Item 8.01 Other Events.
The following disclosures supplement the disclosures contained in the registration statement on Form S-4 filed by Centene Corporation (“Centene”) with the Securities and Exchange Commission (the “SEC”) on May 23, 2019
(the “Registration Statement”) in connection Centene’s previously announced proposed acquisition of WellCare Health Plans, Inc. pursuant to the Agreement and Plan of Merger, dated as of March 26, 2019, by and among Centene, Wellington Merger Sub I,
Inc. (“Merger Sub I”), Wellington Merger Sub II, Inc. (“Merger Sub II”) and WellCare. The Registration Statement includes the joint proxy statement/prospectus of Centene and WellCare (the “Proxy Statement”). The SEC declared the Registration
Statement effective on May 23, 2019, and the Proxy Statement was first mailed to stockholders of Centene and WellCare on or about May 24, 2019.
The following disclosures should be read in conjunction with the disclosures contained in the Registration Statement, which should be carefully read in its entirety. To the extent that information set forth herein
differs from or updates information contained in the Registration Statement, the information contained herein supersedes the information contained in the Registration Statement. All page references are to pages in the Registration Statement, and
any defined terms used but not defined herein shall have the meanings set forth in the Registration Statement.
Supplemental Disclosures
The following disclosures supplement the disclosures contained in the section of the Registration Statement entitled “Interests of Directors and Executive Officers in the Merger”
beginning on page 122:
Vesting of Equity Awards
Because Kenneth Burdick and Andrew Asher will not be the Chief Executive Officer and Chief Financial Officer, respectively, of Centene following the transactions contemplated by the Merger Agreement, they would have
“good reason” to terminate their employment as of the closing of the transactions contemplated by the Merger Agreement (the “Effective Date”) and to receive full acceleration of their WellCare equity awards and severance benefits provided to them
under WellCare’s Executive Severance Plan. However, as described below, Centene asked Messrs. Burdick and Asher to take different positions with Centene following the Effective Date, and Messrs. Burdick and Asher accepted those positions to promote
the success of Centene and to support integration. In connection with the employment letter agreements entered into by and between Centene Management Corporation and each of Messrs. Burdick and Asher (further described below), and as not to
disadvantage Messrs. Burdick and Asher for taking new executive leadership positions with Centene, on June 11, 2019, the Board of Directors of WellCare, following consent given by Centene under the Merger Agreement, approved that (i) all unvested
WellCare equity-based awards held by Messrs. Burdick and Asher would vest in full (with performance goals deemed to be achieved at the same levels as they would have been deemed to be achieved in accordance with Section 2.7 of the Merger Agreement
had such awards remained outstanding through the Effective Date) as of the date that is three business days prior to the Effective Date (with any awards granted after May 29, 2019 vesting on a pro-rata basis based on the period from January 1, 2020
through the Effective Date) and (ii) to the extent settlement of any such equity awards would not result in the imposition of taxes on the applicable executive under Section 409A of the Code, settle the awards into shares of WellCare common stock
no later than one business day prior to the Effective Date, such that the awards will become entitled to receive Merger Consideration (as defined in the Merger Agreement) in accordance with Section 2.5 of the Merger Agreement. In connection with
these negotiations and entry into new employment letter agreements with Centene Management Corporation, Messrs. Burdick and Asher agreed to forego the severance they would otherwise have been entitled to, and instead remain eligible to receive
severance following the Effective Time pursuant to the terms of their new employment letter agreements with Centene Management Corporation.
Burdick and Asher Letter Agreements
On May 30, 2019, Centene Management Corporation entered into employment letter agreements (the “Letter Agreements”) with each of Messrs. Burdick and Asher, which will each become effective upon, and subject to, the
occurrence of the Effective Date. As of the Effective Date, Messrs. Burdick and Asher will each serve as Executive Vice Presidents of Centene. The material terms and conditions of the Letter Agreements are further described below.
Burdick Letter Agreement
Term of Employment
Mr. Burdick’s Letter Agreement provides for a two year term of employment commencing on the Effective Date.
Base Salary and Annual Bonus
Mr. Burdick will receive an initial annual base salary equal to $1,400,000 and a target annual bonus opportunity equal to 150% of base salary. In addition, notwithstanding the terms of the Merger Agreement, no later
than five business days following the Closing Date, Mr. Burdick will receive an amount equal to the average of the two annual bonuses paid to him with respect to the two most recently completed annual bonus cycles, prorated based on the number of
days elapsed in the performance year as of the Effective Date.
