<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-21684
THE WELLCARE MANAGEMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1647239
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
PARK WEST, HURLEY AVENUE EXTENSION, KINGSTON, NY 12401
(Address of principal executive offices) (Zip Code)
(914) 338-4110
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
The number of Registrant's shares outstanding on November 1, 1996
was 4,940,350 shares of Common Stock, $.01 par value, and
1,371,892 shares of Class A Common Stock, $.01 par value.
Page 1 of 94 Pages
Exhibit Index on Page 28
<PAGE>
<PAGE>2
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
Part I - Consolidated Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations
for the Three Months and Nine Months Ended
September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30, 1996 and 1995 6
Consolidated Statement of Shareholders'
Equity for the Nine Months Ended
September 30, 1996 8
Notes to Consolidated Financial Statements 10
Item 2 Management's Discussion and Analysis
of Financial Condition and
Results of Operations 18
Part II - Other Information
Item 1 Legal Proceedings 23
Item 2 Changes in Securities 24
Item 3 Defaults Upon Senior Securities 24
Item 4 Submission of Matters to a
Vote of Security Holders 24
Item 5 Other Information 25
Item 6 Exhibits and Reports on Form 8-K 25
Signatures 27
Index to Exhibits 28
<PAGE>
<PAGE>3
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,054 $ 5,456
Short-term investments -
available for sale 1,122 1,261
Accounts receivable (net
of allowance for doubtful
accounts of $1,628 in 1996
and $1,166 in 1995) 9,319 13,941
Due from affiliates 0 50
Advances to participating providers 2,271 3,078
Other receivables (net of allowance
for doubtful accounts of $4,408 in
1996 and $744 in 1995) 5,328 4,645
Prepaid expenses and other
current assets (net of allowance
for doubtful accounts of $1,711 in
1996 and $534 in 1995) 13,016 5,109
TOTAL CURRENT ASSETS 41,110 33,540
PROPERTY AND EQUIPMENT (net
of accumulated depreciation
and amortization of $4,785 in
1996 and $3,711 in 1995) 12,549 12,993
OTHER ASSETS:
Restricted cash 8,241 8,241
Notes receivable (net of allowance
for doubtful accounts of $3,634 in
1996 and $4,596 in 1995) 1,159 1,389
Preoperational costs (net of
accumulated amortization of
$1,016 in 1996 and $349 in 1995) 2,894 3,232
Other non-current assets (net
of allowance for doubtful
accounts of $458 in 1996 and
$348 in 1995 and accumulated
amortization of $509 in 1996
and $301 in 1995) 4,063 3,817
Due from affiliates 0 173
Goodwill (net of accumulated
amortization of $1,545 in 1996
and $1,066 in 1995) 8,185 8,626
TOTAL $78,201 $72,011
<PAGE>
<PAGE>4
September 30, December 31,
1996 1995
(Unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Notes payable $ 3,100 -
Current portion of long-term debt 798 1,547
Medical costs payable 16,642 14,030
Accounts payable 981 702
Accrued expenses 2,715 1,453
Other current liabilities 238 15
Unearned income 4,536 3,060
TOTAL CURRENT LIABILITIES 29,010 20,807
LONG-TERM LIABILITIES:
Long-term debt 26,638 19,209
Other liabilities 32 191
TOTAL LIABILITIES 55,680 40,207
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Class A Common Stock ($.01 par value;
1,540,769 and 1,599,109 shares authorized
1,425,779 and 1,484,119 shares issued
and outstanding at September 30, 1996 and
December 31, 1995, respectively) 14 15
Common Stock ($.01 par value;
20,000,000 shares authorized,
4,886,463 and 4,807,725 shares
issued at September 30, 1996 and
December 31, 1995, respectively) 49 48
Additional paid-in capital 26,624 26,371
(Accumulated deficit) Retained
earnings (8,294) 1,233
Statutory reserve 4,360 4,360
22,753 32,027
Unrealized gain (loss) on
short-term investments (9) 5
Less:
Notes receivable from shareholders 16 17
Treasury stock (at cost; 14,066 and
14,266 shares of Common Stock at
September 30, 1996 and December 31, 1995,
respectively) 207 211
TOTAL SHAREHOLDERS' EQUITY 22,521 31,804
TOTAL $78,201 $72,011
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>5
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
(Restated) (Restated)
REVENUE:
Premiums earned $39,062 $36,497 $118,825 $105,415
Administrative fee income 163 936 1,526 1,701
Income from affiliates 66 60 196 176
Interest and investment
income 307 297 1,021 713
Other income (11) 2,322 779 3,884
TOTAL REVENUE 39,587 40,112 122,347 111,889
EXPENSES:
Medical expenses (include
approximately $2,912 and
$6,604 for the three months
and nine months ended
September 30, 1996,
respectively, for the
assumption of certain medical
expenses previously assumed
by the Alliances, as instructed
by the New York State Insurance
Department - Note 3) 35,422 29,086 103,815 82,156
General and administrative
expenses 13,764 5,936 30,043 16,414
Depreciation and
amortization expense 808 561 2,428 1,528
Interest expense 527 433 1,636 1,027
Expenses paid to affiliates 101 122 304 312
Other expenses - net 0 38 (1) 79
TOTAL EXPENSES 50,622 36,176 138,225 101,516
(LOSS) INCOME BEFORE
INCOME TAXES (11,035) 3,936 (15,878) 10,373
(BENEFIT) PROVISION FOR
INCOME TAXES (4,414) 1,603 (6,351) 4,242
NET (LOSS) INCOME ($6,621) $2,333 ($9,527) $6,131
NET (LOSS) INCOME PER SHARE ($1.05) $0.37 ($1.51) $0.98
Weighted average shares of
common and common stock
equivalents outstanding 6,298 6,249 6,295 6,242
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>6
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
(Restated)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) income ($9,527) $6,131
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,428 1,528
(Increase) decrease in deferred taxes (6,351) 482
Loss on sale of assets and others - 61
Changes in assets and liabilities -
net of effects of acquisition:
Decrease (increase) in accounts
receivable - net 4,732 (3,852)
Increase (decrease) in medical
costs payable 2,612 (1,538)
Decrease (increase) in due to/from
affiliates - net 223 (13)
Increase in other receivables - net (198) (4,914)
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities 1,786 (659)
Increase in prepaid expenses and other (1,712) (181)
Increase in unearned income 1,474 739
Decrease (increase) in advances to
participating providers 807 (377)
(Increase) decrease in other
non-current assets - excluding
preoperational costs and accounts
and other receivables (702) 5
Other - net (367) (124)
NET CASH USED IN OPERATING ACTIVITIES (4,795) (2,712)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (454) (1,387)
Decrease (increase) in notes receivable 188 (4,395)
Sale of investments 6,639 8,448
Purchase of investments (6,500) (2,953)
Increase in preoperational costs (329) (1,476)
Payments to acquire MCA, net of
cash acquired - (215)
Other investing activities (13) 99
NET CASH USED IN INVESTING ACTIVITIES (469) (1,879)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock and
treasury stock - net 5 -
Proceeds from exercise of stock options 252 322
Proceeds from notes payable and
long-term debt 21,239 10,349
<PAGE>
<PAGE>7
Nine Months Ended
September 30,
1996 1995
(Restated)
Repayment of notes payable and
long-term debt (11,634) (4,116)
Other financing activities - 16
NET CASH PROVIDED BY
FINANCING ACTIVITIES 9,862 6,571
NET INCREASE IN CASH AND
CASH EQUIVALENTS 4,598 1,980
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,456 2,293
CASH AND CASH EQUIVALENTS,
END OF PERIOD $10,054 $4,273
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Income taxes paid $1,792 $ 977
Interest paid 1,272 3,684
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>8
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 1996
(in thousands)
(Unaudited)
Retained
Class A Additional Earnings
Common Common Paid-in (Accumulated Statutory
Stock Stock Capital Deficit) Reserve
[S] [C] [C] [C] [C] [C]
BALANCE,
DEC 31, 1995 $15 $48 $26,371 $ 1,233 $ 4,360
Issuance of
treasury stock 1
Exercise of
stock options 252
Net change of
valuation allowance
on short-term
investments
Net income 28
BALANCE,
MAR 31, 1996 15 48 26,624 1,261 4,360
Conversion of
Class A Common
shares to
Common Shares (1) 1
Net change of
valuation allowance
on short-term
investments
Net loss (2,934)
BALANCE,
JUN 30, 1996 14 49 26,624 (1,673) 4,360
Net change of
valuation allowance
on short-term
investments
Repayment on
shareholders' notes
Net loss (6,621)
BALANCE,
SEP 30, 1996 $14 $49 $26,624 ($8,294) $ 4,360
<PAGE>
<PAGE>9
Unrealized
Gain (Loss)
On Notes Total
Short-term Receivable Treasury Shareholders'
Investments Shareholders' Stock Equity
BALANCE,
DEC 31, 1995 $ 5 ($17) ($211) $31,804
Issuance of
treasury stock 4 5
Exercise of
stock opti 252
Net change of
valuation allowance
on short-term
investments (7) (7)
Net income 28
BALANCE,
MAR 31, 1996 (2) ( 17) ( 207) 32,082
Conversion of
Class A Common
shares to Common
shares 0
Net change of
valuation allowance
on short-term
investments (3) (3)
Net loss (2,934)
BALANCE,
JUN 30, 1996 (5) ( 17) ( 207) 29,145
Net change of
valuation allowance
on short-term
investments (4) (4)
Repayments on
shareholders' notes 1 1
Net loss (6,621)
BALANCE,
SEP 30, 1996 ($9) ($16) ($207) $22,521
<PAGE>
<PAGE>10
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q
and, accordingly, do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction
with the audited consolidated financial statements and notes
thereto included in The WellCare Management Group, Inc.'s ("the
Company") Annual Report on Form 10-K for the year ended December
31, 1995. In the opinion of management, the accompanying
unaudited interim financial statements contain all adjustments
necessary to present fairly the financial position at September
30, 1996, and the results of operations and cash flows for the
interim periods presented. Operating results for the interim
period are not necessarily indicative of results that may be
expected for the year ending December 31, 1996. Certain amounts
in the 1995 financial statements have been reclassified to conform
to the 1996 presentation.
2. Prior Period Restatement
In the second quarter of 1994, two entities which were
predecessors to the regional health care delivery networks with
which WellCare of New York, Inc. ("WCNY") contracted to provide
health care services to WCNY's members (the "Alliances"), made
payments of approximately $2,879,000 to providers in connection
with the close out of the 1993 group risk accounts and to resolve
certain disputed amounts between the Company and certain
providers, which payments might otherwise have been made by the
Company. Additionally, these entities paid approximately
$1,833,000 directly to the Company in payment of 1993 provider
deficits which would otherwise have been due to the Company
directly from the providers. As originally reported in its 1994
financial statements, the Company recorded the $1,833,000 received
as a reduction of medical expense, and the Company did not record
as medical expense, the $2,879,000 paid directly to the providers
by these entities.
In March 1996, accounting personnel of the Company were informed
that Mr. Edward A. Ullmann, then Chairman of the Board, Chief
Executive Officer and President of the Company, (Mr. Ullmann
resigned as Chairman and Chief Executive Officer on April 30,
1996, and as President on September 6, 1996), personally had
guaranteed, in his individual capacity, two loans each in the
amount of $2,700,000, made by banks to these two entities, the
proceeds of which were used to fund the aggregate payments of
approximately $4,712,000 referred to above. After a review of the
relevant circumstances, the Company elected to restate its 1994
financial statements by recording an additional $4,712,000 in
medical expense and establishing an additional medical expense
accrual. Since there are no specific amounts payable by the
Company as a result of these transactions, the additional medical
expense accrual is being accounted for as an offset to medical
expense in future periods as these bank loans are paid down. A
reduction of medical expense of approximately $1,780,000 and
$1,180,000 was recorded in the first nine months of 1996 and 1995,
respectively, as a result of the reductions in the amounts of
these bank loans.
<PAGE>
<PAGE>11
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
3. Medical Expenses
In letters dated August 12, 1996 and September 25, 1996, the New
York State Insurance Department ("NYSID") instructed the Company
to assume certain medical expenses of prior periods. In the
August 12, 1996 letter, NYSID instructed the Company to assume
responsibility for unpaid inpatient hospital claims at June 30,
1996 which had been contractually assumed by the Alliances. This
resulted in additional medical expense of approximately $3.7
million which was recorded in the three months ended June 30,
1996. In the September 25, 1996 letter, NYSID instructed the
Company to record additional medical expense for medical claims
for the period prior to October 1, 1994, which had been
contractually assumed by the Alliances. This resulted in
additional medical expense of $2.9 million, which was recorded in
the three months ended September 30, 1996. Both of these changes
represent obligations which had previously been assumed by the
Alliances.
4. Short-Term Investments
The Company has determined that its short-term investments,
consisting primarily of state and municipal obligations might be
sold prior to maturity to support the Company's investment
strategies. Such investments have, therefore, been classified as
available for sale. Available for sale securities are valued at
market. The separate component of shareholders' equity
representing unrealized gains or losses on investments available
for sale was approximately a $9,000 loss at September 30, 1996 and
a $5,000 gain at December 31, 1995.
5. Acquisition of Managed Care Administrators, Inc.
On March 31, 1995, pursuant to an option for which it had paid
$200,000 in November 1994, the Company acquired the assets and
assumed certain liabilities of Managed Care Administrators, Inc.
("MCA"), a company engaged in managing a network of primary care
physicians who provide health care services to Medicaid recipients
in New York City. The purchase price consisted of $500,000 in
cash, the assumption of certain liabilities and WellCare's
agreement to pay an earn-out not to exceed $1,500,000, whereby MCA
is to be paid each calendar year an amount equal to twenty percent
(20%) of the pre-interest, pre-tax net income generated by the
assets and liabilities thereby acquired. The excess of $668,750,
representing the sum of the $500,000 cash portion of the purchase
price and the unamortized portion of the option at March 31, 1995,
over the $1,055,100 fair value of the net liabilities assumed was
approximately $1,724,000 at December 31, 1995. In the first
quarter of 1996, additional goodwill in the amount of
approximately $38,000 was recognized as a result of obtaining
necessary additional information which allowed the Company to more
accurately quantify the net realizable value of certain assets
purchased from MCA.
<PAGE>
<PAGE>12
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
6. Sale of WellCare Medical Management, Inc.
In June 1995, the Company contributed approximately $5.1 million
to its then wholly-owned subsidiary, WellCare Medical Management,
Inc. ("WCMM") which was engaged in managing physician practices,
and then sold WCMM for cash of $.6 million and a note receivable
of $5.1 million. A gain of approximately $144,000 was deferred
pending the repayment of the note. The Company has a five-year
option to acquire the buyer ( the "Buyer") at any time at a
formula price based on the Buyer's results of operations.
The note receivable bears interest at a rate equal to prime plus
2% (10.25% at September 30, 1996) with interest payable monthly
through July 31, 1996 and, thereafter, principal and interest
monthly through July 31, 2000. The Buyer is in default on the
note and has not paid accrued interest of $4 million.
During 1996, The Company advanced $3.5 million to the Buyer for
operating expenses, which obligation is documented by a note of
$215,000, and receivables of $3.3 million. The note receivable
bears interest at a rate equal to prime plus 2% (10.25% at
September 30, 1996) and matures December 31, 1996.
The Buyer is seeking additional financing, and is contractually
obligated to pay the original note receivable from such proceeds.
Through November 14, 1996 such financing has not taken place. In
view of the Buyer's operating losses and advances to the
Alliances, the Company has obtained from certain of the Buyer's
equity holders personal guarantees of the original note and
pledges of collateral to secure these guarantees. Nevertheless,
in view of the Buyer's financial condition and difficulties
inherent in the collection of personal guarantees and realization
of collateral, the Company had elected to fully reserve the
original note receivable in 1995.
At September 30, 1996, the Company established a reserve of $3.9
million against the additional note, accounts receivables, and
interest accrued on the notes. The note receivable for $5.1
million had been fully reserved in 1995.
7. Income Taxes
The (benefit)/provision for Federal and State income taxes is at
an effective rate of 40.0% for the nine months ended September 30,
1996 and 40.9% for the nine months ended September 30, 1995.
8. Stock Options
The Company's stock option plan (the "Plan"), as amended, has
820,904 shares reserved for issuance, as of September 30, 1996,
upon exercise of options granted or to be granted. Incentive
stock options, as defined in Section 422 of the Internal Revenue
Code, may be granted to employees and non-incentive stock options
may be granted to employees, directors and such other persons as
the Compensation Committee appointed by the Board of Directors
(the "Committee") determines will contribute to the Company's
success, at exercise prices equal to (i) in the case of incentive
<PAGE>
<PAGE>13
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
options, not less than 100% of the fair market value of the Common
Stock on the date of grant, and (ii) in the case of non-incentive
options, not less than 75% of such fair market value. In addition
to selecting the optionee, the Committee determines the number of
shares of Common Stock subject to each option, the term thereof,
which may not exceed ten (10) years, the time or times when the
non-incentive option becomes exercisable and otherwise administers
the Plan. Incentive options expire one (1) year after the date of
termination of a holder's employment by reason of death or
disability (or such earlier date as the option by its terms would
have expired) and three months following the date of termination
of the holder's employment for any other reason.
Options to purchase 642,505 shares of Common Stock at exercise
prices ranging from $10.13 to $24.50 per share were outstanding
under the Plan on September 30, 1996, of which options to purchase
200,000 shares at an exercise price of $10.13 per share had been
granted in the third quarter of 1996. Of the total options
outstanding at September 30, 1996, options to purchase 215,433
shares were exercisable.
In connection with his employment contract, in September 1996, the
Company's President and Chief Operating Officer was granted
options to purchase 200,000 shares at an exercise price of $10.13
per share.
In connection with her employment contract, the Company's Chief
Financial Officer was granted 5,000 phantom shares, payable in
cash only. These phantom shares vest, subject to the executive's
continued employment with the Company, 25% per year on December
31st of each year, commencing December 31, 1994, and are payable
in January 1998 in an amount equal to the product of the number of
phantom shares vested in the Chief Financial Officer, and the
difference between the closing sales prices of the Company's
Common Stock as reported by the Nasdaq Stock Market (National
Market) at various points in time, as specified in her employment
contract. Through September 30, 1996, no expense has been
accrued.
All phantom shares granted to the former President lapsed upon his
termination of employment.
9. Notes Payable and Long-Term Debt
On January 19, 1996, the Company announced the completion of a
private placement of a 6% subordinated convertible note in the
principal amount of $20,000,000 (the "Note") due December 31, 2002
with The 1818 Fund II, L.P., a private equity fund managed by
Brown Brothers Harriman & Co. The Note accrues interest at the
rate of 6% per annum, payable quarterly by the Company. The
principal amount of the Note is payable in one amount on December
31, 2002. The Note is subject to certain mandatory redemption at
the option of the holder of the Note upon certain changes in
control of the Company. In addition, the Note is subject to
certain optional redemptions at the option of the Company after
the fourth anniversary of the date of the Note. By its terms, the
Note is subordinated to all senior indebtedness of the Company.
As of September 30, 1996, the Company is in default of certain
provisions of its loan agreement, including the requirement to
<PAGE>
<PAGE>14
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
maintain a minimum tangible net worth as defined in the loan
agreement. As of November 14, 1996, the Company is renegotiating
amendments of certain terms which it believes will cure any
default provisions, as well as changing the conversion price. In
anticipation of successful renegotiation, the Company continues to
classify this obligation as long term.
During April 1996, in response to the Company's late filing of its
Annual Report on Form 10-K with the Securities and Exchange
Commission Key Bank froze all borrowings under the Company's
$15,000,000 revolving line-of-credit pending submission of the
Company's audited financial statements. Subsequently, Key Bank
granted the Company a waiver of any and all financial covenants
for the periods ending December 31, 1995 and March 31, 1996. The
Company anticipates executing a new unsecured revolving line-of-credit with
Key Bank for $8.0 million prior to November 30, 1996.
In February 1996, the Company's wholly-owned subsidiary, WellCare
Development, Inc. ("WCD") incurred additional mortgage
indebtedness on a building to be used primarily for office space
for the Company. The additional indebtedness of approximately
$300,000 is due on March 1, 2001, with a fixed interest rate of
8.25%.
10. Commitments and Contingencies
a. Alliances - The Alliances commenced operations in the fourth
quarter of 1994. Based on information furnished to the Company by
the Alliances, the Alliances have operated at a deficit since
inception. This deficit resulted from medical expense obligations
assumed from WellCare by the Alliances upon their formation,
medical expenses for incurred but not reported losses which were
in excess of amounts estimated at the time of their formation, and
operating losses since their formation. The deficit was
approximately $16,000,000 at December 31, 1995, based on unaudited
financial results of the Alliances. The Alliances have financed
these deficits through a combination of the lags inherent in the
receipt, adjudication and payment of claims, as well as further
deferral of claim payments and borrowings from the Buyer referred
to in Note 6. In addition, a $3,000,000 bank line-of-credit was
entered into by the Buyer on December 28, 1995, which was
guaranteed by Mr. Ullmann in his personal capacity. The Alliances
committed to the institution of a fee withhold program, effective
July 1, 1996, as permitted under its contracts with physicians, to
withhold payments otherwise payable to referral physicians by
approximately 15% to 22% depending on the geographic location of
the physician. Even though the implementation of this program
was deferred to August 1, 1996, management of the Alliances
and WellCare believe that this withhold program, together with
general changes in the management of the Alliances, and the
introduction of new provider reimbursement schedules should enable
the Alliances to maintain their operations and reduce their
accumulated deficits in 1996 and substantially eliminate them in
1997.
The Company has been advised by counsel that it would have no
financial liability to providers with whom the Alliances had
contracted for services rendered in the event the Alliances were
unable to maintain their operations.
<PAGE>
<PAGE>15
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Further, the Company has direct contracts with providers which
would require the providers to continue to provide medical care to
members on the financial terms similar to those in the Alliances'
agreements with providers, in the event that the Alliance were
unable to maintain their operations. Nevertheless, in the event
of continuing losses or increasing deficits by the Alliances, the
Alliances could request increased capitation rates from the
Company.
Management of the Company does not believe that such additional
financial or increased contractual capitation rates should be
required by the Alliances and has no intention to agree to such
terms if requested by the Alliances. However, as outlined in Note
10c below, the Company agreed to record charges to medical expense
based on the instructions of NYSID. Effective September 1, 1996,
the Company entered into a letter of understanding with the
Alliances to restructure its capitation arrangement. Under this
understanding, the Company reassumed risk for certain previously
capitated services, as well as reducing the rate paid for the
services which continue to be provided by the Alliances.
b. Class Action Litigation - Between April 1, 1996 and June 6,
1996, the Company, its Vice President of Finance and Chief
Financial Officer and the Company's former President and Chief
Executive Officer, were named as defendants in twelve separate
actions filed in Federal Court (the "Securities Litigations"). An
additional three directors were also named in one of these
actions. Plaintiffs sought to recover damages allegedly caused by
the Company's defendants' violations of federal securities laws
with regard to the preparation and dissemination to the investing
public of false and misleading information concerning the
Company's financial condition.
