UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant ¨
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Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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CENTENE
CORPORATION
(Name
of Registrant as Specified In Its Charter)
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Payment
of Filing Fee (Check the appropriate
box):
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x
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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Centene
Corporation
7711
Carondelet Avenue
St.
Louis, Missouri 63105
March 13,
2009
Dear
Fellow Stockholders:
Our 2009
Annual Meeting of Stockholders will be held at The Ritz-Carlton, 100 Carondelet
Avenue, St. Louis, Missouri, at 10:00 A.M., central daylight savings time, on
Tuesday, April 28, 2009. Annual meetings play an important role in
maintaining communications and understanding among our management, board of
directors and stockholders, and I hope that you will be able to join
us.
We are
pleased to continue taking advantage of the Securities and Exchange Commission
rule allowing companies to furnish proxy materials to their stockholders over
the Internet. We believe that this e-proxy process expedites stockholders’
receipt of proxy materials, lowers the costs and reduces the environmental
impact of our annual meeting. On March 13, 2009, we mailed to our stockholders a
Notice containing instructions on how to access our Proxy Statement, Summary
Annual Report, and Annual Report on Form 10-K and vote
on-line. Information concerning the matters to be considered and
voted upon at the Annual Meeting is set out in the Notice of 2009 Annual Meeting
of Stockholders and Proxy Statement. The Proxy Statement
contains instructions on how you can (i) receive a paper copy of the Proxy
Statement, Summary Annual Report and Annual Report on Form 10-K, if you only
received a Notice by mail, or (ii) elect to receive your Proxy Statement
and Annual Report over the Internet, if you received them by mail this
year.
If you
are a stockholder of record you may vote by internet, telephone, mail or at the
meeting. To vote by internet or telephone, please follow the instructions on
your proxy notice. To vote by mail, request a set of proxy materials as
instructed on the proxy notice received. You may attend the meeting and vote in
person even if you have previously voted.
If your
shares are held in the name of a bank, broker or other holder of record, you
will receive instructions from the holder of record that you must follow in
order for your shares to be voted.
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Sincerely,
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MICHAEL F. NEIDORFF
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Chairman,
President and Chief Executive
Officer
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THE
ABILITY TO HAVE YOUR VOTE COUNTED AT THE MEETING IS AN IMPORTANT STOCKHOLDER
RIGHT, AND I HOPE YOU WILL CAST YOUR VOTE IN PERSON OR
BY PROXY REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
CENTENE
CORPORATION
7711
CARONDELET AVENUE
ST.
LOUIS, MISSOURI 63105
NOTICE
OF 2009 ANNUAL MEETING OF STOCKHOLDERS
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Time
and Date
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10:00
A.M., central daylight savings time, on Tuesday, April 28,
2009
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Place
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The
Ritz-Carlton
100
Carondelet Avenue
St.
Louis, Missouri 63105
Amphitheatre
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Items
of Business
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At
the meeting, we will ask you and our other stockholders to consider and
act upon the following matters:
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(1)
to elect three Class II directors to three-year terms;
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(2)
to ratify the appointment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending December 31,
2009;
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(3)
to transact any other business properly presented at the
meeting.
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Record
Date
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You
may vote if you were a stockholder of record at the close of business on
February 27, 2009.
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Proxy
Voting
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It
is important that your shares be represented and voted at the meeting.
Whether or not you plan to attend the meeting, please vote by internet,
telephone or mail. You may revoke your proxy at any time before its
exercise at the meeting. Please reference the proxy notice for additional
information.
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Stockholder
List
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A
list of stockholders entitled to vote will be available at the meeting. In
addition, you may contact our Secretary, Keith H. Williamson, at our
address as set forth in the notice appearing before this proxy statement,
to make arrangements to review a copy of the stockholder list at our
offices located at 7711 Carondelet Avenue, St. Louis, Missouri, before the
meeting, between the hours of 8:00 A.M. and 5:00 P.M., central daylight
savings time, on any business day from April 14, 2009, up to
one hour prior to the time of the meeting.
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Attending
the Annual Meeting
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If
you would like to attend the meeting, please bring evidence to the meeting
that you own common stock, such as a stock certificate, or, if your shares
are held by a broker, bank or other nominee, please bring a recent
brokerage statement or a letter from the nominee confirming your
beneficial ownership of such shares. You must also bring a form of
personal identification.
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By
order of the board of directors,
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Keith
H. Williamson
Secretary
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St.
Louis, Missouri
March 13,
2009
PROXY
STATEMENT
FOR
THE
CENTENE
CORPORATION
2009
ANNUAL MEETING OF STOCKHOLDERS
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INFORMATION
ABOUT THE MEETING
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DISCUSSION
OF PROPOSALS
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INFORMATION
ABOUT CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
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INFORMATION
ABOUT CORPORATE GOVERNANCE
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INFORMATION
ABOUT EXECUTIVE COMPENSATION
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OTHER
MATTERS
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We have
sent you a notice of this proxy statement because our board of directors is
soliciting your proxy to vote at our 2009 Annual Meeting of Stockholders or any
adjournment or postponement of the meeting. The meeting will be held at 10:00
A.M., central daylight savings time, on Tuesday, April 28, 2009, at The
Ritz-Carlton, 100 Carondelet Avenue, St. Louis, Missouri.
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THIS PROXY STATEMENT
summarizes information about the proposals to be considered at the meeting
and other information you may find useful in determining how to
vote.
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THE PROXY CARD is the
means by which you actually authorize another person to vote your shares
in accordance with the
instructions.
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Our
directors, officers and employees may solicit proxies in person or by telephone,
mail, electronic mail or facsimile. We will pay the expenses of soliciting
proxies, although we will not pay additional compensation to these individuals
for soliciting proxies. We will request banks, brokers and other nominees
holding shares for a beneficial owner to forward copies of the proxy materials
to those beneficial owners and to request instructions for voting those shares.
We will reimburse these banks, brokers and other nominees for their related
reasonable expenses. Although no proxy solicitor has been engaged at this
time, we may determine it is necessary to employ an outside firm to assist
in the solicitation process. If so, we will pay the proxy solicitor reasonable
and customary fees.
We are
making this proxy statement, our 2008 Summary Annual Report to Stockholders and
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008
available to stockholders for the first time on or about March 13,
2009.
