individual performance and compensation market
and
survey data. The committee also considers Watson Wyatt’s recommendations
regarding the chief executive officer’s compensation and the chief executive
officer’s recommendations regarding the other named executive officer’s
compensation. Accordingly, each executive’s overall annual compensation is
generally established at two points during each year, the first being in
March
at the beginning of each year when the executive’s base salary is established
and the second being in March of the following year when the executive’s annual
bonus and equity award is determined. The committee, upon the chief executive
officer’s recommendation, also makes equity awards from time to time throughout
the year.
The
committee annually reviews the compensation being paid to the members of
the
board of directors. The compensation committee works closely with the chief
executive officer as well as Watson Wyatt when evaluating the standing fees
as
well as the value of equity awards, if any, to be awarded to our board
members.
Role
of executives in setting compensation: The
chief
executive officer oversees most aspects of the named executive officers’ and
board members’ compensation, but the compensation committee makes all definitive
determinations. In establishing compensation policies and practices and actual
compensation awards for the named executive officers and others, the chief
executive officer works closely with the chairman of the compensation committee,
Watson Wyatt, the finance, human resources and legal departments, as necessary,
and the executives themselves. After review and consideration of each
executive’s performance and other criteria as described in the CD&A, the
chief executive officer makes a recommendation to the compensation committee
as
to the executive’s compensation, with the committee making the final
determination. As for the chief executive officer’s role in setting his own
compensation, Watson Wyatt consults with the chief executive officer regarding
market data and analyses and discusses proposed levels and elements of
compensation with the chief executive officer. Watson Wyatt then makes a
recommendation to the committee during its executive session with no members
of
management present as to what Watson Wyatt believes is an appropriate range
of
compensation for the chief executive officer. After consideration of this
recommendation, the committee makes the final determination as to the chief
executive officer’s compensation. Similarly, the chief executive officer works
closely with the compensation committee, Watson Wyatt and the legal and finance
departments when reviewing and recommending compensation to be paid to the
members of the board of directors.
Role
of compensation consultants: Under
its
charter, the compensation committee has authority to retain compensation
consultants, outside counsel and other advisors that the committee deems
appropriate, in its sole discretion, to assist it in discharging its
duties. The
compensation committee has engaged Watson Wyatt to act as its compensation
consultant. The company pays Watson Wyatt and the committee generally relies
on
the chief executive officer and certain members of the human resources and
legal
departments to manage the relationship and scope of engagement, but the
compensation committee has sole authority to terminate the engagement. Watson
Wyatt’s primary role has been to make recommendations to the compensation
committee as to the chief executive officer’s and the board of directors’
compensation and to analyze and prepare reports regarding compensation levels
at
comparable companies in connection with establishing compensation for our
executive officers, the chief executive officer and our board members. Watson
Wyatt also makes suggestions regarding such matters as the appropriate mix
of
cash and equity compensation and the structure and features of equity awards.
We
also use the services of Corporate Insights & Development, a human resources
consulting firm, which provides us with executive assessment, development,
coaching and consulting services. Corporate Insights & Development is
engaged directly by and provides services primarily on behalf of the company.
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
committee’s assessment of a nominee’s qualification for board membership
includes, 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 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.
Review
of Related Person Transactions
We
have a
written policy for reviewing transactions between us and our officers, directors
and certain of their immediate family members and other related persons,
including those required to be reported under Item 404 of Regulation S-K.
Under
this policy, the nominating and corporate governance committee must approve
any
transaction between us and any related person that involves more than $100,000.
Furthermore, related person transactions that involve executive compensation
or
compensation for the members of our board of directors must be approved by
the
compensation committee. We enter into transactions with such related persons
only if the transaction is on terms comparable to those that could be obtained
in arm’s length dealings with an unrelated third party and is otherwise fair to
us.
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:
• 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 that 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 website 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 website.
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
Tampa,
Florida 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.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and directors,
and
persons who own more than 10% of our common stock, to file reports of ownership
and changes in ownership with the SEC and NYSE. Executive officers, directors
and greater than 10% 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 4 or Form 5 were required
for those persons, we believe that all our executive officers, directors
and
greater than 10% beneficial owners timely filed all such required forms with
respect to 2006 transactions, with the exception of one Form 4 for David
Erickson, a former executive officer of the company, which was filed one
day
late due to a technical error.
Compensation
Discussion and Analysis
Compensation
Philosophy
The
compensation awards for our executives are designed with the goal of setting
total compensation at levels that reflect both personal and organizational
performance and are aligned with the interests of our shareholders. Each
executive’s total compensation opportunity is determined in consideration of the
executive’s experience, level and scope of responsibility within the company and
individual performance and contribution. Our compensation philosophy and
practices are evaluated each year during the annual review process and revised
as necessary to reflect the company’s then-current environment and initiatives.
In 2006, our executives were compensated in line with our compensation
philosophy of aligning overall compensation with performance. The key objectives
that drove our compensation were:
• Performance
driven compensation with meaningful variance based on individual and corporate
performance;
•
Conservative
“fixed” and aggressive “variable” compensation using market based salaries and
cash and equity bonuses based on performance;
•
A
focus
on variable compensation, with bonus and equity incentives being key drivers;
and
•
A
focus
on long-term equity incentives to align management’s interests with
shareholders.
The
goal
of this philosophy is to place a significant amount of the executives’
compensation “at risk” by tying it to the company’s performance. This approach
is designed to drive individual performance and contribution which, in turn,
is
intended to drive corporate performance.
Our
Process for Setting Compensation
During
each annual review process, the chief executive officer, with input from
members
of senior management and the board of directors, develops high-level corporate
goals. The company’s 2006 high-level corporate goals were: deliver on our
commitments to shareholders of $3 billion in annual revenues, $100 million
of
net income and $2.50 of earnings per share; improve core processes through
21
specific corporate initiatives assigned to our executives and their departments;
and invest in people. After establishing the high-level corporate goals,
the
chief executive officer, working with each executive and our finance and
planning departments, establishes specific goals and metrics for each of
our
states, markets and lines of business that set the framework for developing
the
executive’s departmental and personal goals. Some of the executive’s goals and
metrics are quantifiable and measurable and some of them are general guidelines
or over-arching themes. The executive’s performance is then measured against
these goals and metrics at the end of the year. Although we set performance
goals and objectives and aim to set compensation levels based on performance,
the compensation committee does not rely solely on predetermined formulas
or a
limited set of criteria when it evaluates the performance or establishes
the
compensation of our chief executive officer or other executive
officers.
The
performance of an executive against his departmental and personal goals and
metrics as well as other factors such as market dynamics, overall compensation
opportunities and retention and incentive issues form the basis upon which
the
executive’s compensation is established. As for our chief executive officer, his
performance is measured by the compensation committee and the full board
by how
well the company succeeds in meeting its goals. At the end of 2006, the
company’s overall bonus pool was funded based on the company’s success in
satisfying its goals.
During
the annual review process, we internally generate tally sheets to assist
the
chief executive officer and the compensation committee in evaluating each
executive’s total compensation, including future vesting schedules and the lump
sum value of payments and benefits that would be owed should the executive’s
employment terminate under various scenarios. This process allows the chief
executive officer and the compensation committee to focus on individual
performance as well as the need for long-term incentive and retention
compensation.
After
review and consideration of the executives’ performance, the tally sheets,
market analyses and dynamics, retention and incentive needs and other criteria
as appropriate, the chief executive officer makes compensation recommendations
regarding the named executive officers to the compensation committee and
the
committee makes the final determinations. Similarly, Watson Wyatt consults
with
the chief executive officer and reviews the chief executive officer’s tally
sheet and applicable market analyses and then makes a recommendation to the
compensation committee regarding an appropriate range of compensation for
the
chief executive officer. The compensation committee then makes the final
determination regarding the chief executive officer’s compensation.
Compensation
Consultants and Benchmarking
As
previously described under“Committees
of the Board of Directors - Compensation Committee,”
the
compensation committee has engaged Watson Wyatt to act as its compensation
consultant. Watson Wyatt’s primary role has been to make recommendations to the
compensation committee as to the chief executive officer’s and the board of
directors’ compensation and to analyze and prepare reports regarding
compensation levels at comparable companies in connection with establishing
compensation for the executive officers, the chief executive officer and
our
board members.