On July 3, 1996, by Order of Magistrate Judge David R. Homer, the
Securities Litigations were consolidated and an amended
consolidated complaint was served on August 21, 1996, which
complaint did not name the three additional directors. The
Company's auditor, however, was named as an additional defendant.
On October 23, 1996, the Company filed a motion to dismiss the
consolidated amended complaint against the Company as well as the
individual defendants, Corsones and Ullmann. The Company's
auditor has likewise filed its own motion to dismiss. Prior to
the filing of the motion, discovery had not yet begun and pursuant
to the Private Securities Litigation Reform Act, all discovery is
necessarily stayed pending the disposition of the motion.
Although management is unable to predict the likelihood of success
on the merits of the consolidated class action, it has instructed
its counsel to vigorously defend its interests. The Company has
insurance in effect which may, at least in part, offset any costs
to be incurred in these litigations. A decision on the motion to
dismiss is expected sometime during the first quarter of 1997.
c. Regulatory Matters - In connection with a comprehensive
review of its arrangements with the Alliances and the financing of
the Alliances as discussed further in Notes 2 and 10a, the Company
delayed filing its Annual Report on Form 10-K with the Securities
<PAGE>
<PAGE>16
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
and Exchange Commission. Also, NYSID accelerated its normal
statutory audit of the Company and is expected to consider the
same issues which were reviewed by the Company, as well as other
matters. It is not possible to predict the actions, if any, which
may be taken by this or other regulatory bodies or the effects of
those actions, if any, on the business operations or financial
statements of the Company. Nonetheless, in letters dated August
12, 1996 and September 25, 1996, NYSID instructed the Company to
assume certain medical expenses of prior periods (see Note 3 of
"Notes to Consolidated Financial Statements").
d. Other - The Company is involved in litigation and claims
which are considered normal to the Company's business. In the
opinion of the management, the amount of loss that might be
sustained, if any, would not have a material effect on the
Company's consolidated financial statements.
11. Separation Agreements
During the three months ended September 30, 1996, the Company
established a reserve of $.5 million for termination expenses
related to the departure of three of its executives, including its
former President.
12. Related Party Transactions
On December 4, 1995, the Company entered into a Note Agreement
with Cost Management Technologies, Inc. ("CMT"), whereby the
Company agreed to loan CMT $320,000, at a fixed interest rate of
six percent (6%) per annum. The loan was originally due on March
2, 1996, and was ultimately extended to October 30, 1996. On
October 10, 1996, CMT informed the Company that CMT would default
on the payment of the loan. The Company is currently assessing
its legal recourse, and has meanwhile fully reserved this amount
in the third quarter of 1996. The Company's CEO and Chairman of
the Board owns 60.9% of the equity of CMT. As of September 30,
1996, the Company fully reserved $.3 million of receivables from
an affiliated company owned by the former President.
13. Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and
cash equivalents, short-term investments, due from affiliates -
net, advances to participating providers, other receivables - net,
restricted cash, other non-current assets, accounts payable and
accrued expenses approximate their fair value.
The fair value of notes receivable, consisting primarily of
advances to medical practices, is not materially different from
the carrying value for financial statement purposes. In making
this determination, the Company used interest rates based on an
estimate of the credit worthiness of the medical practice.
<PAGE>
<PAGE>17
The WellCare Management Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The carrying amount of long-term debt, the majority of which bears
interest at floating rates, are also assumed to approximate their
fair value.
14. Earnings Per Share
Earnings per share calculations are based on a weighted average
number of shares outstanding for the applicable period and give
effect to all outstanding stock options. No material dilutive
securities existed at September 30, 1996 or 1995.
[Remainder of page intentionally left blank]
<PAGE>
<PAGE>18
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto, included in the quarterly report and with the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
As a result of the restatement of prior period operating results,
the medical expense for the three and nine months period ended
September 30, 1995 has been reduced from the previously reported
amounts (See Note 2 of "Notes to Consolidated Financial
Statements").
Effective October 1, 1994, WCNY changed its capitation
arrangements from capitating primary care physicians with
attendant risk-sharing to capitating the Alliances comprised of
the specialists and previously-capitated primary care physicians.
The Alliances have operated at a deficit since inception and have
recently instituted measures designed to reduce these deficits and
achieve profitability. The Alliances could request additional
funding from the Company, which management does not believe should
be required and, if requested, does not intend to provide. In an
effort to improve profitability of the Company and the Alliances,
effective September 1, 1996, the Company entered into a letter of
understanding with the Alliances to restructure its capitation
arrangement. Under this understanding, the Company reassumed risk
for certain previously capitated services, as well as reducing the
rate paid for the services which continue to be provided by the
Alliances. This restructuring had a minimal impact on medical
expenses in the third quarter of 1996, but is expected to result
in savings for the Company in future periods. (See Note 10a of
"Notes to Consolidated Financial Statements").
Certain statements in this Form 10-Q are forward-looking
statements and are note based on historical facts but are
management's projections or best estimates. Actual results may
differ from these projections due to risks and uncertainties.
These risks and uncertainties include a variety of factors. The
Company's results of operations depend in large part on accurately
predicting and effectively managing medical costs and other
operating expenses. A variety of factors, including competition,
changes in health care practices, changes in federal or state laws
and regulations or the interpretations thereof, inflation,
provider contract changes, new technologies, government imposed
surcharges, taxes or assessments, reductions in provider payments
by governmental payors (including Medicare, whereby such
reductions may cause providers to seek high payments
from private payor), major epidemics, disasters and numerous other
factors affecting the delivery and cost of health care, may in the
future affect the Company's ability to control its medical costs
and other operating expenses.
The following table provides certain statement of operations data
expressed as a percentage of total revenue and other statistical
data for the periods indicated.
<PAGE>
<PAGE>19
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
(Restated) (Restated)
Revenue:
Premium earned 98.7% 91.0% 97.1% 94.2%
Interest and
other income 1.3 9.0 2.9 5.8
TOTAL REVENUE 100.0 100.0 100.0 100.0
Expenses:
Hospital services 20.1 21.7 23.2 20.3
Physician services 66.9 47.0 59.9 49.7
Other medical services 2.5 3.8 1.7 3.4
TOTAL MEDICAL SERVICES 89.5 72.5 84.8 73.4
General and administrative 34.8 14.8 24.6 14.7
Depreciation and amortization 2.0 1.4 2.0 1.3
Interest and other expenses 1.6 1.5 1.6 1.3
TOTAL EXPENSES 127.9 90.2 113.0 90.7
(Loss) income before
income taxes (27.9) 9.8 (13.0) 9.3
(Benefit) provision for
income taxes (11.2) 4.0 (5.2) 3.8
Net (loss) income (16.7)% 5.8% (7.8)% 5.5%
Statistical Data:
HMO member months enrollment 268,062 264,043 817,407 765,663
Medical loss ratio (1) 90.7% 79.7% 87.4% 77.9%
General and administrative
ratio (2) 34.8% 14.8% 24.6% 14.7%
(1) Medical expenses as a percentage of premiums earned;
reflects the combined rates for commercial, Medicaid, full-risk
Medicare and Medicare supplemental members.
(2) General and administrative ratio as percentage of total
revenue.
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995 (Restated)
Premiums earned in the third quarter of 1996 increased by 7.0%, or
$2.6 million, to $39.1 million from $36.5 million in the third
quarter of 1995. This increase is attributable to premiums
generated from full-risk Medicare, a new product line started
October 1, 1995, of $3.8 million; a net increase in Medicaid
premiums of $1.5 million (principally due to an increase in
membership); offset by a $2.7 million reduction in commercial
premiums reflecting reduced membership.
Interest and other income decreased by 85.5%, or $3.1 million, to
$.5 million in the third quarter of 1996. This decrease is
primarily due to reductions in WellCare University revenues and
management fees.
<PAGE>
<PAGE>20
Medical expenses increased 21.8%, or $6.3 million, to $35.4
million in the third quarter of 1996, representing a 20.0%
increase on a per member per month basis and increased as a
percentage of premiums earned (the "medical loss ratio") from
79.7% in the third quarter of 1995 to 90.7% in the third quarter
of 1996. The increase in medical expenses was due to an increase
in the contractual capitation rate paid to the Alliances, and to
the recording of medical expense of approximately $2.9 million as
instructed by the NYSID, relating to unpaid claims for the period
prior to October 1, 1994, which had been assumed by the Alliances.
In the absence of such charges, medical expenses would have been
$32.5 million, the medical loss ratio would have been 83.2%.
As a result of the restatement of prior period operating results,
the medical expenses for the three months ended September 30, 1995
has been reduced by approximately $.5 million from the previously
reported amounts (See Note 2 of "Notes to Consolidated Financial
Statements").
General and administrative ("G&A") expenses increased 131.9%, or
$7.8 million, from $5.9 million in the third quarter of 1995 to
$13.7 million in the third quarter of 1996. The increase resulted
primarily from an increase of approximately $6.0 million in
reserves for trade accounts receivables and notes and other
receivables (including valuation reserves of approximately $3.9
million relating to obligation of the Buyer of the assets of WCMM
- - see Note 6 of "Notes to Consolidated Financial Statements");
increased salaries and benefits of approximately $.9 million for
severance payments and service area and product line expansion;
and approximately $.5 million in extraordinary legal costs
specifically related to the class action litigation; and $.5
million of other professional and outside services.
Depreciation and amortization increased by 44.0%, or $.2 million,
in the third quarter of 1996 due primarily to amortization of
preoperational costs associated with service area and product line
expansion.
Nine Months Ended September 30, 1996 Compared to Nine Months
Ended September 30, 1995 (Restated)
Premiums earned in the first nine months of 1996 increased by
12.7%, or $13.4 million, to $118.8 million from $105.4 million in
the first nine months of 1995. This increase is attributable to
premiums generated from full-risk Medicare, a new product line
started October 1, 1995, of $6.6 million; a net increase in
Medicaid premiums of $7.3 million (principally due to an increase
in membership); offset by a $.9 million reduction in commercial
premiums reflecting reduced membership.
Interest and other income decreased by 45.6%, or $3.0 million, to
$3.5 million in the first nine months of 1996, primarily due to
decreases in WellCare University revenue, insurance reimbursements
and consulting revenue.
<PAGE>
<PAGE>21
Medical expenses increased 26.4%, or $21.7 million, to $103.8
million in the first nine months of 1996, representing an 18.4%
increase on a per member per month basis and increased as a
percentage of premiums earned (the "medical loss ratio") from
77.9% in the first nine months of 1995 to 87.4% in the first nine
months of 1996. This increase in medical expenses was due to an
increase in the contractual capitation rate paid to the Alliances
and to the recording as instructed by the NYSID of medical expense
of (i) approximately $3.7 million in the three months ended June
30, 1996 and (ii) approximately $2.9 million in the three months
ended September 30, 1996 relating to unpaid inpatient hospital
claims at June 30, 1996 relating to unpaid claims for the period
prior to October 1, 1994, and which had been assumed by the
Alliances. In the absence of such additional medical expense,
medical expenses would have been $97.2 million, the medical loss
ratio would have been 81.8%.
As a result of the restatement of prior period operating results,
the medical expenses for the nine months ended September 30, 1995
has been reduced by approximately $1.2 million from the previously
reported amounts (See Note 2 of "Notes to Consolidated Financial
Statements").
General and administrative ("G&A") expenses increased 83.0%, or
$13.6 million, from $16.4 million in the first nine months of 1995
to $30.0 million in the first nine months of 1996. The increase
in G&A expenses resulted primarily from an increase of
approximately $6.5 million in the doubtful accounts reserves for
trade accounts receivables and notes and other receivables;
increased salaries and benefits of $3.3 million related to service
area and product line expansion and severance payments;
approximately $2.0 million in extraordinary legal costs
specifically related to class action litigation; and $1.2 million
in other profeesionally and outside services.
Depreciation and amortization increased by 58.9%, or $.9 million,
in the first nine months of 1996 due primarily to amortization of
preoperational costs associated with service area and product line
expansion.
Interest and other expenses increased by 36.7%, or $.5 million, in
the first nine months of 1996 due primarily to interest expense
associated with the private placement of a subordinated
convertible note (See "Liquidity and Capital Resources").
Liquidity and Capital Resources
On January 19, 1996, the Company announced the completion of a
private placement of a 6% subordinated convertible note in the
principal amount of $20,000,000 (the "Note") due December 31,
2002, with The 1818 Fund II, L.P., a private equity fund managed
by Brown Brothers Harriman & Co. The Company has utilized a part
of the net proceeds of this private placement to retire a portion
of the Company's debt. The Company anticipates utilizing the
balance of the proceeds for general corporate purposes. As of
November 14, 1996, the Company was in negotiation with the holder
of this Note to amend certain terms, including the conversion
price.
<PAGE>
<PAGE>22
The Company's requirements for working capital are principally to
fund geographic and product expansion for HMO operations,
maintenance of necessary regulatory reserves, potential
acquisitions and strategic partnerships, and marketing and product
expansion of other managed care operations. Management believes
that these requirements can be met through the net proceeds from
the Note, together with cash on hand, cash generated from
operations and available borrowings.
Net cash used in operating activities was $4.8 million during the
first nine months of 1996, as compared to net cash used in
operating activities of $2.7 million for the first nine months of
1995. The cash used in operating activities in the first nine
months of 1996 resulted from operating losses, an increase in
deferred expense related to corporate income taxes and a reduction
in medical costs liabilities primarily due to increased levels of
disbursements, partially offset by the recording of a $6.6 million
liability as instructed by NYSID, a decrease in accounts
receivable and increases in accrued expenses and prepaid health
coverage premiums. The cash used in operations in the first nine
months of 1995 resulted from an increase in receivables partially
attributable to increases in HMO membership and premium rates, and
a decrease in the level of medical costs payable attributable
primarily to the prepayment of costs for specialists' care on a
monthly basis under the new contractual capitation arrangements
with the Alliances. Cash used for capital expenditures was
approximately $.5 million during the first nine months of 1996, as
compared to $1.4 million for the same period in 1995.
New York State certified HMOs are required to maintain a cash
reserve equal to the greater of 5% of expected annual medical
costs or $100,000. Additionally, WCNY is required to maintain a
contingent reserve equal to at least 1% of premiums earned
limited, in total, to a maximum of 5% of premiums earned for the
most recent calendar year and which may be offset by the cash
reserve. The cash reserve is calculated at December 31st of each
year and is maintained throughout the following calendar year. At
September 30, 1996, WellCare had required cash reserves of $8.2
million and a contingent reserve of $4.4 million, which was fully
offset by the cash reserve. In the event the contingent reserve
exceeds the required cash reserve, the excess of the contingent
reserve over the required cash reserve would be required to be
maintained.
At September 30, 1996, the Company had working capital of $12.1
million, excluding the $8.2 million cash reserve required by New
York State which is classified as a non-current asset, compared to
working capital of $12.7 million at December 31, 1995; the
decrease was attributable primarily to operating losses, the
recording of a $6.6 million liability as instructed by NYSID
partially offset by the net proceeds from the Note which is
classified as a long-term liability.
In response to the Company's late filing of its Annual Report on
Form 10-K with the Securities and Exchange Commission, during
April 1996, Key Bank froze all borrowings under the Company's
$15,000,000 revolving line-of-credit pending submission of the
Company's audited financial statements. Subsequently, Key Bank
granted the Company a waiver of any and all financial covenants
for the periods ending December 31, 1995 and March 31, 1996. The
Company anticipates executing a new unsecured revolving line-of-credit with
Key Bank for $8.0 million prior to November 30, 1996.
<PAGE>
<PAGE>23
At September 30, 1996, the Company had total mortgage indebtedness
of $6.2 million outstanding on five of its office buildings, of
which approximately $800,000 is due February 1, 1999,
approximately $4.3 million is due on January 1, 2000,
approximately $800,000 is due March 1, 2000, and approximately
$300,000 due on March 1, 2001.
Between April 1, 1996 and June 6, 1996, the Company, its Vice
President of Finance and Chief Financial Officer and its former
President and Chief Executive Officer, were named as defendants in
twelve separate actions filed in Federal Court (the "Securities
Litigations"). An additional three directors were also named in
one of these actions. Plaintiffs sought to recover damages
allegedly caused by the Company and defendants violations of
federal securities laws with regard to the preparation and
dissemination to the investing public of false and misleading
information concerning the Company's financial condition.
On July 3, 1996, by Order of Magistrate Judge David R. Homer, the
Securities Litigations were consolidated and an amended
consolidated complaint was served on August 21, 1996, which
complaint did not name the three additional directors. The
Company's auditor, however, was named as an additional defendant.
Although management is unable to predict the likelihood of success
on the merits of the consolidated class action, it has instructed
its counsel to vigorously defend its interests. The Company has
insurance in effect which may, at least in part, offset any costs
to be incurred in these litigations.
Inflation
Medical costs have been rising as a higher rate than consumer
goods as a whole. The Company believes its premium increases,
capitation arrangements and other cost controls measures mitigate,
but do not wholly offset, the effects of medical cost inflation on
its operations and its inability to increase premiums could
negatively impact the Company's future earnings.
PART II - Other Information
Item 1 Legal Proceedings
Between April 1, 1996 and June 6, 1996, the Company, its Vice
President of Finance and Chief Financial Officer and former
President and Chief Executive Officer, were named as defendants in
twelve separate actions filed in Federal Court (the "Securities
Litigations"). An additional three directors were also named in
one of those actions. The claims asserted in the Securities
Litigations were substantially similar and essentially sought the
same relief. Plaintiffs are seeking to recover damages allegedly
caused by violations of federal securities laws with regard to the
preparation and dissemination to the investing public of false and
misleading information concerning the Company's financial
condition. Plaintiffs allege that as a result of their reliance
on these alleged misrepresentations, they purchased the Company's
common stock at artificially inflated prices. Plaintiffs are
seeking compensatory damages in an amount to be determined at
trial.
<PAGE>
<PAGE>24
On July 3, 1996, by Order of Magistrate Judge David R. Homer, the
Securities Litigations were consolidated and an amended
consolidated complaint was served on August 21, 1996, which
did not name the three additional directors as defendants. The
Company's auditor, however, was named as an additional defendant.
On October 23, 1996, the Company filed a motion to dismiss the
consolidated amended complaint against the Company and the
individual defendants. The Company's auditor has likewise filed
its own motion to dismiss. Prior to the motion discovery had not
yet begun and pursuant to the Private Securities Litigation Reform
Act, all discovery is stayed pending disposition of the motion.
Although management is unable to predict the likelihood of success
on the merits of the consolidated class action, it has instructed
its counsel to vigorously defend its interests. The Company has
insurance in effect which may, at least in part, offset any costs
to be incurred in these litigations. A decision on the motion to
dismiss is expected sometime during the first quarter of 1997.
On August 2, 1996, the Company announced that the Securities and
Exchange Commission ("SEC") had issued a Formal Order of Private
Investigation of the Company. The Formal Order enables the SEC to
utilize its subpoena powers to obtain relevant information from
third parties as well as the Company. In its letter to the
Company, the SEC stated that this investigation is confidential
and should not be construed as an indication by the Commission or
its staff that any violations of the federal securities laws have
occurred. The Company has been, and intends to continue complying
and cooperating fully with all requests from the SEC. The Company
is not aware of any unlawful conduct with respect to these
matters.
Item 2 Changes in Securities
Not Applicable
Item 3 Defaults Upon Senior Securities
The Company is in default of certain provisions of its loan
agreement with The 1818 Fund II, L.P., a private equity fund
managed by Brown Brothers Harriman & Co., including the
requirement to maintain a minimum tangible net worth as defined in
the loan agreement. As of November 14, 1996, the Company was in
negotiations with the holder of this note to amend certain terms
including the conversion price, and other terms which it believes
will cure any default provisions.
Item 4 Submission of Matters to a Vote of Security Holders
On July 23, 1996, the shareholders of the Company held their
annual meeting of shareholders in Kingston, New York. The holders
of 3,460,573 shares of Common Stock and 1,272,706 shares of Class
A Common Stock (constituting a majority of the aggregate 6,298,176
shares of Common Stock and Class A Common Stock entitled to vote
at the meeting) were present or represented by proxy, and
accordingly a quorum was present and matters were voted upon as
follows, each share of Common Stock having one vote and each share
of Class A Common Stock having ten votes:
<PAGE>
<PAGE>25
a. By plurality vote of the total votes cast by the holders of
Common Stock and Class A Common Stock voting as one class, the
following persons were elected as Class III Directors and Class II
Directors :
CLASS III DIRECTORS FOR AGAINST ABSTAIN
Robert W. Morey, Jr. 16,156,242 31,191 0
Edward A. Ullmann 16,160,962 26,671 0
Charles E. Crew, Jr. 16,161,172 26,461 0
CLASS II DIRECTORS FOR AGAINST ABSTAIN
John E. Ott, M.D. 16,161,172 26,461 0
Lawrence C. Tucker 16,161,172 26,461 0
b. By the affirmative vote of a majority of the total votes cast
by the holders of Common Stock and Class A Common Stock voting
as one class, the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year ending
December 31, 1996 was ratified as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
Common Stock and Class 16,147,445 31,379 8,809 0
A Common Stock voting
as one class
Item 5 Other Information
On April 30, 1996, Mr. Robert W. Morey, Jr. was appointed Chairman
of the Board, Chief Executive Officer and a director of the Board.
Mr. Edward A. Ullmann remained President and assumed the functions
of Chief Operating Officer as of said date.
On September 6, 1996, Joseph R. Papa was named President and Chief
Operating Officer, replacing Mr. Ullmann.
On September 19, 1996, Peter G. Kraft resigned as Vice President
of Marketing.
October 24, 1996, Robert E. Goff resigned as Executive Vice
President, Executive Director of WellCare of New York, Inc. and
President of WellCare Medical Management, Inc.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1a Copy of Registrant's Amended and Restated
1993 Incentive and Non-Incentive Stock
Option Plan, including Form of Option (As of
September 1, 1996)
Exhibit 10.2d Copy of Voluntary Separation and Release
Agreement dated October 16, 1996, between
Registrant and Edward A. Ullmann
Exhibit 10.4b Copy of Voluntary Separation and Release
Agreement dated October 24, 1996, between
Registrant and Robert E. Goff<PAGE>
<PAGE>26
Exhibit 10.8b Copy of Separation from Employment Agreement
dated September 19, 1996, between Registrant
and Peter G. Kraft
Exhibit 10.52 Copy of Employment Agreement dated
September 1, 1996, between Registrant and Joseph
R. Papa
Exhibit 11 Computation of Net Income Per Share of
Common Stock
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Not Applicable
<PAGE>
<PAGE>27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
The WellCare Management Group, Inc.
By: /s/ Robert W. Morey, Jr.
Robert W. Morey, Jr.