Holders
of record of our common stock at the close of business on February 27, 2009 are
entitled to one vote per share on each matter properly brought before the
meeting. The proxy
notice states the number of shares you are entitled to vote.
A list of
stockholders entitled to vote will be available at the meeting. In addition, you
may contact our Secretary, Keith H. Williamson, at our address as set forth in
the notice appearing before this proxy statement, to make arrangements to review
a copy of the stockholder list at our offices located at 7711 Carondelet Avenue,
St. Louis, Missouri, before the meeting, between the hours of 8:00 A.M. and 5:00
P.M., central daylight savings time, on any business day from April 14,
2009, up to one hour prior to the time of the meeting.
You may
vote your shares at the meeting in person or by proxy:
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TO VOTE IN PERSON, you
must attend the meeting, and then complete and submit the ballot provided
at the meeting. If your shares are held in the name of a bank, broker or
other nominee holder, you will receive instructions from the holder of
record explaining how your shares may be voted. Please note that, in such
an event, you must obtain a proxy, executed in your favor, from the holder
of record to be able to vote at the
meeting.
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TO VOTE BY PROXY, you
must follow the instructions on the proxy notice and then vote by means of
the internet, telephone or, if you received your proxy materials by mail,
mailing the proxy card in the enclosed postage-paid envelope. Your proxy
will be valid only if you vote before the meeting. By voting, you will
direct the designated persons to vote your shares at the meeting in the
manner you specify. If, after requesting paper materials, you complete the
proxy card with the exception of the voting instructions, then the
designated persons will vote your shares in accordance with the
instructions contained therein, and if no choice is specified, such
proxies will be voted in favor of the
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matters
set forth in the accompanying Notice of Annual Meeting. If any other
business properly comes before the meeting, the designated persons will
have the discretion to vote your shares as they deem
appropriate.
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Even if
you complete and return a proxy card, you may revoke it at any time before it is
exercised by taking one of the following actions:
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send
written notice to Keith H. Williamson, our Secretary, at our address as
set forth in the notice appearing before this proxy
statement;
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send
us another signed proxy with a later date;
or
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attend
the meeting, notify our Secretary that you are present, and then vote by
ballot.
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If you
would like to attend the meeting, please bring evidence to the meeting that you
own common stock, such as a stock certificate, or, if your shares are held by a
broker, bank or other nominee, please bring a recent brokerage statement or a
letter from the nominee confirming your beneficial ownership of such shares. You
must also bring a form of personal identification.
At the
close of business on February 27, 2009, 43,185,370 shares of our common stock
were outstanding. Our by-laws require that a majority of the shares of our
common stock issued and outstanding on that date be represented, in person or by
proxy, at the meeting in order to constitute the quorum we need to transact
business. We will count abstentions and broker non-votes in determining whether
a quorum exists. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
In the
election of directors, the three nominees receiving the greatest number of votes
cast “FOR” shall be elected as directors. Abstentions and broker non-votes will
have no effect on the voting outcome with respect to the election of
directors.
The
affirmative vote of the holders of a majority of the shares of common stock
present or represented by proxy and entitled to vote on the matter at the
meeting is necessary to ratify the selection of KPMG LLP as our independent
registered public accounting firm for the fiscal year ending December 31,
2009. Abstentions with respect to a matter are considered present and entitled
to vote and therefore will have the same effect as a vote against the
proposal. Broker non-votes with respect to a matter will not be
considered as present and entitled to vote with respect to the matter and thus
will have no effect on the vote.
DISCUSSION
OF PROPOSALS
The first
proposal on the agenda for the meeting is the election of three nominees to
serve as Class II directors for three-year terms beginning at the meeting and
ending at our 2012 Annual Meeting of Stockholders.
Under our
by-laws, our board of directors has the authority to fix the number of
directors, provided that the board must have between five and eleven members.
The board of directors currently consists of nine members. Our by-laws provide
that the board is to be divided into three classes serving for staggered
three-year terms.
The board
has nominated Robert K. Ditmore, Frederick H. Eppinger and David L. Steward,
current Class II directors, for re-election to the board. Brief biographies of
the nominees, as of February 27, 2009, follow. You will find information about
their stock holdings on page 27.
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Class
II Directors
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Robert
K. Ditmore
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Mr.
Ditmore has been a director since 1996. Mr. Ditmore is a retired
President and Chief Operating Officer of United Healthcare Corp., a
publicly traded managed care organization now known as UnitedHealth Group
Incorporated. Mr. Ditmore also served as a director of
UnitedHealth Group Inc. from 1985 to 1995. Mr. Ditmore is 75 years
old.
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Frederick
H. Eppinger
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Mr.
Eppinger has been a director since April 2006. Mr. Eppinger has served as
a director and President and Chief Executive Officer of The Hanover
Insurance Group, Inc., a holding company for a group of insurers that
offers a wide range of property and casualty products, since 2003. From
2001 to 2003, Mr. Eppinger was Executive Vice President of Property and
Casualty Field and Service Operations for The Hartford Financial Services
Group, Inc. From 2000 to 2001, he was Executive Vice President for Channel
Point, Inc. From 1985 to 2000, he was in the financial institutions group
at McKinsey & Company, an international management consulting firm,
where he was admitted as a partner in 1992. Mr. Eppinger is 50 years
old.
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David
L. Steward
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Mr.
Steward has been a director since May 2003. Mr. Steward is the founder of
World Wide Technology, Inc. and has served as its Chairman since its
founding in 1990. In addition, Mr. Steward has served as Chairman of
Telcobuy.com, an affiliate of World Wide Technology, Inc., since 1997.
World Wide Technology, Inc. and Telcobuy.com provide electronic
procurement and logistics services to companies in the information
technology and telecommunications industries. He also serves as director
of First Banks, Inc., a registered bank holding company. Mr. Steward is
57 years old.
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We expect
that Messrs. Ditmore, Eppinger and Steward will be able to serve if elected. If
any of them are not able to serve, proxies may be voted for a substitute nominee
or nominees.
The
board believes the election of these three nominees is in our best interest and
the best interest of our stockholders and recommends a vote “FOR” the election
of the three nominees.
