EMPLOYMENT AGREEMENTEmployee Retention Agreement |
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Exhibit 10.1
EXECUTION
COPY
EMPLOYMENT
AGREEMENT
This
EMPLOYMENT AGREEMENT (the “Agreement”) is
made as of July 17, 2008, by and among WELLCARE HEALTH PLANS, INC., a Delaware
corporation (“WellCare”),
COMPREHENSIVE HEALTH MANAGEMENT, INC., a Florida corporation (the “Corporation”),
and Thomas Tran, an individual (“Executive”),
with respect to the following facts and circumstances:
RECITALS
WHEREAS,
WellCare and the Corporation desire for the Corporation to employ Executive as
its Senior Vice President and Chief Financial Officer and for the Executive to
be appointed by WellCare as its Senior Vice President and Chief Financial
Officer, and Executive desires to accept such employment and
appointment;
NOW,
THEREFORE, in consideration of the mutual promises, covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE
1
ARTICLE
2EMPLOYMENT, TERM AND DUTIES
2.1 Employment. The
Corporation shall hereby employ Executive as Senior Vice President, Chief
Financial Officer of the Corporation, upon the terms and conditions set forth in
this Agreement. During the Term, Executive also shall be appointed as
Senior Vice President and Chief Financial Officer of
WellCare. Executive shall report directly to the Chief Executive
Officer of WellCare, unless otherwise determined by the Board of Directors of
WellCare (the “Board”).
2.2 Term. The
Corporation shall employ Executive, and Executive shall serve as the Senior Vice
President and Chief Financial Officer of the Corporation commencing upon the
Executive’s first day of employment on or before July 21, 2008 (the “Effective
Date”), and continuing thereafter for a term (the “Term”) of four
(4) years, unless earlier terminated under Article 4; provided,
that the Term shall automatically renew for additional one-year periods unless
either the Corporation or Executive gives notice of non-renewal at least ninety
(90) days prior to expiration of the Term (as it may have been extended by any
renewal period).
2.3 Duties. Executive
shall perform all the duties and obligations reasonably associated with the
positions of Senior Vice President and Chief Financial Officer and consistent
with the Bylaws of WellCare and the Corporation as in effect from time to time,
subject to the supervision of the Chief Executive Officer of WellCare (or such
other individual(s) designated by the Board), and such other executive duties
consistent with the foregoing as are mutually agreed upon from time to time by
Executive and the Chief Executive Officer of WellCare. Executive
shall perform the services contemplated herein faithfully and
diligently. Executive shall devote substantially all his business
time and efforts to the rendition of such services; provided,
that Executive may participate in social, civic, charitable, religious,
business, educational or professional associations and, with the prior approval
of the Board, serve on the boards of directors of companies, so long as such
participation does not materially interfere with the duties and obligations of
Executive hereunder.
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2.4 Primary Work
Location. Executive shall perform the services hereunder at
the Corporation’s offices located in the metropolitan area of Tampa,
Florida. Executive acknowledges and agrees that the nature of the
Corporation’s business will require travel from time to time. To
facilitate Executive’s relocation, the Corporation shall pay all reasonable
expenses associated with a full service move by a national moving carrier
selected by the Corporation for the purpose of transporting household goods (but
excluding any exceptional and unique furniture or other items) from Hartford,
Connecticut metropolitan area to the Tampa, Florida area, up to a maximum of
$25,000. During the Term but only through December 31, 2009, the
Corporation also shall pay Executive $6,000 per month as an allowance for
housing in the Tampa area and as an automobile allowance. All
relocation expenses must be repaid to the Corporation on a pro-rated basis if
Executive resigns or is terminated for Cause less than one (1) year after the
Effective Date (the “Reimbursement Period”). The obligation to repay
relocation expenses will be based upon the number of months of the Reimbursement
Period remaining as of the date of Executive’s termination of employment and
Executive specifically agrees that such repayment may be deducted from any
amounts owed to Executive.