Chairman of the Board and
Chief Executive Officer (was appointed 4/30/96)
By: /s/ Marystephanie Corsones
Marystephanie Corsones
Vice President of Finance/
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 14, 1996
<PAGE>
<PAGE>28
INDEX TO EXHIBITS
All exhibits listed below are filed with this Quarterly Report on
Form 10-Q:
Exhibit Number Page Number
10.1a Copy of Registrant's Amended and
Restated 1993 Incentive and Non-
Incentive Stock Option Plan,
Including Form of Option (As of
September 1, 1996) 29
10.2d Copy of Voluntary Separation and
Release dated October 16, 1996,
between Registrant and Edward A. Ullmann 44
10.4b Copy of Voluntary Separation and
Release dated October 24, 1996,
between Registrant and Robert E. Goff 52
10.8b Copy of Separation from Employment
Agreement dated September 19, 1996,
between Registrant and Peter G. Kraft 59
10.52 Copy of Employment Agreement
dated September 1, 1996, between
Registrant and Joseph R. Papa 64
11 Computation of Net Income Per Share
of Common Stock 92
27 Financial Data Schedule 93
<PAGE>
<PAGE>29
[TYPE] EX-10.1a
[DESCRIPTION] MATERIAL CONTRACTS
10.1a Copy of Regsitrant's 1993 Incentive
and Non-Incentive Stock Option Plan
(As Amended and Restated as of
September 1, 1996)
THE WELLCARE MANAGEMENT GROUP, INC.
1993 INCENTIVE AND NON-INCENTIVE
STOCK OPTION PLAN
(As Amended and Restated as of September 1, 1996)
1. Purpose of Plan.
The purpose of this 1993 Incentive and Non-Incentive Stock
Option Plan ("Plan") is to further the growth and development of
The WellCare Management Group, Inc. ("Company") and any direct and
indirect subsidiaries thereof (collectively, "Subsidiaries" and
each, singly, a "Subsidiary") by encouraging selected employees,
directors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a
proprietary interest in the Company through the ownership of
stock, thereby providing such persons with an added incentive to
promote the best interests of the Company and affording the
Company a means of attracting to its service persons of
outstanding ability.
2. Stock Subject to the Plan.
An aggregate of 900,000 shares of the Company's Common
Stock, par value $0.01 per share ("Common Stock"), subject,
however, to adjustment or change pursuant to Section 13 hereof,
shall be reserved for issuance upon the exercise of options which
may be granted from time to time in accordance with the Plan
("Options"). Such shares may be, in whole or in part, as the
Compensation Committee of the Board of Directors ("Committee")
shall from time to time determine, authorized but unissued shares
or issued shares which have been reacquired by the Company. If,
for any reason, an Option shall lapse, expire or terminate without
having been exercised in full, the unpurchased shares covered
thereby shall again be available for purposes of the Plan.
3. Administration.
(a) The Board of Directors has appointed the Committee
from among its members to administer and help set
policy for the Plan. The Committee shall at all times
be comprised only of three or more Non-Employee
Directors (as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended). Such
Committee shall have and may exercise any and all of
the powers relating to the administration of the Plan
and the grant of Options thereunder as are set forth
herein. The Board of Directors shall have the power
at any time to fill vacancies in, to change the
membership of, or to discharge such Committee. The
Committee shall select one of its members as
<PAGE>
<PAGE>30
its chairman and shall hold its meetings at such time
and at such places as it shall deem advisable. A
majority of such Committee shall constitute a quorum
and such majority shall determine its action. Any
action may be taken without a meeting by written
consent of all the members of the Committee. The
Committee shall keep minutes of its proceedings and
shall report the same to the Board of Directors at the
meeting next succeeding.
(b) The Committee shall administer the Plan and, subject
to the provisions of the Plan, shall have sole
authority in its discretion to determine the persons
to whom, and the time or times at which, Options shall
be granted, the number of shares to be subject to each
such Option and whether all or any portion of such
Options shall be incentive stock options ("Incentive
Options") qualifying under Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), or stock
options which do not so qualify ("Non-Incentive
Options"). Both Incentive Options and Non-Incentive
Options may be granted to the same person at the same
time provided each type of Option is clearly
designated. In making such determinations, the
Committee may take into account the nature of the
services rendered by such persons, their present and
potential contributions to the Company's success and
such other factors as the Committee in its sole
discretion may deem relevant. Subject to the express
provisions of the Plan, the Committee shall also have
the authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating
thereto, to determine the terms and provisions of the
respective Option Agreements, which shall be
substantially in the forms attached hereto as Exhibit
A and Exhibit B, and to make all other determinations
necessary or advisable for the administration of the
Plan, all of which determinations shall be conclusive
and not subject to review.
4. Eligibility for Receipt of Options.
(a) Incentive Options.
Incentive Options may be granted only to employees
(including officers) of the Company and/or any of its
Subsidiaries.
The aggregate Fair Market Value (as defined in Section
5 of the Plan), determined as of the time the
Incentive Option is granted, of the shares of the
Company's Common Stock purchasable thereunder
exercisable for the first time by an employee during
any calendar year may not exceed $100,000.
A director of the Company or any Subsidiary who is not
an employee of the Company or of one of its
Subsidiaries is not eligible to receive Incentive
Options under the Plan. Further,
<PAGE>
<PAGE>31
Incentive Options may not be granted to any person
who, at the time the Incentive Option is granted, owns
(or is considered as owning within the meaning of
Section 424(d) of the Code) stock possessing more than
10% of the total combined voting powers of all classes
of stock of the Company or any Subsidiary (a "10%
Owner"), unless at the time the Incentive Option is
granted to a 10% Owner, the option price is at least
110% of the fair market value of the Common Stock
subject thereto and such Incentive Option by its terms
is not exercisable subsequent to five years from the
date of grant.
(b) Non-Incentive Options.
Non-Incentive Options may be granted to any employee
(including employees who have been granted Incentive
Options), directors, consultants, agents, independent
contractors and other persons whom the Committee
determines will contribute to the Company's success.
(c) Notwithstanding the forgoing, the maximum aggregate
number of shares with respect to which Options,
whether Incentive or Non-Incentive, may be granted to
any person eligible therefor under the Plan within any
one calendar year is 200,000 shares.
5. Option Price
The purchase price of the shares of Common Stock under each
Option shall be determined by the Committee, which determination
shall be conclusive and not subject to review, but in no event
shall such purchase price be less than (i) 100% of the fair market
value of the Common Stock on the date of grant for Incentive
Options (110% of the fair market value of Common Stock on date of
grant where grant is made to a 10% Owner), and (ii) 75% of the
fair market value of the Common Stock on the date of grant for
Non-Incentive Options.
In determining the fair market value of the Common Stock as
of a specified date ("Fair Market Value"), the Committee shall
consider, if the Common Stock is: (a) publicly traded and listed
on the New York Stock Exchange or another national securities
exchange or The Nasdaq Stock Market, the closing sale price of the
Common Stock on the business day immediately preceding the date as
of which the Fair Market Value is being determined, or on the next
preceding date on which such Common Stock is traded if no Common
Stock was traded on such immediately preceding business day, or,
if the Common Stock is not so listed on a national securities
exchange or The Nasdaq Stock Market, but publicly traded, the
representative closing sale price in the over-the-counter market
as quoted by the National Quotation Bureau or a recognized dealer
in the Common Stock, on the date immediately preceding the date as
of which the Fair Market Value is being determined, or on the next
preceding date on which such Common Stock is traded if no Common
Stock was traded on such immediately preceding business day; or
(b) not publicly traded, the fair market value as determined by
the Committee in good faith based on such factors as it shall deem
appropriate. The Committee may also consider such other factors
as it shall deem appropriate.
<PAGE>
<PAGE>32
For purposes of the Plan, the date of grant of an Option
shall be the date on which the Committee shall by resolution duly
authorize such Option.
6. Term of Options.
The term of each Option shall be such number of years as the
Committee shall determine, subject to earlier termination as
provided for in Sections 9, 10, 11, and 12 hereof (and each
Incentive Option subject to the limitations set forth in Section
4(a) of the Plan with respect to grants to 10% Owners), but in no
event shall the term of any Option be more than ten years from the
date of grant. No Option may be exercised following termination
thereof.
7. Exercise of Options.
(a) Incentive and Non-Incentive Options shall be
exercisable within the times or upon the events
determined by the Committee as set forth in the Option
Agreements.
(b) An Option may not be exercised for fractional shares
of the Company's Common Stock.
(c) Except as provided in Sections 10, 11, 12 and 13
hereof, no Option shall be exercisable unless the
holder thereof shall have been an employee, director,
consultant, agent, independent contractor or other
person employed by or engaged in performing services
for the Company and/or a Subsidiary continuously from
the date of grant to the date of exercise.
(d) The exercise of an Option shall be contingent upon
receipt by the Company from the holder of such Option
of a written representation that at the time of such
exercise it is the Optionholder's then present
intention to acquire the Option shares for investment
and not with a view to the distribution or resale
thereof (unless a Registration Statement covering the
shares purchasable upon exercise of the Options shall
have been declared effective by the Securities and
Exchange Commission) and upon receipt by the Company
of cash, or a check to its order, for the full
purchase price of such shares. In addition, the
holder of such Option must agree to refrain from
selling or offering to sell any securities of the
Company for such reasonable period of time after the
effective date of any registration statement relating
to an underwritten offering of securities of the
Company, as may be requested by the managing
underwriter of such underwritten offering, and
approved by the Board of Directors.
(e) Payment for the shares of Common Stock may be made (i)
in cash or by check to the order of the Company, (ii)
by surrender of shares of Common Stock having a Fair
Market Value equal to the exercise price of the
Option; (iii) by a Cashless Exercise Election (as
defined below); or (iv) by any combination of the
foregoing where approved by the Committee in its sole
discretion; provided, however, in the event of payment
<PAGE>
<PAGE>33
for the shares of Common Stock by method (ii) above,
the shares of Common Stock so surrendered, if
originally issued to the Optionholder upon exercise of
an Option(s) granted by the Company, shall have been
held by the Optionholder for more than six months.
(f) Cashless Exercise Election.
(i) An Optionholder may elect ("Cashless Exercise
Election") to receive, without the payment by the
Optionholder of any additional consideration, shares
of Common Stock equal to the value of his, her or its
Options or a portion thereof by delivery to the
Company of a written notice. Thereupon, the Company
shall issue to such Optionholder such number of shares
of Common Stock as is computed using the following
formula:
X=Y(A-B)
A
where X= the number of shares of Common Stock to be
issued to the Optionholder pursuant to his, her
or its Cashless Exercise Election;
Y= the number of shares of Common Stock covered by
the Options in respect of which the Cashless
Exercise Election is made;
A= the Cashless Fair Market Value (as defined
below); and
B= the exercise price for the Options as set forth
in Section 5 above.
(ii) The term "Cashless Fair Market Value" means the
average closing sale price for a share of Common Stock
over the immediately preceding twenty trading dates as
reported on The Nasdaq Stock Market or, if no closing
sale prices shall have been made on such relevant
dates, on the next preceding days on which there were
closing sale prices; provided, however, that if no
closing sale prices shall have been made within the
twenty business days preceding the Cashless Exercise
Election, or if deemed appropriate by the Committee
for any other reason, the Cashless Fair Market Value
of such shares of Common Stock shall be as determined
by the Committee. In no event shall the Cashless Fair
Market Value of any share of Common Stock be less than
its par value.
(g) The holder of an Option shall have none of the rights
of a shareholder with respect to the shares
purchasable upon exercise of the Option until a
certificate for such shares shall have been issued to
the holder upon due exercise of the Option.
(h) The proceeds received by the Company upon exercise of
an Option shall be added to the Company's working
capital and be available for general corporate
purposes.
<PAGE>34
8. Non-Transferability of Incentive Options.
No Incentive Option granted pursuant to the Plan shall be
transferable otherwise than by will or the laws of descent or
distribution and an Incentive Option may be exercised during the
lifetime of the Optionholder only by such Optionholder.
9. Termination of Employment of Holder of Incentive Option.
In the event the employment with the Company or a Subsidiary
of the holder of an Incentive Option shall be terminated for any
reason other than by reason of death or disability within the
meaning of Section 22(e)(3) of the Code, such holder's Incentive
Option shall terminate three (3) months from the date of such
termination of employment; provided, however, such Optionholder
shall only be entitled to exercise that portion of his, her or its
Incentive Option which was exercisable at the date of such
termination of employment; provided, further, no Incentive Option
may be exercised after the expiration of its term. Absence on
leave approved by the employer corporation shall not be considered
an interruption of employment for any purpose under the Plan.
Nothing in the Plan or in any Option Agreement granted
hereunder shall confer upon any Optionholder any right to continue
in the employ of the Company or any Subsidiary or obligate the
Company or any Subsidiary to continue the engagement of any
Optionholder or interfere in any way with the right of the Company
or any such Subsidiary to terminate such Optionholder's employment
or engagement at any time.
10. Disability of Holder of Incentive Option.
If the employment with the Company or a Subsidiary of the
holder of an Incentive Option shall be terminated by reason of
such holder's disability within the meaning of Section 22(e)(3) of
the Code, such holder (or such holder's legal representative on
such holder's behalf, if applicable) may, within one (1) year from
the date of such termination, exercise such Incentive Option, but
only to the extent such Incentive Option was exercisable by such
holder at the date of such termination. Notwithstanding the
foregoing, no Incentive Option may be exercised subsequent to the
date of its expiration.
11. Death of Holder of Incentive Options.
If the holder of any Incentive Option shall die while in the
employ of, or while performing services for, the Company or one or
more of its Subsidiaries (or within one (1) year following
termination of employment due to disability within the meaning of
Section 22(e)(3) of the Code), the Incentive Option theretofore
granted to such person may be exercised, but only to the extent
such Incentive Option was exercisable by such holder at the date
of death (or the date of termination of employment due to
disability within the meaning of Section 22(e)(3) of the Code, by
the legatee or legatees of such person under such person's Last
Will, or by such person's personal representative or distributees,
within one (1) year from the date of death but in no event
subsequent to the expiration date of the Incentive Option.
<PAGE>
<PAGE>35
12. Termination of Non-Incentive Options.
A Non-Incentive Option shall terminate, lapse and expire at
such time or times as the Committee provides in the Option
Agreement governing such Non-Incentive Option.
13. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the
Company shall by stock dividend, split-up, combination,
reclassification or exchange, or through merger or consolidation
or otherwise, change its shares of Common Stock into a different
number or kind or class of shares or other securities or property,
then the number of shares covered by such Option and the price per
share thereof shall be proportionately adjusted for any such
change by the Committee, whose determination thereon shall be
conclusive. In the event that a fraction of a share results from
the foregoing adjustment, said fraction shall be eliminated and
the price per share of the remaining shares subject to the Option
adjusted accordingly.
14. Vesting of Rights Under Options.
Nothing contained in the Plan or in any resolution adopted
or to be adopted by the Committee or the shareholders of the
Company shall constitute the vesting of any rights under any
Option. The vesting of such rights shall take place only when a
written Option Agreement, substantially in the form of the
Incentive Stock Option Agreement attached hereto as Exhibit A or
the Non-Incentive Stock Option Agreement attached hereto as
Exhibit B, shall be duly executed and delivered by and on behalf
of the Company and the person to whom the Option shall be granted.
15. Withholding Taxes.
Whenever under the Plan shares are to be issued in
satisfaction of the exercise of Options granted thereunder, the
Company shall have the right to require the recipient to remit to
the Company an amount sufficient to satisfy federal, state and
local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares.
16. Termination and Amendment.
The Committee may at any time terminate, amend or modify
this Plan in any respect (including, but not limited to, any form
of grant, agreement or instrument to be executed pursuant to this
Plan); provided, however, that shareholder approval shall be
required to be obtained by the Company if required to comply with
the Incentive Option provisions or Section 162(m) of the Code, or
the listed company requirements of The Nasdaq Stock Market or of a
national securities exchange on which the shares of Common Stock
are traded, or other applicable provisions of state or federal law
or self-regulatory agencies; provided, further, that no
termination, amendment or modification of this Plan may materially
adversely affect the rights of a holder of an Option previously
granted under this Plan without the written consent of such
Optionholder.
<PAGE>
<PAGE>36
17. Term of Plan.
The Plan was originally adopted by the Board of Directors on
March 20, 1993 and approved by the shareholders of the Company on
April 26, 1993. The Plan was amended by the Board of Directors on
March 25, 1995, which amendments were approved by the shareholders
of the Company on June 5, 1995, and subsequently amended by the
Board of Directors on September 1, 1996, subject to approval by
the shareholders of the Company. No Option shall be granted
pursuant to this Plan on or after March 19, 2003, but Options
theretofore granted may extend beyond that date and the terms of
this Plan shall continue to apply to such Options and to any
shares of Common Stock acquired upon exercise thereof.
<PAGE>
<PAGE>37
EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT
To:
We are pleased to notify you that by the determination of
the Compensation Committee (hereinafter called the "Committee") an
incentive stock option to purchase ________ shares of the Common
Stock of The WellCare Management Group, Inc. (herein called the
"Company") at a price of $______ per share has this ____ day of
_______________, been granted to you under the Company's 1993
Incentive and Non-Incentive Stock Option Plan, as amended (herein
called the "Plan"). This option may be exercised only upon the
terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this incentive stock
option has been granted is to further the growth and development
of the Company and its direct and indirect subsidiaries by
encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are
expected to contribute materially to the Company's success to
obtain a proprietary interest in the Company through the ownership
of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company, and affording the
Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by
its terms; it imposes no obligation upon you to purchase any of
the shares subject to the option. Your obligation to purchase
shares can arise only upon your exercise of the option in the
manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
The option granted you hereunder may not be exercised
for a period of [one year] from the date of its grant by the
Committee as set forth above. Thereafter, this option shall be
exercisable as follows:
[(i) at the end of one year from the date of grant,
up to 25% of the total shares subject to the
option;
(ii) at the end of the second year from the date of
grant, up to 50%;
(iii) at the end of the third year from the date of
grant, up to 75%;
(iv) at the end of the fourth year from the date of
grant, up to 100%].
This option may not be exercised for less than ten shares at any
one time (or the remaining shares then purchasable if less than
ten) and expires at the end of [indicate term of option, not to
exceed ten years, but for 10% Owners, not to exceed 5 years] years
<PAGE>
<PAGE>38
from the date of grant whether or not it has been duly exercised,
unless sooner terminated as provided in Sections 6, 7 and 8
hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices, signifying
your election to exercise the option. The notice must state the
number of shares of Common Stock as to which your option is being
exercised, must contain a statement by you (in a form acceptable
to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale
(unless a registration statement covering the shares purchasable
has been declared effective by the Securities and Exchange
Commission) and must be accompanied by payment as set forth in
Section 5 hereof for the full purchase price of the share being
purchased. No share shall be issued until full payment therefor
has been made.
If notice of the exercise of this option is given by a
person or persons other than you, the Company may require, as a
condition to the exercise of this option, the submission to the
Company of appropriate proof of the right of such person or
persons to exercise this option.
Certificates for shares of the Common Stock so purchased
will be issued as soon as practicable. The Company, however,
shall not be required to issue or deliver a certificate for any
shares until it has complied with all requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, any
stock exchange on which the Company's Common Stock may then be
listed and all applicable state laws in connection with the
issuance or sale of such shares or the listing of such shares on
said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise
this option, shall have none of the rights of a shareholder with
respect to shares subject to this option.
You shall promptly advise the Company of any sale of shares
of Common Stock issued upon exercise of this option which occurs
within one (1) year from the date of the exercise of this option
relating to the issuance of such shares.
5. Payment of Options.
Payment for the shares of Common Stock may be made (i) in
cash or by check to the order of the Company, (ii) by surrender of
shares of Common Stock having a Fair Market Value equal to the
exercise price of the Option; (iii) by a Cashless Exercise
Election (as defined below); or (iv) by any combination of the
foregoing where approved by the Committee in its sole discretion;
provided, however, in the event of payment for the shares of
Common Stock by method (ii) above, the shares of Common Stock so
surrendered, if originally issued to you upon exercise of an
option(s) granted by the Company, shall have been held by you for
more than six months.
You may elect ("Cashless Exercise Election") to receive,
without the payment by you of any additional consideration, shares
of Common Stock equal to the value of your options or a portion
thereof by delivery to the Company of a written notice. Thereupon
<PAGE>
<PAGE>39
the Company shall issue to you such number of shares of Common
Stock as is computed using the following formula:
X=Y(A-B)
A
where X= the number of shares of Common Stock to be issued to
you pursuant to your Cashless Exercise Election;
Y= the number of shares of Common Stock covered by the
options in respect of which the Cashless Exercise
Election is made;
A= the Cashless Fair Market Value (as defined below); and
B= the exercise price for the options as set forth in
Section 6 of the Plan.
The term "Cashless Fair Market Value" means the average
closing sale price for a share of Common Stock over the
immediately preceding twenty trading dates as reported on The
Nasdaq Stock Market or, if no closing sale prices shall have been
made on such relevant dates, on the next preceding days on which
there were closing sale prices; provided, however, that if no
closing sale prices shall have been made within the twenty
business days preceding the Cashless Exercise Election, or if
deemed appropriate by the Committee for any other reason, the
Cashless Fair Market Value of such shares of Common Stock shall be
as determined by the Committee. In no event shall the Cashless
Fair Market Value of any share of Common Stock be less than its
par value.
6. Termination of Employment.
If your employment with the Company (or a subsidiary
thereof) is terminated for any reason other than by death or
disability, this option shall terminate three (3) months from the
date of such termination of employment (but in no event shall you
be able to exercise this option after [not to exceed ten years,
but for 10% Owners, not to exceed 5 years] years from the date
this option was granted to you), provided, however, you shall only
be entitled to exercise that portion of this option which was
exercisable by you at the date of such termination of employment.
7. Disability.
If your employment with the Company (or a subsidiary
thereof) is terminated by reason of your disability, you may
exercise, within one (1) year from the date of such termination,
that portion of this option which was exercisable by you at the
date of such termination, provided, however, that such exercise
occurs within [not to exceed ten years, but for 10% Owners, not to
exceed 5 years] years from the date this option was granted to
you.
8. Death.
If you die while employed by the Company (or a subsidiary
thereof) or within one (1) year after termination of your
employment due to disability , that portion of this option which
was exercisable by you at the date of your death may be exercised
by your legatee or legatees under your Last Will, or by your
<PAGE>
<PAGE>40
personal representatives or distributees, within one (1) year from
the date of your death, but in no event after [not to exceed ten
years, but for 10% Owners, not to exceed 5 years] years from the
date this option was granted to you.
9. Non-Transferability of Option.
This option shall not be transferable except by Last Will or
the laws of descent and distribution, and may be exercised during
your lifetime only by you.
10. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination,
reclassification or exchange, or through merger or consolidation,
or otherwise, change its shares of Common Stock into a different
number or kind or class of shares or other securities or property,
then the number of shares covered by this option and the price of
each such share shall be proportionately adjusted for any such
change by the Committee whose determination shall be conclusive.
Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject
to this options adjusted accordingly.