KPMG LLP
audited our financial statements for the fiscal year ended December 31,
2008. The audit committee has selected KPMG LLP to serve as our
independent registered public accounting firm for the current fiscal year, and
we are asking stockholders to ratify this appointment. Stockholder ratification
of this selection is not required by our by-laws or other applicable legal
requirements. Our board of directors is, however, submitting the selection of
KPMG LLP to stockholders for ratification as a matter of good corporate
practice. In the event that stockholders fail to ratify the selection, the audit
committee will consider whether or not to retain that firm. Even if the
selection is ratified, the audit committee, in its discretion, may direct the
appointment of a different independent registered public accounting firm at any
time during the year if the audit committee believes that a change would be in
our and our stockholders’ best interest.
The
affirmative vote of the holders of a majority of the shares present or
represented by proxy and entitled to vote at the meeting is being sought to
ratify the selection of KPMG LLP as our independent registered public accounting
firm for the current fiscal year.
The
board recommends that stockholders vote “FOR” the ratification of the selection
of KPMG LLP to serve as our independent registered public accounting firm for
the fiscal year ending December 31, 2009.
Our board
of directors is not aware of any matters that are expected to come before the
meeting other than those referred to in this proxy statement. If any other
matter should properly come before the meeting, the persons appointed as proxies
by the board of directors intend to vote the proxies in accordance with their
best judgment.
The
chairperson of the meeting may refuse to allow the transaction of any business
not presented beforehand, or to acknowledge the nomination of any person not
made, in compliance with the above procedures.
Under SEC
rules, a stockholder who intends to present a proposal, including nomination of
a director, at our 2010 Annual Meeting of Stockholders and who wishes the
proposal to be included in the proxy statement for that meeting must submit the
proposal in writing to Keith H. Williamson, our Secretary, at 7711 Carondelet
Avenue, St. Louis, Missouri 63105, before November 13, 2009. SEC rules set
standards for the types of stockholder proposals and the information that must
be provided by the stockholder making the request.
A
stockholder may also submit a proposal to be considered at our 2010 Annual
Meeting of Stockholders pursuant to our by-laws, which provide that the proposal
must be received by our Secretary not less than sixty days nor more than ninety
days before that meeting. This notice must include the information required by
the provisions of our by-laws, a copy of which may be obtained by writing to our
Secretary at the address specified above. We have not yet set a date for our
2010 Annual Meeting of Stockholders. If the 2010 Annual Meeting of Stockholders
were to be held on April 28, 2010, the anniversary of the 2009 Annual
Meeting, the deadline for delivery of a stockholder proposal pursuant to our
by-laws would be February 27, 2010. If a proposal is submitted pursuant to
our by-laws by February 27, 2010 but after November 13, 2009, the
stockholder may not require that the proposal be included in the proxy statement
for the 2010 Annual Meeting of Stockholders. If the date of our 2010 Annual
Meeting of Stockholders is advanced or delayed by more than 30 days from
April 28, 2010, we shall inform our stockholders, in our earliest possible
quarterly report on Form 10-Q, of such change and the new dates for submitting
stockholder proposals.
INFORMATION
ABOUT CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS
Our Class
I and Class III directors will continue in office following the meeting. The
terms of our Class I directors will expire upon our 2011 Annual Meeting of
Stockholders, and the terms of our Class III directors will expire upon our 2010
Annual Meeting of Stockholders. Brief biographies of these directors follow. You
will find information about their holdings of common stock on page
27.
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Class
I Directors
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Michael
F. Neidorff
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Mr.
Neidorff has served as our Chairman and Chief Executive Officer since May
2004. From May 1996 to May 2004, Mr. Neidorff served as
President, Chief Executive Officer and as a member of our board of
directors. From 1995 to 1996, Mr. Neidorff served as a Regional
Vice President of Coventry Corporation, a publicly-traded managed care
organization, and as the President and Chief Executive Officer of one of
its subsidiaries, Group Health Plan, Inc. From 1985 to 1995, Mr. Neidorff
served as the President and Chief Executive Officer of Physicians Health
Plan of Greater
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St.
Louis, a subsidiary of United Healthcare Corp., a publicly-traded managed
care organization now known as UnitedHealth Group
Incorporated. Mr. Neidorff also serves as a director of Brown
Shoe Company, Inc., a publicly-traded footwear company with global
operations. Mr. Neidorff is 66 years old.
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Richard
A. Gephardt
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Mr.
Gephardt has been a director since December 2006. Mr. Gephardt is CEO and
President of Gephardt Group, LLC a multi-disciplined consulting firm
focused on helping clients gain access to new markets, expand competitive
advantages in existing markets, manage labor negotiations, develop
political strategies and promote policy initiatives. Mr.
Gephardt has served as a consultant to Goldman, Sachs & Co. since
January 2005, as Senior Advisor to DLA Piper since June 2005, and as
Senior Advisor to FTI since January 2007. Mr. Gephardt served
as a Member of the U.S. House of Representatives from 1977 to 2005. He
also serves as a director for Spirit Aerosystems, Inc., a supplier of
commercial airplane assemblies and components; US Steel Corporation, a
manufacturer of a wide variety of steel sheet, tubular and tin products,
coke, and taconite pellets; Embarq Corporation, a communication services
company; and Dana Corporation, an auto parts manufacturer and supplier.
Mr. Gephardt is 68 years old.
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John
R. Roberts
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Mr.
Roberts has been a director since March 2004. Mr. Roberts served as the
Executive Director of Civic Progress, Inc., a St. Louis civic
organization, from 2001 to December 2006. Mr. Roberts is a retired
Managing Partner, Mid-South Region, Arthur Andersen LLP. He also serves as
a director of Regions Financial Corporation, a provider of banking,
brokerage, mortgage and insurance products and services, and Energizer
Holdings, Inc., a manufacturer of household products. Mr. Roberts is 67
years old.
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Class
III Directors
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Steve
Bartlett
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Mr.
Bartlett has been a director since May 2004. Mr. Bartlett is President and
Chief Executive Officer of The Financial Services Roundtable in
Washington, D.C., a position he has held since 1999. Mr. Bartlett served
as the Mayor of Dallas, Texas from 1991 to 1995 and as a Member of the
U.S. House of Representatives from 1983 to 1991. Mr. Bartlett is 61 years
old.
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Pamela
A. Joseph
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Ms.