ARTICLE
3
COMPENSATION
3.1 Salary. In
consideration for Executive’s services hereunder, the Corporation shall pay
Executive an annual salary at the rate of not less than $475,000 per year during
each of the years of the Term, payable in accordance with the Corporation’s
regular payroll schedule from time to time (less any deductions required for
Social Security, state, federal and local withholding taxes, and any other
authorized or mandated similar withholdings). The annual salary shall
be reviewed by the Compensation Committee of the Board (the “Compensation
Committee”), or, if there is none, the Board, no less frequently than
annually and may be increased (but not decreased) from its then-existing level
at the discretion of the Compensation Committee or the
Board.
3.2 Bonus.
3.2.1 Annual
Bonuses. Executive shall be entitled to earn bonuses with
respect to each fiscal year (or partial fiscal year) during the Term, based upon
Executive’s achievement of performance objectives set by the Compensation
Committee or the Board after consultation with Executive, with a targeted bonus
of one hundred percent (100%) of Executive’s annual salary for such fiscal year
(or partial fiscal year). Any such bonus earned by Executive shall be
paid annually by March 15 of the year following the end of the fiscal year for
which a bonus has been earned. Executive may also receive special
bonuses in additional to his annual bonus eligibility at the discretion of the
Compensation Committee. Notwithstanding the foregoing, Executive
shall earn a minimum guaranteed bonus of $475,000 for the initial calendar year
of his employment, pro rated for the portionof the year Executive is
employed. Executive must be employed on the bonus payment date in
order to receive the bonus.
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3.2.2 Sign on
Bonus. Executive shall be entitled to a one-time sign on bonus
of $75,000 payable in a lump sum within thirty (30) days of the Effective Date,
which must be repaid to the Corporation on a pro-rated basis if Executive
resigns or is terminated for Cause (as defined in Section 4.1.2 hereof) during
the Reimbursement Period. The obligation to repay the sign on bonus
will be based upon the number of months of the Reimbursement Period remaining as
of the date of Executive’s termination of employment and Executive specifically
agrees that such repayment may be deducted from any amounts owed to
Executive.
3.3 Incentive
Awards.
3.3.1 Initial Equity
Compensation. As an additional element of compensation to
Executive, in consideration of the services to be rendered hereunder, on the
Effective Date, WellCare shall grant to Executive 50,000 restricted shares of
WellCare’s common stock (the “Restricted
Stock”) and an
option to purchase 100,000 shares of WellCare’s common stock for an exercise
price per share equal to the fair market value of one share of WellCare’s common
stock as of the close of business on the Effective Date (the “Option”). These
equity compensation awards shall be granted under and be subject to the terms of
the WellCare Health Plans, Inc. 2004 Equity Incentive Plan (the “2004
Plan”). The terms and conditions of the Restricted Stock also
shall be governed by a restricted stock award agreement reflecting such grant
pursuant to the 2004 Plan, and the terms and conditions of the Option also shall
be governed by a stock option agreement reflecting such grant pursuant to the
2004 Plan and, in each case, providing for, among other things, the terms set
forth in this Section 2.3. The Option and the
Restricted Stock shall vest in equal annual installments on each of the first
through fourth anniversaries of the Effective Date. Notwithstanding
anything in this Agreement or the applicable stock option agreement to the
contrary, the Option cannot be exercised until WellCare is again current in its
periodic report filings with the United States Securities and Exchange
Commission (the “SEC”) and has
filed all periodic reports required to be filed by it with the SEC within the
preceding twelve months.
3.3.2 Future
Awards. In addition to the Restricted Stock and the Option,
during the Term, Executive shall be entitled to earn equity compensation awards
granted under and subject to the terms of the WellCare Health Plans, Inc. 2004
Equity Incentive Plan, or a successor thereto, based upon Executive’s
achievement of performance objectives set by the Compensation Committee or the
Board after consultation with Executive, with an annual equity compensation
award target of one hundred fifty percent (150%) of Executive’s annual salary
for such fiscal year (with a minimum guaranteed annual equity compensation award
in 2009 of one hundred fifty percent (150%) of Executive’s annual salary for
2008, prorated for the portion of the year employed). The number of
options, shares of restricted stock or other equity awards granted will be based
on the standard valuation methodologies used by WellCare under FAS 123(R) and
applicable internal policies. The exact terms of any future awards, as
well as the determination as to whether or not future awards will be granted
(other than the minimum guaranteed annual equity compensation award in 2009),
remains in the sole and absolute discretion of the Compensation Committee or the
Board, subject to the terms of the Plan. Until such time as the
Compensation Committee or the Board approves a future award, Executive is not
entitled by this Agreement or otherwise to receive any such award.
