SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
Report (Date of earliest event reported): January 25, 2008
WELLCARE
HEALTH PLANS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-32209
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47-0937650
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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8725
Henderson Road, Renaissance One
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Tampa,
Florida
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33634
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(813) 290-6200
Not
Applicable
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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Item
5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
(b)
Resignations of
Todd
Farha, Paul Behrens and Thaddeus Bereday
On
January 25, 2008, WellCare Health
Plans, Inc. (the “Company”) announced that Todd Farha, the Chief Executive
Officer, President and Chairman of the Board of Directors of the Company,
Paul
Behrens, the Senior Vice President and Chief Financial Officer of the Company
and Thaddeus Bereday, the Senior Vice President, General Counsel and Secretary
of the Company, had resigned from their officer and director positions with
the
Company and its subsidiaries, effective immediately. Each of Messrs.
Farha, Behrens and Bereday has agreed to assist in an orderly transition
to new
management by remaining as a non-executive employee of the Company through
March
31, 2008.
(c)
Election of Heath
Schiesser as President and Chief Executive Officer of the Company and Charles
Berg as
Executive Chairman of the Company
On
January 25, 2008, the Board of
Directors of the Company elected Heath Schiesser as the President and Chief
Executive Officer of the Company and Charles Berg as the Executive Chairman
of
the Company.
Mr.
Schiesser, age 40, originally
joined the Company in July 2002 and served as a Senior Vice President of
Marketing and Sales, focused on the growth of the Company’s Medicaid and
Medicare businesses, through July 2006. In addition, as President of
WellCare Prescription Insurance, Inc. from January 2005 to July 2006, Mr.
Schiesser led the Company’s national entry into Medicare Prescription Drug
Plans. Since 2006, he has served as a senior advisor to the Company,
focusing on the Company’s Medicare products. Prior to joining the
Company, Mr. Schiesser worked at the management consulting firm of McKinsey
& Company, co-founded an online pharmacy for Express Scripts, a pharmacy
benefit manager, and worked in the development of new ventures. Mr.
Schiesser received a Bachelor of Arts degree from Trinity University and
holds a
Master of Business Administration from Harvard University.
Mr.
Berg, age 50, has been a senior
advisor to Welsh, Carson, Anderson & Stowe, a private equity firm, since
January 2007. From April 1998 to July 2004, Mr. Berg held various
executive positions with Oxford Health Plans, Inc., a health insurance company,
which included Chief Executive Officer from November 2002 to July 2004,
President and Chief Operating Officer from March 2001 to November 2002, and
Executive Vice President, Medical Delivery, from April 1998 to March
2001. From July 2004 to September 2006, Mr. Berg served as an
executive of UnitedHealth Group, a health care company. Mr. Berg
received a Bachelor of Arts degree from Macalester College and holds a J.D.
from
Georgetown University Law Center. Mr. Berg serves as a director and a
member of the audit committee of DaVita, Inc., as well as on the boards of
directors of several private companies. He is also a trustee of
Macalester College.
(d)
Appointment of
Messrs.
Schiesser and Berg as Members of the Board of Directors of the Company
On
January 25, 2008, the Board of
Directors of the Company appointed Mr. Berg as a Class III member of the
Board
of Directors to fill an existing vacancy, to serve until the next election
of
the Class III directors at the 2010 annual meeting of stockholders, and
appointed Mr. Schiesser as a Class I member of the Board of Directors to
fill
the position vacated by Mr. Farha’s departure from the Board of Directors, to
serve until the next election of the Class I directors at the 2008 annual
meeting of stockholders.
Each
of Messrs. Schiesser and Berg was
appointed as a director by the Board of Directors pursuant to his employment
agreement with the Company, in each case as described below. Because
each of Messrs. Schiesser and Berg also will serve as an executive of the
Company, neither of Messrs. Schiesser or Berg will receive any additional
compensation for his service as a director.
(e)
Separation Agreements
with Messrs. Farha, Behrens and Bereday
In
addition, on January 25, 2008, the
Company and Comprehensive Health Management, Inc., an indirect wholly-owned
subsidiary of the Company (“CHMI”), entered into separation agreements with each
of Messrs. Farha, Behrens and Bereday (each, a “Separation Agreement” and
collectively, the “Separation Agreements”), providing for their respective
resignations from the Company and its subsidiaries. Copies of the
Separation Agreements are filed with this report as Exhibits 10.1, 10.2 and
10.3
and are incorporated herein by reference. The summary of the
Separation Agreements set forth below is qualified in its entirety by reference
to the text of the Separation Agreements.