Overall,
the total compensation opportunity for 2006 was intended to create a
compensation program for our named executive officers that aims to provide
base
salaries at the fiftieth percentile of the market, bonus amounts at the
seventy-fifth percentile of the market and long-term compensation in the
form of
stock options and restricted stock at or above the seventy-fifth percentile
of
the market. However, in determining compensation to be paid to our executive
officers, these benchmarks are only a starting point and actual compensation
can
vary, sometimes significantly, from the benchmarks. For purposes of determining
the relevant market, Watson Wyatt prepared an analysis of compensation practices
and levels of publicly traded comparable medical service and health plan
providers in both 2006 and 2007. The 2006 peer group analysis included
Amerigroup Corp., Centene Corp., Coventry Health Care, Inc., Health Net,
Inc.,
Humana, Inc., Molina Healthcare, Inc., Pacificare Health Systems, Inc., Sierra
Health Services, Inc. and WellChoice Health Plans, Inc. The 2007 analysis
included the same companies although Assurant, Inc. was added and Pacificare
Health Systems, Inc. and WellChoice Health Plans, Inc. which were both acquired,
were dropped. All of these companies were selected based, in part, on their
similarity of product offerings, market capitalization, earnings per share
and
revenues. Although several of these companies are larger than we are, the
size
differential is taken into consideration when evaluating our executive
compensation. These companies were also selected because they are representative
of the pool of companies in which we compete for talent. Watson Wyatt also
analyzed compensation data from various published surveys, such as the William
M. Mercer and the Hay Group Health Insurance surveys.
Compensation
Committee Activity
Although
the committee has regularly scheduled meetings in connection with the
establishment of executive compensation, the committee also holds
ad
hoc
meetings
to address compensation related matters as they arise from time to time.
Our
chief executive officer, in consultation with the compensation committee
chairman and the general counsel, sets the schedules and agendas for the
committee meetings. The chief executive officer usually attends and actively
participates in compensation committee meetings except when the committee
is
making determinations relating to his compensation. The general counsel usually
acts as secretary for the meetings, although the chief executive officer
or
committee chairman often serve as secretary as well.
As
described under “Committees
of the Board of Directors - Compensation Committee,”
the
company’s annual review process takes place during the first quarter of each
year, with year-end bonuses, equity awards and base salary increases taking
effect in the middle of March of each year.
In
setting the compensation paid to our named executive officers for 2006,
including the chief executive officer, the committee met in March 2006, during
which meeting the committee approved annual bonuses and equity awards for
the
executives’ performance during 2005 and 2006 base salaries. The committee also
met in June 2006, during which meeting the committee, among other things,
approved certain changes to the compensation policy for the board of directors
and equity awards to the members of the board. The committee met in July
2006 to
approve an award of stock options to the named executive officers, other
than
the chief executive officer, for their performance during the first half
of
2006. Lastly, the committee met in March 2007 to approve annual bonuses and
equity awards for the executives’ performance during 2006 and 2007 base
salaries. In addition to the committee members, our chief executive officer
attended all of the committee’s meetings, our general counsel attended the
meetings during which his compensation was not addressed and representatives
from Watson Wyatt attended the March 2006, July 2006 and March 2007 meetings.
The committee met in executive session during each of the March 2006 and
March
2007 meetings.
Components
of Compensation Program
The
company’s compensation program consists of three main components: (i) base
salary; (ii) annual cash bonuses; and (iii) equity awards. Each of these
components and how they are applied to each named executive officer are
discussed in more detail below.
All
of
the company’s named 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. These arrangements are described in more detail
under“Employment
Agreements with Named Executive Officers.”
In
general, except for the chief executive officer, the company’s practice is not
to enter into formal employment agreements. However, in addition to Mr. Farha,
Messrs. Behrens and Bereday have employment agreements that were entered
into
upon the commencement of their employment with us at a time when the company’s
future was less certain.
The
following are summaries of each of the components of our compensation
program:
|
•
|
Salaries:
Base salaries are based on the particular experience, skills, knowledge
and responsibilities of each executive officer. In determining
the salary
for each of the company’s executive officers in 2006, 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 executives’ salaries, although market data and benchmarking
analyses to assess our market competitiveness are reviewed on an
annual
basis. Base salaries are the “fixed” component of our executives’
compensation awards and are generally set to be in line with the
fiftieth
percentile of our competitors based on the market data described
herein.
Based
on the Watson Wyatt market analysis and the chief executive officer’s
recommendations as well as a review of each executive’s total compensation
opportunity, including prior equity awards and cash compensation,
the
compensation committee determined during its March 2006 annual
executive
compensation review not to increase any of the executives’ base salaries
for 2006. In making this decision, the committee considered the
fact that
Messrs. Farha, Hodgin and Sattaur had all received base salary
increases
in 2005. As for Messrs. Bereday and Behrens, the committee considered
both
their performance and the market analyses relating to each in determining
that their base salaries were appropriate. However, based on the
Watson
Wyatt market analysis as well as a thoughtful review of the tally
sheets
and the individual executive’s performance relative to their goals, during
the compensation committee’s annual compensation review in March 2007, the
committee increased Mr. Behrens’ and Mr. Sattaur’s salaries from $284,000
to $310,000 and Mr. Bereday’s salary from $258,000 to $276,000.
In
reviewing Mr. Farha’s base salary, although the committee acknowledged his
outstanding performance throughout both 2005 and 2006, the committee
recognized that in connection with Mr. Farha’s renegotiation of his
employment contract in June 2005, the committee and Mr. Farha
had agreed
to weight his compensation more heavily on the at-risk equity
component of
compensation in order to more appropriately align his interests
with those
of our shareholders. Accordingly, the committee determined not
to increase
Mr. Farha’s base salary in either 2006 or 2007.
|
| • |
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 executive;
and (iii)
the chief executive officer’s recommendation or, in the case of the chief
executive officer, Watson Wyatt’s recommendation. 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, although market data and benchmarking analyses are
periodically reviewed, potential bonuses are not based solely upon
formulas or other specific criteria and the committee maintains
discretion
to adjust the amount of annual incentive compensation paid to the
named
executive officers. Annual bonuses are a “variable” component of our
executives’ compensation and can fluctuate greatly from year to year.
Although
our executive officers have target bonus amounts for purposes
of
estimating bonuses throughout the year, these targets were only
a starting
point for determining the 2006 bonus payments reflected in the
“Summary
Compensation Table” herein.
Other critical factors considered by the compensation committee
included
the company’s overall performance relative to its 2006 goals and the
executive’s departmental and personal performance. However, the company’s
overall financial performance was the primary driver in funding
the
company’s bonus pool and the individual executive’s satisfaction of his
departmental and personal goals underlying the high level corporate
goals
was the critical factor in determining the executive’s individual bonus.
Despite the company’s 2006 overall financial performance, the compensation
committee did not increase Mr. Farha’s annual bonus from prior years
primarily because of Mr. Farha’s request that his compensation be more
heavily weighted toward equity
awards.
|
|
•
|
Equity
awards:
The committee believes that equity awards to its executive officers
are a
highly motivational method of encouraging and rewarding individual
performance while at the same time aligning such executive’s interests
with those of our shareholders. The company uses equity awards
both as a
component of the compensation for the prior year’s performance, as well as
a periodic incentive and retention tool. When making equity awards,
our
practice is to determine the dollar amount of equity compensation
that we
want to provide and then grant a number of shares of restricted
stock or a
number of stock options that, in the case of restricted stock,
have an
intrinsic value, or in the case of options have a fair value, equal
to
that amount on the date of grant. Our general philosophy is to
provide a
dollar amount of equity compensation equal to or in excess of the
seventy-fifth percentile of the market as described under “Compensation
Consultants and Benchmarking” above. We
issue both restricted stock and non-qualified stock options. We
find that
the combination of restricted stock and stock options strikes the
appropriate balance between aligning our executives’ interests with those
of our shareholders and providing meaningful retention compensation.
For
the past two years, the compensation committee has awarded Mr.
Farha only
stock options so that he realizes value only when our stock price
increases from the date of the award onward. The committee believes
that
this appropriately motivates Mr. Farha to drive the company’s performance
and is in the best interests of our shareholders.
The
dollar amount of the equity awards made in March 2006 and March
2007 were
determined based on the executive’s performance and contribution to the
company’s success during 2005 and 2006, respectively. The equity awards
made in July 2006 were designed to reward the executives for the
company’s
overall performance during the first half of 2006 and as a means
of
incenting and retaining the executives. Specific amounts for each
executive were also determined after considering the total value
and
future vesting schedules of each executive’s existing equity awards. The
details regarding the equity awards approved by our compensation
committee
during 2006 are set forth in the table entitled “Grants
of Plan-Based Awards”
herein. During the compensation committee’s March 2007 meeting, in
addition to setting 2007 base salaries and approving 2006 cash
bonuses,
the committee approved the following equity awards for our named
executive
officers:
|
|
Name
|
Award
|
|
Exercise
Price
|
|
Vesting
|
|||||
|
Todd
Farha
|
200,000
stock options
|
|
$
|
85.53
|
|
|
25%
on each anniversary date
|
|
||
|
Paul
Behrens
|
|
|
7,308
shares of restricted stock
|
|
|
-
|
|
|
20%
on each anniversary date
|
|
|
|
|
|
13,004
stock options
|
|
$
|
85.53
|
|
|
100%
on date of grant
|
|
|
|
|
|
16,352
stock options
|
|
$
|
85.53
|
|
|
25%
on each anniversary date
|
|
|
Thaddeus
Bereday
|
|
|
2,339
shares of restricted stock
|
|
|
-
|
|
|
20%
on each anniversary date
|
|
|
|
|
|
4,161
stock options
|
|
$
|
85.53
|
|
|
100%
on date of grant
|
|
|
|
|
|
5,233
stock options
|
|
$
|
85.53
|
|
|
25%
on each anniversary date
|
|
|
Imtiaz
Sattaur
|
|
|
4,385
shares of restricted stock
|
|
|
-
|
|
|
20%
on each anniversary date
|
|
|
|
|
|
7,802
stock options
|
|
$
|
85.53
|
|
|
100%
on date of grant
|
|
|
|
|
|
9,811
stock options
|
|
$
|
85.53
|
|
|
25%
on each anniversary date
|
|
|
Because
our compensation strategy is weighted toward variable, at-risk
compensation, particularly equity compensation, and several
of our
executives already own sufficiently large amounts of our common
stock, we
do not believe that it is appropriate at this time to have
a formal
requirement for share ownership by any group of employees.