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ARTICLE
4
EXECUTIVE
BENEFITS
4.1 Vacation. Executive
shall be entitled to vacation each calendar year in accordance with the general
policies of the Corporation applicable generally to other senior executives of
the Corporation, provided that Executive shall be entitled to at least four
weeks of vacation per year. Unused vacation shall carry over in
accordance with the general policies of the Corporation.
4.2 Employee
Benefits. Executive shall receive all group insurance and
pension plan benefits and any other benefits on the same basis as are available
to other senior executives of the Corporation under the Corporation personnel
policies in effect from time to time. Executive shall receive all
other such fringe benefits as the Corporation may offer to other senior
executives of the Corporation generally under the Corporation personnel policies
in effect from time to time, such as health and disability insurance coverage
and paid sick leave.
4.3 Indemnification. Concurrently
with the execution and delivery of this Agreement, WellCare, the Corporation and
Executive are entering into an indemnification agreement (the “Indemnification
Agreement”).
4.4 Reimbursement
for Expenses. Executive shall be reimbursed by the Corporation
for all documented reasonable expenses incurred by Executive in the performance
of his duties or otherwise in furtherance of the business of the Corporation in
accordance with the policies of the Corporation in effect from time to
time. Any reimbursement under this Section 3.4 that is taxable to
Executive shall be made as soon as reasonably practicable but in any
event by December 31 of the calendar year following the calendar year in
which Executive incurred the expense.
ARTICLE
5
TERMINATION
5.1 Grounds
for Termination.
5.1.1 Death or
Disability. Executive’s employment shall terminate immediately
in the event of Executive’s death or Disability. “Disability”
means Executive is unable to engage in any substantial gainful business
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or that has rendered Executive unable
effectively to carry out his duties and obligations under this Agreement or
unable to participate effectively and actively in the management of WellCare and
the Corporation for a period of ninety (90) consecutive days or for shorter
periods aggregating to one hundred twenty (120) days (whether or not
consecutive) during any consecutive twelve (12) months of the
Term.
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5.1.2 Cause. The
Corporation shall have the right to terminate Executive’s employment by giving
written notice of such termination to Executive upon the occurrence of any one
or more of the following events (“Cause”):
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(a)
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any
willful act or willful omission, other than as a result of Executive’s
Disability, that represents a breach of any of the terms of this Agreement
to the material detriment of WellCare or the
Corporation;
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(b)
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bad
faith by Executive in the performance of his duties, consisting of willful
acts or willful omissions, other than as a result of Executive’s
Disability, to the material detriment of WellCare or the Corporation;
or
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(c)
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Executive’s
conviction of, or pleading guilty or nolo contendere to, a crime that
constitutes a felony involving fraud, conversion, misappropriation, or
embezzlement under the laws of the United States or any political
subdivision thereof, which conviction has become final and
non-appealable.
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5.1.3 Good
Reason. Executive may terminate his employment under this Agreement
by giving written notice to the Corporation upon the occurrence of any one or
more of the following events (“Good Reason”):
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(a)
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a
material diminution during the Term in Executive’s authority, duties or
responsibilities, or any change in Executive’s title, including the
Executive ceasing to serve as the Senior Vice President and Chief
Financial Officer of the senior surviving entity following any Change of
Control or the Executive ceasing to report directly either to the Chief
Executive Officer of WellCare or the Chief Executive Officer of the senior
surviving entity following any Change of
Control;
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(b)
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a
material diminution during the Term in Executive’s base salary or bonus
opportunity;
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(c)
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a
material breach by WellCare or the Corporation of any term of this
Agreement; or
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(d)
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a
change in Executive’s office location to a point more than fifty (50)
miles from Executive’s offices in Tampa,
Florida.