Under
the Separation Agreements and
subject to the terms and conditions set forth therein, each of Messrs. Farha,
Behrens and Bereday (referred to herein as the “separating executives”) have
agreed to continue as non-executive employees of the Company to assist in
an
orderly transition and be available to the Company upon request, in each
case
through the close of business on March 31, 2008.
Each
separating executive’s outstanding
equity awards will continue to vest through March 31, 2008 in accordance
with
their terms. Except as provided below in the case of Mr. Farha’s
performance shares, after March 31, 2008, all unvested equity awards held
by the
separating executives will terminate. Each of the separating
executives is permitted to exercise vested options (including both options
that
vest between January 25, 2008 and March 31, 2008 and options that were
previously vested in accordance with their terms) until the expiration of
the
applicable 60 or 90 day period, as the case may be, set forth in their
respective option agreements.
In
the case of Mr. Farha only, he may
be entitled to vesting of up to 130,000 of his unvested performance shares
if
certain specified conditions have been satisfied prior to June 6,
2010. If such specified conditions are not satisfied by June 6, 2010,
all unvested performance shares will lapse.
(e)
Employment Agreement
between the Company and Mr. Schiesser
In
connection with Mr. Schiesser’s
election as President and Chief Executive Officer of the Company, Mr. Schiesser,
the Company and CHMI entered into an employment agreement, and the Company
and
Mr. Schiesser entered into a restricted stock agreement and a stock option
agreement, each effective as of January 25, 2008. Copies of Mr.
Schiesser’s employment agreement, restricted stock agreement and stock option
agreement are attached to this report as Exhibits 10.4, 10.6 and 10.8,
respectively, and are incorporated herein by reference. The summaries
set forth below of Mr. Schiesser’s employment agreement, restricted stock
agreement and stock option agreement are qualified in their entirety by
reference to the text of the employment agreement, restricted stock agreement
and stock option agreement.
Mr.
Schiesser’s employment agreement
commenced on January 25, 2008 and has an initial term of four
years. Effective as of the expiration of the initial four-year term,
the employment agreement automatically extends for additional one-year periods
unless either party gives notice of non-renewal at least 90 days before the
expiration of the then-current term.
Pursuant
to the terms of his employment
agreement, Mr. Schiesser will receive a minimum base salary of
$400,000. He also will be entitled to receive an annual cash bonus
based on his achievement of performance objectives set by the Compensation
Committee of the Board of Directors, after consultation with Mr. Schiesser,
with
a targeted bonus of 200% of his annual salary for each fiscal
year. During the term of the employment agreement, Mr. Schiesser will
be entitled to participate in all Company benefit plans on the most favorable
basis available to any senior executive of the Company.
Under
the terms of his employment
agreement, if Mr. Schiesser’s employment is terminated without “cause” or by Mr.
Schiesser for “good reason” (as defined in his employment agreement), he will be
entitled to severance benefits including: (i) a lump sum cash payment equal
to
two times (or if the termination date occurs on or after January 25, 2009,
one
times) the sum of Mr. Schiesser’s annual salary as in effect on the termination
date and the greater of Mr. Schiesser’s target bonus for the fiscal year
during
which
the
termination date occurs or the highest performance bonus earned by Mr. Schiesser
with respect to any preceding fiscal year, (ii) the vesting of all of Mr.
Schiesser’s equity-based awards so that such awards are vested as of the
termination date to the same extent that such awards would have been vested
had
Mr. Schiesser’s employment continued for twenty-four months (or, if the
termination date occurs on or after January 25, 2009, twelve months) after
his
termination date, and (iii) for a period of twenty-four months (or, if the
termination date occurs on or after January 25, 2009, twelve months) after
the
termination date, reimbursement on an after-tax basis for the cost of continued
participation in the medical, dental and vision care and life insurance benefits
in which Mr. Schiesser and his family participated prior to the termination
date, provided Mr. Schiesser elects to continue health insurance coverage
pursuant to COBRA. Mr. Schiesser’s employment agreement also provides
for certain benefits upon Mr. Schiesser’s death or disability.
The
employment agreement requires that
to the extent that any payment or benefit received or to be received by Mr.
Schiesser would be subject to an excise tax under the Internal Revenue Code
of
1986, as amended (the “Code”), the Company will pay to Mr. Schiesser an
additional amount such that the net amount received by Mr. Schiesser is equal
to
what he would have received if none of his payments or benefits were subject
to
an excise tax, provided that if the amount of payments subject to an excise
tax
exceeds the safe harbor under Section 280G of the Code by less than ten percent
of Mr. Schiesser’s base salary, then Mr. Schiesser’s payment will be reduced so
that no amounts are subject to an excise tax.