In order to
allow our executives to achieve liquidity for purposes of financial
diversification with respect to their equity ownership in a
prudent and
managed fashion, the committee has approved the use by the
executives,
including the chief executive officer, of trading plans that
comply with
the requirements of Rule 10b5-1(c)(1) of the Exchange Act.
These plans are
approved in advance by our general counsel or, in the case
of the general
counsel, by the chief executive
officer.
|
|
•
|
Perquisites.
In
general, our executives receive very few perquisites.
Mr. Farha receives a
monthly allowance of $4,000 to maintain an apartment
in New York and each
of Messrs. Farha, Behrens and Bereday receive an annual
amount of $5,000,
$3,000 and $3,000, respectively, to be applied toward
additional life and
disability insurance policies. Because we believe that
our executives
should receive the total amount of their benefit, we
gross up the payments
to cover any income taxes attributed to these
payments.
|
Tax
and Accounting Implications
|
•
|
Tax
deductibility.
Section 162(m) of the Internal Revenue Code of 1986, as amended
(“IRC”),
prohibits a deduction to any publicly held corporation for compensation
to
a “covered employee” in excess of $1 million per year. A covered employee
generally is any employee who has ever appeared in the summary
compensation table who is also employed by the company on the last
day of
the company’s calendar year. While we endeavor to structure our
compensation programs to maximize the deductibility of compensation,
the
adverse tax consequences of paying compensation in excess of the
Section
162(m) limits are not so significant so as to be a factor in establishing
our compensation programs or in setting compensation levels.
|
|
•
|
Nonqualified
deferred compensation.
In October 2004, the American Jobs Creation Act of 2004 was signed
into
law, changing the tax rules applicable to nonqualified deferred
compensation arrangements under IRC Section 409A. Although we do
not have
formal nonqualified deferred compensation plans, we believe we
are
operating in good faith compliance with these new
rules.
|
|
•
|
Accounting
for stock-based compensation.
Beginning on January 1, 2006, we began accounting for stock-based
payments, including stock options, performance shares and restricted
stock
awards, in accordance with Statement of Financial Accounting Standards
No.
123R (“SFAS 123R”). The compensation committee and the chief executive
officer take into consideration the accounting treatment under
SFAS 123R
of alternative award proposals when determining the form and amount
of
equity compensation awards. Because our determinations regarding
equity
awards are generally based on a dollar value, SFAS 123R has impacted
the
size and terms of our equity
awards.
|
Equity
Award Process
As
described above, we grant awards of our common stock and/or options to purchase
shares of our common stock to our directors and associates, including our
named
executive officers. We maintain an equity award process to ensure that the
authorization, timing and pricing of all equity awards are processed, recorded,
disclosed and accounted for in full compliance with all applicable laws and
regulations, including the IRC and accounting principles generally accepted
in
the United States.
Pursuant
to this process, the board or the compensation committee may grant equity
awards
as the board or compensation committee may determine in its sole discretion.
In
addition, the compensation committee has delegated authority to the chief
executive officer to grant restricted stock and/or stock options to such
individuals as he may determine. However, this delegated authority does not
give
the chief executive officer authority to make equity awards to members of
the
board of directors, the chief executive officer himself, any senior vice
president or any person that constitutes an “officer” for purposes of Section 16
of the Exchange Act. The chief executive officer’s delegated authority is
further limited to awards of no more than 50,000 shares to any individual
or
1,000,000 shares in the aggregate per calendar year.
For
equity awards issued to existing associates, the awards are effective and,
in
the case of options, the exercise price is set, as of the date of the approval.
For equity awards issued to newly-hired or promoted associates, including
officers, the awards are effective and, in the case of options, the exercise
price is set, as of the associate’s first date of employment or the effective
date of promotion, as the case may be. For equity awards to new board members,
the awards are effective and, in the case of options, the exercise price
is set,
as of the first date of service as a board member. In 2006, the compensation
committee also developed a policy whereby annual equity awards to incumbent
board members will be effective, and in the case of stock options, the exercise
price will be set, as of the date of our annual shareholders meeting. Approvals
for all equity awards are obtained in advance of or on the date of grant.
The
exercise price for all stock option awards is the officially-quoted closing
selling price of our common stock on the NYSE on the date of grant (or the
officially-quoted closing selling price of our common stock on the next trading
day if the NYSE is closed on the date in question).
Since
our
initial public offering in 2004, we have generally made equity awards to
existing associates twice each year: once in connection with our March annual
review process, with these awards generally being a reward for the prior
year’s
performance; and again in July, with these awards generally being awarded
as an
incentive and retention tool and as a reward for the associates’ performance
during the first half of the year. However, both the March and July awards
are
discretionary and may not be repeated in the future. Because we hold our
board
and committee meetings shortly before we announce our quarterly and annual
financial results, there are times when equity awards for our executive officers
are approved and, according to our process, are effective, shortly before
we
announce earnings.
Summary
Compensation Table
The
following summary compensation table sets forth the 2006 cash compensation
and
certain other components of the compensation earned or paid to Todd Farha,
our
chairman, president and chief executive officer, Paul Behrens, our senior
vice
president and chief financial officer, and the three most highly compensated
executive officers who were serving as such at the end of 2006.
|
Name
and Principal Position
|
Year
|
Salary
($)(1)
|
Bonus
($)(2)
|
Stock
Awards ($)(3)
|
Option
Awards ($)(3)
|
All
Other Compensation ($)(4)
|
Total
($)
|
|||||||||||||||
|
Todd
Farha
Chairman,
President and Chief Executive Officer
|
|
|
2006
|
|
|
400,000
|
|
|
400,000
|
|
|
2,758,269
|
|
|
1,635,495
|
|
|
77,061
|
|
|
5,270,825
|
|
|
Paul
Behrens
Senior
Vice President and Chief Financial Officer
|
|
|
2006
|
|
|
282,269
|
|
|
200,000
|
|
|
361,232
|
|
|
136,597
|
|
|
4,079
|
|
|
984,177
|
|
|
Thaddeus
Bereday
Senior
Vice President and General Counsel
|
|
|
2006
|
|
|
256,462
|
|
|
150,000
|
|
|
50,954
|
|
|
129,339
|
|
|
9,745
|
|
|
596,500
|
|
|
Ace
Hodgin
Senior
Vice President and Chief Medical Officer(5)
|
|
|
2006
|
|
|
271,346
|
|
|
-
|
|
|
98,146
|
|
|
1,440,832
|
|
|
4,100
|
|
|
1,814,424
|
|
|
Imtiaz
Sattaur
President,
Florida(6)
|
|
|
2006
|
|
|
282,269
|
|
|
200,000
|
|
|
123,714
|
|
|
460,635
|
|
|
3,000
|
|
|
1,069,618
|
|
|
|
||||||||||||||||||||||
|
(1)
|
Represents
total salary earned by these named executive officers and includes
amounts
of compensation contributed by these named executive officers to
our
401(k) savings plan.
|
|
(2)
|
Bonus
amounts represent payments earned for service rendered in 2006
although
paid in 2007.
|
|
(3)
|
The
amounts included in the “Stock Awards” and “Option Awards” columns are the
amounts of compensation cost recognized by us in fiscal 2006 related
to
stock awards and stock option awards, respectively, in fiscal 2006
and
prior years, in accordance with SFAS 123R. These amounts reflect
our
accounting expense for these awards and do not correspond to the
actual
value that will be recognized by the executives. For a discussion
of
valuation assumptions and methodologies, see Note 2 to our 2006
consolidated financial statements included in our annual report
of Form
10-K for the year-ended December 31, 2006. Pursuant to SEC rules,
the
amounts shown exclude the impact of estimated forfeitures related
to
service-based vesting conditions.
|
|
(4)
|
The
amounts included in the “All Other Compensation” column include: (i)
matching contributions to the 401(k) plan for each of Messrs. Farha,
Bereday and Sattaur in the amount of $3,000 and for Dr. Hodgin
in the
amount of $4,100; (ii) a housing allowance in the amount of $48,000,
$5,000 toward certain life and disability insurance policies and
tax
gross-ups totaling $21,061 on the foregoing for Mr. Farha; (iii)
payments
toward a disability insurance policy in the amount of $3,000 and
a tax gross-up in the amount of $1,079
for Mr. Behrens; and (iv) payments toward a disability insurance
policy in
the amount of $4,961 and tax gross-ups in the amount of $1,784
for Mr.
Bereday.
|
|
(5)
|
Dr.