Joseph has been a director since September 2007. Ms. Joseph has
served as Vice Chairman of U.S. Bancorp and Chairman and Chief Executive
Officer of NOVA Information Systems, Inc. since 2004. From 2000
to 2004, Ms. Joseph served as President and Chief Operating Officer for
NOVA Information Systems, Inc. She also serves as a director
for Paychex Inc., a payroll, human resource, and employee benefit
outsourcing solution for small to medium sized businesses. Ms. Joseph is
50 years old.
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Tommy
G. Thompson
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Mr. Thompson has been a director
since April 2005. Mr. Thompson is a partner in the law firm of Akin Gump
Strauss Hauer & Feld LLP in Washington, D.C.; is President of
Logistics Health, Inc., a provider of medical readiness and homeland
security solutions; and works for the consulting practice of Deloitte and
Touche USA LLP. From 2001 to January 2005, Mr. Thompson served as
secretary of
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U.S. Department of Health &
Human Services. From 1987 to 2001, Mr. Thompson served as Governor of the
State of Wisconsin. He also serves as a director for C.R. Bard, Inc., a
designer, manufacturer, and distributor of medical, surgical, diagnostic,
and patient care devices; Pure Bioscience, a manufacturer and marketer of
technology-based bioscience products; and SpectraScience Inc., a designer
and manufacturer of medical devices. Mr. Thompson is 67 years
old.
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No
director, including any director standing for election, or any associate of a
director, is a party adverse to us or any of our subsidiaries in any material
proceeding or has any material interest adverse to us or any of our
subsidiaries. No director, including any director standing for election, is
related by blood, marriage or adoption to any other director or any executive
officer.
Our
executive officers are elected by our board of directors and hold office until
the first meeting of the board following an annual meeting of stockholders,
subject, in the case of Michael F. Neidorff, to the term of his employment
agreement with us. Brief biographies of our executive officers, as of February
27, 2009, follow. You will find information about their holdings of common stock
on page 27.
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Michael
F. Neidorff
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Mr.
Neidorff is our Chairman, President and Chief Executive Officer. You will
find background information about Mr. Neidorff on page
4.
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Mark.
W. Eggert
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Mr.
Eggert has served as our Executive Vice President, Health Plan Business
Unit since November 2007. From January 1999 to November 2007,
Mr. Eggert served as the Associate Vice Chancellor and Deputy General
Counsel at Washington University, where he oversaw the legal affairs of
the School of Medicine. Mr. Eggert is 47 years
old.
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Carol
E. Goldman
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Ms.
Goldman has served as Executive Vice President and Chief Administrative
Officer since June 2007. From July 2002 to June 2007, she
served as our Senior Vice President, Chief Administrative
Officer. From September 2001 to July 2002, Ms. Goldman served
as our Plan Director of Human Resources. From 1998 to August
2001, Ms. Goldman was Human Resources Manager at Mallinckrodt Inc., a
medical device and pharmaceutical company. Ms. Goldman is
51 years old.
|
|
Cary
D. Hobbs
|
Ms.
Hobbs has served as our Senior Vice President, Business Management
and Integration since September 2007. She served as our Senior
Vice President of Strategy and Business Implementation from January 2004
to September 2007. She served as our Vice President of Strategy
and Business Implementation from September 2002 to January 2004 and as our
Director of Business Implementation from 1997 to August
2002. Ms. Hobbs is 41 years old.
|
|
|
Jesse
N. Hunter
|
|
Mr.
Hunter has served as our Executive Vice President, Corporate Development
since April 2008. He served as our Senior Vice President,
Corporate Development from April 2007 to April 2008. He served
as our Vice President, Corporate Development from December 2006 to April
2007. From October 2004 to December 2006, he served as our Vice
President, Mergers & Acquisitions. From July 2003 until
October 2004, he served as the Director of
|
|
|
|
Mergers
& Acquisitions and from February 2002 until July 2003, he served as
the Manager of Mergers & Acquisitions. Mr. Hunter is
33 years old.
|
|
Donald
G. Imholz
|
Mr.
Imholz has served as our Senior Vice President and Chief Information
Officer since September 2008. From January 2008 to September
2008, Mr. Imholz was an independent consultant working for clients across
a variety of industries. From January 1975 to January 2008, Mr. Imholz was
with The Boeing Company and served as Vice President of Information
Technology from 2002 to January 2008. In that role, Mr. Imholz was
responsible for all application development and support worldwide.
Mr. Imholz is 57 years old.
|
|
|
Edmund
E. Kroll
|
|
Mr.
Kroll has served as our Senior Vice President, Finance and Investor
Relations since May 2007. From June 1997 to November 2006, Mr.
Kroll served as Managing Director at Cowen and Company LLC, where his
research coverage focused on the managed care industry, including the
Company. Mr. Kroll is 49 years old.
|
|
Frederick
J. Manning
|
Mr.
Manning has served as our Executive Vice President, Celtic Insurance
Company since July 2008. From 1978 to July 2008, Mr. Manning
served as Chief Executive Officer and Chairman of the Board of Celtic
Insurance Company. Mr. Manning is 61 years
old.
|
|
|
William
N. Scheffel
|
|
Mr.
Scheffel has served as our Executive Vice President, Specialty Business
Unit since June 2007. From May 2005 to June 2007, he served as our Senior
Vice President, Specialty Business Unit. From December 2003
until May 2005, he served as our Senior Vice President and
Controller. From July 2002 to October 2003, Mr. Scheffel was a
partner with Ernst & Young LLP. From 1975 to July 2002, Mr.
Scheffel was with Arthur Andersen LLP. Mr. Scheffel is 55 years
old.
|
|
Jeffrey
A. Schwaneke
|
Mr.
Schwaneke has served as our Vice President, Corporate Controller since
July 2008 and Chief Accounting Officer since September 2008. He
previously served as Vice President, Controller and Chief Accounting
Officer at Novelis Inc. from October 2007 to July 2008, and Assistant
Corporate Controller from May 2006 to September 2007. Mr.
Schwaneke served as Segment Controller for SPX Corporation from January
2005 to April 2006. Mr. Schwaneke served as Corporate
Controller at Marley Cooling Technologies, a segment of SPX Corporation,
from March 2004 to December 2004 and Director of Financial Reporting from
November 2002 to February 2004. Mr. Schwaneke is 33 years
old.
|
|
|
Eric
R. Slusser
|
Mr.