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5.1.4 Change of
Control. For purposes of this Agreement, a “Change of
Control” shall mean the occurrence of any of the following
events:
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(a)
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if
any “person” or “group,” as those terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) or any successors thereto, other than an Exempt Person, as
defined below, is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act or any successor thereto), directly or
indirectly, of securities of WellCare representing more than 50% of either
the then outstanding shares or the combined voting power of the then
outstanding securities of WellCare;
or
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(b)
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during
any period of two consecutive years, individuals who at the beginning of
such period constitute the Board and any new directors whose election by
the Board or nomination for election by WellCare’s stockholders was
approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority
thereof; or
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(c)
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the
consummation of a merger or consolidation of WellCare with any other
corporation or other entity, other than a merger or consolidation which
would result in all or a portion of the voting securities of WellCare
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of WellCare or such surviving entity outstanding immediately
after such merger or consolidation;
or
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(d)
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the
consummation of a plan of complete liquidation of WellCare or an agreement
for the sale or disposition by WellCare of all or substantially all
WellCare’s assets, other than a sale to an Exempt
Person.
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For purposes
of this Agreement, “Exempt Person”
shall mean (i) Soros Private Equity Investors LP, (ii) any person, entity or
group controlled by or under common control with any party included in clause
(i), or (iii) any employee benefit plan of WellCare or any Subsidiary, as
defined below, or a trustee or other administrator or fiduciary holding
securities under an employee benefit plan of WellCare or any Subsidiary, as
defined below.
For purposes
of this Agreement, “Subsidiary”
shall mean a corporation or other entity of which outstanding shares or
ownership interests representing 50% or more of the combined voting power of
such corporation or other entity entitled to elect the management thereof, or
such lesser percentage as may be approved by the Compensation Committee, are
owned directly or indirectly by WellCare.
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5.1.5 Opportunity to
Cure. Notwithstanding Sections 4.1.2 and
4.1.3, it shall
be a condition precedent to a party’s right to terminate Executive’s employment
for Cause or Good Reason, as applicable, that (a) such party shall have first
given the other party written notice stating with reasonable specificity the
breach on which such termination is premised within ninety (90) days after the
party providing such notice becomes aware of such breach, and (b) if such breach
is susceptible of cure or remedy, such breach has not been cured or remedied
within forty-five (45) days after receipt of such notice.
5.1.6 Any Other
Reason. Notwithstanding anything to the contrary herein, the
Corporation shall have the right to terminate Executive’s employment under this
Agreement at any time without Cause by giving written notice of such termination
to Executive, and Executive shall have the right to terminate Executive’s
employment under this Agreement at any time without Good Reason by giving
written notice of such termination to the Corporation.
5.2 Termination
Date. Except as provided in Section 4.1.1 with
respect to Executive’s death or Disability, and subject to Section 4.1.5, any
termination under Section 4.1 shall be effective upon receipt of notice by
Executive or the Corporation, as the case may be, of such termination or upon
such other later date as may be provided herein or specified by the Corporation
or Executive in the notice (the “Termination
Date”).
5.3 Effect of
Termination.
5.3.1 Termination
with Cause or without Good Reason. In the event that
Executive’s employment is terminated by the Corporation with Cause or by
Executive without Good Reason, the Corporation shall pay all Accrued Obligations
to Executive in a lump sum in cash within ten (10) days after the Termination
Date. “Accrued
Obligations” means the sum of (a) Executive’s base salary hereunder
through the Termination Date to the extent not theretofore paid, (b) the amount
of any incentive compensation, deferred compensation and other cash compensation
accrued by Executive as of the Termination Date to the extent not theretofore
paid, and (c) any vacation pay, expense reimbursements and other cash
entitlements accrued by Executive as of the Termination Date to the extent not
theretofore paid.
5.3.2 Termination
without Cause or with Good Reason. In the event that
Executive’s employment is terminated by the Corporation without Cause or by
Executive for Good Reason:
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(a)
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The
Corporation shall pay all Accrued Obligations to Executive in a lump sum
in cash within ten (10) days after the Termination
Date;
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(b)
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The Corporation shall pay to Executive, in a lump sum
in cash no later than the Severance Payment Deadline (as defined in
Section 4.3.4), an amount equal to one (1) times (or,
if the Termination
Date occurs within one year after a Change in Control, one-and-a-half
(1.5) times) the sum of (a) Executive’s annual salary as in effect on
the Termination Date and (b) the average of the two (2) highest bonuses
earned by
the Executive over the three (3) prior years or, if Executive has not been
employed for three (3) years, the target bonus for the year of the
Termination Date.