Hodgin ceased employment with us effective December 31,
2006.
|
|
(6)
|
Mr.
Sattaur ceased employment with us effective April 6,
2007.
|
Grants
of Plan-Based Awards
The
following table sets forth certain information regarding each grant of an
award
made to a named executive officer in 2006 under any plan. All plan-based
awards
made during 2006 were equity awards under our 2004 Equity Incentive Plan
(the
“2004 Equity Plan”) and, other than continued service through the applicable
vesting dates, are not subject to performance goals. The grant date for all
of
the below-listed awards was the date the compensation committee approved
the
awards.
|
Name
|
Grant
Date
|
All
Other Stock Awards:
Number
of Shares of Stock or Units(1)(4)
(#)
|
All
Other Option Awards:
Number
of Securities Underlying Options(2)(4)
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)(3)
|
Grant
Date Fair Value of Stock and Option Awards ($)(5)
|
|||||||||||
|
Todd
Farha
|
3/13/06
|
-
|
100,000
|
41.74
|
1,633,700
|
|||||||||||
|
Paul
Behrens
|
3/13/06
|
9,584
|
-
|
-
|
400,036
|
|||||||||||
|
7/27/06
|
-
|
20,141
|
50.16
|
391,830
|
||||||||||||
|
Thaddeus
Bereday
|
3/13/06
|
4,792
|
-
|
-
|
200,018
|
|||||||||||
|
|
7/27/06
|
-
|
12,588
|
50.16
|
244,887
|
|||||||||||
|
Ace
Hodgin
|
3/13/06
|
11,979
|
-
|
-
|
500,003
|
|||||||||||
|
7/27/06
|
-
|
12,588
|
50.16
|
244,887
|
||||||||||||
|
Imtiaz
Sattaur
|
3/13/06
|
11,979
|
-
|
-
|
500,003
|
|||||||||||
|
7/27/06
|
-
|
15,106
|
50.16
|
293,878
|
||||||||||||
|
(1)
|
This
column shows the number of shares of restricted stock awarded to
our named
executive officers in 2006. These awards vest as to 20% on each
one-year
anniversary of the date of grant.
|
|
(2)
|
This
column shows the number of stock options granted to our named executive
officers in 2006. The March 13, 2006 grant of stock options to
Mr. Farha
vests as to 20% on each one-year anniversary of the date of grant
and
expires on the seventh anniversary of the date of grant.
The
July 27, 2006 grants of stock options to Messrs. Behrens, Bereday
and
Sattuar and Dr. Hodgin vested as to 20% on December 31, 2006 and
vest as
to 16% on each one-year anniversary of the date of grant and expire
on the
seventh anniversary of the date of
grant.
|
|
(3)
|
This
column shows the exercise price for the stock options granted,
which was
the closing price of our stock on the date of
grant.
|
|
(4)
|
Acceleration
of vesting of awards made under the 2004 Equity Plan is described
in more
detail below under “Potential
Payments to Named Executive Officers upon Termination or Change
in
Control.”
|
|
(5)
|
This
column shows the full grant date fair value of stock options and
restricted stock calculated in accordance with SFAS 123R granted
to our
named executive officers in 2006. These amounts reflect the accounting
expense that we will recognize over the vesting term for these
awards and
do not correspond to the actual value that will be recognized by
the
executives. For a discussion of valuation assumptions and methodologies,
see Note 2 to our 2006 consolidated financial statements included
in our
annual report of Form 10-K for the year-ended December 31, 2006.
Pursuant
to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting
conditions.
|
Employment
Agreements with Named Executive Officers
Todd
Farha serves as our chairman, president and chief executive officer pursuant
to
an amended and restated employment agreement, dated June 6, 2005. The agreement
has an initial term of five years and will automatically renew for successive
one-year periods thereafter 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. The agreement also provides for a
monthly allowance of $4,000 for Mr. Farha to maintain an apartment in New
York
and an annual amount of $5,000 to be applied toward additional life and
disability insurance (the “executive insurance”). Mr. Farha has agreed to
maintain the confidentiality of our proprietary information and not to compete
with us during the term of his employment and for one year thereafter. He
has
also agreed to a non-solicitation provision for a period of one year following
his date of termination. The benefits to be provided to Mr. Farha in the
event
of termination of employment are described below under “Potential
Payments to Named Executive Officers Upon Termination or Change in
Control.”
Paul
Behrens serves as our senior vice president and chief financial officer and
Thaddeus Bereday serves as our senior vice president and general counsel
pursuant to employment agreements with us, dated as of 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. Bereday is entitled to an annual salary of $250,000, in
each
case subject to annual review and potential increase by our board of directors.
Their current base salaries are described under “Compensation
Discussion and Analysis - Components of Compensation”
herein.
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. The agreements
also
provide for an annual amount of $3,000 to be applied toward additional executive
insurance. These executives’ employment agreements each contain provisions
requiring the executives to maintain the confidentiality of our proprietary
information, that they refrain from soliciting our employees for a period
of one
year following their termination of employment, and that they not compete
with
us during the term of their employment and for one year thereafter.
Pursuant
to an offer letter to Imtiaz 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. Mr. Sattaur also entered into our standard confidentiality,
non-competition, non-solicitation and non-disparagement agreements. In April
2004, Mr. Sattaur was promoted to president, Florida. Mr. Sattaur ceased
employment with us effective April 6, 2007.
Pursuant
to an offer letter to Ace Hodgin, M.D., 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 $235,000 and a bonus award potential of up to 40% of
his
base salary. Dr. Hodgin also entered into our standard confidentiality,
non-competition, non-solicitation and non-disparagement agreements. Dr. Hodgin
ceased employment with us effective December 31, 2006.
We
have
entered into indemnification agreements with each of Messrs. Farha, Behrens
and
Bereday in addition to the indemnification that is provided for in our
certificate of incorporation and bylaws. These agreements, among other things,
provide for the indemnification for expenses specified in the agreements,
including attorneys’ fees, judgments, fines and settlement amounts incurred by
any of these officers in any action or proceeding arising out of their service
as an officer of the company, any of our subsidiaries or any other entity
to
which the officer provides services at our request.
The
benefits to be provided to our named executive officers in the event of
termination of employment, or, in the case of Dr. Hodgin upon actual termination
of employment, are described below under “Potential
Payments to Named Executive Officers Upon Termination or Change in
Control.”
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth certain information regarding unexercised options,
stock that has not vested and equity incentive plan awards for each named
executive officer outstanding as of December 31, 2006.
|
Option
Awards
|
Stock
Awards
|
||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
|
Option
Exercise Price
($)
|
|
|
Option
Expiration Date
|
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market
Value of Shares or Units of Stock That Have Not
Vested
($)(14)
|
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested
(#)
|
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)(14)
|
|
||
|
Todd
Farha
|
|
|
57,598
|
|
|
23,717(1)
|
|
|
8.33
|
|
|
2/6/14
|
|
|
12,000(2)
|
|
|
826,800
|
|
|
240,279(3)
|
|
|
16,555,223
|
|
|
|
|
|
-
|
|
|
220,000(4)
|
|
34.95
|
|
|
6/6/15
|
|
|
220,000(5)
|
|
|
15,158,000
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
100,000(6)
|
|
|
41.74
|
|
|
3/13/13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Paul
Behrens
|
|
|
5,760
|
|
|
2,371(1)
|
|
|
8.33
|
|
|
2/6/14
|
|
|
85,983(7)
|
|
|
5,924,229
|
|
|
-
|
|
|
-
|
|
|
|
|
|
1,620
|
|
|
6,480(8)
|
|
|
36.45
|
|
|
7/27/12
|
|
|
1,800(2)
|
|
|
124,020
|
|
|
-
|
|
|
-
|
|
|
|
|
|
4,028
|
|
|
16,113(9)
|
|
|
50.16
|
|
|
7/27/13
|
|
|
9,584(6)
|
|
|
660,338
|
|
|
-
|
|
|
-
|
|
|
Thaddeus
Bereday
|
|
|
11,519
|
|
|
4,744(1)
|
|
|
8.33
|
|
|
2/6/14
|
|
|
1,800(2)
|
|
|
124,020
|
|
|
-
|
|
|
-
|
|
|
|
|
|
6,250
|
|
|
3,750(10)
|
|
|
17.00
|
|
|
6/30/14
|
|
|
4,792(6)
|
|
|
330,169
|
|
|
-
|
|
|
-
|
|
|
|
|
|
1,620
|
|
|
6,480(8)
|
|
|
36.45
|
|
|
7/27/12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,518
|
|
|
10,070(9)
|
|
|
50.16
|
|
|
7/27/13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Ace
Hodgin
|
|
|
1,667
|
|
|
33,334(11)
|
|
|
19.10
|
|
|
8/5/14
|
|
|
1,800(2)
|
|
|
124,020
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
|
31,120(8)
|
|
|
36.45
|
|
|
7/27/12
|
|
|
11,979(6)
|
|
|
825,353
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,518
|
|
|
10,070(9)
|
|
|
50.16
|
|
|
7/27/13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Imtiaz
Sattaur
|
|
|
71,150
|
|
|
26,428(12)
|
|
|
8.33
|
|
|
2/6/14
|
|
|
4,380(2)
|
|
|
301,782
|
|
|
-
|
|
|
-
|
|
|
|
|
|
12,500
|
|
|
7,500(10)
|
|
|
17.00
|
|
|
6/30/14
|
|
|
11,979(6)
|
|
|
825,353
|
|
|
-
|
|
|
-
|
|
|
|
|
|
10,416
|
|
|
9,584(13)
|
|
|
23.50
|
|
|
11/3/14
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
7,780
|
|
|
31,120(8
|
|
|
36.45
|
|
|
7/27/12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
3,021
|
|
|
12,085(9)
|
|
|
50.16
|
|
|
7/27/13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1)
|
Award
vests as to 25% on February 6, 2005 and as to 2.083% upon the end
of each
full calendar month thereafter.