The
employment agreement also includes
confidentiality and non-competition provisions, including a requirement that
Mr.
Schiesser not seek employment with, or ownership in, a company in direct
competition with the Company and its subsidiaries for a period of one-year
after
the termination of his employment.
(i) Restricted
Stock Award.
The
employment agreement also provides
for Mr. Schiesser to receive 250,000 restricted shares (the “Restricted Shares”)
of the Company’s common stock, par value $0.01 per share (“Common Stock”) under
the Company’s existing 2004 Equity Incentive Plan (the “2004
Plan”). On January 25, 2008, the Company and Mr. Schiesser entered
into a restricted stock agreement, setting forth the terms of such
grant. The Restricted Shares will vest in equal quarterly
installments on the 25th
day of
every third calendar month for forty-eight months, commencing on January
25,
2008. The vesting of the Restricted Shares will be accelerated in the
event of a “change of control” of the Company (as defined in his employment
agreement). In addition, if Mr. Schiesser is terminated without
“cause” or terminates employment for “good reason” (each as defined in his
employment agreement), he will vest in the Restricted Shares to the same
extent
that such awards would have vested had Mr. Schiesser’s employment continued for
24 months (or, if the termination date occurs on or after January 25, 2009,
twelve months) after the termination date. Mr. Schiesser will make an
election under Section 83(b) of the Code on the 100,000 Restricted Shares
that
are scheduled to vest first and the Company will pay, on a fully-grossed
up
basis, all federal, state, and local income taxes incurred by Mr. Schiesser
on
compensation resulting from the grant or vesting of such 100,000 Restricted
Shares.
(ii) Non-Qualified
Stock Option Award.
The
employment agreement also provides
for Mr. Schiesser to receive 500,000 options (the “Options”) to purchase shares
of Common Stock under the 2004 Plan. On January 25, 2008, the Company
and Mr. Schiesser entered into a stock option agreement, setting forth the
terms
of such grant. The Options will vest in equal monthly installments on
the 25th
day of
each calendar month following January 25, 2008 for forty-eight consecutive
months, and have an exercise price equal to $43.12, the closing price of
one
share of the Common Stock on the New York Stock Exchange on January 25,
2008. The vesting of the Options will be accelerated in the event of
a “change of control” of the Company (as defined in his employment
agreement). In addition, if Mr. Schiesser is terminated without
“cause” or terminates employment for “good reason” (each as defined in his
employment agreement), he will vest in the Options to the same extent that
such
awards would have vested had Mr. Schiesser’s employment continued for
24months (or, if the termination date occurs on or after
January 25, 2009, twelve months) after the termination date.
(e)
Employment Agreement
between the Company and Mr. Berg
On
January 25, 2008, the Company and
Mr. Berg entered into a letter agreement (the “Letter Agreement”), pursuant to
which Mr. Berg will serve as the Executive Chairman of the Board of Directors
of
the Company. The Company and Mr. Berg also entered into a restricted
stock agreement and a stock option agreement, each effective as of January
25,
2008. Copies of Mr. Berg’s Letter Agreement, restricted stock
agreement and stock option agreement are attached to this report as Exhibits
10.5, 10.7 and 10.9, respectively, and are incorporated herein by
reference. The summaries set forth below of Mr. Berg’s Letter
Agreement, restricted stock agreement and stock option agreement are qualified
in their entirety by reference to the text of the Letter Agreement, restricted
stock agreement and option agreement.
The
term of the Letter Agreement
commences on January 25, 2008 and ends on January 25, 2010. Pursuant
to the terms of the Letter Agreement, Mr. Berg will receive a minimum base
salary of $500,000. Mr. Berg will be eligible to participate in the
employee benefit plans maintained by the Company and its subsidiaries for
senior
executives on the same basis as other executive officers. He will
also be eligible to receive, in the sole discretion of the Compensation
Committee of the Board of Directors, an annual bonus based on his individual
performance and the performance of the Company.
In
the event of Mr. Berg’s separation
from service with the Company prior to the end of the term of his Letter
Agreement by the Company without “cause,” by Mr. Berg for “good reason” or due
to Mr. Berg’s “death or disability” (each as defined in his Letter Agreement),
Mr. Berg will receive an amount equal to his base salary for the remainder
of
the term paid in a lump sum 38 days after such separation from
service.