Slusser has served as our Executive Vice President and Chief Financial
Officer since July 2007 and as our Treasurer since February
2008. Mr. Slusser served as Executive Vice President of
Finance, Chief Accounting Officer and Controller of Cardinal Health, Inc.
from May 2006 to July 2007 and as Senior Vice President, Chief Accounting
Officer and Controller of Cardinal Health, Inc. from May 2005 to May
2006. Mr. Slusser served as Senior Vice President-Chief
Accounting Officer and Controller for MCI, Inc. from November 2003 to May
2005, as Corporate Controller for AES (an electric
|
|
|
power
generation and transmission company) from May 2003 to November 2003, and
as Vice President-Controller from January 1996 to May 2003 for Sprint
PCS. Mr. Slusser is 48 years old.
|
|
|
Keith
H. Williamson
|
|
Mr.
Williamson has served as our Senior Vice President, General Counsel since
November 2006 and as our Secretary since February 2007. From
1988 until November 2006, he served at Pitney Bowes Inc. in various legal
and executive roles, the last seven years as a Division
President. Mr. Williamson also serves as a director of PPL
Corporation, a publicly-traded energy and utility holding
company. Mr. Williamson is 56 years
old.
|
No
executive officer, or any associate of an executive officer, is a party adverse
to us or any of our subsidiaries in any material proceeding or has any material
interest adverse to us or any of our subsidiaries. No executive officer is
related by blood, marriage or adoption to any director or any other executive
officer.
We
believe that good corporate governance is important to ensure that we are
managed for the long-term benefit of our stockholders. Our Corporate Ethics and
Compliance Program was first established in 1998 and provides methods by which
we further enhance operations, safeguard against fraud and abuse and help assure
that our values are reflected in everything we do. We have also reviewed and
believe we are in compliance with the provisions of the Sarbanes-Oxley Act of
2002, the rules of the SEC, and the listing standards of the New York Stock
Exchange.
Our board
of directors has responsibility for establishing broad corporate policies and
reviewing our overall performance rather than day-to-day operations. The board's
primary responsibility is to oversee the management of the company and, in so
doing, serve the best interests of the company and its stockholders. The board
selects, evaluates and provides for the succession of executive officers and,
subject to stockholder election, directors. It reviews and approves corporate
objectives and strategies, and evaluates significant policies and proposed major
commitments of corporate resources. Management keeps the directors informed of
our activities through regular written reports and presentations at board and
committee meetings.
Our board
held five regular meetings and five special meetings during 2008 and acted by
written consent once. All of our directors attended 75% or more of
the meetings of the board and of any committees thereof on which they served.
Our corporate governance guidelines provide that directors are expected to
attend the 2009 Annual Meeting of Stockholders. Eight directors attended the
2008 Annual Meeting of Stockholders.
Our board
of directors has appointed Robert K. Ditmore “presiding director” to preside at
all executive sessions of “non-management” directors, as defined under the rules
of the New York Stock Exchange. Executive sessions of non-management directors
will be held at least twice a year.
Our board
of directors has established three standing committees – Audit, Compensation,
and Nominating and Governance – each of which operates under a charter that has
been approved by our board. Current copies of each committee’s charter are
posted on our website, www.centene.com, and are available in print to any
stockholder who requests a copy. Our board of directors has also
established a Government and Regulatory Affairs Committee, which is co-chaired
by Richard A. Gephardt and Tommy G. Thompson.
Our board
of directors has affirmatively determined that all directors except Michael F.
Neidorff, our Chairman, President and Chief Executive Officer, and, therefore, a
majority of our directors, as well as all of the members of each of the board’s
committees, are independent as defined under the rules of the New York Stock
Exchange, including, in the case of all members of the Audit Committee, the
independence requirements
8
contemplated
by Rule 10A-3 under the Exchange Act. In the course of the board's
determination regarding the independence of each non-employee director, it
considered any transactions, relationships and arrangements as required by the
rules of the New York Stock Exchange. In particular, with respect to each of the
most recent three completed fiscal years, the board evaluated for Tommy
Thompson the amount of fees paid to a law firm in which he serves as a partner
and determined that they were under 2% of the law firm's annual
revenues. All directors, excluding Michael F. Neidorff, have no direct or
indirect material relationship with us except for their role as a director or
stockholder. The board also broadly considers what it deems to be all relevant
facts and circumstances in determining the independence of its
members.
Audit
Committee
The Audit
Committee’s responsibilities include:
|
•
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appointing,
retaining, evaluating, terminating, approving the compensation of, and
assessing the independence of our independent registered public accounting
firm;
|
|
|
•
|
overseeing
the work of our independent auditor, including through the receipt and
consideration of certain reports from the independent registered public
accounting firm;
|
|
•
|
reviewing
and discussing with management and the independent registered public
accounting firm our annual and quarterly financial statements and related
disclosures;
|
|
•
|
monitoring
our internal control over financial reporting, disclosure controls and
procedures and code of business conduct and
ethics;
|
|
•
|
overseeing
our internal audit function;
|
|
•
|
discussing
our risk management policies;
|
|
•
|
establishing
policies regarding hiring employees from our independent registered public
accounting firm and procedures for the receipt and retention of accounting
related complaints and concerns;
|
|
•
|
meeting
independently with our internal auditing staff, independent registered
public accounting firm and management;
and
|
|
•
|
preparing
the audit committee report required by SEC rules (which is included on
page 11 of this proxy statement).
|
The board
has determined that John R. Roberts is an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K.
The
current members of the Audit Committee are Steve Bartlett, Frederick H. Eppinger
and John R. Roberts. The Chairman of the Audit Committee is John R. Roberts. The
Audit Committee held four regular meetings and one special meeting in
2008.
Compensation
Committee
The
compensation committee is currently comprised of four members of our board of
directors. The board has determined that each of the members of the compensation
committee is “independent,” as defined under the rules of the New York Stock
Exchange, or NYSE.