|
|
(2)
|
Award
vests as to 20% on March 15, 2005, 20% on March 15, 2006, 20% on
March 15,
2007, 20% on March 15, 2008 and 20% on March 15, 2009.
|
|
(3)
|
Award
vests on June 6, 2008 and June 6, 2010 based upon the achievement
of
compounded annual percentage increases in diluted net income per
share
(“EPS”) over three-year and five-year periods. 50% of the shares will
be
available for issuance on June 6, 2008 based on the achievement
of
cumulative EPS goals for the three-year period measured from January
1,
2005 through December 31, 2007. Any portion of the 50% not issued
on June
6, 2008 will be available for issuance on June 6, 2010 (together
with the
remaining 50%) based on achievement of the cumulative EPS goals
for the
five-year period measured from January 1, 2005 through December
31, 2010.
The target number of shares to be issued in the aggregate is 130,000
with
the actual number of shares to be issued being between zero and
240,279.
|
|
(4)
|
Award
vests as to 50% on June 6, 2007, 25% on June 6, 2008 and 25% on
June 6,
2009.
|
|
(5)
|
Award
vests as to 25% on June 6, 2007, 25% on June 6, 2008, 25% on June
6, 2009
and 25% on June 6, 2010.
|
|
(6)
|
Award
vests as to 20% on March 13, 2007, 20% on March 13, 2008, 20% on
March 13,
2009, 20% on March 13, 2010 and 20% on March 13, 2011.
|
|
(7)
|
Award
vests as to 25% on September 15, 2004 and as to 2.083% upon the
end of
each full calendar month thereafter.
|
|
(8)
|
Award
vests as to 20% on July 27, 2006, 20% on July 27, 2007, 20% on
July 27,
2008, 20% on July 27, 2009 and 20% on July 27, 2010.
|
|
(9)
|
Award
vests as to 20% on December 31, 2006, 16% on July 27, 2007, 16%
on July
27, 2008, 16% on July 27, 2009, 16% on July 27, 2010 and 16% on
July 27,
2011.
|
|
(10)
|
Award
vests as to 25% on June 30, 2005 and as to 2.083% upon the end
of each
full calendar month thereafter.
|
|
(11)
|
Award
vests as to 25% on August 5, 2005 and as to 2.083% upon the end
of each
full calendar month thereafter.
|
|
(12)
|
Award
vests as to 25% on January 6, 2005 and as to 2.083% upon the end
of each
full calendar month thereafter.
|
|
(13)
|
Award
vests as to 25% on November 3, 2005 and as to 2.083% upon the end
of each
full calendar month thereafter.
|
|
(14)
|
Value
based on $68.90 per share that was the closing price of our common
stock
on the NYSE on December 29, 2006, the last business day of
2006.
|
Option
Exercises and Stock Vested
The
table
below sets forth the number of stock options exercised and the aggregate
dollar
value realized upon exercise of the stock options or upon the vesting of
restricted stock for the executive officers named in the Summary
Compensation Table
during
the fiscal year ended December 31, 2006.
|
Option
Awards
|
Stock
Awards
|
||||||||||||
|
Name
|
Number
of Shares
Acquired
on
Exercise (#)
|
Value
Realized on
Exercise ($)(1)
|
Number
of Shares
Acquired
on
Vesting (#)
|
Value
Realized on
Vesting($)(2)
|
|||||||||
|
Todd
Farha
|
-
|
|
|
-
|
|
|
4,000
|
|
|
169,960
|
|
||
|
Paul
Behrens
|
|
|
-
|
|
|
-
|
|
|
115,243
|
|
|
5,943,838
|
|
|
Thaddeus
Bereday
|
|
|
-
|
|
|
-
|
|
|
75,668
|
|
|
3,783,010
|
|
|
Ace
Hodgin
|
|
|
27,779
|
|
|
1,011,639
|
|
|
600
|
|
|
25,494
|
|
|
Imtiaz
Sattaur
|
|
|
-
|
|
|
-
|
|
|
1,460
|
|
|
62,035
|
|
|
(1)
|
The
value realized is calculated by multiplying the number of shares
by the
difference between the market price of our common stock at time
of
exercise and the exercise price of the stock
option.
|
|
(2)
|
The
value realized is calculated by multiplying the number of shares
vested by
the closing market price of our common stock on the date of
vesting.
|
Pension
Benefits
and Nonqualified Deferred Compensation
We
do not
maintain a pension or nonqualified deferred compensation plan.
Potential
Payments to Named Executive Officers upon Termination or Change in
Control
Messrs.
Farha, Bereday and Behrens all serve as executive officers pursuant to
employment agreements with us which have been filed with the SEC. Mr. Sattaur
and Dr. Hodgin served as executive officers pursuant to offer letters which
have
also been filed with the SEC. The descriptions of these employment agreements
and offer letters below use certain terms, such as “change in control,”
“termination for good reason” and “termination for cause” which are defined in
the actual documents. Below are summaries of the definitions of these terms,
although these descriptions are qualified by reference to the actual documents.
|
•
|
A
“change in control” generally occurs upon: (i) any “person,” as defined in
the Exchange Act, acquiring more than 50% of our voting shares;
(ii) a
majority of our directors being replaced in certain circumstances
during a
two-year period; or (iii) the consummation of certain mergers or
a
liquidation or sale of our assets.
|
|
•
|
A
“termination
for good reason” generally means that the executive terminated as the
result of: (i) a material diminution in duties and responsibilities;
(ii)
any material failure by us to make any payment of compensation
or
benefits; or (iii) permanent relocation by more than 50
miles.
|
|
•
|
A
“termination
for cause” generally means that we terminate the executive as the result
of the executive: (i) being convicted of a felony or other serious
crime;
(ii) engaging in deliberate or reckless conduct that causes a demonstrable
or serious injury to the company; (iii) willfully refusing to perform
or
recklessly disregarding his duties; or (iv) breaching his duty
of loyalty
to the company or any other act of fraud or dishonesty with respect
to the
company.
|
For
purposes of quantifying any payments to be made to these officers in the
event
of termination of employment, it is assumed that the hypothetical termination
event occurred on December 31, 2006, and thus includes amounts earned through
such time and are estimates of the amounts which would be paid out to the
executives upon their termination. The actual amounts to be paid out can
only be
determined at the time of such executive’s termination. Notwithstanding the
foregoing, Dr. Hodgin’s actual termination of employment occurred on December
31, 2006 and the description of his termination payments are the actual payments
that he received upon termination of employment. For purposes of valuing
the
acceleration of vesting of equity awards, option values are equal to the
number
of options times the difference between the exercise price of the particular
option and $68.90 and restricted stock award values are equal to the number
of
restricted shares multiplied by $68.90. $68.90 was the closing price of our
common stock on the NYSE on December 29, 2006 which was the last business
day of
2006. With the exception of the value of stock option awards, the
post-termination payments described below are not contingent upon the
executives’ compliance with their non-competition, non-solicitation,
non-disparagement and confidentiality obligations, although we have the ability
to enforce these provisions through any remedies available at law or in
equity.
The
triggering event for acceleration of vesting of equity awards upon termination
or a change in control depends on the plan or particular agreement under
which
the awards were granted. Below are summaries of the triggering events under
the
agreements which are applicable to our named executive officers.
| • |
2002
Executive Plan:
Mr. Behrens is the only named executive officer with unvested equity
awards under the 2002 Senior Executive Equity Plan (the “2002 Executive
Plan”). Under the 2002 Executive Plan, Mr. Behrens entered into a
subscription agreement pursuant to which all of his unvested shares
of
restricted stock shall vest at any time following a change in control
in
the event: (i) he is terminated without cause; (ii) he terminates
employment for good reason; or (iii) of his death, disability or
retirement.
|
| • |
2002
Option Plan:
Under the 2002 Employee Stock Option Plan (the “2002 Option Plan”),
unvested options outstanding at the time of a change in control
will
expire and be forfeited.
|
| • |
2004
Equity Plan:
Under the 2004 Equity Plan, unvested awards of restricted stock
will vest:
(i) in the event of the awardee’s death, disability or retirement; or (ii)
if there is a change in control and the awardee’s employment is terminated
within one year of the change in control by the company without
cause or
by the awardee for good reason. Unvested awards of stock options
will vest
if there is a change in control and the awardee’s employment is terminated
within one year of the change in control: (i) by the company without
cause; (ii) by the awardee for good reason; or (ii) by reason of
the
awardee’s death, disability or retirement.
|
| • |
Farha
Award Agreements:
In conjunction with the renegotiation of Mr. Farha’s employment agreement
in June 2005, he was awarded stock options to acquire 220,000 shares
of
our common stock, 220,000 shares of restricted stock and up to
240,279
performance shares.
|
|
o
|
Stock
Options. The
vesting of Mr. Farha’s June 2005 option award will accelerate in full, and
remain exercisable for one year thereafter, in the event of the
termination of (a) Mr. Farha’s employment with us as a result of his
death, disability or retirement, or (b) Mr. Farha’s employment with us (or
successor thereto) by Mr. Farha for good reason or by us (or successor
thereto) without cause within two years 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, as compared to the 48-month term, and will remain exercisable
for
one year thereafter.
|
|
o
|
Restricted
Stock.