Initial Equity Compensation
On the Effective Date, Mr. Burdick will receive a grant of time-based Centene restricted stock units (“RSUs”) with a grant date fair market value equal to $4,400,000, which will vest on the second anniversary of the
Effective Date, subject to his continued employment through the applicable vesting date (except that the termination provisions as described under
Equity and Long-Term Incentive Treatment Upon Termination
below will apply and the holding period set forth in any equity awards granted by Centene will not apply if Mr. Burdick remains in compliance with Centene’s share ownership guidelines).
Ongoing Long-Term Compensation
Mr. Burdick will receive annual equity grants under the terms of Centene’s Stock Incentive Plan with a target amount equal to $7,000,000. Mr. Burdick will also participate in Centene’s Cash Long-Term Incentive Plan (the
“Cash LTIP”), beginning with the 2020-2022 performance cycle, with a Cash LTIP target of 100% of annual base salary (the “Annual Cash LTIP Awards”) and the potential to earn up to 200% of the Cash LTIP target. Each annual equity grant will consist
40% of time-based RSUs and 60% of performance stock units (“PSUs”). Mr. Burdick’s annual equity grants will be subject to similar terms as those applicable to other similarly-situated Centene executives, except for the severance provisions
described under
Equity and Long-Term Incentive Treatment Upon Termination
below.
Cash Severance Payments Upon Termination
Upon termination of Mr. Burdick’s employment for any reason during, after, or at the expiration of, the employment term, Mr. Burdick will be entitled to severance benefits under the terms of the WellCare Severance Plan
as a Tier 1 Participant, calculated as if his employment terminated on the Effective Date (except Mr. Burdick will not be entitled to receive a prorated bonus under the WellCare Severance Plan). Please refer to the Proxy Statement filed by the
WellCare on May 23, 2019 for a description of the terms of the WellCare Severance Plan.
In addition, if Mr. Burdick’s employment is terminated by Centene Management Corporation without “cause,” by Mr. Burdick for an “acceptable reason” (each as defined in Mr. Burdick’s Letter Agreement), or due to death or
disability, then Mr. Burdick will receive an amount equal to $4,200,000, less any annual bonuses actually paid to Mr. Burdick following the Effective Date.
If Mr. Burdick terminates employment by reason of his retirement, and such termination occurs on or after July 1
st
of the applicable
annual performance period, then Mr. Burdick will receive an annual bonus equal to the annual bonus he would have received based on continued service through the remainder of the applicable performance period based on actual level of achievement,
prorated based on the number of whole and partial months Mr. Burdick was employing during the performance period.
Equity and Long-Term Incentive Treatment Upon Termination
With respect to Mr. Burdick’s initial grant of RSUs, if Mr. Burdick’s employment is terminated by Centene Management Corporation without cause, by Mr. Burdick for an acceptable reason, or due to death or disability
prior to the applicable vesting date, then the RSUs will vest in full and be settled as soon as practicable following his termination date. If Mr. Burdick terminates his employment by reason of his retirement prior to the applicable vesting date,
then the number of RSUs that would have vested based on continued employment through the first anniversary of the termination date will vest and be settled in Centene shares as soon as practicable following his termination date.
With respect to Mr. Burdick’s annual equity grants, if Mr. Burdick’s employment is terminated by Centene Management Corporation without cause, by Mr. Burdick by virtue of retirement, or due to death or disability, then
(i) Mr. Burdick’s annual RSUs will immediately vest in full and (ii) Mr. Burdick’s Annual Cash LTIP Awards and PSUs will remain outstanding and will vest or be forfeited at the end of the applicable performance period based on actual levels of
achievement (without regard to additional service-based vesting requirements).
In addition, upon termination of Mr. Burdick’s employment for any reason during, after, or at the expiration of, the employment term, the vesting of any WellCare equity award granted prior to March 26, 2019 and
converted to a Centene equity award on the Effective Date will be accelerated in full. As provided in the Merger Agreement, any WellCare equity awards granted to Mr. Burdick following March 26, 2019 and converted into Centene equity awards on the
Effective Date will vest pro-rata on his termination of employment for any reason based on the portion of the original vesting period that he remained employed.
Benefits and Perquisites
Mr. Burdick will be entitled to participate in Centene’s employee benefit plans and programs during the term of Mr. Burdick’s employment on the same basis as other Executive Vice Presidents. In addition, during the term
of Mr. Burdick’s employment he will receive temporary executive housing (plus reimbursement of any taxes incurred in connection with Centene’s provision of housing) and use of Centene’s corporate aircraft on an as-available basis.
Restrictive Covenants
Mr. Burdick will be subject to customary restrictive covenants, including a confidentiality covenant and 12 month post-termination non-competition and non-solicitation covenants.
Asher Letter Agreement
Term of Employment
Mr. Asher’s Letter Agreement provides for a two year term of employment commencing on the Effective Date.