11. Subject to Terms of the Plan.
This incentive stock option agreement shall be subject in
all respects to the terms and conditions of the Plan and in the
event of any question or controversy relating to the terms of the
Plan, the decision of the Committee shall be conclusive.
Sincerely yours,
THE WELLCARE MANAGEMENT GROUP, INC.
By:
President
Agreed to and accepted this
___ day of _________, 199_.
Signature of Optionholder
<PAGE>
<PAGE>41
EXHIBIT B
NON-INCENTIVE STOCK OPTION AGREEMENT
To:
We are pleased to notify you that by the determination of
the Compensation Committee (hereinafter called the "Committee") a
non-incentive stock option to purchase _______ shares of the
Common Stock of The WellCare Management Group, Inc. (herein called
the "Company") at a price of $_______ per share has this ___ day
of ______________, been granted to you under the Company's 1993
Incentive and Non-Incentive Stock Option Plan, as amended (herein
called the "Plan"). This option may be exercised only upon the
terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this non-incentive stock
option has been granted is to further the growth and development
of the Company and its direct and indirect subsidiaries by
encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are
expected to contribute materially to the Company's success to
obtain a proprietary interest in the Company through the ownership
of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company, and affording the
Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this non-incentive stock option agreement
will indicate your acceptance of and your willingness to be bound
by its terms; it imposes no obligation upon you to purchase any of
the shares subject to the option. Your obligation to purchase
shares can arise only upon your exercise of the option in the
manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
The option granted you hereunder shall be exercisable as
follows:
This option may not be exercised for less than ten shares at any
one time (or the remaining shares then purchasable if less than
ten) and expires at the end of [indicate term of option, not to
exceed ten years] years from the date of grant whether or not it
has been duly exercised, unless sooner terminated as provided in
Section 6 hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices, signifying
your election to exercise the option. The notice must state the
number of shares of Common Stock as to which your option is being
exercised, must contain a statement by you (in a form acceptable
to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale
(unless a registration statement covering the shares purchasable
has been declared effective by the Securities and Exchange
<PAGE>
<PAGE>42
Commission) and must be accompanied by payment as set forth in
Section 5 hereof for the full purchase price of the shares being
purchased, plus such amount, if any, as is required for
withholding taxes. No share shall be issued until full payment
therefor has been made.
If notice of the exercise of this option is given by a
person or persons other than you, the Company may require, as a
condition to the exercise of this option, the submission to the
Company of appropriate proof of the right of such person or
persons to exercise this option.
Certificates for shares of the Common Stock so purchased
will be issued as soon as practicable. The Company, however,
shall not be required to issue or deliver a certificate for any
shares until it has complied with all requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, any
stock exchange on which the Company's Common Stock may then be
listed and all applicable state laws in connection with the
issuance or sale of such shares or the listing of such shares on
said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise
this option, shall have none of the rights of a shareholder with
respect to shares subject to this option.
5. Payment of Options.
Payment for the shares of Common Stock may be made (i) in
cash or by check to the order of the Company, (ii) by surrender of
shares of Common Stock having a Fair Market Value equal to the
exercise price of the Option; (iii) by a Cashless Exercise
Election (as defined below); or (iv) by any combination of the
foregoing where approved by the Committee in its sole discretion;
provided, however, in the event of payment for the shares of
Common Stock by method (ii) above, the shares of Common Stock so
surrendered, if originally issued to you upon exercise of an
option(s) granted by the Company, shall have been held by you for
more than six months.
You may elect ("Cashless Exercise Election") to receive,
without the payment by you of any additional consideration, shares
of Common Stock equal to the value of your options or a portion
thereof by delivery to the Company of a written notice.
Thereupon, the Company shall issue to you such number of shares of
Common Stock as is computed using the following formula:
X=Y(A-B)
A
whereX= the number of shares of Common Stock to be issued to
you pursuant to your Cashless Exercise Election;
Y= the number of shares of Common Stock covered by the
options in respect of which the Cashless Exercise
Election is made;
A= the Cashless Fair Market Value (as defined below); and
B= the exercise price for the options as set forth in
Section 6 of the Plan.
The term "Cashless Fair Market Value" means the average
<PAGE>
<PAGE>43
closing sale price for a share of Common Stock over the
immediately preceding twenty trading dates as reported on The
Nasdaq Stock Market or, if no closing sale prices shall have been
made on such relevant dates, on the next preceding days on which
there were closing sale prices; provided, however, that if no
closing sale prices shall have been made within the twenty
business days preceding the Cashless Exercise Election, or if
deemed appropriate by the Committee for any other reason, the
Cashless Fair Market Value of such shares of Common Stock shall be
as determined by the Committee. In no event shall the Cashless
Fair Market Value of any share of Common Stock be less than its
par value.
6. Termination of Employment or Engagement.
If your employment or engagement with the Company (or a
subsidiary thereof) is terminated for any reason, [insert terms
upon which non-incentive option holder's options shall lapse and
expire.] [Insert terms upon which non-incentive options shall
survive the termination of a holder's employment or engagement,
but in such event the option shall be exercisable only to the
extent exercisable on the date of such termination and in no event
shall the option be exercisable after the expiration date of this
option.] [If the option survives the death of the option holder,
add language that it may be exercised by the holder's legatee or
legatees under his Last Will, or by his personal representatives
or distributees.]
7. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination,
reclassification or exchange, or through merger or consolidation,
or otherwise, change its shares of Common Stock into a different
number or kind or class of shares or other securities or property,
then the number of shares covered by this option and the price of
each such share shall be proportionately adjusted for any such
change by the Committee whose determination shall be conclusive.
Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject
to this option adjusted accordingly.
8. Subject to Terms of the Plan.
This non-incentive stock option agreement shall be subject
in all respects to the terms and conditions of the Plan and in the
event of any question or controversy relating to the terms of the
Plan, the decision of the Committee shall be conclusive.
9. Tax Status.
This option does not qualify as an "incentive stock option"
under the provisions of Section 422 of the Internal Revenue Code
of 1986, as amended, and the income tax implications of your
receipt of a non-incentive stock option and your exercise of such
an option should be discussed with your tax counsel.
Sincerely yours,
THE WELLCARE MANAGEMENT GROUP, INC.
By:
President
Agreed to and accepted this
___ day of _________, 199_.
Signature of Optionholder
<PAGE>44
[TYPE] EX-10.2d
[DESCRIPTION] MATERIAL CONTRACTS
EX-10.2d Copy of Voluntary Separation Agreement
and Release dated October 16, 1996, between
Registrant and Edward A. Ullmann
VOLUNTARY SEPARATION AGREEMENT AND RELEASE
This memorandum dated October 16, 1996, sets forth the terms
and conditions of the Voluntary Separation Agreement and Release
("Agreement") between Edward A. Ullmann, on his own behalf and on
behalf of his estate, heirs, executors, administrators, attorneys,
successors and assigns (hereinafter collectively referred to as
"Ullmann"), and The WellCare Management Group, Inc. ("WellCare"),
WellCare of New York, Inc. ("WCNY") and WellCare of Connecticut,
Inc. ("WC Conn") and their parent(s), agencies, subsidiaries,
related companies and divisions and their respective successors,
assigns, representatives, agents, officers, directors,
shareholders, and employees, whether current or former
(hereinafter collectively referred to as "Companies").
WHEREAS, Ullmann agrees to resign as President of WellCare and
as a member of the executive committee of the Board of Directors
of WellCare as of September 6, 1996 (hereinafter referred to as
the "Termination Date"); and
WHEREAS, Ullmann and WellCare mutually and voluntarily agree to
terminate the Employment Contract dated January 1, 1994 and
amended on March 9, 1996 ("Employment Contract"), as of September
6, 1996.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, Ullmann and the Companies agree as
follows:
1. (a) As of September 6, 1996, Ullmann has resigned as
President of WellCare and as a member of the executive committee
of the Board of Directors of WellCare.
(b) WellCare agrees to cause WCNY to amend its By-Laws to
create the position of Chairman of the Board of Directors with the
responsibility of presiding at all meetings of the Board of
Directors and of the shareholders of WCNY, and to delete from
Section 5.02(a) of the By-Laws, relating to responsibilities of
the President of WCNY, the words "and shall preside at all
meetings of the shareholders and the Board of Directors."
(c) Upon the amendment of the By-Laws of WCNY as referred
to in paragraph 1(b) above, Ullmann shall be the Chairman of the
Board of WCNY for such time as he remains a director of WCNY, and
Ullmann shall support and vote for the appointment of Joseph Papa
as President and Chief Executive Officer of WCNY when such
appointment is next brought up at a meeting of the Board of
Directors of WCNY.
(d) Ullmann shall support and vote for the appointment of
William Strein as Executive Director of WCNY when such appointment
is brought up at a meeting of the Board of Directors of WCNY.
2. WellCare hereby retains Ullmann as a consultant for the
period September 6, 1996 through March 6, 1997 (the "Consultant
Period"). During the Consultant Period, Ullmann shall<PAGE>
<PAGE>45
be available to perform services to WellCare as may be reasonably
requested by WellCare's Chief Executive Officer or Chief Operating
Officer, but shall have no obligation to render services for more
than 2 days per week. As part of these services Ullmann may
assist in the management of the following: WellCare's Presidential
Leadership Club; the WellCare Foundation; the WellCare Mentor and
Fellowship Programs; the Park West Theater; and the Gallery at
Park West.
WellCare has no obligation to fund these programs other than to
the extent it deems necessary or appropriate.
During the Consultant Period, WellCare shall pay to Ullmann One
Hundred Twelve Thousand Five Hundred Dollars ($112,500.00) to be
paid on a semi-monthly basis. WellCare shall issue a Form 1099
with respect to these payments. Neither federal, state or local
income tax nor payroll tax of any kind shall be withheld or paid
by WellCare on behalf of Ullmann. Ullmann shall not be treated as
an employee during the Consultant Period for tax purposes or any
other purpose.
3. As consideration for Ullmann's release of claims as set
forth in paragraph 9 herein, upon completion of the Consultant
Period, WellCare agrees to pay to Ullmann Two Hundred Twenty Five
Thousand Dollars ($225,000.00) to be paid on a semi-monthly basis
over twelve months commencing March 6, 1997. WellCare shall issue
a Form 1099 with respect to these payments. Neither federal,
state or local income tax nor payroll tax of any kind shall be
withheld or paid by WellCare on behalf of Ullmann. Ullmann shall
not be treated as an employee during this twelve-month for tax
purposes or any other purpose.
4. As further consideration for Ullmann's release of claims as
set forth in paragraph 9 herein, WellCare agrees to maintain,
pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), for the continued health benefit of Ullmann and
his covered beneficiaries, all group health plan coverage. This
coverage will be provided to Ullmann at WellCare's expense for the
period of continuation provided by COBRA. WellCare also agrees to
maintain at its expense Ullmann's existing Executive Life
Insurance coverage, Executive Long-Term Disability Insurance
coverage and use of a Wellcare automobile pursuant to paragraph 3c
of the Employment Contract for the Consulting Period and the
subsequent twelve month period referred to in paragraph 3 above.
5. As further consideration for Ullmann's release of claims as
set forth in paragraph 9 herein, WellCare grants an option to
Ullmann to buy its 70% interest in Bienestar, Inc. ("Bienestar")
and its rights to the name "Bienestar," at 70% of the fair market
value of the entity as of the date of this Agreement as shall be
determined by an independent appraiser within 15 days of the date
of this Agreement. The cost of such appraisal shall be borne by
WellCare. Ullmann shall have 30 days from the date the appraisal
is delivered to him to exercise this option. If Ullmann exercises
this option, he will execute a note in favor of WellCare in the
amount as determined by the appraisal, which note will provide for
the repayment of the principal and interest accrued thereon at a
rate of 8% per annum (without compounding). The principal shall
be repaid in three equal installments, due on each of the first
three anniversary dates of Ullmann's exercise of the option
together with interest thereon. Upon Ullmann's exercise of the
option, the WellCare-Bienestar Agreement will be deemed amended to
provide that:
<PAGE>
<PAGE>46
(a) the term of the WellCare-Bienestar Agreement is reduced
to one year from the date of Ullmann's exercise of the
option to purchase the 70% interest in Bienestar, subject to
renewal;
(b) during the term of the WellCare-Bienestar Agreement,
WellCare shall be obligated to offer to its members the
services described in the WellCare-Bienestar Agreement;
(c) during the term of the WellCare-Bienestar Agreement,
Bienestar shall be the exclusive provider of the services
referred to in Article 6 of the WellCare-Bienestar
Agreement;
(d) in the event that the WellCare-Bienestar Agreement is
terminated pursuant to Article 2.2 thereof, WellCare shall
immediately pay to Bienestar the monthly fees that would be
due to Bienestar for the remainder of the term of the
WellCare-Bienestar Agreement, based on the number of
WellCare members eligible to receive the Bienestar services,
whether by rider or preexisting contract, at the time notice
of termination is given; and
(e) the fee paid to Bienestar will be $1.30 per member per
month for those new members or current members renewing
existing contracts who select the benefits offered by WCNY
and managed by Bienestar under the WellCare-Bienestar
Agreement, provided that it is understood that the existing
compensation of $1.25 per member per month set forth in
Article 1.1 of the WellCare-Bienestar Agreement shall remain
in effect for the terms of all contracts in effect at the
time of this Agreement.
6. The Employment Contract shall be deemed to be mutually
terminated as of the date of this Agreement.
7. Ullmann shall serve out his current terms as directors of
WellCare, WCNY and WC Conn. The only limitations on the
Companies' agreement to this provision shall be if a court or
administrative agency of competent jurisdiction, after an
evidentiary hearing, which is no longer subject to appeal, holds
that Ullmann acted with fraudulent intent, or that Ullmann failed
to disclose material facts evidencing fraudulent conduct by him to
the Companies prior to the date of this agreement.
8. Nothing in this contract shall affect Ullmann's rights to
indemnification under the Certificate of Incorporation and Bylaws
of WellCare and Article 7 of the New York Business Corporation
Law, as Article 7 may be amended and supplemented or by any
successor thereto, in connection with any action (civil or
criminal) or investigation (regulatory or otherwise) for which
Ullmann may be entitled to indemnification. To the extent that
Ullmann may be entitled to such indemnification, WellCare
expressly approves Ullmann's retention of Orans, Elsen & Lupert
LLP ("OEL") to represent him and agrees to pay the hourly rates
OEL has heretofore been charging. WellCare also agrees to pay
Ullmann's attorneys' fees and expenses incurred in connection with
entering into this Agreement on the same basis as set forth in
this paragraph above.
<PAGE>
<PAGE>47
9. Ullmann hereby releases the Companies from any and all
liability for any claims as of the date of his execution of this
Agreement, whether known or unknown to him, which may arise from
the Employment Contract. This release includes but is not limited
to any claims for discrimination on the basis of race, color, sex,
national origin, religion, disability, age, marital status and
veteran status, including but not limited to any claims arising
under Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1866, the Civil Rights Act of 1991, the Age Discrimination
in Employment Act of 1967, as amended by the Older Workers Benefit
Protection Act of 1990, the Family and Medical Leave Act of 1993,
the Americans With Disabilities Act of 1990, the Fair Labor
Standards Act of 1938, the New York State Human Rights Law, the
New York City Human Rights Law and all claims for workers'
compensation, wages, monetary or equitable relief arising from the
Employment Contract, vacation, other employee fringe benefits,
benefit plans, medical plans, 401(k) plan, stock options plans or
attorneys' fees relating to these benefits. This release
expressly does not include a release of Ullmann's rights of
indemnification as set forth in this Agreement, the Certificate of
Incorporation of WellCare and New York law, or any other terms of
this Agreement which require future performance. This Agreement
does not constitute any admission by the Companies that they have
violated any such law or legal obligation with respect to any
aspect of Ullmann's employment or termination therefrom.
10. Ullmann represents, warrants and acknowledges that the
Companies owe him no wages, commissions, bonuses, sick pay,
personal leave pay, severance pay, vacation pay, tuition
reimbursement, or other compensation or payments or forms of
remuneration of any kind or nature, other than that specifically
provided for in this Agreement and other than $15,808, in payment
for 137 vacation days owed to Ullmann by WellCare, which payment
shall be made to Ullmann by October 31, 1996.
11. Ullmann agrees that during the Consultant Period and
the subsequent twelve month period in which he is receiving income
under paragraphs 2 and 3, within the service area of plans managed
by WellCare as of the date of this Agreement, he will not directly
or indirectly enter into the employment of or render services to
any other person, corporation, or health-related service company
engaged in a similar type business as the Companies as an
individual party, director, officer, principal, agent, employee or
in any other relationship or capacity whatsoever, without the
written consent of the Companies, provided that it is understood
that Bienestar and Ullmann's activities in connection with
Bienestar do not come within the prohibitions of this paragraph.
12. Ullmann and the Companies represent and agree that:
(a) neither has filed or caused to be filed any lawsuits against
the other in any court whatsoever; (b) neither has filed or caused
to be filed any charges or complaints against the other with any
municipal, state or federal agency charged with the enforcement of
any law; and (c) Ullmann agrees, to the fullest extent permitted
by law, not to file or cause to be filed a charge, complaint,
grievance or demand for arbitration in any forum or assist or
otherwise participate willingly or voluntarily in any claim,
arbitration, suit, action, investigation or other proceeding of
any kind which relates to the Employment Contract matters released
by this Agreement.
<PAGE>
<PAGE>48
13. Ullmann agrees that, except as may be necessary in
connection with litigation or other proceedings in which he may be
involved, he will not disclose, or cause to be disclosed in any
way, any confidential information, trade secrets or other
proprietary information which Ullmann in any way acquired during
his employment with the Companies. If Ullmann believes disclosure
of such information is necessary in a litigation or other
proceeding, he will, at the request of the Companies, cooperate
with the Companies to try to limit such disclosure, if possible.
In connection with litigation or other proceedings, Ullmann and
the Companies will cooperate with one another and share documents
and other materials to the extent requested by the other.
14. Upon service on Ullmann, or anyone acting on his
behalf, of any subpoena, order, directive or other legal process
requiring Ullmann to engage in conduct encompassed within
paragraph 12 of this Agreement, Ullmann or his attorney shall
immediately notify Seth I. Truwit, Esq., Epstein Becker & Green,
P.C., 250 Park Avenue, New York, New York 10177 and Robert W.
Morey, Chairman of the Board, The WellCare Management Group, Inc.,
Park West/Hurley Avenue Extension, Kingston, New York 12501, of
such service. Upon service on any of the Companies or any
directors, officers, agents or employees thereof, or anyone acting
on behalf of any such entity or person, of any subpoena, order,
directive or other legal process requiring such entity or person
to engage in conduct encompassed within paragraph 12 of this
Agreement, such Company or person, or his attorney, shall
immediately notify counsel for Ullmann, Leslie A. Lupert, Esq.,
Orans, Elsen & Lupert LLP, One Rockefeller Plaza, New York, New
York 10020 and Ullmann at P.O. Box 133, Miller Road, Mount
Tremper, New York 12457, of such service.
15. Ullmann and the Companies agree that each will
cooperate fully with the other in connection with any existing or
future litigation against Ullmann or the Companies, whether
administrative, civil or criminal in nature, in which and to the
extent Ullmann or the Companies, as the case may be, deem the
other's cooperation necessary.
16. The failure of Ullmann or the Companies to insist upon
strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver thereof or deprive that party of
the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement.
17. Ullmann acknowledges that he has been offered more
than twenty-one (21) days from the date he received this Agreement
within which to consider its terms, and that he has been advised
that during such period he should consult an attorney regarding
the terms of this Agreement. Ullmann acknowledges that he has
consulted with and been advised by attorneys of his own choosing
regarding the terms of this Agreement. Ullmann further
acknowledges that his signature below indicates that he is
entering into this Agreement freely, knowingly and voluntarily
with a full understanding of its terms. The terms of this
Agreement shall not become effective or enforceable until seven
(7) days following the date of its execution, during which time
Ullmann may revoke the Agreement by notifying the Companies in
writing, by registered letter delivered to the attention of the
undersigned representative of the Companies, provided, however,
that Ullmann's acknowledgment of his resignation as President and
member of the executive committee of the Board of Directors of
<PAGE>
<PAGE>49
WellCare shall become effective immediately. This Agreement
constitutes the entire agreement between Ullmann and the
Companies, and supersedes and cancels all prior oral and written
agreements, if any, between Ullmann and the Companies.
18. If any of the provisions, terms or clauses of this
Agreement are declared illegal, unenforceable or ineffective in a
legal forum, those provisions, terms and clauses shall be deemed
severable, such that all other provisions, terms and clauses of
this Agreement shall remain valid and binding upon both parties.
19. Ullmann acknowledges and agrees that the restrictions
and agreements contained in paragraphs 11 and 13 of this
Agreement, in view of the nature of Ullmann's position and of the
Companies' business, are reasonable and necessary in order to
protect the Companies' legitimate interests, and that any
violation thereof would result in irreparable injuries to the
Companies which would not be readily ascertainable or compensable
in terms of money, and therefore Ullmann further acknowledges
that, in the event Ullmann violates any of these restrictions, the
Companies shall be entitled to obtain from any court of competent
jurisdiction temporary, preliminary and permanent injunctive
relief as well as damages, which rights shall be cumulative and in
addition to any other rights or remedies to which it may be
entitled. Ullmann further agrees that if it is determined that he
has materially breached the terms of any or all of the aforesaid
paragraphs, the Companies shall be entitled to recover from
Ullmann all costs and reasonable attorneys' fees incurred as a
result of the Companies' attempt to redress such breach or to
enforce the Companies' rights and protect the Companies'
legitimate interests. If it is determined that Ullmann has not
materially breached the terms of any or all of the aforesaid
paragraphs, Ullmann shall be entitled to recover all costs and
reasonable attorneys' fees incurred as a result of the litigation
by the Companies.
20. The law of the State of New York will control any
questions concerning the validity and interpretation of this
Agreement, without regard to principles of conflicts of law.
21. Should a dispute arise as to the interpretation or
implementation of this Agreement, the parties agree to submit the
dispute to, and be bound by the decision of, a panel of three
arbitrators, one to be selected by each party and the third to be
selected by the first two. If the two party-selected arbitrators
cannot agree on a third arbitrator, then the president of
JAMS/Endispute Inc. shall select the third arbitrator under its
rules. The arbitration shall be a private arbitration conducted
by reference to the rules of the American Arbitration Association.
The parties to this Agreement shall share the cost of the
arbitration equally, but the arbitrators shall have the authority
to award costs and reasonable attorneys' fees in their discretion.
The parties agree that the neutral arbitrator shall be selected
within ten (10) calendar days of service of a notice of
arbitration, and that the arbitration shall commence within
twenty-one (21) days thereafter. The arbitrators shall render
their award promptly after the closing of the hearing.
22. This Agreement shall be binding upon and inure to the
benefit of the Companies, their successors and assigns, and shall
inure to the benefit of and be binding upon Ullmann, his
administrators, executors, legatees, heirs and assigns.