The
Letter Agreement provides that Mr.
Berg not seek employment with, or ownership in, a company in direct competition
with the Company and its subsidiaries during any period in which he is receiving
severance payments.
The
Letter Agreement requires that to
the extent that any payment or benefit received or to be received by Mr.
Berg
would be subject to an excise tax under the Code, the Company will pay to
Mr.
Berg an additional amount such that the net amount received by Mr. Berg is
equal
to what he would have received if none of his payments or benefits were subject
to an excise tax, provided that if the amount of payments subject to an excise
tax exceeds the safe harbor under Section 280G of the Code by less than $50,000,
then Mr. Berg’s payment will be reduced so that no amounts are subject to an
excise tax.
(i) Restricted
Stock Award.
The
Letter Agreement provides that on
January 25, 2008 Mr. Berg will receive 200,000 Restricted Shares under the
2004
Plan. On January 25, 2008, the Company and Mr. Berg entered into a
restricted stock agreement, setting forth the terms of such
grant. Twenty-five percent (25%) of the Restricted Shares will vest
six months after January 25, 2008 and the remaining Restricted Shares will
vest
quarterly thereafter over the remainder of the term of the Letter Agreement,
with the last quarterly installment vesting on the last day of the term of
the
Letter Agreement. All Restricted Shares held by Mr. Berg will become
immediately vested in full upon a “change in control” of the Company or in the
event Mr. Berg’s employment is terminated by the Company without “cause”, by Mr.
Berg for “good reason” (each as defined in his Letter Agreement) or
due to Mr. Berg’s disability or death.
(ii) Non-Qualified
Stock Option Award.
The
Letter Agreement also provides for
Mr. Berg to receive 300,000 Options to purchase shares of Common Stock under
the
2004 Plan. On January 25, 2008, the Company and Mr. Berg entered into
a stock option
agreement, setting forth the terms of such grant. The Options have an
exercise price per share equal to $43.12, the closing price of one share
of the
Common Stock on the New York Stock Exchange on January 25, 2008 and will
vest
and become exercisable in eight quarterly installments beginning three months
after January 25, 2008 and continuing quarterly thereafter during the term,
with
the last quarterly installment vesting and becoming exercisable on the last
day
of the term of the Letter Agreement. All Options held by Mr. Berg
will become immediately vested and exercisable in full upon a change in control
of the Company or in the event Mr. Berg’s employment is terminated by the
Company without “cause”, by Mr. Berg for “good reason” (each as defined in the
Letter Agreement) or due to Mr. Berg’s disability or death.
Item
5.03 Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On
January 25, 2008, the Board of
Directors of the Company approved an amendment to the Company’s Amended and
Restated Bylaws (the “Bylaws”). Article III, Section 6 of the
Bylaws was amended to provide that any of the following may call a special
meeting of the Board of Directors: (1) the Chairman of the Board of
Directors, (2) the non-management director chosen by the Company’s Board of
Directors pursuant to the Company’s Corporate Governance Guidelines to preside
at executive sessions or meetings of non-management directors or independent
directors, or (3) any two members of the Company’s Board of
Directors.
Prior
to the amendment, the Bylaws
provided that only the Chairman of the Board of Directors or the Company’s Chief
Executive Officer could call a special meeting of the Board of Directors.
The amendment was effective upon its adoption by the Company’s Board of
Directors.
A
copy of Amendment No. 1 to the
Bylaws effecting this amendment is filed as Exhibit 3.2 to this Current Report
on Form 8-K and is incorporated herein by reference.
Item
8.01 Other Events.
On
January 25, 2008, the Company issued
a press release announcing the election of Mr. Schiesser as President and
Chief
Executive Officer and Mr. Berg as Executive Chairman, the appointment of
Messrs.
Schiesser and Berg to the Company’s Board of Directors and the resignations of
Messrs. Farha, Behrens and Bereday. A copy of the Company’s press
release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and
is
incorporated herein by reference.
Item
9.01 Financial Statements and Exhibits.
(a) Financial
Statements
of Business Acquired.
Not
applicable.
(b) Pro
Forma Financial
Information.
Not
applicable.
(c) Shelf
Company
Transaction.
Not
applicable.
(d) Exhibits.
The
following
exhibits are filed as part of this report:
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Date:
January 31, 2008
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WELLCARE
HEALTH PLANS, INC.
/s/ Heath
Schiesser
Heath
Schiesser
President
and Chief Executive Officer
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EXHIBIT
INDEX