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(c)
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For the duration of the applicable COBRA period, the
Corporation shall continue to provide medical, dental and vision care and
life insurance benefits to Executive and/or Executive’s family at least
equal to those which would have been provided to them in accordance with
Section 3.2; provided,
further,
that Executive agrees to elect COBRA coverage to the extent available
under the Corporation’s health insurance plans (and the Corporation shall
reimburse the cost of any premiums for such coverage on an after-tax
basis). Any payment or reimbursement under this Section
4.3.2(c) that is taxable to
Executive or any of his family members shall be made (subject to the
provisions of such health care plans that may require earlier payment) by
December 31 of the calendar year following the calendar year in which
Executive or such family member incurred the
expense.
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5.3.3 Termination
Due to Death or Disability. In the event that Executive’s
employment is terminated due to Executive’s death or Disability the Corporation
shall pay all Accrued Obligations to Executive or Executive’s estate in a lump
sum in cash within ten (10) days after the Termination Date.
5.3.4 Waiver and
Release Agreement. In consideration of the severance payments
and other benefits described in clauses (b) and (c) of Section 4.3.2, to which
severance payments and benefits Executive would not otherwise be entitled, and
as a precondition to Executive becoming entitled to such severance payments and
other benefits under this Agreement, Executive agrees to execute and deliver to
the Corporation within thirty (30) days after the applicable Termination Date a
Waiver and Release Agreement in the form attached hereto as Exhibit A without
alteration or addition other than to include the date (the “Release”). If
Executive fails to execute and deliver the Release Agreement within thirty (30)
days after the applicable Termination Date, or if Executive revokes such Release
as provided therein, the Corporation shall have no obligation to provide any of
the severance payments and other benefits described in clauses (b) and (c) of
Section 4.3.2. The timing of severance
payments under clause (b) of Section 4.3.2 upon Executive’s execution and delivery of the
Release shall be further governed by the following provisions (the last date on
which such payments may be made, the “Severance Payment
Deadline”):
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(a)
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In any case in which the Release (and the expiration
of any revocation rights provided therein) could only become effective in
a particular tax year of Executive, payments conditioned on execution of
the release shall be made within ten
(10) days after the Release becomes effective and such revocation rights
have lapsed.
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(b)
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In
any case in which the Release (and the expiration of any revocation rights
provided therein) could become effective in one of two (2) taxable years
of Executive depending on when Executive executes and delivers the
Release, payments conditioned on execution of the Release shall be made
within ten (10) days after the Release becomes effective and such
revocation rights have lapsed, but not earlier than the first business day
of the later of such tax years.
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5.4 Required Delay
For Certain Deferred Compensation and Section 409A. In the
event that any compensation with respect to Executive’s termination is “deferred
compensation” within the meaning of Section 409A of the Code and the regulations
promulgated thereunder (“Section 409A”),
the stock of WellCare, the Corporation or any affiliate is publicly traded on an
established securities market or otherwise, and Executive is determined to be a
“specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code,
payment of such compensation shall be delayed as required by Section
409A. Such delay shall last six (6) months from the date of
Executive’s termination, except in the event of Executive’s
death. Within thirty (30) days following the end of such six
(6)-month period, or, if earlier, Executive’s death, the Corporation shall make
a catch-up payment to Executive equal to the total amount of such payments that
would have been made during the six (6)-month period but for this Section
4.4. Such catch-up payment
shall bear simple interest at the prime rate of interest as published by the
Wall
Street Journal’s bank survey as of the first day of the six (6)-month
period, which such interest shall be paid with the catch-up
payment. Wherever payments under this Agreement are to be made in
installments, each such installment shall be deemed to be a separate payment for
purposes of Section 409A.
5.5 Additional
Payments.