<PAGE>
<PAGE>50
23. This Agreement may not be changed or altered, except
by a writing signed by Ullmann and an authorized officer of each
of the Companies.
Dated: October 10, 1996 /s/ Edward A. Ullmann
Edward A. Ullmann
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 10th day of October, 1996, before me personally came
Edward A. Ullmann, to me known to be the individual described in
the foregoing instrument, who executed the foregoing instrument in
my presence, and who duly acknowledged to me that he executed the
same.
/s/ Robert L. Plotz
Notary Public
ROBERT L. PLOTZ
Notary Public, State of New York
No. 24-4980164
Qualified in Kings County
Commission Expires April 15, 1997
THE WELLCARE MANAGEMENT GROUP, INC.
Dated: October 16, 1996 By: /s/ Robert W. Morey
Name: Robert W. Morey
Title: CEO and Board Chairman
STATE OF NEW YORK )
) ss.:
COUNTY OF ULSTER )
On this 16th day of October, 1996, before me personally came
Robert W. Morey, to me known, who being by me duly sworn, did
depose and say that he is CEO and Board Chairman of The WellCare
Management Group, Inc., the corporation described in and which
executed the foregoing instrument; that he is duly authorized to
execute said instrument on behalf of said corporation, and that
s/he executed said instrument pursuant to that authority.
/s/ Jerrold I. Ehrlich
Notary Public
JERROLD I. EHRLICH
NOTARY PUBLIC, State of New York
No. 31-4690822
Qualified in New York County
Commission Expires November 30, 1997
WELLCARE OF NEW YORK, INC.
Dated: October 16, 1996 By: /s/ Marystephanie Corsones
Name: Marystephanie Corsones
Title: Treasurer
<PAGE>
<PAGE>51
STATE OF NEW YORK )
) ss.:
COUNTY OF ULSTER )
On this 16th day of October, 1996, before me personally came
Marystephanie Corsones, to me known, who being by me duly sworn,
did depose and say that she is Treasurer of WellCare of New York,
Inc., the corporation described in and which executed the
foregoing instrument; that s/he is duly authorized to execute said
instrument on behalf of said corporation, and that s/he executed
said instrument pursuant to that authority.
/s/ Jerrold I. Ehrlich
Notary Public
JERROLD I. EHRLICH
NOTARY PUBLIC, State of New York
No. 31-4690822
Qualified in New York County
Commission Expires November 30, 1997
WELLCARE OF CONNECTICUT, INC.
Dated: October 16, 1996 By: /s/ Douglas A. Hayward
Name: Douglas A. Hayward
Title: President and CEO
STATE OF CONNECTICUT )
) ss.:
COUNTY OF ULSTER )
On this 16th day of October, 1996, before me personally came
Douglas A. Hayward, to me known, who being by me duly sworn, did
depose and say that he is President and CEO of WellCare of
Connecticut, Inc., the corporation described in and which executed
the foregoing instrument; that he is duly authorized to execute
said instrument on behalf of said corporation, and that s/he
executed said instrument pursuant to that authority.
/s/ Jerrold I. Ehrlich
Notary Public
JERROLD I. EHRLICH
NOTARY PUBLIC, State of New York
No. 31-4690822
Qualified in New York County
Commission Expires November 30, 1997
<PAGE>
<PAGE>52
[TYPE] EX-10.4b
[DESCRIPTION] MATERIAL CONTRACTS
10.4b Copy of Voluntary Separation Agreement
and Release dated October 24, 1996 between
Registrant and Robert E. Goff
VOLUNTARY SEPARATION AGREEMENT AND RELEASE
This memorandum dated October 24, 1996, sets forth the terms and
conditions of the Voluntary Separation Agreement and Release
("Agreement") between Robert E. Goff, on his own behalf and on behalf
of his estate, heirs, executors, administrators, attorneys,
successors and assigns (hereinafter collectively referred to as
"Goff"), and The WellCare Management Group, Inc. ("WellCare"), and
WellCare of New York, Inc. ("WCNY"). For purposes of this Agreement
the term "Companies" shall mean WellCare of New York, Inc., WellCare
of Connecticut, Inc. ("WC Conn"), WellCare Development, Inc. ("WCDEV"),
Agente Benefit Consultants, Inc. ("ABC"), and WellCare Medical
Management ("WCMM") and their parent(s), agencies, subsidiaries,
related companies and divisions and their respective successors,
assigns, representatives, agents, officers, directors, shareholders,
and employees, whether current or former.
WHEREAS, Goff agrees to voluntarily resign as Executive Director
of WCNY, and as an Officer and Director of WCNY and from any and all
Committees or positions of, and, or with WCNY; as President and
Director of WCMM and from any and all Committees or positions of, and
or with WCMM; as Executive Vice President of The WellCare Management
Group, Inc., Trustee on the 401K Pension plan of The WellCare
Management Group, Inc.; as a Director of the Board of WC Conn. and
from any and all Committees or positions of, and or with WC Conn., as
a member of any and all Committees or positions of, and with WellCare
Development.
NOW THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, Goff and the Companies agree as
follows:
1. Goff hereby confirms his voluntary resignation of his
employment with and/or positions with the Companies effective October
24, 1996. The Employment Contract dated January 1, 1994 and amended
on July 16, 1995 and June 26, 1996 by and between WellCare and Goff
("Employment Contract") is terminated as of October 24, 1996 including
but not limited to each of the positions set forth in the whereas
clause above. Goff will receive payments equal to his current salary,
less applicable deductions, through October 24, 1996. Goff will also
receive a check in the amount of $3,630.20, less applicable
deductions, which shall represent the amount of his accrued unused
vacation. The Companies shall have no further obligation to Goff
under the Employment Contract.
2. As consideration for Goff's release of any and all claims
against the Companies as set forth in paragraph 4 herein, WellCare
agrees to provide Goff eight (8) days after his execution of this
Agreement provided he does not breach the terms of this Agreement, or
revoke his signature as set forth in paragraph 16 herein with the
following:
a. payments totaling $18,670.08 to be paid in equal installments
on a bi-weekly basis, for the period of October 25, 1996
through December 31, 1996, less applicable deductions;
<PAGE>
<PAGE>53
b. payments totaling $26,654.04 to be paid in equal installments
on a bi-weekly basis for the period of January 1, 1997 through
March 28, 1997, less applicable deductions, provided, however
that in the event Goff secures alternative employment
(including self-employment), the payments set forth in this
paragraph shall be reduced to the extent of income derived from
said employment. Goff agrees to notify the Chief Operating
Officer of WellCare within three days (in writing) of any such
employment (including self-employment), and his compensation
including all bonus and incentive payments.
c. monthly payments each in the amount of $700.00, less applicable
deductions, for the period from November 1, 1996 through March
28, 1997, payable on the last day of each month. Said payments
are intended to reimburse Goff for the rental of office space
during this period.
d. use of a WellCare automobile through October 28, 1996
(including continued lease payments and reimbursement for the
costs of auto insurance and service). In lieu of continued use
of said automobile in November and December 1996, WellCare will
provide Goff with monthly payments in the amount of $699.00,
less applicable deductions, payable on the last day of each
month.
e. group health plan and dental coverage for Goff and his covered
beneficiaries pursuant to applicable law for the period of
October 25, 1996 through March 28, 1997. After that date, Goff
will be allowed to continue such coverage at his own expense in
accordance with applicable law.
f. continuation of Goff's existing Executive Life Insurance
coverage and Executive Long-Term Disability Insurance coverage
for the period of October 25, 1996 through March 28, 1997;
g. WellCare agrees to indemnify Goff in accordance with and
subject to the limitations set forth in the Certificate of
Incorporation and the By-Laws of the Companies and the
applicable state law of the jurisdiction of incorporation of
the Companies.
h. provide Goff with a written recommendation on its letterhead in
the form annexed hereto as Exhibit A. In response to any
inquiry concerning Goff's employment with the Companies, the
Companies will provide a copy of the letter annexed as Exhibit
A. To be subject to this obligation, any such inquiries must
be in writing and addressed to: Joseph R. Papa, Chief Operating
Officer, The WellCare Management Group, Inc., PO Box 4059,
Kingston, NY 12402.
3. During the period from October 25, 1996 through March 28, 1997
Goff shall be available to answer questions from time to time
relating to those services Goff performed prior to his voluntary
resignation. In no event shall Goff be required to perform services
in excess of the equivalent of ten (10) full business days during
this period. Such services shall be performed at the sole discretion
and specific request of Chief Operating Officer, Joseph Papa, or his
designee; however, Goff shall not hold himself out as an employee of
the Companies during this period nor shall any employment
relationship exist between Goff and the Companies after October 24,
1996, and Goff specifically acknowledges that no such employment
relationship exists.
<PAGE>
<PAGE>54
4. In exchange for the payments and benefits set forth above in
paragraph 2 and for other good and valuable consideration, Goff
hereby releases the Companies from any and all liability for any
claims against the Companies as of the date of his execution of this
Agreement, whether known or unknown to him, which may arise under
express or implied contract, federal, state or local statute,
executive order, law, ordinance, tort or other obligations arising
out of public policy. This release includes but is not limited to
any claims for discrimination on the basis of race, color, sex,
national origin, religion, disability, age, marital status and
veteran status, including but not limited to any claims arising under
Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of
1991, the Age Discrimination in Employment Act of 1967, as amended by
the Older Workers Benefit Protection Act of 1990, the Family and
Medical Leave Act of 1993, the Americans With Disabilities Act of
1990, the Fair Labor Standards Act of 1938, the New York State Human
Rights Law and all claims for workers' compensation, wages, monetary
or equitable relief, vacation, other employee fringe benefits,
benefit plans, medical plans, 401(k) plan, stock options plans or
attorneys' fees. This Agreement does not constitute any admission by
the Companies that they have violated any such law or legal
obligation with respect to any aspect of Goff's employment or
termination therefrom.
5. Goff represents, warrants and acknowledges that the Companies
owe him no wages, commissions, bonuses, sick pay, personal leave pay,
severance pay, vacation pay or other compensation or payments or
forms of remuneration of any kind or nature, other than that
specifically provided for in Section 1 of this Agreement. WellCare
hereby agrees to reimburse Goff for any business expenditures
approved by the Chief Operating Officer which are incurred up to and
including October 24, 1996, as well as travel expenses occurred for
the ten (10) business days referred to in Section 3 herein. Goff
further acknowledges and agrees that any and all stock options which
he may be eligible to exercise or those which he may be eligible to
exercise in the future, including but not limited to those pursuant
to The WellCare Management Group, Inc.'s Incentive Stock Option
Agreements agreed to and accepted on July 1, 1993 and August 10,
1995, expire as of October 24, 1996, the date of his voluntary
resignation from employment.
6. Goff agrees that during the period from October 25, 1996
through March 28, 1997 within the service areas of plans managed by
the Companies, he will not directly or indirectly enter into the
employment of or render services to any other person, corporation, or
health-related service company engaged in a similar type business as
the Companies, as an individual party, director, officer, principal,
agent, employee or in any other relationship or capacity whatsoever,
without the written consent of the Companies. Such consent shall not
be unreasonably withheld.
7. Goff represents and agrees that: (a) he has not filed or caused
to be filed any lawsuits against the Companies in any court
whatsoever; (b) he has not filed or caused to be filed any charges or
complaints against the Companies with any municipal, state or federal
agency charged with the enforcement of any law; and (c) pursuant to
and as a part of Goff's complete, total and irrevocable release and
discharge of the Companies, Goff agrees, to the fullest extent
permitted by law, not to file or cause to be filed a charge,
complaint, grievance or demand for arbitration in any forum or assist
or otherwise participate willingly or voluntarily in any claim,
arbitration, suit, action, investigation or other proceeding of any
<PAGE>
<PAGE>55
kind which relates to any matter that involves the Companies and that
occurred on or before the date of Goff's execution of this Agreement.
8. The terms, contents or execution of this Agreement, any claims
that have been or could have been raised against the Companies as of
the date of execution of this Agreement, and the facts and
circumstances underlying any such claims shall not be admissible in
any litigation, arbitration or proceeding in any forum for any
purpose other than to secure enforcement of the terms and conditions
of this Agreement, except as required by law.
9. Goff agrees that he shall not disparage, criticize or otherwise
speak or write of the Companies in a manner that encourages any
adverse action against the Companies. Goff further agrees that under
no circumstances will he disclose or cause to be disclosed to the
media any information relating to the Companies or its operations.
10. Goff agrees that he will not disclose, or cause to be
disclosed in any way, any confidential information, trade secrets or
other proprietary information which Goff in any way acquired during
his employment with the Companies. Goff may speak and write about
his experience in the health-related services industry so long as he
does not disclose confidential information, trade secrets or
proprietary information of the Companies in violation of the
preceding sentence. It is understood and agreed that all books,
handbooks, manuals, files, papers, memoranda, letters, facsimile or
other communications which Goff has in his possession that were
written, authorized, signed, received or transmitted during his
employment are and remain the property of the Companies and, as such,
are not to be removed from the Companies' offices. In addition, any
such materials which Goff possesses, but which are not in the
Companies' offices are to be returned immediately. Further, Goff
agrees that he will return his credit cards (and pay any balances on
said credit cards), building keys and security badges, laptop
computer and any other items, equipment or other such property of
the Companies to the WellCare Human Resources Department prior to
October 25, 1996. It is hereby acknowledged that Goff has returned
his keys, security badges, laptop computer and has paid any
outstanding balances on his credit card. Goff further agrees to
return the aforementioned WellCare automobile, on the morning of
October 28, 1996. If he does not do so, all payments and benefits to
which he is entitled pursuant to paragraph 2 shall cease.
11. Upon service on Goff, or anyone acting on his behalf, of
any subpoena, order, directive or other legal process requiring Goff
to engage in conduct encompassed within paragraphs 7, 8, 9, or 10 of
this Agreement, Goff or his attorney shall immediately notify Seth I.
Truwit, Esq., Epstein, Becker & Green, P.C., 250 Park Avenue, New
York, New York 10177 and Joseph R. Papa, Chief Operating Officer of
such services.
12. Goff further agrees that he will cooperate fully with the
Companies in connection with any existing or future litigation
against the Companies, whether administrative, civil or criminal in
nature, in which and to the extent the Companies deems his
cooperation necessary. WellCare shall reimburse Goff for his time at
a reasonable hourly rate to be agreed upon by the parties (the lesser
of his per hour wage at any new employment or $112.82 per hour, and
for any reasonable and necessary out-of-pocket expenses incurred by
Goff, in connection with the provision of services described in this
paragraph, upon receipt of itemized statements of such services
and/or expense; provided, however, that WellCare will not reimburse
<PAGE>
<PAGE>56
Goff for his time spent testifying before any arbitral,
administrative, judicial, legislative or other body or agency.
13. Goff agrees that he will not at any time in the future
seek employment, reemployment or reinstatement with the Companies,
and hereby waives any right that may accrue to him from any rejection
of any such application for employment therefrom that he may make,
notwithstanding this provision. By this Agreement, Goff intends to
remove himself from consideration for future employment with the
Companies. Goff's execution of this Agreement shall constitute good
and sufficient cause to reject any application Goff may make
notwithstanding this provision.
14. WellCare represents and agrees that (a) it has not filed
or caused to be filed any lawsuits against Goff in any court
whatsoever; (b) it has not filed or caused to be filed any charges or
complaints against Goff with any municipal, state or federal agency
charged with the enforcement of any law. In the event WellCare
receives any subpoena, order, directive or other legal process
directed to or naming Goff as an individual defendant WellCare will
promptly notify Goff of the receipt of such process.
15. The failure of Goff or the Companies to insist upon
strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
16. Goff acknowledges that he has been offered up to twenty-one (21)
days from the date he received this Agreement within which
to consider its terms, and that he has been advised that during such
period he should consult an attorney regarding the terms of this
Agreement. Goff further acknowledges that his signature below
indicates that he is entering into this Agreement freely, knowingly
and voluntarily with a full understanding of its terms. The terms of
this Agreement shall not become effective or enforceable until seven
(7) days following the date of its execution, during which time Goff
may revoke the Agreement by notifying the Companies in writing, by
registered letter delivered to the attention of the undersigned
representative of the Companies. This Agreement constitutes the
entire agreement between Goff and the Companies, and supersedes and
cancels all prior oral and written agreements, if any, between Goff
and the Companies.
17. If any of the provisions, terms or clauses of this
Agreement are declared illegal, unenforceable or ineffective in a
legal forum, those provisions, terms and clauses shall be deemed
severable, such that all other provisions, terms and clauses of this
Agreement shall remain valid and binding upon both parties.
18. Goff acknowledges and agrees that the restrictions and
agreements contained in paragraphs 6, 7, 8, 9, and 10 of this
Agreement, in view of the nature of Goff's position and the
Companies' business, are reasonable and necessary in order to protect
the Companies' legitimate interests, and that any violation thereof
would result in irreparable injuries to the Companies which would not
be readily ascertainable or compensable in terms of money, and
therefore Goff further acknowledges that, in the event Goff violates
any of these restrictions, the Companies shall be entitled to obtain
from any court of competent jurisdiction temporary, preliminary and
permanent injunctive relief as well as damages, which rights shall be
cumulative and in addition to any other rights or remedies to which
<PAGE>
<PAGE>57
it may be entitled. Goff further agrees that if it is determined
that he has breached the terms of any or all of the aforesaid
paragraphs, the Companies shall be entitled to recover from Goff all
costs and reasonable attorneys' fees incurred as a result of the
Companies' attempt to redress such breach or to enforce the
Companies' rights and protect the Companies' legitimate interests.
19. The law of the State of New York will control any
questions concerning the validity and interpretation of this
Agreement, without regard to principles of conflicts of law. The
parties agree that any dispute concerning the enforcement or
interpretation of this Agreement shall be submitted to the American
Arbitration Association for resolution and subject to its rules and
procedures, except as set forth in paragraph 18 above.
20. This Agreement may not be changed or altered, except by
a writing signed by Goff and an authorized officer of the Companies.
Dated: 10-24-96 /s/ Robert E. Goff
Robert E. Goff
State of New York )
County of Ulster ) ss.:
On this 24th day of October, 1996, before me personally came
Robert E. Goff, to me known to be the individual described in the
foregoing instrument, who executed the foregoing instrument in my
presence, and who duly acknowledged to me that he executed the same.
/s/ Judy L. Johnson
Notary Public
JUDY L. JOHNSON
Notary Public, State of New York
Reg. No. 5022167
Qualified in Dutchess County
Commission Expires Jan. 03, 1998
THE WELLCARE MANAGEMENT GROUP, INC.
Dated: October 24, 1996 By: /s/ Joseph R. Papa
Name: Joseph R. Papa
Title:President/COO
STATE OF NEW YORK )
) ss:
COUNTY OF ULSTER )
On this 24th day of October, 1996, before me personally came
Joseph R. Papa, to me known, who being by me duly sworn, did depose
and say that he is President/COO of The WellCare Management Group,
Inc., the corporation described in and which executed the foregoing
instrument; that he is duly authorized to execute said instrument on
behalf of said corporation, and that he executed said instrument
pursuant to that authority.
/s/ Jeannine G. Earl
Notary Public
JEANNINE G. EARL
Notary Public, State of New York
No. 4937485
Qualified in Ulster County
Commission Expires July 25, 1998
<PAGE>
<PAGE>58
WELLCARE OF NEW YORK, INC.
Dated: October 24, 1996 By: /s/ Marystephanie Corsones
Name: Marystephanie Corsones
Title:Treasurer
STATE OF NEW YORK )
) ss:
COUNTY OF ULSTER )
On this 24th day of October, 1996, before me personally came
Marystephanie Corsones, to me known, who being by me duly sworn, did
depose and say that she is Treasurer of WellCare of New York, Inc.,
the corporation described in and which executed the foregoing
instrument; that she is duly authorized to execute said instrument on
behalf of said corporation, and that she executed said instrument
pursuant to that authority.
/s/ Jeannine G. Earl
Notary Public
JEANNINE G. EARL
Notary Publuc, State of New York
No. 4937485
Qualified in Ulster County
Commission Expires July 25, 1998
<PAGE>
<PAGE>59
[TYPE] EX-10.8b
[DESCRIPTION] MATERIAL CONTRACTS
10.8b Copy of Separation from Employment Agreement
dated September 19, 1996, between Registrant
and Peter G. Kraft
CONFIDENTIAL
September 19, 1996
Mr. Peter G. Kraft
RR 1 Box 10
Glenford, NY 12433
Re: Separation From Employment
Dear Peter:
This letter sets forth the agreement reached concerning the
change of your employment status with The WellCare Management Group,
Inc., including its subsidiaries and affiliated corporations, and
their respective current and former successors, assigns,
representatives, agents, shareholders, officers, directors and
employees ("WellCare" or "the Company").
1. Subject to the terms and conditions hereof, you shall resign
your position with WellCare effective September 20, 1996. The
Employment Contract by and between The WellCare Management Group,
Inc. and Peter G. Kraft effective January 1, 1995 and amended June
14, 1995 and June 11, 1996 ("Employment Contract") and all obligations
of the parties under said Employment Contract shall terminate as of
September 20, 1996. WellCare will continue your current salary of
$65,520.00, less applicable deductions, through September 20, 1996.
WellCare will also provide you with a check in the amount of
$2,637.60, less applicable deductions, which represents the value of
your accrued unused vacation through September 20, 1996.
2. During the period from September 21, 1996 through December 21,
1996 you shall be available to perform services for the Company
consistent with those services you performed prior to your
termination. Such services shall be performed at the sole discretion
and specific request of Chief Operating Officer, Joseph Papa, or his
designee; however, you shall not hold yourself out as an employee of
WellCare during this period nor shall any employment relationship
exist between you and WellCare after September 20, 1996.
3. In consideration for signing this Agreement and in exchange for
the promises, covenants and waivers set forth herein, WellCare will
provide you, upon your execution of this Agreement, provided you do
not breach the terms of this Agreement, with the following: payments
totaling $70,000, to be paid in equal installments on a bi-weekly
basis, for a period of 12 months, through September 21, 1997, less
applicable deductions; group health plan and dental coverage,
pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), and to maintain at its expense your existing Executive
Life Insurance Coverage and Executive Long-Term Disability Insurance
Coverage for a period of 12 months through September 21, 1997 less
applicable deductions; the use of a Company automobile for the months
of October 1996 and November 1996 (including continued lease payments
and reimbursement for the costs of auto insurance and service).