The vesting of Mr. Farha’s June 2005 restricted stock award will
accelerate in full in the event of the termination of (a) Mr. Farha’s
employment with us as a result of his death, disability or retirement,
or
(b) 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 two years after a change in control. Absent a change in
control, in
the event of the termination of Mr. Farha’s employment 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, as compared to the
60-month
term.
|
|
o
|
Performance
Shares.
The vesting of Mr. Farha’s performance awards will accelerate in full at
the target level in the event of (a) the termination of Mr. Farha’s
employment 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 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 at the target level 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.
|
In
calculating the amounts estimated to be paid to Mr. Farha upon a change in
control pursuant to Section 4999 of the IRC, it was assumed that: (i) the
change
in control and Mr. Farha’s termination occurred on December 31, 2006; (ii) all
equity awarded under the 2004 Equity Plan vested and was sold on December
31,
2006; (iii) all unvested awards under the 2002 Option Plan were forfeited
on
December 31, 2006; (iv) Mr. Farha’s 2006 base salary rate was used to calculate
his salary and bonus severance payments; and (v) the Social Security Wage
Base
was reached prior to his termination date. In addition, the following tax
rates
were assumed to apply: excise tax rate of 20%; Medicare tax rate of 1.45%;
applicable state tax rate of 0% in Florida; and a Federal tax rate of
35%.
Below
are
descriptions of the circumstances under which each of our named executive
officers would be entitled to payments upon the occurrence of a change in
control or termination of employment as of December 31, 2006 and a
quantification of such payments under the terms of the applicable agreements
between us and each of our named executive officers. All of these descriptions
and the quantification of payments are subject to the assumptions described
above and the descriptions are qualified by reference to the applicable
agreements between us and each of our named executive officers.
Todd
Farha, Chairman, President and Chief Executive Officer
Todd
Farha serves as our chairman, president and chief executive officer pursuant
to
an amended and restated employment agreement, dated June 6, 2005, which is
described above under “Employment
Agreements with Named Executive Officers.”
Termination
without cause or for good reason
If
Mr.
Farha’s employment is terminated by us without cause or by Mr. Farha for good
reason, then Mr. Farha would be entitled to continue to receive his base
salary
for one year, equal to $400,000. He would 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, which is equal to $400,000. Further,
he
would be entitled to continuation of benefits for 12 months following
termination, which is equal to approximately $10,988, and to the
value
of any
unused, accrued vacation time equal to approximately $7,692. Further, certain
of
Mr. Farha’s unvested equity awards would vest and become immediately exercisable
which would result in a value of $10,035,375.
Change
in control
If
Mr.
Farha’s employment is terminated by us without cause or by Mr. Farha for good
reason following a change in control, then he would be entitled to continue
to
receive his base salary for 24 months, equal to $800,000. He would 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, which
is
equal to $400,000. Further, he would be entitled to continuation of benefits
for
12 months following termination, which is equal to approximately $10,988,
and to
the value of any unused, accrued vacation time equal to approximately $7,692.
In
the event Mr. Farha’s employment is terminated following a change in control by
us without cause, by Mr. Farha for good reason or upon death, disability
or
retirement, certain of Mr. Farha’s unvested equity awards would vest which would
have a value of $35,126,800. 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 IRC 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.
This additional payment would equal approximately $7,826,023.
Upon
the
occurrence of a change in control irrespective of whether Mr. Farha’s employment
is terminated, his performance shares would vest as described above which
would
have a value of $8,957,000. 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 IRC 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.
This additional payment would equal approximately $3,703,697.
Termination
upon death, disability or retirement
If
Mr.
Farha’s employment is terminated as the result of death or disability, then Mr.
Farha, or his estate, as the case may be, would be entitled to continue to
receive his base salary for three months, equal to $100,000. Upon Mr. Farha
becoming disabled, he would also be entitled to continuation of benefits
for
three months following termination, which is equal to approximately $2,864,
and
to the value of any unused, accrued vacation time equal to approximately
$7,692.
In the event of Mr. Farha’s death, under the executive insurance policies Mr.
Farha’s estate would receive a death benefit in the amount of $250,000 that is
attributable to the portion of the premium that we pay. In the event of
disability, under the executive insurance policies, Mr. Farha would receive
a
disability benefit of $15,000 per month for up to five years, for a potential
total of up to $900,000. These disability and life insurance benefits would
not
be paid by us, but would be paid by a third party insurer. Further, in the
event
Mr. Farha’s employment is terminated as the result of death, disability or
retirement, certain of his unvested equity awards would vest which would
have a
value of approximately $32,410,800.
Termination
for cause or voluntarily
If
Mr.
Farha’s employment is terminated by us for cause or voluntarily by him, then Mr.
Farha would only be entitled to the value of any unused, accrued vacation
time
equal to approximately $7,692.
Paul
Behrens, Senior Vice President and Chief Financial Officer
Paul
Behrens serves as our senior vice president and chief financial officer pursuant
to an employment agreement with us which is described above under “Employment
Agreements with Named Executive Officers.”
Termination
without cause or for good reason
If
Mr.
Behrens’ employment is terminated by us without cause or by him for good reason,
he would be entitled to continue to receive his base salary for 12 months
following the date of termination, equal to $275,000. He would also be entitled
to continuation of benefits for 12 months following termination, which is
equal
to approximately $16,731, and to the value of any unused, accrued vacation
time
equal to approximately $5,642.
Termination
following a change in control
If
Mr.
Behrens’ employment is terminated by us without cause or by him for good reason
following a change in control, he would be entitled to continue to receive
his
base salary for 12 months following the date of termination, equal to $275,000.
In addition, if Mr. Behrens’ employment is terminated following a change in
control by us without cause, by him for good reason or by reason of death,
disability or retirement, certain of Mr. Behrens’ unvested equity awards would
vest which would have a value of $7,220,820. He would also be entitled to
continuation of benefits for 12 months following termination, which is equal
to
approximately $16,731 and the value of any unused, accrued vacation time
equal
to approximately $5,642.
Termination
upon death, disability or retirement
If
Mr.
Behrens’ employment is terminated as the result of death or disability, then Mr.
Behrens, or his estate, as the case may be, would be entitled to continue
to
receive his base salary for six months, equal to approximately $141,250.
Under
such circumstance, he, or his estate, as the case may be, would also be entitled
to continuation of benefits for six months following termination, which is
equal
to approximately $8,366, and to the value of any unused, accrued vacation
time
equal to approximately $5,642. In the event of disability, under his executive
insurance policy, Mr. Behrens would receive a disability benefit attributable
to
the portion of the premium that we pay equal to $6,383 per month up until
he
reaches age 65, for a potential total of up to $1,531,920. This disability
benefit would not be paid by us, but would be paid by a third party insurer.
Further, if Mr. Behrens’ employment is terminated as the result of death,
disability or retirement, certain of his unvested equity awards would vest
which
would have a value of approximately $784,358.
Termination
for cause or voluntarily
If
Mr.
Behrens’ employment is terminated by us for cause or voluntarily by him, then
Mr. Behrens would only be entitled to any unused, accrued vacation time equal
to
approximately $5,642.
Thaddeus
Bereday, Senior Vice President and General Counsel
Thaddeus
Bereday serves as our senior vice president and general counsel pursuant
to an
employment agreement with us which is described above under “Employment
Agreements with Named Executive Officers.”
Termination
without cause or for good reason
If
Mr.
Bereday’s employment is terminated by us without cause or by him for good
reason, he
would
be entitled to continue to receive his base salary for 12 months following
the
date of termination, equal to $250,000.
He
would also be entitled to continuation of benefits for 12 months following
termination, which is equal to approximately $16,550, and to the value of
any
unused, accrued vacation time equal to approximately $4,962.
Termination
following a change in control
If
Mr.
Bereday’s employment is terminated by us without cause or by him for good
reason, he would be entitled to continue to receive his base salary for 12
months following the date of termination, equal to $250,000. In addition,
if Mr.