The
compensation committee oversees our activities in the area of compensation and
benefits (generally with regard to all employees and specifically with regard to
officers) and reviews and makes recommendations concerning compensation-related
matters to be submitted to the board and/or shareholders for approval. The
committee’s responsibilities include:
|
•
|
annually
reviewing and approving corporate goals and objectives relevant to our
chief executive officer’s
compensation;
|
|
•
|
reviewing
and making recommendations to the board with respect to our chief
executive officer’s
compensation;
|
|
•
|
reviewing
and approving, or making recommendations to the board with respect to, the
compensation of our other executive
officers;
|
|
•
|
overseeing
an evaluation of our senior
executives;
|
|
•
|
overseeing
and administering our equity incentive plans;
and
|
|
•
|
reviewing
and making recommendations to the board with respect to director
compensation.
|
Members
of management assist the committee in its responsibilities by providing
recommendations for the committee’s approval concerning the design of our
compensation program for our executive officers other than our chief executive
officer, including those executive officers listed in the Summary Compensation
Table for the 2008 fiscal year, who we refer to in this proxy statement as the
Named Executive Officers, as well as recommended award levels. The design of our
compensation program for our chief executive officer is recommended by the
committee and approved by the full Board of Directors without any approval of
the Chairman, who is the chief executive officer. The committee considered
information and data supplied by management and by Hewitt Associates, Inc., or
Hewitt, a compensation and benefits consultant retained by management. In
addition, the committee has retained an independent compensation consultant,
Pearl Meyer and Partners, or Pearl Meyer, that reports directly to the committee
to review and make recommendations on the chief executive officer’s
compensation.
In 2008,
the compensation committee utilized Hewitt to provide advice with respect to the
base salaries, bonuses and long-term incentives of our officers, including our
Named Executive Officers. The consultants analyzed the compensation levels of
the Named Executive Officers of a peer group of companies for the most recently
completed fiscal years and used proprietary valuation methodologies to value the
long-term incentive compensation levels of the officers of the companies in the
peer group. As discussed in the Compensation Discussion and Analysis (CD&A),
the compensation committee considered this information, along with a variety of
other factors, in reviewing our executive compensation in 2008.
The
committee delegates to management the authority to grant stock options and
restricted stock units under the 2003 Stock Incentive Plan. Our chief executive
officer is authorized to issue awards (other than to himself) of up to 30,000
shares to any new hired executive during a calendar year, and is required to
report any such grants to the compensation committee retrospectively at the
following Compensation Committee meeting . The delegation of authority may be
terminated by the compensation committee at any time and for any
reason. All internal promotions and equity grants to a Corporate
Officer level and all offers to any “executive officer” (as defined by Rule 3b-7
under the Securities Exchange Act of 1934) will still require full Compensation
Committee approval.
The
current members of the Compensation Committee are Robert K. Ditmore, Pamela A.
Joseph, David L. Steward and Tommy Thompson . The Chairman of the Compensation
Committee is Robert K. Ditmore. The Compensation Committee met five times during
2008.
Nominating
and Governance Committee
The
Nominating and Governance Committee’s responsibilities include:
|
•
|
identifying
individuals qualified to become members of the
board;
|
|
•
|
recommending
to the board the persons to be nominated for election as directors and to
each of the board’s committees;
|
|
•
|
reviewing
and making recommendations to the board with respect to management
succession planning;
|
|
•
|
reviewing
and recommending to the board corporate governance principles;
and
|
|
•
|
overseeing
an annual evaluation of the board’s
performance.
|
The
current members of the Nominating and Governance Committee are Robert K.
Ditmore, David L. Steward and Tommy G. Thompson. The Chairman of the Nominating
and Governance Committee is David L. Steward. The Nominating and Governance
Committee met once during 2008.
The
process followed by the Nominating and Governance Committee to identify and
evaluate director candidates includes requests to board members and others for
recommendations, meetings from time to time to evaluate biographical information
and background material relating to potential candidates and interviews of
selected candidates by members of the Nominating and Governance Committee and
the board.
In
considering whether to recommend any particular candidate for inclusion in the
board’s slate of recommended director nominees, the Nominating and Governance
Committee will apply the criteria set forth in our Corporate Governance
Guidelines. These criteria include the candidate’s integrity, business acumen,
knowledge of our business and industry, age, experience, diligence, conflicts of
interest and the ability to act in the interests of all stockholders. The
Nominating and Governance Committee does not assign specific weights to
particular criteria and no particular criterion is a prerequisite for each
prospective nominee. We believe that the backgrounds and qualifications of our
directors, considered as a group, should provide a composite mix of experience,
knowledge and abilities that will allow the board to fulfill its
responsibilities.
Stockholders
may recommend individuals to the Nominating and Governance Committee for
consideration as potential director candidates by submitting their names,
together with appropriate biographical information and background materials and
a statement as to whether the stockholder or group of stockholders making the
recommendation has beneficially owned more than 5% of our common stock for at
least one year as of the date such recommendation is made, to Nominating and
Governance Committee, c/o Corporate Secretary, Centene
Corporation, 7711 Carondelet Avenue, St. Louis, Missouri 63105.
Assuming that appropriate biographical and background material has been provided
on a timely basis in accordance with the procedures set forth in our by-laws,
the Nominating and Governance Committee will evaluate stockholder-recommended
candidates by following substantially the same process and applying
substantially the same criteria as it follows for candidates submitted by
others.
Stockholders
also have the right under our by-laws to directly nominate director candidates,
without any action or recommendation on the part of the Nominating and
Governance Committee or the board, by following the procedures set forth under
“Submission of Future Stockholder Proposals” of this proxy
statement.
The board
will give appropriate attention to written communications that are submitted by
stockholders and other interested parties, and will respond if and as
appropriate. The chairman of the Nominating and Governance Committee, with the
assistance of our chief executive officer, is primarily responsible for
monitoring communications from stockholders and other interested parties and for
providing copies or summaries to the other directors as he or she considers
appropriate.
Under
procedures approved by a majority of the independent directors, communications
are forwarded to all directors if they relate to important substantive matters
and include suggestions or comments considered to be important for the directors
to know. In general, communications relating to corporate governance and
long-term corporate strategy are more likely to be forwarded than communications
relating to ordinary business affairs, personal grievances and matters as to
which we tend to receive repetitive or duplicative communications.
Stockholders
and interested parties who wish to send communications on any topic to the board
should address such communications to Board of Directors c/o Corporate
Secretary, Centene Corporation, 7711 Carondelet Avenue, St. Louis, Missouri
63105. Any stockholder or interested party who wishes to communicate directly
with our presiding director, or with our non-employee directors as a group,
should also follow the foregoing method.