<PAGE>
<PAGE>60
4. In exchange for WellCare providing you with the above-referenced payments
and benefits and other good and valuable consideration, you hereby waive all
claims against WellCare and release and discharge WellCare from liability for
any claims or damages that you ever had, now have, or which may arise in the
future regarding any matter arising on or before the date of your execution
of this Agreement, whether known or unknown to you including, but not
limited to, any claims arising out of your employment relationship or
termination of employment with WellCare, or violations of any
federal, state or local fair employment practices law, including but
not limited to, any claims for discrimination on the basis of race,
color, sex, national origin, religion, disability, age, marital
status and veteran status, including but not limited to any claims
arising under Title VII of the Civil Rights Act, the Civil Rights Act
of 1991, the Civil Rights Act of 1866, 42 U.S.C. 1981, the
Americans With Disabilities Act, the Family and Medical Leave Act,
the New York State Human Rights Law, the Employee Retirement Income
Security Act, or any other employee relations statute, rule,
executive order, law or ordinance, tort, express or implied contract,
public policy, or other obligations or any rights under any Company
bonus, pension, welfare or stock plans, including all claims for
workers compensation, wages, monetary or equitable relief or vacation
pay. You understand that the consideration provided to you under the
terms of this Agreement does not constitute an admission by WellCare
that it has violated any such law or legal obligation.
5. You represent, warrant and acknowledge that WellCare owes you
no wages, commissions, bonuses, sick pay, personal leave pay,
severance pay, vacation pay or other compensation or payments or
forms of remuneration of any kind or nature, other than that
specifically provided for in this Agreement. You further acknowledge
and agree that any and all stock options which you may be eligible to
exercise or those which you may be eligible to exercise in the
future, including but not limited to those pursuant to The WellCare
Management Group, Inc.'s Incentive Stock Option Agreements agreed to
and accepted on July 14, 1993 and January 31, 1995, expire as of
September 20, 1996, the date of your termination from employment.
6. You agree that you will not disclose, or cause to be disclosed
in any way, any confidential information, trade secrets or other
proprietary information which you in any way acquired during your
employment with WellCare including but not limited to the generality
of the foregoing, the names of any of its customers, the prices it
obtains or has obtained, or at which it sells or has sold its
products, or any other information of, about, or concerning the
business of the employer, its manner of operation, its plans,
processes, or other data of any kind, nature, or description, without
regard to whether any or all of the foregoing matters would be deemed
confidential material, or important, the parties hereto stipulating
that as between them, the same are important, material, and
confidential, and gravely effect the successful conduct of the
business of the employer and its goodwill, and that any breach of the
terms of this paragraph is a material breach hereof. It is
understood and agreed that all books, handbooks, manuals, files,
papers, memoranda, letters, facsimile or other communications which
you have in your possession that were written, authorized, signed,
received or transmitted during your employment are and remain the
property of WellCare and, as such, are not to be removed from
WellCare's offices. In addition, any such materials which you
possess, but which are not in WellCare's offices, are to be returned
immediately. Further, you agree that you will return your Company
credit cards (and pay any balances on said credit cards to the
<PAGE>
<PAGE>61
Company), car phone, building keys and security badges, laptop
computer and any other Company items, equipment or other such
property to the WellCare Human Resources Department prior to
September 20, 1996. You further agree to return the aforementioned
Company automobile on the morning of November 29, 1996.
7. You agree that during the period in which you are receiving
payments pursuant to this Agreement as set forth above, you will not
directly or indirectly enter into the employment of or render
services to any other person, corporation, or health-related service
company engaged in a similar type business as WellCare as an
individual party, director, officer, principal, agent, employee or in
any other relationship or capacity whatsoever, without the written
consent of WellCare. Such consent shall not be unreasonably
withheld.
8. The terms, contents or execution of this Agreement, any claims
that have been or could have been raised against WellCare as of the
date of execution of this Agreement, and the facts and circumstances
underlying any such claims shall not be admissible in any litigation,
arbitration or proceeding in any forum for any purpose other than to
secure enforcement of the terms and conditions of this Agreement,
except as required by law.
9. By executing this Agreement, you further agree that you have
not and will not institute, assist or otherwise participate willingly
or voluntarily in any complaint, claim, charge, lawsuit,
administrative agency proceeding, or action at law or otherwise
against WellCare with respect to any act, omission, transaction or
occurrence up to and including the date of your execution of this
Agreement.
10. You agree not to issue any communication, written or
otherwise, that disparages, criticizes or otherwise reflects
adversely or encourages any adverse action against WellCare, except
if testifying truthfully under oath pursuant to any lawful court
order or subpoena or otherwise responding to or providing disclosures
required by law.
You agree not to disclose the terms, contents or execution of
this Agreement or the facts and circumstances underlying this
Agreement, except in the following circumstances:
a. You may disclose the terms of this Agreement to
your immediate family, so long as such family member agrees to be
bound by the confidential nature of this Agreement;
b. You may disclose the terms of this Agreement to (i)
your tax advisors so long as such tax advisors agree in writing to be
bound by the confidential nature of this Agreement (ii) taxing
authorities if requested by such authorities and so long as they are
advised in writing of the confidential nature of this Agreement or
(iii) your legal counsel; and
c. Pursuant to the order of a court or governmental
agency of competent jurisdiction, or for purposes of securing
enforcement of the terms and conditions of this Agreement.
11. Upon service on you, or anyone acting on your behalf, of
any subpoena, order, directive or other legal process requiring you
to engage in conduct encompassed within paragraphs 6, 8, 9, or 10 of
this Agreement, you or your attorney shall immediately notify Joseph
<PAGE>
<PAGE>62
Papa, Chief Operating Officer and Seth I. Truwit, Esq., Epstein,
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177, of
such service.
12. You further agree that you will cooperate fully with
WellCare in connection with any existing or future litigation against
WellCare, whether administrative, civil or criminal in nature, in
which and to the extent WellCare deems your cooperation necessary.
13. You agree that you will not at any time in the future
seek employment, reemployment or reinstatement with WellCare, and
hereby waive any right that may accrue to you from any rejection of
any such application for employment therefrom that you may make,
notwithstanding this provision. By this Agreement, you intend to
remove yourself from consideration for future employment with
WellCare. Your execution of this Agreement shall constitute good and
sufficient cause to reject any application you may make
notwithstanding this provision.
14. The failure of you or WellCare to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
15. You acknowledge and agree that the restrictions and
agreements contained in paragraphs 6, 7, 8, 9 and 10, of this
Agreement, in view of the nature of your position and of WellCare's
business, are reasonable and necessary in order to protect WellCare's
legitimate interests, and that any violation thereof would result in
irreparable injuries to WellCare which would not be readily
ascertainable or compensable in terms of money, and therefore you
further acknowledge that, in the event you violate any of these
restrictions, WellCare shall be entitled to obtain from any court of
competent jurisdiction temporary, preliminary and permanent
injunctive relief as well as damages, which rights shall be
cumulative and in addition to any other rights or remedies to which
it may be entitled. You further agree that if it is determined that
you have breached the terms of any or all of the aforesaid
paragraphs, WellCare shall be entitled to recover from you all costs
and reasonable attorney's fees incurred as a result of WellCare's
attempt to redress such breach or to enforce WellCare's rights and
protect its legitimate interests.
16. You acknowledge that you are entering into this Agreement
freely, knowingly, and voluntarily, with a full understanding of its
terms. This Agreement constitutes the entire Agreement between
WellCare and you, and supersedes and cancels all prior written and
oral agreements, if any, between WellCare and you.
17. This Agreement may not be changed or altered, except by
a writing signed by an authorized officer of WellCare and you. This
Agreement is entered into in the State of New York and the laws of
the State of New York will apply to any dispute concerning it. If
any clause of this Agreement should ever be determined to be
unenforceable, it is agreed that this will not affect the
enforceability of any other clause or the remainder of this
Agreement.
Very truly yours,
/s/ Joseph R. Papa
Joseph R. Papa, COO
<PAGE>
<PAGE>63
AGREED AND ACCEPTED:
By: /s/ Peter G. Kraft Date: 9/19/96
Peter G. Kraft
On this 19th day of September, 1996
before me personally came
Peter G. Kraft, to me known
and known to me to be the individual
described in and who executed the
foregoing agreement, and duly
acknowledged to me that he
executed the same.
/s/ Judy L. Johnson
Notary Public
Judy L. Johnson
Notary Public, State of New York
Reg. No. 5022167
Qualified in Dutchess County
Commission Expires Jan. 03, 1998
<PAGE>
<PAGE>64
[TYPE] EX-10.52
[DESCRIPTION] MATERIAL CONTRACTS
EX-10.52 Copy of Employment Agreement dated
September 1, 1996 between Registrant
and Joseph R. Papa
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated September 1, 1996 (the "Employment
Agreement" or "Agreement"), by and among THE WELLCARE MANAGEMENT
GROUP, INC., a New York corporation with its principal place of
business at Park West/Hurley Avenue Extension, Kingston, New York
12401 (the "Company"), and Joseph R. Papa, residing at 40 Patten
Lane, Long Branch, New Jersey 07740 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee and the
Employee desires to be employed by the Company.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants, and agreements herein
contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties
hereto, the parties hereto, intending to be legally bound, agree as
follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ the
Employee, and the Employee hereby accepts such employment with the
Company, upon the terms and conditions set forth in this Employment
Agreement, for the period commencing on September 1, 1996 (the
"Effective Date") and ending August 31, 1999 (the "Expiration
Date"), unless sooner terminated in accordance with the provisions
of Section 4 (such period being referred to herein as the
"Employment Period").
2. EMPLOYEE'S RESPONSIBILITY AND PERFORMANCE.
2.1 During the Employment Period, the Employee shall serve
in the capacity of and hold the title of Senior Vice President and
shall be subject to the supervision of, and shall have such
authority as is delegated to him by, the Board of Directors of the
Company (the "Board") or the Chief Executive Officer of the Company
(the "CEO") consistent with such position. On September 6, 1996
through the remainder of the Employment Period, the Employee shall
serve in the capacity of and hold the title of Chief Operating
Officer and shall be subject to the supervision of, and shall have
such authority as is delegated to him by, the Board or CEO
consistent with such position. On or before October 15, 1996, the
Employee shall be elected to serve in the capacity of and hold the
title of President of the Company. All employees of the Company
and its subsidiaries other than the Chief Executive Officer of the
Company shall report directly or indirectly to the Employee or his
designee; provided, however, that the Chief Financial Officer shall
report to both the Employee and the Chairman of the Audit Committee
and the current President of the Company shall report to the Chief
Executive Officer. The Employee hereby accepts such employment and
agrees to undertake the duties and responsibilities normally
inherent in such position and such other duties and
responsibilities as the Board or the CEO shall from time to time
reasonably assign to him consistent with such position. The
Employee acknowledges that the New York State Department of Health
<PAGE>
<PAGE>65
may require a character and competency review of the Employee
pursuant to Section 98.11(j)(4) of the regulations promulgated
under Article 44 of the New York Public Health Law.
2.2 During the Employment Period, the Employee shall devote
his full business time and attention to the discharge of his duties
and responsibilities hereunder and shall be based in Kingston, New
York for the purpose of carrying out his duties under this
Agreement, it being understood that the Employee's principal place
of residence shall not be in Kingston, New York. Notwithstanding
the preceding sentence, the Employee may spend up to ten (10)
business days during the period from the September 1, 1996 through
December 31, 1996, working on matters related to the transition of
the Employee's consulting engagements, with no diminution of salary
or benefits under this Agreement. The Employee agrees to abide by
the reasonable rules, regulations, instructions, personnel
practices and policies of the Company, and any reasonable changes
therein which may be adopted from time to time by the Company, as
such rules, regulations, instructions, personnel practices and
policies may reasonably be applied to senior executives of the
Company.
2.3 During the Employment Period and for a period
thereafter, as and to the extent set forth in Section 6.1, the
Employee shall not compete with the Company, as specifically
provided for in Section 6.
3. COMPENSATION; BONUS; BENEFITS.
3.1 Salary. During the Employment Period, the Company
shall pay the Employee, in installments consistent with the
Company's usual payroll practices, an annual base salary of
$300,000, which amount shall be subject to review for increase as
provided in this Section 3.1 by the Compensation Committee of the
Board. The Compensation Committee of the Board shall review the
Employee's annual base salary in July of each year during the
Employment Period commencing in 1997 and to consider a merit
increase in such annual base salary for the ensuing year of the
Employment Period based upon the performance of the Employee during
the twelve-month period ended on the immediately preceding June 30.
If the Employee's annual base salary is increased in accordance
with the provisions of this Section 3.1, it shall be effective as
of the September 1 immediately following such review. In the event
that the Employee is, or is to be, employed for less than a full
payroll installment period, such installment of the annual base
salary shall be appropriately adjusted.
3.2 Stock Options.
(a) To provide the Employee with an incentive to become
employed by the Company, which incentive provides the Employee with
a proprietary interest in the Company through ownership of Common
Stock, $.01 par value, of the Company (the "Common Stock"), subject
to the execution and delivery of stock option agreements, the
Company hereby:
(i) agrees to grant to the Employee on September 1, 1996, a
five-year option under the Company's 1993 Incentive and
Non-Incentive Stock Option Plan (the "Plan") to
purchase 200,000 shares of Common Stock thereunder at
an exercise price equal to the greater of (I) $9.50 per
share or (II) the closing sale price of the Common
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Stock on August 30, 1996. Such options shall include
both incentive and non-incentive stock options, the
exact number of incentive options to be equal to
(($100,000/per share exercise price of the options) x
3), with the balance of the options to be non-incentive
options. Such options shall have the terms and
conditions set forth in the forms of incentive and non-incentive
stock option agreements annexed hereto as
Exhibit 3.2(a)(i).
(ii) shall grant to the Employee on each of September 1,
1997, September 1, 1998 and September 1, 1999, provided
(A) the Employee is employed under this Employment
Agreement on the immediately preceding August 31 and
(B) a Change of Control (as defined in Schedule 6.3
annexed hereto) shall not have occurred prior to such
date, a five-year option under the Plan to purchase
30,000 shares of Common Stock under the Plan, at an
exercise price equal to the greater of (I) the fair
market value of the Common Stock on the date of grant
and (II) $15 per share with respect to the option
granted on September 1, 1997, $20 per share with
respect to the option granted on September 1, 1998, and
$25 per share with respect to the option granted on
September 1, 1999, respectively. The options subject
to grant in September 1997 and 1998 shall be non-incentive
options and the options subject to grant in
September 1999 shall be incentive and non-incentive
options in the amounts of 4,000 and 26,000 shares,
respectively (or all non-incentive options if the
Employee is not employed by the Company on the date of
grant). Such options shall have the terms and
conditions set forth in the forms of incentive and
non-incentive stock option agreements annexed hereto as
Exhibit 3.2(a)(ii).
The Company shall use its best efforts to register the shares of
Common Stock underlying the options to be granted under this
Section 3.2 under the Securities Act of 1933, as amended, within
sixty (60) days following the date hereof by filing a Form S-8
Registration Statement registering those shares issuable upon
exercise of options granted under the Plan which have not yet been
registered under the Securities Act of 1933, as amended. In the
event such registration is not effected, the Company shall grant to
the Employee an option to put the options to the Company at such
times as they are exercisable, requiring the Company to pay to the
Employee an amount equal to the difference between the then fair
market value of the Common Stock and the exercise price of the
option subject to the put.
3.3 Benefits. As of the Effective Date and during the
Employment Period, the Employee shall be entitled to participate in
the benefit programs available to employees in senior management
positions at the Company (the "Executive Benefit Plans") from time
to time in a manner and amount consistent with the Company's
employment policies in effect from time to time.
Such Executive Benefit Plans are listed on Schedule 3.3. The
Employee shall be entitled to participate in, and receive the
benefits of, any Executive Benefit Plan as of the Effective Date,
subject to any eligibility or waiting periods with respect thereto.
In addition, during the Employment Period, the Company shall
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reimburse the Employee for the premiums payable with respect to a
term life insurance policy in the face amount of $1,000,000 issued
by a nationally recognized life insurance carrier. The Employee
shall be entitled to designate the beneficiary or beneficiaries
thereunder.
3.4 Vacation; Sick Leave. During the Employment Period,
the Employee shall be entitled to six (6) weeks' paid vacation
during each twelve-month period. In the event the Employee fails
to utilize the entire six (6) weeks' paid vacation during any such
twelve-month period, he may carry over up to five (5) days to be
available for use during the immediately subsequent twelve-month
period, but in no event other than upon termination of employment
shall the Employee be entitled to payment for accrued, but unused,
vacation. During the Employment Period, the Employee shall be
entitled to sick leave as is consistent with the Company's
employment policies in effect from time to time.
3.5 Reimbursement of Expenses. The Company shall reimburse
the Employee for all reasonable expenses incurred or paid by the
Employee in connection with, or related to, the business of the
Company and the performance of his duties, responsibilities or
services under this Employment Agreement, upon presentation by the
Employee of documentation, expense statements, vouchers and/or such
other supporting information as the Company may reasonably request.
Without limiting the foregoing, automobile travel by the Employee
between Employee's permanent residence and Kingston, New York shall
be reimbursed at the rate of $.30 per mile; provided, however, the
parties acknowledge and agree that the Company shall have no
obligation to reimburse the Employee for the retention of a driver
in connection with such automobile travel.
3.6 Car Allowance. The Company shall pay to the Employee a
car allowance of $550 per month to cover any car the Employee may
own or lease which is used in connection with the Company's
business in the Kingston, New York area, inclusive of associated
expenses which the Employee may incur in connection with such car
(e.g., maintenance, repair, insurance, gas and garage).
3.7 Lodging. The Company shall make available for the sole
use of the Employee, and the Employee, while working hereunder in
Kingston, New York, shall make use of, an apartment in Kingston,
New York leased or owned by the Company, such apartment to be
comparable in size to that currently leased by the Company in
Kingston, New York and used by Robert W. Morey.
4. EMPLOYMENT TERMINATION. The employment of the Employee by
the Company pursuant to this Employment Agreement may be terminated
upon the occurrence of any of the following:
4.1 Expiration of the Employment Period in accordance with
Section 1.
4.2 At the election of the Company, for Cause, immediately
upon written notice by the Company to the Employee.
For the purposes of this Section 4.2, "Cause" for termination shall
be deemed to exist solely in the event of:
(a) the Employee's willful failure to perform his
reasonable responsibilities and duties under this Agreement;
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(b) any material breach of the Employment Agreement by the
Employee which is not cured by the Employee within thirty (30) days
after written notice by the Company to the Employee setting forth a
detailed description of such material breach, or, in the event such
a breach cannot be cured within thirty (30) days, the Employee
takes reasonable steps to cure such breach and fully cures such
breach within a reasonable period of time; or
(c) the indictment of the Employee for any felony.
4.3 At the election of the Company, without Cause, upon not
less than forty-five (45) days' prior written notice to the
Employee.
4.4 Immediately upon the death or disability of the
Employee. As used in this Employment Agreement, "Disability" shall
mean the complete inability to perform the material services
contemplated under this Employment Agreement for a period of ninety
(90) consecutive days or one hundred twenty (120) days in any
calendar year. A determination of Disability shall be made by a
single physician mutually satisfactory to the Employee or his
representative and the Company. In the event the parties cannot
agree on the selection of a single physician, each party shall
designate one physician and such physician shall designate a third
physician, in which event the determination of Disability shall be
made by a vote of a majority of the panel of physicians.
4.5 At the election of the Employee, for any reason, upon
not less than forty-five (45) days' prior written notice to the
Company.
4.6 At the election of the Employee, for Good Reason,
immediately upon written notice by the Employee to the Company.
For the purposes of this Section 4.6, "Good Reason" for termination
shall be deemed to exist solely in the event of a material breach
of the Employment Agreement by the Company that is not cured by the
Company within thirty (30) days after written notice by the
Employee to the Company setting forth a detailed description of
such material breach, or, in the event such a breach cannot be
cured within thirty (30) days, the Company takes reasonable steps
to cure such breach and fully cures such breach within a reasonable
period of time.
4.7 At the election of the Company upon ten (10) days'
prior written notice to the Employee, if pursuant to the
regulations promulgated under Article 44 of the New York Public
Health Law, the New York State Department of Health undertakes a
character and competency review of the Employee as an officer of
the Company, in its capacity as the management contractor of
WellCare of New York, Inc. ("WellCare-NY"), and as a result of such
review the Company receives notice of a determination that the
Employee is of unsatisfactory character, competence or standing in
the community.
5. EFFECT OF TERMINATION.
5.1 Termination by the Company for Cause or Termination by
the Employee. In the event the Employee's employment is terminated
pursuant to Section 4.2 or 4.5, the following shall occur:
(a) the Company shall have no obligation to grant any
stock options under Section 3.2(a)(ii) not required to be granted
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on or prior to the date of termination; and
(b) the Company shall pay to the Employee the salary
and benefits otherwise payable to him under Section 3 through the
last day of his actual employment by the Company.
5.2 Termination by the Company Without Cause or by the
Employee With Good Reason. In the event the Employee's employment
is terminated pursuant to Section 4.3 or 4.6, the following shall
occur:
(a) the Company shall have no obligation to grant any
stock options under Section 3.2(a)(ii) not required to be granted
on or prior to the date of termination;
(b) the Company shall pay to the Employee, within
thirty (30) days following the date of termination, a lump sum
payment in an amount equal to:
(i) if the date of termination shall be on or
prior to August 31, 1997, two years' base salary
at the rate payable at the date of termination
under Section 3.1;
(ii) if the date of termination shall be
subsequent to August 31, 1997 but on or prior to
August 31, 1998, one year's base salary at the
rate payable at the date of termination under
Section 3.1; or
(iii) if the date of termination shall be
subsequent to August 31, 1998 but on or prior to
August 31, 1999, one-half year's base salary at
the rate payable at the date of termination under
Section 3.1; and
(c) maintain the benefits otherwise payable to the
Employee under Section 3 through last day of his actual employment
and maintain the benefits generally payable to senior management of
the Company from the date of termination until:
(i) if the date of termination shall be on or
prior to August 31, 1997, the date two years
following the date of termination;
(ii) if the date of termination shall be
subsequent to August 31, 1997 but on or prior to
August 31, 1998, the date one year following the
date of termination; or
(iii) if the date of termination shall be
subsequent to August 31, 1998 but on or
prior to August 31, 1999, the date six months
following the date of termination.
5.3 Termination for Death or Disability. In the event that
the Employee's employment is terminated by the Company pursuant to
Section 4.4, the following shall occur:
(a) the Company shall have no obligation to grant any
stock options under Section 3.2(a)(ii) not required to be granted
on or prior to the date of termination; and
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(b) the Company shall pay, in the case of the
Employee's death, to the estate or designated beneficiaries of the
Employee, or, in the case of the Employee's Disability, to his
legal representatives, the salary and benefits to which the
Employee would otherwise be entitled under Section 3 through the
last day of his actual employment.
5.4 Termination by the Company following the New York State
Department of Health's Non-approval of Character and Competency of
the Employee. In the event the Employee's employment is terminated
by the Company pursuant to Section 4.7, the following shall occur:
(a) the Company shall have no obligation to grant any
stock options under Section 3.2(a)(ii) not required to be granted
on or prior to the date of termination; and
(b) the Company shall pay to the Employee the salary
and benefits otherwise payable to him under Section 3 through the
last day of his actual employment by the Company.
5.5 Mitigation of Damages. The Company agrees that the
position, duties and responsibilities of the Employee are unique,
and, as a result, agrees that the Employee shall have no duty to
mitigate damages upon termination or expiration of his employment
hereunder for any reason.