Bereday’s employment is terminated following a change in control by us without
cause, by him for good reason or by reason of death, disability or retirement,
certain of Mr. Bereday’s unvested equity awards would vest which would have a
value of $853,177. He would also be entitled to continuation of benefits
for 12
months following termination, which is equal to approximately $16,550, and
to
the value of any unused, accrued vacation time equal to approximately
$4,962.
Termination
upon death, disability or retirement
If
Mr.
Bereday’s employment is terminated as the result of death or him becoming
disabled, then Mr. Bereday, or his estate, as the case may be, would be entitled
to continue to receive his base salary for six months, equal to approximately
$128,250. Under such circumstance, he, or his estate, as the case may be,
would
also be entitled to continuation of benefits for six months following
termination, which is equal to approximately $8,275, and to any unused, accrued
vacation time equal to approximately $4,962. In the event of disability,
under
the executive insurance policies, Mr. Bereday would receive a disability
benefit
equal to $9,750 per month up until he reaches age 65, for a potential total
of
up to $2,691,000. This disability benefit would not be paid by us, but would
be
paid by a third party insurer. Further, in the event Mr. Bereday’s employment is
terminated as the result of death, disability or retirement, certain of his
unvested equity awards would vest which would have a value of approximately
$454,189.
Termination
for cause or voluntarily
If
Mr.
Bereday’s employment is terminated by us for cause or voluntarily by him, then
Mr. Bereday would only be entitled to the value of any unused, accrued vacation
time equal to approximately $4,962.
Imtiaz
Sattaur, President, Florida
Mr.
Sattaur served as our president, Florida pursuant to an offer letter, dated
December 5, 2003, which is described above under “Employment
Agreements with Named Executive Officers.”
Notwithstanding his termination of employment with us on April 6, 2007, in
the
event Mr. Sattaur’s employment would have terminated following a change in
control by us without cause, by him for good reason or upon death, disability
or
retirement, certain of Mr. Sattaur’s unvested equity awards would have vested
which would have had a value of $4,399,310. If Mr. Sattaur’s employment were
terminated as the result of death, disability or retirement, certain of his
unvested equity awards would have vested which would have had a value of
approximately $1,127,135.
Ace
Hodgin, M.D., Senior Vice President and Chief Medical Officer
Dr.
Hodgin terminated his employment with us effective December 31, 2006. Pursuant
to our separation agreement with him, Dr. Hodgin received a lump sum separation
payment in the amount of $10,000, released and waived all claims against
us, and
agreed to remain subject to confidentiality and non-disparagement provisions
and
one year non-competition and non-solicitation provisions. We will have the
right
to seek repayment of the separation payment in the event Dr. Hodgin violates
any
of the provisions of the separation agreement. On the date of his termination,
unvested equity awards lapsed and were forfeited in accordance with the terms
of
the awards.
Directors’
Compensation
Through
June 2006, we paid each non-employee member of our board an annual director’s
fee of $25,000 for attending board and committee meetings. In July 2006,
the
compensation committee, with the advice of Watson Wyatt, our outside
compensation consultant, re-evaluated the fees paid to board members. As
the
result of this re-evaluation, commencing July 2006, all board members are
paid
an annual director’s fee of $27,500 with the non-chair members of the audit
committee receiving an additional $2,500 and the audit committee chair receiving
an additional $5,000. All board fees are paid on a quarterly basis. Until
April
2007, Mr. Moszkowski’s employer imposed certain restrictions on his ability to
receive compensation from us. Accordingly, prior to April 2007, Mr. Moszkowski
did not receive an annual retainer nor was he paid for his attendance at
board
or committee meetings. However, commencing April 2007, these restrictions
were
no longer in effect and Mr. Moszkowski began participating in the standard
director compensation programs described herein. Mr. Farha does not receive
any
additional compensation for his service as a member of the board. For
information regarding Mr. Farha’s compensation as a named executive officer, see
“Executive
Compensation and Related Information.”
In
June
2006, the compensation committee also approved an award of 5,000 stock options
to each non-employee member of the board of directors, with the exception
of the
chairperson of the audit committee, Dr. Herzlinger, who was awarded 6,500
stock
options. These stock options were awarded on June 7, 2006 and were immediately
vested. Mr. Moszkowski was not awarded any stock options. The compensation
committee also awarded Dr. Andrew Agwunobi, a newly elected director, an
initial
grant of 12,500 stock options, which were immediately vested and expired
after
seven years, and 2,000 shares of restricted stock which vested over two years.
All of these stock options have an exercise price of $47.40 per share, which
was
the closing price of our stock on June 7, 2006. Upon Dr. Agwunobi’s resignation
from the board in December 2006, the compensation committee accelerated the
vesting of his unvested restricted stock. Similarly, the compensation committee
has approved the acceleration of vesting of 9,376 of Ms. Swift’s unvested stock
options upon the expiration of her term on the date of the 2007 annual
shareholders meeting.
In
consideration of Mr. Moszkowski’s continued service on the board and the
termination of the prior restrictions on his ability to receive compensation
from us, in April 2007, the compensation committee awarded Mr. Moszkowski
2,728
shares of restricted stock which vest over a two-year period and 10,495 stock
options which were immediately vested as of the date of grant. In anticipation
of Senator Graham’s appointment to our board, the compensation committee
approved an award to him of $250,000 worth of shares of restricted stock
that
vest over a two-year period and $250,000 worth of stock options that are
fully
vested on the date of grant. Due to the timing of Senator Graham’s appointment
to the board and this proxy statement, the actual number of restricted shares
and stock options to be awarded to Senator Graham cannot be determined at
this
time.
All
of
our directors’ unvested stock options were issued under our 2004 Equity Plan,
except for a portion of Mr. Michalik’s stock options. The circumstances under
which the vesting of equity awards under the 2004 Equity Plan will accelerate
are described above under “Potential
Payments to Named Executive Officers upon Termination or Change in
Control.”
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. We
have
entered into indemnification agreements with each of our directors 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 for expenses specified in the agreements, including attorneys’
fees, judgments, fines and settlement amounts incurred by the directors in
any
action or proceeding arising out of their service as a director for us, any
of
our subsidiaries or any other entity to which the director provides services
at
our request.
As
discussed above under “Compensation
Discussion and Analysis -
Equity
Award Process,”
in
July
2006, the compensation committee of the board determined that all annual
equity
awards to board members will be issued effective as of the date of the annual
meeting of shareholders. Notwithstanding the foregoing, our directors do
not
receive regular awards of stock options under a plan or otherwise. We may,
in
our discretion, grant additional stock options and other equity awards to
our
directors from time to time.
The
table
below sets forth the compensation paid to each non-employee member of our
board
of directors during 2006.
|
Name
|
Fees
Earned or Paid
in
Cash
($)
|
Stock
Awards
($)(3)(4)
|
Option
Awards
($)(3)(4)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||
|
Andrew
Agwunobi, M.D.(1)
|
13,750
|
|
|
137,220
|
|
|
200,745
|
|
|
-
|
|
|
351,715
|
|
||
|
Regina
Herzlinger
|
|
|
28,750
|
|
|
24,749
|
|
|
122,058
|
|
|
-
|
|
|
175,557
|
|
|
Kevin
Hickey
|
|
|
26,250
|
|
|
121
|
|
|
89,128
|
|
|
-
|
|
|
115,499
|
|
|
Alif
Hourani
|
|
|
26,250
|
|
|
24,749
|
|
|
89,128
|
|
|
-
|
|
|
140,127
|
|
|
Glen
Johnson, M.D.(2)
|
|
|
37,500
|
|
|
-
|
|
|
11,653
|
|
|
10,000
|
|
|
59,153
|
|
|
Ruben
King-Shaw, Jr.
|
|
|
26,250
|
|
|
24,749
|
|
|
89,128
|
|
|
-
|
|
|
140,127
|
|
|
Christian
Michalik
|
|
|
27,500
|
|
|
-
|
|
|
107,705
|
|
|
-
|
|
|
135,205
|
|
|
Neal
Moszkowski
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Jane
Swift
|
|
|
27,500
|
|
|
-
|
|
|
155,636
|
|
|
-
|
|
|
183,136
|
|
|
(1)
|
Dr.
Agwunobi joined our board on June 7, 2006 and resigned as of December
12,
2006. Upon his cessation of service, Dr. Agwunobi’s equity awards became
fully vested.
|
|
(2)
|
Dr.