Our board
of directors has adopted Corporate Governance Guidelines addressing, among other
things, director qualifications and responsibilities, responsibilities of key
board committees, director compensation and management succession. A current
copy of the Corporate Governance Guidelines is posted on our website,
www.centene.com. In addition, copies of the Corporate Governance Guidelines are
available to all stockholders upon request.
Our board
of directors has adopted a Code of Business Conduct and Ethics which is
applicable to all employees of the Company, including the principal executive
officer and principal financial officer. While no code of conduct can replace
the thoughtful behavior of an ethical director, officer or employee, we feel the
Code of Business Conduct and Ethics will, among other things, focus our board
and management on areas of ethical risk, provide guidance in recognizing and
dealing with ethical issues, provide mechanisms to report unethical conduct and
generally help foster a culture of honesty and accountability. Any amendment or
waiver of the Code of Business Conduct and Ethics may only be made by the board
or a committee of the board. A current copy of the Code of Business Conduct and
Ethics is posted on our website, www.centene.com. Any future amendments or
waivers of the Code of Business Conduct and Ethics will be promptly disclosed on
our website. In addition, copies of the Code of Business Conduct and Ethics are
available to all stockholders upon request.
Our
policy concerning pre-approval of related party transactions is incorporated in
the provisions of our Code of Business Conduct and Ethics regarding conflicts of
interest. As part of our Code of Business Conduct and Ethics, our directors,
officers and employees are responsible for disclosing any transaction or
relationship that reasonably could be expected to give rise to a conflict of
interest to the Corporate Compliance Officer of the Company or the board of
directors in the case of an executive officer or director, who shall be
responsible for determining whether such transaction or relationship constitutes
a conflict of interest.
The
following table provides information as of December 31, 2008, about the
securities authorized for issuance under our equity compensation plans,
consisting of our 1996 Stock Plan, 1998 Stock Plan, 1999 Stock Plan, 2000 Stock
Plan, 2002 Employee Stock Purchase Plan and 2003 Stock Incentive
Plan.
Equity
Compensation Plan Information
|
|
(a)
|
|
(b)
|
|
(c)
|
||
|
Plan
Category
|
|
Number
of Securities
to
be Issued Upon
Exercise of Outstanding
Options,
Warrants
and
Rights
|
|
Weighted-Average
Exercise
Price of
Outstanding Options,
Warrants
and Rights
|
|
Number
of Securities
Remaining
Available
For
Future Issuance
Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in Column (a))
|
|
|
Equity
compensation plans approved by stockholders
|
|
5,632,502
|
|
$
|
19.81
|
|
2,001,239
|
|
Equity
compensation plans not approved by stockholders
|
|
—
|
|
—
|
|
—
|
|
|
|
5,632,502
|
|
|
2,001,239
|
|||
The
number of securities in column (a) includes 3,718,372 options with a
weighted-average remaining life of 6.4 years and 1,914,130 shares of restricted
stock and restricted stock units.
The
number of securities in column (c) includes 706,430 shares available for
future issuance under the 2002 Employee Stock Purchase Plan.
Management
is responsible for the preparation of Centene’s consolidated financial
statements and for establishing and maintaining an adequate system of disclosure
controls and procedures and internal control over financial reporting for that
purpose. KPMG LLP, as independent registered public accountants for Centene, is
responsible for performing an independent audit of our consolidated financial
statements and of the Company’s internal control over financial reporting and
issuing a report thereon, in accordance with standards established by the Public
Company Accounting Oversight Board, or PCAOB. The Audit Committee's
responsibility is to monitor and provide independent, objective oversight of
these processes. The Audit Committee has implemented procedures to ensure that
during the course of each fiscal year it devotes the attention it deems
necessary and appropriate to each of the matters assigned to it under its
charter.
The Audit
Committee met and held discussions with management and the independent
registered public accountants to review and discuss all financial statements
included in public filings during the fiscal year ended December 31, 2008
before their issuance and to discuss significant accounting issues and the
Company’s internal control over financial reporting. Management represented to
the Audit Committee that the consolidated financial statements were prepared in
accordance with generally accepted accounting principles and that there were no
material weaknesses in its internal control over financial reporting. The Audit
Committee has received from and discussed with the independent registered public
accountants matters required to be discussed under the PCAOB standards, SEC
rules, and Statement on Auditing Standards, or SAS, No. 61, as amended by
SAS No. 90 (Communication with Audit Committees) including, among other things,
the following:
|
•
|
methods
to account for significant unusual
transactions;
|
|
•
|
the
quality of the Centene’s accounting principles, including the effect of
significant accounting policies in controversial or emerging
areas;
|
|
•
|
the
process used by management in formulating particularly sensitive
accounting estimates, the reasonableness of significant judgments, and the
basis for the conclusions of KPMG LLP regarding the reasonableness of
those estimates;
|
|
•
|
disagreements
with management over the application of accounting principles, the basis
for management's accounting estimates and the disclosures in the financial
statements; and
|
|
•
|
material
weaknesses or significant internal control deficiencies, if
any.
|
KPMG LLP
also provided the Audit Committee with the written disclosures and the letter
required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent accountant’s communications with the Audit
Committee concerning independence which requires auditors, among other things,
annually to:
|
•
|
disclose
in writing all relationships that in the auditor’s professional opinion
may reasonably be thought to bear on
independence;
|
|
•
|
confirm
their perceived independence; and
|
|
•
|
engage
in a discussion of independence.
|
The Audit
Committee has discussed with KPMG LLP their independence with respect to
Centene, including a review of audit and non-audit fees and services and
concluded that KPMG LLP is independent.
Based on
its discussions with management and KPMG LLP and its review of the
representations and information provided by management and KPMG LLP, the Audit
Committee recommended to Centene’s Board of Directors that the audited
consolidated financial statements be included in Centene’s Annual Report on Form
10-K for the year ended December 31, 2008.
By the
Audit Committee of the Board of Directors of Centene Corporation.
|
|
AUDIT
COMMITTEE
|
|
|
Steve
Bartlett
|
|
|
Frederick
H. Eppinger
|
|
|
John
R. Roberts, Chair
|
Our board
of directors, upon the recommendation of the Audit Committee, has selected KPMG
LLP to serve as our independent registered public accounting firm for the year
ending December 31, 2009. See “Discussion of proposals – Proposal Two:
Ratification of Appointment of Independent Registered Public Accounting Firm.”