6. NON-COMPETE.
6.1 The Employee, whether as employee, partner, joint
venturer, officer, director, manager, consultant, advisor, owner
(direct or indirect) of more than one percent (1%) of the stock or
equity interest of a corporation or other entity or otherwise,
shall not, during the Employment Period and for the period
specified in Section 6.3:
(a) engage directly or indirectly in, or permit any
entity controlled by such person or entity to engage directly or
indirectly in, any managed health care, health insurance or other
business, venture or enterprise (including, without limitation, a
self-insured employer, insurer, employee welfare benefit plan,
health service corporation or other managed care payor
organization, a health maintenance organization, preferred provider
organization, physician-hospital organization or provider
organization or network, a third-party administrator, an
independent practice association, a health care alliance, a
hospital or other health care facility, or another individual or
entity that, directly or indirectly, provides, finances, manages or
administers health care services) that is in competition with any
of the businesses carried on by the Company or any of its
subsidiaries or affiliates in (i) those areas within the State of
New York where the Company is engaged in the delivery of its
products and services, or (ii) the State of Connecticut; or
(b) recruit or otherwise solicit or induce any
employee of the Company or any of its subsidiaries (including
WellCare-NY and WellCare of Connecticut, Inc. ("WellCare-CT") or
affiliates to terminate his employment with, or otherwise terminate
his relationship with, the Company or any of its subsidiaries
(including WellCare-NY and WellCare-CT) or affiliates, as the case
may be.
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6.2 If any restriction set forth in this Section 6 is found
by any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time, over too great a range of
activities, in too broad a geographic area or for any other reason,
it shall be interpreted to extend only to the maximum extent,
whether period of time, range of activities, geographic area or
other terms, as to which it may be enforceable.
6.3 The covenants set forth in this Section 6 shall
terminate upon termination of the employment hereunder, including
but not limited to the nonrenewal of employment following the
Expiration Date, unless the Employee's employment is terminated
without cause by the Company under Section 4.3 or the Employee
terminates his employment under Section 4.5, in either of which
events the covenants shall survive for the periods set forth
herein. In the event the Employee shall terminate his employment
under Section 4.5, the covenants set forth in this Section 6 shall
survive for a period of two (2) years following the date of
termination unless such termination shall occur following a Change
of Control, in which event the covenants set forth in this Section
6 shall terminate on the date of termination of employment. In the
event the Company shall terminate the employment of the Employee
under Section 4.3, the covenants set forth in Section 6 shall
survive (i) if the date of termination is on or prior to August 31,
1997, for a period of two (2) years following the date of
termination, (ii) if the date of termination is subsequent to
August 31, 1997 but on or prior to August 31, 1998, for a period of
one (1) year following the date of termination, and (iii) if the
date of termination is subsequent to August 31, 1998 but on or
prior to August 31, 1999, for a period of six (6) months following
the date of termination.
7. PROPRIETARY INFORMATION.
7.1 The Employee acknowledges that his relationship with
the Company is one of high trust and confidence and that in the
course of his employment by the Company he will have access to and
contact with "Proprietary Information" (as defined below). The
Employee agrees that he will not (except in the performance of his
duties for the Company), during the Employment Period or at any
time thereafter, disclose, communicate or divulge, in whole or in
part, to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, or use for his benefit or the
benefit of any such other person, firm, corporation, association or
entity, any Proprietary Information. For purposes of this
Employment Agreement, "Proprietary Information" shall mean (i) any
and all (A) methods, processes, manuals, trade secrets, know-how,
inventions and other proprietary information used by the Company or
any of its subsidiaries or affiliates in the conduct of their
respective businesses, (B)software owned by or under the exclusive
license to the Company or any of its subsidiaries or affiliates,
and (C) improvements, enhancements, modifications, updates and
corrections with respect to any of the foregoing, as and when same
are released, (ii) any and all information, data, forms, policies,
procedures, manuals, customer lists, documents, files, surveys and
materials of any kind created, owned or provided by the Company or
any of its subsidiaries or affiliates, (iii) any and all
information or data affecting or relating to the business or
financial affairs of, or other information relating to, the Company
or any of its subsidiaries or affiliates or any customer or client
thereof (including, without limitation, the names of its customers,
prices and rates, and any health care information pertaining to
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subscribers thereof), and (iv) any derivative works based on any of
the foregoing information, data or materials described in clauses
(i) through (iii) above.
7.2 The Employee's obligations under Section 7.1 shall not
apply to any information that:
(a) is or becomes available to the general public
under circumstances involving no breach by the Employee of the
terms of Section 7.1;
(b) is generally disclosed to third parties by the
Company without restriction on such third parties; or
(c) is approved for release by written authorization
of the Board; provided, however, that a breach of any obligation
under Section 7.1 shall not be cured by the subsequent occurrence
of any of the foregoing exceptions.
7.3 Upon termination of this Employment Agreement or at any
other time upon request by the Company, the Employee shall promptly
deliver to the Company all Proprietary Information, including all
records, files, memoranda, notes, reports, price lists, customer
lists, plans, tapes, computer diskettes and any other documents
(and all copies or reproductions of such materials in his
possession or control) relating to the business of the Company and
its subsidiaries and affiliates.
8. INJUNCTIVE RELIEF. The restrictions contained in
Sections 6 and 7 are necessary for the protection of the business
and goodwill of the Company and are considered by the Employee to
be reasonable for such purpose. The Employee agrees that any
breach or threatened breach of Sections 6 and 7 will cause the
Company substantial and irreparable damage and therefore, in the
event of any such breach, the remedies at law will be inadequate,
and in addition to such other remedies which may be available, the
Company shall be entitled to equitable remedies (including an
injunction) and such other relief as a court may deem appropriate.
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
9. REPRESENTATIONS.
9.1 The Employee hereby represents to the Company that he
is legally entitled to enter into this Employment Agreement and to
perform the services contemplated herein. The Employee is under no
physical or mental disability that would hinder his performance of
his duties hereunder and has satisfactorily completed a physical
examination prior to the date hereof and furnished the Company with
evidence of (upon commercially reasonable terms) his current
health, life and disability insurability.
9.2 The Company hereby represents to the Employee that this
Employment Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability
relating to or affecting the enforcement of creditors' rights. The
Company has obtained all necessary corporate approvals of this
Agreement, including but not limited to, the provisions of Section
3.2(a)(i) except shareholder approval to approve certain amendments
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to the Plan. If shareholder approval of the amendments to the Plan
are not obtained, the Company shall take all steps reasonably
necessary to ensure that the Employee is placed in the same
economic position and enjoys the same economic advantages that he
would have had if shareholder approval had been so obtained.
10. NOTICES. All notices and communications hereunder
shall be in writing and shall be deemed to be duly given if
delivered personally, mailed by certified mail (return receipt
requested) or sent by telecopier (confirmed thereafter by certified
mail) to the parties at the following addresses or such other
addresses as shall be specified by the parties by like notice:
if to the Company:
The WellCare Management Group, Inc.
Park West/Hurley Avenue Extension
Kingston, NY 12401
Attention: Robert W. Morey, Chief Executive Officer
Telecopier Number: (914) 338-0566
if to the Employee:
Joseph R. Papa
40 Patten Lane
Long Branch, New Jersey 07740
Telecopier Number: (908) 229-8151
Notice so given shall (in case of notice so given by certified
mail) be deemed to be given and received on the fifth calendar day
after posting and (in case of notice so given by telecopier or
personal delivery) on the date of actual transmission or (as the
case may be) personal delivery.
11. INDEMNIFICATION. The Company agrees to indemnify the
Employee with respect to matters arising in connection with his
employment by the Company to the fullest extent permitted by the
New York Business Corporation Law. In the event the Employee is a
party, witness or otherwise involved in any action, suit or
proceeding, the Employee shall have the right to assume his own
defense with counsel of his choosing and the expenses incurred by
the Employee in defending or otherwise participating in such
proceeding shall be paid by the Company as incurred in advance of
the final disposition of such matter upon receipt of an undertaking
by or on behalf of the Employee to repay the amounts so advanced
as, and to the extent, required by paragraph (a) of Section 725 of
the New York Business Corporation Law. If required by law, such
undertaking shall be secured by collateral reasonably acceptable to
the Company. The Company will use its best efforts to obtain and
maintain directors' and officers' liability insurance. The
Employee shall be covered thereunder and insured up to the maximum
individual limits provided by such insurance throughout the term of
this Agreement. The Company hereby warrants and represents that
the undertakings of payment, indemnification and maintenance of
insurance covering the Employee set forth in this Agreement are not
in conflict with the Certificate of Incorporation or Bylaws of the
Company or with any existing agreement or other corporate action by
the Company.
12. GOVERNING LAW. This Employment Agreement shall be
governed by and construed in accordance with the laws of the State
of New York, without giving effect to conflict of laws provisions.
The parties acknowledge their respective covenants of good faith
and fair dealing under this Agreement.
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13. MISCELLANEOUS.
13.1 Assignment. The obligations of the Employee are
personal and may not be assigned by him. This Agreement shall not
be assignable by the Company except (i) to a corporation or other
entity controlling, controlled by or under common control with the
Company, or (ii) to a successor to all or substantially all of the
business of the Company or WellCare-NY.
13.2 Headings. The article and section headings of this
Employment Agreement are for convenience of reference only and
shall not be deemed to alter or affect provisions hereof.
13.3 Waivers. Neither the failure nor any delay on the
part of either party hereto in exercising any right, power or
remedy hereunder shall operate as a waiver thereof or preclude any
further or other exercise thereof, or the exercise of any other
right, power or remedy. A waiver or consent given by either party
on any one occasion shall be effective only in that instance and
shall not be construed as a bar or waiver of any right on any
other occasion.
13.4 Binding Effect. Subject to the provisions of Section
13.1, all the terms and provisions of this Employment Agreement
shall be binding upon and inure to the benefit of the Employee and
the legal representatives of the Employee and the Company and its
successors and assigns.
13.5 Entire Agreement. This Employment Agreement
constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether
written or oral, relating to the subject matter of this Employment
Agreement.
13.6 Validity. The invalidity, illegality, or
unenforceability of any particular provision of this Employment
Agreement shall not affect any other provisions hereof, and this
Employment Agreement shall be construed in all other respects as
if such invalid, illegal, and unenforceable provisions were
omitted.
13.7 Counterparts. This Employment Agreement may be
executed in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
13.8 No Conflict. Each of the parties does hereby
represent and warrant to the other that nothing herein conflicts
with or shall cause a default under any document, agreement,
instrument or other writing to which said party is a party or by
which said party is bound.
13.9 Publicity. Neither party shall have the right to
disclose to third parties the terms and conditions of this
Employment Agreement, including its existence, without the express
prior written consent of the other party, except as may be
required by applicable law, including United States securities
laws, rules and regulations. Neither party shall originate any
publicity, news release or public announcement, written or oral,
whether to the public or press, stockholders or otherwise,
relating to the terms of this Employment Agreement, including its
existence, the subject matter to which it relates, performance
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under it, or any of the specific terms or conditions to any
amendment hereto or performance hereunder except such
announcements as in the opinion of the counsel for the party
making such announcement are required by law. If a party decides
to make an announcement which it believes to be required by law
with respect to this Employment Agreement, it will give the other
party such notice as is reasonably practicable and an opportunity
to comment upon the announcement.
13.10 Pronouns. Whenever the context may require, any
pronouns used in this Employment Agreement shall include
corresponding masculine, feminine or neuter forms, and the
singular forms of nouns and pronouns shall include the plural, and
vice versa.
13.11 Amendment. This Employment Agreement may be amended
or modified only by a written instrument executed by both the
Company and the Employee.
13.12 Survival. The provisions contained in Sections 5, 6,
7, 8 and 11 shall survive any expiration or termination of this
Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement as of the day and year set forth above.
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Robert W. Morey
Robert W. Morey,
Chief Executive Officer
EMPLOYEE
/s/ Joseph R. Papa
Joseph R. Papa
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Schedule 6.3 to
Employment Agreement
"Change of Control" of the Company shall mean such time as:
(i) Any Person or "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) other than the Principal Shareholders or
The 1818 Fund II, L.P., is or becomes the beneficial owner,
directly or indirectly, of outstanding shares of capital stock
of the Company, entitling such Person or Persons to exercise
50% or more of the total votes entitled to be cast at a regular
or special meeting, or by action by written consent, of
shareholders of the Company (the term "beneficial owner" shall
be determined in accordance with Rule 13d-3, promulgated by the
Securities Exchange Commission under the Exchange Act);
(ii) A majority of the Board shall consist of Persons other
than Continuing Directors. The term "Continuing Director"
shall mean any member of the Board on the Effective Date and
any other member of the Board who shall be recommended or
elected to succeed or become a Continuing Director by a
majority of Continuing Directors who are then members of the
Board.
(iii) The shareholders of the Company shall have approved a
recapitalization, reorganization, merger, consolidation or
similar transaction, in each case, with respect to which all or
substantially all the Persons who were the respective
beneficial owners of the outstanding shares of capital stock of
the Company immediately prior to such recapitalization,
reorganization, merger or consolidation, beneficially own,
directly or indirectly, less than 50% of the combined voting
power of the then outstanding shares of capital stock of the
Company resulting from such recapitalization, reorganization,
merger, consolidation or similar transaction;
(iv) The shareholders of the Company shall have approved of
the sale or other disposition of all or substantially all the
assets of the Company in one transaction or in a series of
related transactions;
(v) Immediately after any merger, consolidation,
recapitalization or similar transaction, the Principal
Shareholders (A) shall have increased the aggregate percentage
of the outstanding shares of capital stock of the Company they
beneficially own, directly or indirectly, by 10% of such
outstanding shares of capital stock or more (or if the entity
surviving such transaction is a corporation, the Principal
Shareholders' ownership in the new entity shall have increased
by 10% or more of their aggregate percentage of ownership of
the Company immediately prior to the transaction) and (B) shall
be the beneficial owners directly or indirectly, of outstanding
shares of stock of the Company (or any Person surviving such
transaction) entitling them collectively to exercise 50% or
more of the total voting power of shares of capital stock of
the Company (or the surviving Person in such transaction) and,
in anticipation of, in connection with or as a result of, such
transaction, the Company (or such surviving Person) shall have
incurred or issued additional Indebtedness such that
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the total Indebtedness so incurred or issued equals at least
50% of the consideration payable in such transaction; provided,
however, that any such transaction shall not be considered a
Change of Control if the holders of Notes shall have
participated therein on no less than a pari passu basis
(assuming conversion of all such holders' Notes into Conversion
Shares) with the Principal Shareholders;
(vi) The shareholders of the Company approve any
transaction (or if no such approval is required, upon the
occurrence of any transaction) the result of which is that the
Common Stock shall no longer be required to be registered under
Section 12 of the Exchange Act and that the holders of shares
of Common Stock do not receive common stock of the Person
surviving such transaction that is required to be registered
under Section 12 of the Exchange Act;
(vii) The Company ceases to be the beneficial owner,
directly or indirectly, of the outstanding shares of capital
stock of WELLCARE-NY, entitling the Company to exercise 50% or
more of the total votes entitled to be cast at a regular or
special meeting, or by action by written consent of the
shareholders of WELLCARE-NY; or
(viii) Robert W. Morey and The 1818 Fund II, L.P. shall each
cease to own at least 50% of the shares of Common Stock and
Class A Common Stock (including Conversion Shares) that they
own as of the date hereof; provided, however, that for purposes
of the foregoing calculation, the number of Conversion Shares
shall be based upon the lesser of the existing Conversion Price
set forth in the Notes on the date hereof and the Conversion
Price agreed to by The 1818 Fund II, L.P. and the Company in
any amendment to the Notes.
For purposes of this Schedule 3.3(c): (a) "Conversion Shares"
shall mean the Common Stock issued or issuable upon the conversion
of the Notes; (b) "Indebtedness" shall mean as to any Person (i)
all obligations of such Person for borrowed money (including
without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers'
acceptances, whether or note matured), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments,
(iii) all obligations to pay the deferred purchase price of
property or services, except trade accounts payable and accrued
liabilities arising in the ordinary course of business, (iv) all
interest rate and currency swaps and similar agreements under
which payments are obligated to be made, whether periodically or
upon the happening of a contingency, (v) all indebtedness created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or
sale of such property), (vi) all obligations under leases which
have been or should be, in accordance with GAAP, recorded as
capital leases, (vii) all indebtedness secured by any lien on any
property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person,
and (viii) any contingent obligation of the foregoing; (c) "Notes"
shall mean the 6.0% Subordinated Convertible Notes due December
31, 2002 of the Company;
<PAGE>
<PAGE>78
(d) "Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature;
and (e) "Principal Shareholders" shall mean Edward A. Ullmann and
Robert W. Morey.<PAGE>
<PAGE>79
Exhibit 3.2(a)(i)
INCENTIVE STOCK OPTION AGREEMENT
To: JOSEPH R. PAPA
We are pleased to notify you that by the determination of
the Compensation Committee (hereinafter called the "Committee") an
incentive stock option to purchase 29,630 shares of the Common
Stock of The WellCare Management Group, Inc. (herein called the
"Company") at a price of $10.125 per share has this 1st day of
September 1996 been granted to you under the Company's 1993
Incentive and Non-Incentive Stock Option Plan, as amended (herein
called the "Plan"). This option is subject to shareholder
approval of the amendments adopted by the Board of Directors to
the Plan in September 1996. This option may be exercised only
upon the terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this incentive stock option
has been granted is to further the growth and development of the
Company and its direct and indirect subsidiaries by encouraging
key employees, directors, consultants, agents, independent
contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a
proprietary interest in the Company through the ownership of
stock, thereby providing such persons with an added incentive to
promote the best interests of the Company, and affording the
Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by
its terms; it imposes no obligation upon you to purchase any of
the shares subject to the option. Your obligation to purchase
shares can arise only upon your exercise of the option in the
manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
The option shall be exercisable as follows:
(i) on the date of grant, up to 33% of the total shares
subject to the option;
(ii) at the end of one year from the date of grant, up to
66% of the total shares subject to the option,
provided you are employed by the Company on the date
one year from the date of grant; and
(iii) at the end of two years from the date of grant,
up to 100% of the total shares subject to the
option, provided you are employed by the Company
on the date two years from the date of grant.
This option shall become immediately exercisable in full upon a
Change of Control of the Company (as defined below) provided you
are employed by the Company on the date thereof or your employment
were terminated without cause by the Company under
<PAGE>
<PAGE>80
Section 4.3 of your employment agreement (the "Employment
Agreement") dated September 1, 1996 within ninety (90) days of the
Change in Control. For purposes hereof, a "Change of Control" of
the Company shall mean such time as:
a. Any Person or "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than the Principal
Shareholders or The 1818 Fund II, L.P., is or becomes the
beneficial owner, directly or indirectly, of outstanding
shares of capital stock of the Company, entitling such Person
or Persons to exercise 50% or more of the total votes entitled
to be cast at a regular or special meeting, or by action by
written consent, of shareholders of the Company (the term
"beneficial owner" shall be determined in accordance with
Rule 13d-3, promulgated by the Securities Exchange
Commission under the Exchange Act);
b. A majority of the Board shall consist of Persons other
than Continuing Directors. The term "Continuing Director"
shall mean any member of the Board on the Effective Date and
any other member of the Board who shall be recommended or
elected to succeed or become a Continuing Director by a
majority of Continuing Directors who are then members of the
Board;
c. The shareholders of the Company shall have approved a
recapitalization, reorganization, merger, consolidation or
similar transaction, in each case, with respect to which all
or substantially all the Persons who were the respective
beneficial owners of the outstanding shares of capital stock
of the Company immediately prior to such recapitalization,
reorganization, merger or consolidation, beneficially own,
directly or indirectly, less than 50% of the combined voting
power of the then outstanding shares of capital stock of the
Company resulting from such recapitalization,
reorganization, merger, consolidation or similar
transaction;
d. The shareholders of the Company shall have approved of
the sale or other disposition of all or substantially all
the assets of the Company in one transaction or in a series
of related transactions;
e. Immediately after any merger, consolidation,
recapitalization or similar transaction, the Principal
Shareholders (A) shall have increased the aggregate
percentage of the outstanding shares of capital stock of the
Company they beneficially own, directly or indirectly, by
10% of such outstanding shares of capital stock or more (or
if the entity surviving such transaction is a corporation,
the Principal Shareholders' ownership in the new entity
shall have increased by 10% or more of their aggregate
percentage of ownership of the Company immediately prior to
the transaction) and (B) shall be the beneficial owners
directly or indirectly, of outstanding shares of stock of
the Company (or any Person surviving such transaction)
entitling them collectively to exercise 50% or more of the
total voting power of shares of capital stock of the Company
(or the surviving Person in such transaction) and, in
anticipation of, in connection with or as a result of, such
transaction, the Company (or such surviving Person) shall
<PAGE>
<PAGE>81
have incurred or issued additional Indebtedness such that
the total Indebtedness so incurred or issued equals at least
50% of the consideration payable in such transaction;
provided, however, that any such transaction shall not be
considered a Change of Control if the holders of Notes shall
have participated therein on no less than a pari passu basis
(assuming conversion of all such holders' Notes into
Conversion Shares) with the Principal Shareholders;
f. The shareholders of the Company approve any
transaction (or if no such approval is required, upon the
occurrence of any transaction) the result of which is that
the Common Stock shall no longer be required to be
registered under Section 12 of the Exchange Act and that the
holders of shares of Common Stock do not receive common
stock of the Person surviving such transaction that is
required to be registered under Section 12 of the Exchange
Act;
g. The Company ceases to be the beneficial owner,
directly or indirectly, of the outstanding shares of capital
stock of WellCare of New York, Inc., entitling the Company
to exercise 50% or more of the total votes entitled to be
cast at a regular or special meeting, or by action by
written consent of the shareholders of WellCare of New York,
Inc.; or
h. Robert W. Morey and The 1818 Fund II, L.P. shall each
cease to own at least 50% of the shares of Common Stock and
Class A Common Stock (including the Conversion Shares) that
they own as of the date of grant of this option; provided,
however, that for purposes of the foregoing calculation, the
number of Conversion Shares shall be based upon the lesser
of the existing Conversion Price set forth in the Notes on
the date of grant and the Conversion Price agreed to by The
1818 Fund II, L.P. and the Company in any amendment to the
Notes.
For purposes of this Agreement (a) "Conversion Shares" shall
mean the Common Stock issued or issuable upon the conversion of
the Notes; (b) "Indebtedness" shall mean as to any Person (i) all
obligations of such Person for borrowed money (including without
limitation, reimbursement and all other obligations with respect
to surety bonds, letters of credit and bankers' acceptances,
whether or not matured), (ii) all obligations evidenced by notes,
bonds, debentures or similar instruments, (iii) all obligations to
pay the deferred purchase price of property or services, except
trade accounts payable and accrued liabilities arising in the
ordinary course of business, (iv) all interest rate and currency
swaps and similar agreements under which payments are obligated to
be made, whether periodically or upon the happening of a
contingency, (v) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property),
(vi) all obligations under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (vii) all
indebtedness secured by any lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse
to the credit of that Person, and (viii) any contingent obligation
<PAGE>
<PAGE>82
of the foregoing; (c) "Notes" shall mean the 6.0% Subordinated
Convertible Notes due December 31, 2002 of the Company; (d)
"Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature;
and (e) "Principal Shareholders" shall mean Edward A. Ullman and
Robert W. Morey.