Johnson’s term expired on June 7, 2006. In consideration of his valued
service on our board, we paid Dr. Johnson $25,000 and our private
foundation contributed $10,000 to the Texas Academy of Family Physicians
Foundation in his name. Dr. Johnson forfeited 20,497 unvested stock
options upon his cessation of
service.
|
|
(3)
|
The
amounts included in the “Stock Awards” and “Option Awards” columns are the
grant date fair values of such awards which are equal to the amounts
of
compensation cost recognized by us in 2006 related to stock awards
and
stock option awards, respectively, in 2006 and prior years, in
accordance
with SFAS 123R. For a discussion of valuation assumptions and
methodologies, see Note 2 to our 2006 consolidated financial statements
included in our annual report of Form 10-K for the year ended December
31,
2006.
|
|
(4)
|
The
following table shows the aggregate numbers of outstanding stock
options
and restricted stock awards for each director as of December 31,
2006.
|
|
Stock
Awards (#)
|
Option
Awards (#)
|
||||||||||||
|
Name
|
Vested
|
Unvested
|
Vested
|
Unvested
|
|||||||||
|
Regina
Herzlinger
|
|
|
35,554
|
|
|
6,777
|
|
|
19,541
|
|
|
3,959
|
|
|
Kevin
Hickey
|
|
|
36,647
|
|
|
-
|
|
|
12,520
|
|
|
1,980
|
|
|
Alif
Hourani
|
|
|
17,804
|
|
|
6,777
|
|
|
12,520
|
|
|
1,980
|
|
|
Glen
Johnson, M.D.
|
|
|
989
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Ruben
King-Shaw, Jr.
|
|
|
13,304
|
|
|
6,777
|
|
|
12,520
|
|
|
1,980
|
|
|
Christian
Michalik
|
|
|
10,810
|
|
|
-
|
|
|
48,094
|
|
|
7,063
|
|
|
Jane
Swift
|
|
|
-
|
|
|
-
|
|
|
14,020
|
|
|
11,980
|
|
The
compensation committee, comprised of independent directors, has reviewed
and
discussed the Compensation Discussion and Analysis (“CD&A”) with the
company’s management. Based on the review and discussions, the compensation
committee recommended to the company’s board of directors that the CD&A be
included in this proxy statement and incorporated by reference in the annual
report on Form 10-K for the year ended December 31, 2006.
The
Compensation Committee
Neal
Moszkowski (Chairman)
Alif
Hourani
Kevin
Hickey
Independent
Registered Public Accounting Firm
The
table
below presents fees for professional audit services rendered by Deloitte
&
Touche LLP for the years ended December 31, 2006 and 2005 and fees billed
for
other services rendered by Deloitte & Touche LLP during those periods.
|
Audit,
Audit-Related, Tax and Other Fees
|
|||||||
|
Services
|
2006
|
2005
|
|||||
|
Audit
|
$
|
2,930,000(1)
|
|
$
|
2,205,000(1)
|
|
|
|
Audit-related
|
|
$
|
141,345(2)
|
|
|
-
|
|
|
Tax
|
|
|
-
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
-
|
|
| (1) |
The
audit services billed by Deloitte & Touche LLP in 2006 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 quarterly reports on Form 10-Q. 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.
|
| (2) |
The
audit-related services billed by Deloitte & Touche LLP in 2006 related
to procedures performed and reported under Statement on Auditing
Standard
70, Reports
on Processing of Transactions by Service Organizations.
|
Audit
and Non-Audit Services Pre-Approval Policy
Deloitte
& Touche LLP was our independent registered public accounting firm for the
year ended December 31, 2006 and has been selected by our audit committee
to be
our independent registered public accounting firm for the year ended December
31, 2007. 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 its
independence from the company. This policy sets forth 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 that may be
provided under these four categories and also sets forth 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. The policy does not provide for
a
de
minimus
exception to the pre-approval requirements. Accordingly, all of the 2006
and
2005 fees described above were pre-approved by the audit committee in accordance
with the Audit and Non-Audit Services Pre-Approval Policy.
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 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 discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, Communication
with Audit Committees.
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, 2006, the committee fulfilled its duties
and
responsibilities generally as outlined in the charter. Specifically, the
committee, among other actions:
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Reviewed
and discussed the company’s quarterly earnings press releases,
consolidated financial statements and related periodic reports
filed with
the SEC with management and the independent
auditor;
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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;
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Reviewed
with the independent auditor, management and the internal auditor
the
audit scope and plan;
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Conducted
reviews and evaluations of the effectiveness of the committee
and the
company’s audit function; and
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Met
in periodic executive sessions with each of the independent auditor,
management and the internal
auditor.
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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, 2006, as filed with the SEC. In addition, the
committee has approved the appointment of Deloitte & Touche LLP as the
company’s independent registered public accounting firm for the fiscal year
ending December 31, 2007.
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The Audit Committee
Regina Herzlinger (Chairperson)
Alif Hourani
Christian Michalik
Jane Swift
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REGISTERED
PUBLIC ACCOUNTING FIRM
The
audit
committee has appointed the firm of Deloitte & Touche LLP as our independent
registered public accounting firm for fiscal year 2007, 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 LLP 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 LLP. We
anticipate that a representative of Deloitte & Touche LLP 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.
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* * * *
Shareholder
Proposals
In
order
to be considered for inclusion in our proxy statement and form of proxy relating
to the 2008 annual meeting of shareholders, pursuant to Rule 14a-8 of the
Exchange Act, all shareholder proposals must have been received by our secretary
at our principal offices in Tampa, Florida, on or before December 29, 2007.
In
addition, under our bylaws, any shareholder proposal for consideration at
the
2008 annual meeting of shareholders submitted outside the processes of Rule
14a-8 of the Exchange Act, 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. Because our 2007 annual meeting is being held on June
12,
2007, we must receive written notice of a shareholder proposal submitted
other
than pursuant to Rule 14a-8 by March 14, 2008 but no earlier than February
12,
2008.
Multiple
Shareholders Having the Same Address
We
have
adopted a process called “householding” for mailing proxy materials in order to
reduce costs. Householding means that shareholders who share the same last
name
and address will receive only one copy of our proxy materials, unless we
receive
contrary instructions. We will continue to mail a proxy card to each shareholder
of record. If you prefer to receive multiple copies of the proxy materials
at
the same address, additional copies will be provided to you promptly upon
request. If you hold your shares in street name, you should direct your request
to your bank or broker. If you are a registered holder, you should direct
your
request to WellCare Health Plans, Inc., C/O Computershare Investor Services,
P.O
Box 43078, Providence, RI 02940-3078, telephone number (781) 575-2879. You
may
also request copies of our proxy materials by writing to Investor Relations
Department, WellCare Health Plans, Inc., 8735 Henderson Road, Tampa, Florida
33634, or by calling (813) 865-1284. The company’s 2006 annual report to
shareholders, 2006 annual report on Form 10-K and this proxy statement are
also
available on our website at
www.wellcare.com.
Committee
Reports
The
information contained in the Report of the Compensation Committee and the
Report
of the Audit Committee 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 Exchange Act, except to the extent the
filing
specifically incorporates such information by reference therein.
Solicitation
All
costs
and expenses associated with soliciting proxies will be borne by us. In addition
to the use of the mails, the directors, officers and our associates by personal
interview, telephone or telegram may solicit proxies. 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.
Other
Matters for Consideration
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.
Requests
for More Information
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 2006
annual report to shareholders and annual report on Form 10-K (without exhibits)
for the fiscal year ended December 31, 2006, 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, Tampa, Florida 33634. A
copy
of these documents and our other SEC filings are also available on our website
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 website.
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Electronic
Voting Instructions
You
can vote by Internet or telephone!
Available
24 hours a day, 7 days a week!
Instead
of
mailing your proxy, you may choose one of the two voting methods
outlined
below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies
submitted by the Internet or telephone must be received by 1:00
a.m.,
Central Time, on June 12, 2007.
Vote
by Internet
•
Log
on to
the Internet and go to
www.investorvote.com
•
Follow
the
steps outlined on the secured website.
Vote
by telephone
•
Call
toll
free 1-800-652-VOTE (8683) within the United
States,
Canada
& Puerto Rico any time on a touch tone
telephone.
There is NO CHARGE to you for the call.
•
Follow
the
instructions provided by the recorded message.
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Using
a
black ink pen, mark your votes with an X
as shown in this example. Please do not write outside
the
designated areas.
x
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Annual
Meeting Proxy Card
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IF
YOU
HAVE NOT VOTED VIA THE INTERNET
OR TELEPHONE, FOLD ALONG
THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
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A Proposals
— The Board of Directors recommends a vote
FOR all the nominees listed
and
FOR Proposal
2.
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1.
Election of
Class III Directors:
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01
- Alif
Hourani
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02
- Neal
Moszkowski
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For
[
]
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Withhold
[
]
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For
[
]
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Withhold
[
]
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2.
Ratification of Deloitte & Touche LLP as independent registered public
accounting firm for fiscal year 2007.
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For
[
]
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Against
[
]
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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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B.
Non-Voting Items
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Change
of Address — Please print your new address below.
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C. Authorized
Signatures — This section must be completed for your vote to be counted. —
Date and Sign Below
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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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Date
(mm/dd/yyyy) - Please print date below
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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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_____________________________________
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________________________________________
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_________________________________________
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IF
YOU
HAVE NOT VOTED VIA THE INTERNET
OR TELEPHONE, FOLD ALONG
THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
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Annual
Meeting Proxy Card
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PROXY
FOR 2007 ANNUAL MEETING ON JUNE 12, 2007
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 2007
Annual Meeting to be held at 8735 Henderson Road, Renaissance Centre,
Tampa, Florida 33634, on June 12, 2007, at 10:00 a.m. and at any
adjournment or postponement thereof.
UNLESS
THE STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR
ITEMS 1
AND 2.
(Continued
and
to be voted on reverse
side.)
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