Base Salary, Annual Bonus and Initial Cash Bonus
Mr. Asher will receive an initial annual base salary equal to $750,000 and a target annual bonus opportunity equal to 100% of base salary. Mr. Asher will also receive a cash bonus award equal to $1,250,000, which will
vest on the 90th day following the Effective Date, subject to his continued employment with Centene Management Corporation through the vesting date and paid on the date that is 13 months following his date of termination.
Initial Equity Compensation
On the Effective Date, Mr. Asher will receive a grant of time-based Centene RSUs with a grant date fair market value equal to $1,250,000, which will vest 50% on each of the first two anniversaries of the Effective Date,
subject to his continued employment through the applicable vesting date (except that the termination provisions as described under
Equity and Long-Term Incentive Treatment Upon Termination
below will apply
and the one-year holding period from the vesting date will not apply if Mr. Asher remains in compliance with Centene’s share ownership guidelines).
Ongoing Long-Term Compensation
Mr. Asher will receive annual equity grants under the terms of Centene’s Stock Incentive Plan with a target amount equal to $2,250,000. Mr. Asher will also participate in Centene’s Cash LTIP, beginning with the
2020-2022 performance cycle, with a Cash LTIP target of 100% of annual base salary and the potential to earn up to 200% of the Cash LTIP target. Each annual equity grant will consist 40% of time-based RSUs and 60% of PSUs. Mr. Asher’s annual equity
grants will be subject to similar terms as those applicable to other similarly-situated Centene executives.
Cash Severance Payments Upon Termination
Mr. Asher’s initial cash bonus award will vest immediately upon a termination of employment by Centene Management Corporation without cause, by Mr. Asher for an “acceptable reason” (as defined in Mr. Asher’s Letter
Agreement), or due to death or disability. For purposes of Mr. Asher’s Letter Agreement, a non-renewal of the term by Centene Management Corporation will be considered a termination of employment without cause.
In addition, Mr. Asher will receive severance benefits pursuant to a Centene Severance and Change in Control Agreement (“ESA”) upon a Qualifying Termination, which includes a termination of employment by Centene
Management Corporation without “cause” or by Mr. Asher at or after a Change in Control for “good reason” (each as defined in the ESA). For the first 36 months following the Effective Date, a Qualifying Termination will also include Mr. Asher’s
termination of employment for an acceptable reason. In the event of a Qualifying Termination not in connection with a Change in Control, Mr. Asher will receive (i) 12 months’ salary continuation, (ii) a prorated bonus based on actual achievement
for the year of termination, (iii) COBRA healthcare continuation coverage at active employee rates for 12 months following his date of termination and (iv) continued vesting of his equity awards during the 12 month period of salary continuation.
In the event of a Qualifying Termination either prior to a Change in Control at the request of a third party participating in or causing the Change in Control or within 24 months following a Change in Control, Mr.
Asher will receive (i) severance pay equal to two times the sum of his annual base salary (based on his highest base salary during the two year period prior to his date of termination), plus the average of the last two annual cash bonuses paid to
him during the two most recently completed full fiscal years, (ii) a prorated target annual bonus for the year of termination, (iii) Centene Management Corporation’s full payment for COBRA medical coverage for 18 months following his date of
termination and (iv) if Centene Management Corporation purchased a life insurance policy for the benefit of his beneficiaries prior to the Change in Control, Centene Management Corporation’s continued maintenance and payment of all expenses
associated with the corporate-owned life insurance policy for the remainder of his life. In addition, any equity-based awards that were outstanding immediately prior to the termination in connection with a Change in Control will fully vest and
become exercisable, as applicable, as of his date of the termination in connection with the Change in Control.
Equity and Long-Term Incentive Treatment Upon Termination
With respect to Mr. Asher’s initial grant of RSUs, if Mr. Asher’s employment is terminated by Centene Management Corporation without cause, by Mr. Asher for an acceptable reason, or due to death or disability prior to
the applicable vesting date, then the RSUs will vest in full and be settled as soon as practicable following the termination date. Mr. Asher’s ongoing equity grants will be subject to similar terms upon a termination of employment as those
applicable to other similarly-situated Centene executives.
In addition, upon termination of Mr. Asher’s employment for any reason during, after, or at the expiration of, the employment term, the vesting of any WellCare equity award granted prior to March 26, 2019 and converted
to a Centene equity award on the Effective Date will be accelerated in full. As provided in the Merger Agreement, any WellCare equity awards granted to Mr. Asher following March 26, 2019 and converted into Centene equity awards on the Effective
Date will vest pro-rata on his termination of employment for any reason based on the portion of the original vesting period that he remained employed.
Restrictive Covenants
Mr. Asher will be subject to customary restrictive covenants, including a confidentiality covenant and 12 month post-termination non-competition and non-solicitation covenants.