This option may not be exercised for less than ten shares at
any one time (or the remaining shares then purchasable if less
than ten) and expires at the end of five (5) years from the date
of grant whether or not it has been duly exercised, unless sooner
terminated as provided in Sections 6, 7 and 8.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices, signifying
your election to exercise the option. The notice must state the
number of shares of Common Stock as to which your option is being
exercised, must contain a statement by you (in a form acceptable
to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale
(unless a registration statement covering the shares purchasable
has been declared effective by the Securities and Exchange
Commission) and must be accompanied by payment as set forth in
Section 5 hereof for the full purchase price of the share being
purchased. No share shall be issued until full payment therefor
has been made.
If notice of the exercise of this option is given by a
person or persons other than you, the Company may require, as a
condition to the exercise of this option, the submission to the
Company of appropriate proof of the right of such person or
persons to exercise this option.
Certificates for shares of the Common Stock so purchased
will be issued as soon as practicable. The Company, however,
shall not be required to issue or deliver a certificate for any
shares until it has complied with all requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, any
stock exchange on which the Company's Common Stock may then be
listed and all applicable state laws in connection with the
issuance or sale of such shares or the listing of such shares on
said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise
this option, shall have none of the rights of a shareholder with
respect to shares subject to this option.
You shall promptly advise the Company of any sale of shares
of Common Stock issued upon exercise of this option which occurs
within one (1) year from the date of the exercise of this option
relating to the issuance of such shares.
5. Payment of Options.
Payment for the shares of Common Stock may be made (i) in
cash or by check to the order of the Company, (ii) by surrender of
shares of Common Stock having a Fair Market Value equal to the
exercise price of the Option; (iii) by a Cashless Exercise
Election (as defined below); or (iv) by any combination of the
foregoing where approved by the Committee in its sole discretion;
<PAGE>
<PAGE>83
provided, however, in the event of payment for the shares of
Common Stock by method (ii) above, the shares of Common Stock so
surrendered, if originally issued to you upon exercise of an
option(s) granted by the Company, shall have been held by you for
more than six months.
You may elect ("Cashless Exercise Election") to receive,
without the payment by you of any additional consideration, shares
of Common Stock equal to the value of your options or a portion
thereof by delivery to the Company of a written notice. Thereupon
the Company shall issue to you such number of shares of Common
Stock as is computed using the following formula:
X=Y(A-B)
A
where X= the number of shares of Common Stock to be
issued to you pursuant to your Cashless
Exercise Election;
Y= the number of shares of Common Stock covered by
the options in respect of which the Cashless
Exercise Election is made;
A= the Cashless Fair Market Value (as defined
below); and
B= the exercise price for the options as set forth
in Section 6 of the Plan.
The term "Cashless Fair Market Value" means the average
closing sale price for a share of Common Stock over the
immediately preceding twenty trading dates as reported on The
Nasdaq Stock Market or, if no closing sale prices shall have been
made on such relevant dates, on the next preceding days on which
there were closing sale prices; provided, however, that if no
closing sale prices shall have been made within the twenty
business days preceding the Cashless Exercise Election, or if
deemed appropriate by the Committee for any other reason, the
Cashless Fair Market Value of such shares of Common Stock shall be
as determined by the Committee. In no event shall the Cashless
Fair Market Value of any share of Common Stock be less than its
par value.
6. Termination of Employment.
Subject to Section 12 hereof, if your employment with the
Company (or a subsidiary thereof) is terminated for any reason
other than by death or disability, this option shall terminate
three (3) months from the date of such termination of employment;
provided, however, you shall only be entitled to exercise that
portion of this option which was exercisable by you at the date of
such termination of employment (or the entire option if your
employment shall have been terminated without cause by the Company
under Section 4.3 of your Employment Agreement within ninety (90)
days of a Change of Control), but in no event shall you be able to
exercise this option after five (5) years from the date this
option was granted to you.
<PAGE>
<PAGE>84
7. Disability.
If your employment with the Company (or a subsidiary
thereof) is terminated by reason of your disability, you may
exercise, within one (1) year from the date of such termination,
that portion of this option which was exercisable by you at the
date of such termination, provided, however, that such exercise
occurs within five (5) years from the date this option was granted
to you.
8. Death.
If you die while employed by the Company (or a subsidiary
thereof) or within on e (1) year after termination of your
employment due to disability , that portion of this option which
was exercisable by you at the date of your death may be exercised
by your legatee or legatees under your Last Will, or by your
personal representatives or distributees, within one (1) year from
the date of your death, but in no event after five (5) years from
the date this option was granted to you.
9. Non-Transferability of Option.
This option shall not be transferable except by Last Will or
the laws of descent and distribution, and may be exercised during
your lifetime only by you.
10. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination,
reclassification or exchange, or through merger or consolidation,
or otherwise, change its shares of Common Stock into a different
number or kind or class of shares or other securities or property,
then the number of shares covered by this option and the price of
each such share shall be proportionately adjusted for any such
change by the Committee whose determination shall be conclusive.
Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject
to this options adjusted accordingly.
11. Subject to Terms of the Plan.
This incentive stock option agreement shall be subject in
all respects to the terms and conditions of the Plan and in the
event of any question or controversy relating to the terms of the
Plan, the decision of the Committee shall be conclusive.
12. Automatic Reversion of Non-Qualifying Incentive Stock
Options.
In the event for any reason any of the options granted to
you hereunder do not qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended, such
options shall automatically revert to non-incentive stock options.
Thereafter, such non-incentive stock options shall be subject in
all respects to the terms and conditions of the Non-Incentive
Stock Option Agreement attached as Exhibit 3.2(a)(i) to your
Employment Agreement.
<PAGE>
<PAGE>85
Sincerely yours,
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Robert W. Morey
Name: Robert W. Morey
Title:Chairman and CEO
Agreed to and accepted this
1st day of September, 1996.
/s/ Joseph R. Papa
Signature of Optionholder
<PAGE>
<PAGE>86
Exhibit 3.2(a)(i)
NON-INCENTIVE STOCK OPTION AGREEMENT
To: JOSEPH R. PAPA
We are pleased to notify you that by the determination
of the Compensation Committee (hereinafter called the "Committee")
a non-incentive stock option to purchase 170,370 shares of the
Common Stock of The WellCare Management Group, Inc. (herein called
the "Company") at a price of $10.125 per share has this 1st day of
September 1996 been granted to you under the Company's 1993
Incentive and Non-Incentive Stock Option Plan, as amended (herein
called the "Plan"). This option is subject to shareholder
approval of the amendments adopted by the Board of Directors to
the Plan in September 1996. This option may be exercised only
upon the terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this non-incentive stock
option has been granted is to further the growth and development
of the Company and its direct and indirect subsidiaries by
encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are
expected to contribute materially to the Company's success to
obtain a proprietary interest in the Company through the ownership
of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company, and affording the
Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this non-incentive stock option agreement
will indicate your acceptance of and your willingness to be bound
by its terms; it imposes no obligation upon you to purchase any of
the shares subject to the option. Your obligation to purchase
shares can arise only upon your exercise of the option in the
manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
This option shall be exercisable as follows:
(i) on the date of grant, up to 33% of the total shares
subject to the option;
(ii) at the end of one year from the date of grant, up to
66% of the total shares subject to the option,
provided you are employed by the Company on the date
one year from the date of grant; and
(iii) at the end of two years from the date of grant, up to
100% of the total shares subject to the option,
provided you are employed by the Company on the date
two years from the date of grant.
This option shall become immediately exercisable in full
upon a Change of Control of the Company (as defined below),
provided you are employed by the Company on the date thereof or
<PAGE>
<PAGE>87
your employment was terminated without cause by the Company under
Section 4.3 of your employment agreement dated September 1, 1996
within 90 days of the Change of Control. For purposes hereof, a
"Change of Control" of the Company shall mean such time as:
(i) Any Person or "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than the Principal Shareholders
or The 1818 Fund II, L.P., is or becomes the beneficial
owner, directly or indirectly, of outstanding shares of
capital stock of the Company, entitling such Person or
Persons to exercise 50% or more of the total votes entitled
to be cast at a regular or special meeting, or by action by
written consent, of shareholders of the Company (the term
"beneficial owner" shall be determined in accordance with
Rule 13d-3, promulgated by the Securities Exchange
Commission under the Exchange Act);
(ii) A majority of the Board shall consist of Persons other
than Continuing Directors. The term "Continuing Director"
shall mean any member of the Board on the Effective Date and
any other member of the Board who shall be recommended or
elected to succeed or become a Continuing Director by a
majority of Continuing Directors who are then members of the
Board;
(iii) The shareholders of the Company shall have approved a
recapitalization, reorganization, merger, consolidation or
similar transaction, in each case, with respect to which all
or substantially all the Persons who were the respective
beneficial owners of the outstanding shares of capital stock
of the Company immediately prior to such recapitalization,
reorganization, merger or consolidation, beneficially own,
directly or indirectly, less than 50% of the combined voting
power of the then outstanding shares of capital stock of the
Company resulting from such recapitalization,
reorganization, merger, consolidation or similar
transaction;
(iv) The shareholders of the Company shall have approved of
the sale or other disposition of all or substantially all
the assets of the Company in one transaction or in a series
of related transactions;
(v) Immediately after any merger, consolidation,
recapitalization or similar transaction, the Principal
Shareholders (A) shall have increased the aggregate
percentage of the outstanding shares of capital stock of the
Company they beneficially own, directly or indirectly, by
10% of such outstanding shares of capital stock or more (or
if the entity surviving such transaction is a corporation,
the Principal Shareholders' ownership in the new entity
shall have increased by 10% or more of their aggregate
percentage of ownership of the Company immediately prior to
the transaction) and (B) shall be the beneficial owners
directly or indirectly, of outstanding shares of stock of
the Company (or any Person surviving such transaction)
entitling them collectively to exercise 50% or more of the
total voting power of shares of capital stock of the Company
(or the surviving Person in such transaction) and, in
anticipation of, in connection with or as a result of, such
transaction, the Company (or such surviving Person) shall
<PAGE>
<PAGE>88
have incurred or issued additional Indebtedness such that
the total Indebtedness so incurred or issued equals at least
50% of the consideration payable in such transaction;
provided, however, that any such transaction shall not be
considered a Change of Control if the holders of Notes shall
have participated therein on no less than a pari passu basis
(assuming conversion of all such holders' Notes into
Conversion Shares) with the Principal Shareholders;
(vi) The shareholders of the Company approve any
transaction (or if no such approval is required, upon the
occurrence of any transaction) the result of which is that
the Common Stock shall no longer be required to be
registered under Section 12 of the Exchange Act and that the
holders of shares of Common Stock do not receive common
stock of the Person surviving such transaction that is
required to be registered under Section 12 of the Exchange
Act;
(vii) The Company ceases to be the beneficial owner,
directly or indirectly, of the outstanding shares of capital
stock of WellCare of New York, Inc., entitling the Company
to exercise 50% or more of the total votes entitled to be
cast at a regular or special meeting, or by action by
written consent of the shareholders of WellCare of New York,
Inc.; or
(viii)Robert W. Morey and The 1818 Fund II, L.P. shall each
cease to own at least 50% of the shares of Common Stock and
Class A Common Stock (including the Conversion Shares) that
they own as of the date of grant of this option; provided,
however, that for purposes of the foregoing calculation, the
number of Conversion Shares shall be based upon the lesser
of the existing Conversion Price set forth in the Notes on
the date of grant and the Conversion Price agreed to by The
1818 Fund II, L.P. and the Company in any amendment to the
Notes.
For purposes of this Agreement (a) "Conversion Shares" shall
mean the Common Stock issued or issuable upon the conversion of
the Notes; (b) "Indebtedness" shall mean as to any Person (i) all
obligations of such Person for borrowed money (including without
limitation, reimbursement and all other obligations with respect
to surety bonds, letters of credit and bankers' acceptances,
whether or not matured), (ii) all obligations evidenced by notes,
bonds, debentures or similar instruments, (iii) all obligations to
pay the deferred purchase price of property or services, except
trade accounts payable and accrued liabilities arising in the
ordinary course of business, (iv) all interest rate and currency
swaps and similar agreements under which payments are obligated to
be made, whether periodically or upon the happening of a
contingency, (v) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property),
(vi) all obligations under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (vii) all
indebtedness secured by any lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse
to the credit of that Person, and (viii) any contingent obligation
<PAGE>
<PAGE>89
of the foregoing; (c) "Notes" shall mean the 6.0% Subordinated
Convertible Notes due December 31, 2002 of the Company; (d)
"Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature;
and (e) "Principal Shareholders" shall mean Edward A. Ullman and
Robert W. Morey.
This option may not be exercised for less than ten shares at
any one time (or the remaining shares then purchasable if less
than ten) and expires at the end of five years from the date of
grant whether or not it has been duly exercised.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices signifying
your election to exercise the option. The notice must state the
number of shares of Common Stock as to which your option is being
exercised, must contain a statement by you (in a form acceptable
to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale
(unless a registration statement covering the shares purchasable
has been declared effective by the Securities and Exchange
Commission) and must be accompanied by payment as set forth in
Section 5 hereof for the full purchase price of the shares being
purchased, plus such amount, if any, as is required for
withholding taxes. No share shall be issued until full payment
therefor has been made.
If notice of the exercise of this option is given by a
person or persons other than you, the Company may require, as a
condition to the exercise of this option, the submission to the
Company of appropriate proof of the right of such person or
persons to exercise this option.
Certificates for shares of the Common Stock so purchased
will be issued as soon as practicable. The Company, however,
shall not be required to issue or deliver a certificate for any
shares until it has complied with all requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, any
stock exchange on which the Company's Common Stock may then be
listed and all applicable state laws in connection with the
issuance or sale of such shares or the listing of such shares on
said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise
this option, shall have none of the rights of a shareholder with
respect to shares subject to this option.
5. Payment of Options.
Payment for the shares of Common Stock may be made (i) in
cash or by check to the order of the Company, (ii) by surrender of
shares of Common Stock having a Fair Market Value equal to the
exercise price of the Option; (iii) by a Cashless Exercise
Election (as defined below); or (iv) by any combination of the
foregoing where approved by the Committee in its sole discretion;
provided, however, in the event of payment for the shares of
Common Stock by method (ii) above, the shares of Common Stock so
surrendered, if originally issued to you upon exercise of an
option(s) granted by the Company, shall have been held by you for
more than six months.
<PAGE>
<PAGE>90
You may elect ("Cashless Exercise Election") to receive,
without the payment by you of any additional consideration, shares
of Common Stock equal to the value of your options or a portion
thereof by delivery to the Company of a written notice. Thereupon
the Company shall issue to you such number of shares of Common
Stock as is computed using the following formula:
X=Y(A-B)
A
where X= the number of shares of Common Stock to be
issued to you pursuant to your Cashless
Exercise Election;
Y= the number of shares of Common Stock covered by
the options in respect of which the Cashless
Exercise Election is made;
A= the Cashless Fair Market Value (as defined
below); and
B= the exercise price for the options as set forth
in Section 6 of the Plan.
The term "Cashless Fair Market Value" means the average
closing sale price for a share of Common Stock over the
immediately preceding twenty trading dates as reported on The
Nasdaq Stock Market or, if no closing sale prices shall have been
made on such relevant dates, on the next preceding days on which
there were closing sale prices; provided, however, that if no
closing sale prices shall have been made within the twenty
business days preceding the Cashless Exercise Election, or if
deemed appropriate by the Committee for any other reason, the
Cashless Fair Market Value of such shares of Common Stock shall be
as determined by the Committee. In no event shall the Cashless
Fair Market Value of any share of Common Stock be less than its
par value.
6. Termination of Employment.
This option shall not terminate upon your termination of
employment with the Company (or a subsidiary thereof); provided,
however, you shall only be entitled to exercise that portion of
this option which was exercisable by you at the date of such
termination (or the entire option if your employment shall have
been terminated without cause by the Company under Section 4.3 of
your employment agreement dated September 1, 1996 within ninety
(90) days of a Change of Control), but in no event shall you be
able to exercise this option after five (5) years from the date
this option was granted to you.
7. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassi-
fication or exchange, or through merger or consolidation, or
otherwise, change its shares of Common Stock into a different
number or kind or class of shares or other securities or property,
then the number of shares covered by this option and the price of
each such shares shall be proportionately adjusted for any such
change by the Committee whose determination shall be conclusive.
Any fraction of a share resulting from any adjustment shall be
<PAGE>
<PAGE>91
eliminated and the price per share of the remaining shares subject
to this option adjusted accordingly.
8. Subject to Terms of the Plan.
This non-incentive stock option agreement shall be subject
in all respects to the terms and conditions of the Plan and in the
event of any question or controversy relating to the terms of the
Plan, the decision of the Committee shall be conclusive.
9. Tax Status.
This option does not qualify as an "incentive stock option"
under the provisions of Section 422 of the Internal Revenue Code
of 1986, as amended, and the income tax implications of your
receipt of a non-incentive stock option and your exercise of such
an option should be discussed with your tax counsel.
Sincerely yours,
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Robert W. Morey
Name: Robert W. Morey
Title:Chairman and CEO
Agreed to and accepted this
1st day of September, 1996
/s/ Joseph R. Papa
Signature of Optionholder
<PAGE>
<PAGE>92
[TYPE] EX-11
[DESCRIPTION] STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
11 Computation of Net Income Per
Share of Common Stock
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
Computation of Net Income Per Share of Common Stock
(in thousands, except per share data)
(Unaudited)
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
1996 1995 1996 1995
(Loss) income before
income taxes ($11,036) $3,936 ($15,879) $10,373
Provision for income taxes (4,414) 1,603 (6,351) 4,242
Net (loss) income ($6,622)$2,333 ($9,528) $6,131
Weighted average number of
common and common equivalent
shares outstanding 6,298 6,249 6,295 6,242
Net (loss) income per share ($1.05) $0.37 ($1.51) $0.98
<PAGE>
<PAGE>93
[TYPE] EX-27
[DESCRIPTION] FINANCIAL DATA SCHEDULE
27 Financial Data Schedule
[ARTICLE]
[LEGEND]
This schedule contains summary financial information extracted
from the Consolidated Balance Sheet of The WellCare Management
Group, Inc. and Subsidiaries as of September 30, 1996 and the
related Statement of Operations for the nine month period ending
September 30, 1996, and is qualified in it's entirety by reference
to such financial statements.
[CIK] -0- If this is a co-registered
FDS, the co-registrant's CIK
[NAME] -0- Is this is a co-registrants, the
co-registrant's name
[MULTIPLIER] 1,000 Identifies units of data.
Applies to all monetary
values except per share
data. Default is 1.
[CURRENCY] US Dollars Identifies currency of financial data.
Default is US Dollars.
<TABLE>
<S> <C> <S> <C>
[PERIOD-TYPE] 9 mos Reporting period type (e.g.
3- MOS, 6-MOS, YEAR)
[FISCAL-YEAR-END] DEC-31-1996 Dec-31-1996 Registrant's
fiscal year end (e.g. DEC 31-1995)
[PERIOD-START] JAN-01-1996 Start of reporting period
(e.g. JAN-01-1995)
[PERIOD-END] SEP-30-1996 End of reporting period
(e.g. DEC-31-1995)
<EXCHANGE RATE> -0- Identifies multiplier of
currency for financial data
that yields US Dollars. Default is 1.
[CASH] 10,054 Cash and cash items.
[SECURITIES] 1,122 Marketable securities.
[RECEIVABLES] 10,947 Notes and accounts
receivable - trade.
[ALLOWANCES] 11,828 Allowances for doubtful accounts.
[INVENTORY] -0- Inventory.
[CURRENT-ASSETS] 41,110 Total current assets.
[PP&E] 17,334 Property, plant and equipment.
[DEPRECIATION] 4,785 Accumulated depreciation.
[TOTAL-ASSETS] 78,201 Total assets.
[CURRENT-LIABILITIES] 29,010 Total current liabilities.
[BONDS] 29,738 Bonds, Mortgages and similar debt.
[PREFERRED-MANDATORY] -0- Preferred stock - mandatory
redemption.
[PREFERRED] -0- Preferred stock - no
mandatory redemption.
[COMMON] 63 Common stock.
<PAGE>94
[OTHER-SE] 22,458 Other shareholders' equity.
TOTAL-LIABILITY-AND-
EQUITY> 78,201 Total liabilities and
stockholders' equity.
[SALES] 111,825 Net sales of tangible products.
[TOTAL-REVENUES] 122,347 Total revenues.
[CGS] -0- Cost of tangible goods sold.
[TOTAL-COSTS] 103,815 Total costs and expenses
applicable to sales and revenues.
[OTHER-EXPENSES] 34,410 Other costs and expenses.
[LOSS-PROVISION] 6,531 Provision for doubtful
accounts and notes.
[INTEREST-EXPENSE] 1,636 Interest and amortization
of debt discount.
[INCOME-PRETAX] (15,878) Income before taxes and
other items.
[INCOME-TAX] (6,251) Income tax expense.
[INCOME-CONTINUING] (9,527) Income/loss continuing
operations.
[DISCONTINUED] -0- Discontinued operations.
[EXTRAORDINARY] -0- Extraordinary items.
[CHANGES] -0- Cumulative effect - changes
in accounting principles.
[NET-INCOME] (9,527) Net income or loss.
[EPS-PRIMARY] (1.51) Earnings per share - primary.
[EPS-DILUTED] (1.51) Earnings per share - fully diluted.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of The WellCare Management Group, Inc. and
Subsidiaries as of September 30, 1996 and the related Statement of Operations
for the nine month period ending September 30, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,054
<SECURITIES> 1,122
<RECEIVABLES> 10,947
<ALLOWANCES> 11,828
<INVENTORY> 0
<CURRENT-ASSETS> 41,110
<PP&E> 17,334
<DEPRECIATION> 4,785
<TOTAL-ASSETS> 78,201
<CURRENT-LIABILITIES> 29,010
<BONDS> 29,738
0
0
<COMMON> 63
<OTHER-SE> 22,458
<TOTAL-LIABILITY-AND-EQUITY> 78,201
<SALES> 111,825
<TOTAL-REVENUES> 122,347
<CGS> 0
<TOTAL-COSTS> 103,815
<OTHER-EXPENSES> 34,410
<LOSS-PROVISION> 6,531
<INTEREST-EXPENSE> 1,636
<INCOME-PRETAX> (15,878)
<INCOME-TAX> (6,251)
<INCOME-CONTINUING> (9,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,527)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