KPMG LLP has served as our independent registered public accounting firm since
June 8, 2005. We expect that representatives of KPMG LLP will be present at
our Annual Meeting of Stockholders to answer appropriate questions. They will
have the opportunity to make a statement if they desire to do so.
Independent
Auditor Fees
The
following table discloses the aggregate fees billed in 2008 and 2007, by KPMG
LLP, our independent registered public accounting firm ($ in
thousands):
|
KPMG
|
||||||||
|
2008
|
2007
|
|||||||
|
Audit
Fees
|
$ | 1,350 | $ | 1,308 | ||||
|
Audit-Related
Fees
|
112 | 65 | ||||||
|
Tax
Fees
|
— | — | ||||||
|
All
Other Fees
|
— | — | ||||||
Audit-related
fees in 2008 and 2007 consist primarily of fees for operational control
reviews.
The Audit
Committee has adopted policies and procedures relating to the approval of all
audit and non-audit services that are to be performed by our independent
registered public accounting firm. This policy generally provides that we will
not engage our independent registered public accounting firm to render audit or
non-audit services unless the service is specifically approved in advance by the
Audit Committee or the engagement is entered into pursuant to one of the
pre-approval procedures described below.
From time
to time, the Audit Committee may pre-approve specified types of services that
are expected to be provided to us by our independent registered public
accounting firm during the next 12 months. Any such pre-approval is detailed as
to the particular service or type of services to be provided and is also
generally subject to a maximum dollar amount.
The Audit
Committee has also delegated to the chairman of the Audit Committee the
authority to approve any audit or non-audit services to be provided to us by our
independent registered public accounting firm. Any approval of services by the
chairman of the Audit Committee pursuant to this delegated authority is reported
on at the next meeting of the Audit Committee. All audit-related fees and tax
fees for 2008 and 2007 were pre-approved by the Audit Committee, and no fees
were provided under the de minimis exception to the audit committee pre-approval
requirements.
None.
The
compensation committee has reviewed and discussed the “Compensation Discussion
and Analysis” with the Company’s management. Based on such review and
discussions, the compensation committee recommended to the board of directors
that the “Compensation Discussion and Analysis” be included in this proxy
statement and our annual report on Form 10-K.
|
|
COMPENSATION COMMITTEE
|
|
|
Robert
K. Ditmore, Chair
|
|
|
Pamela
A. Joseph
|
|
|
David
L. Steward
|
|
|
Tommy
G. Thompson
|
This
Compensation Discussion and Analysis discusses our compensation policies and
arrangements that are applicable to our Named Executive Officers.
Overview
of the Compensation Program
The
compensation committee administers the executive compensation program. The key
compensation goals are to hire, motivate, reward and retain executives who
create long-term investor value. The philosophy of the compensation committee as
it relates to executive compensation is that our chief executive officer and
other executive officers should be compensated at competitive levels sufficient
to attract, motivate and retain talented executives who are capable of leading
us in achieving our business objectives in an industry facing increasing
regulation, competition and change, while aligning the compensation of senior
management with the long-term interests of stockholders. Centene must leverage
its compensation and benefit programs to attract the best talent in order to
compete and achieve aggressive operating objectives. The establishment of
aggressive expectations and Centene’s ability to deliver consistent operating
performance and demonstrated growth in earnings per share has a proven impact on
the value of Centene’s share price and therefore shareholder value; attracting
and retaining the right management team and establishing the proper rewards
alignment to company performance is paramount to the interests of both Centene
and its shareholders.
In order
to achieve these objectives, the compensation committee establishes target,
market-based total compensation (e.g., base salary, annual bonus target and
long-term incentives) for similarly sized companies based on revenues. For total
compensation, the committee’s competitive objective is for our total
compensation to:
|
·
|
fall
between the 50th percentile to 75th percentile of similarly-sized
organizations based on revenues of $4 billion;
and
|
|
·
|
approximate
the 50th percentile of larger organizations in the health insurance
industry based on revenues.
|
For each
component of total compensation, the committee’s competitive objectives are for
our:
|
·
|
base
salary to approximate the 75th percentile of similarly-sized
organizations;
|
|
·
|
annual
bonus target to approximate the 50th percentile of similarly-sized
organizations; and
|
|
·
|
long-term
incentives to approximate the 50th percentile of similarly-sized
organizations.
|
Both
objectives generally result in approximately the same market based total
compensation.
The
market data was supplied and analyzed by Hewitt and is based upon survey data
from ten different sources for businesses which the committee feels are
relatively similar in complexity and size (based on 2007
15
revenues
and market capitalization) to us and are representative of the types of major
companies with which we have historically competed for executive talent. The
survey sources are as follows:
|
1.
|
Hewitt:
Total Compensation Measurement General Industry and Retail Compensation by
Industry: Executive.
|
|
2.
|
Hewitt:
Total Compensation Measurement Industrial & Service Executive
Regression Analysis.
|
|
3.
|
Mercer:
US Mercer Benchmark Database-Executive
Survey.
|
|
4.
|
Mercer:
US Mercer Benchmark Database-Executive Regression
Survey.
|
|
5.
|
Mercer:
Integrated Health Networks Compensation Survey-Module 1 Health Plan
Executives
|
|
6.
|
Warren
Surveys: The HMO Salary Survey.
|
|
7.
|
Watson
Wyatt Data Services: Survey Report on Health, Annuity and Life Insurance
Management Compensation.
|
|
8.
|
Watson
Wyatt Data Services: Survey Report on Top Management
Compensation.
|
|
9.
|
Watson
Wyatt Data Services: Regression Analysis Survey Report on Top Management
Compensation.
|
|
10.
|
Mercer:
Integrated Health Networks Compensation Survey-Module 1 Health Plan
Executives.
|
In
addition to the survey data, proxy data was reviewed for selected industry peers
and selected industry leaders. The industry peers the Committee
reviewed for executive compensation purposes were Amerigroup Corporation,
Assurant, Inc., Coventry Health Care, Inc., Magellan Health Services, Inc.,
Molina Healthcare Inc., Omnicare and Principal Financial Group,
Inc.
The
Committee reviewed additional data sources from Pearl Meyer in determining the
compensation for the CEO. Pearl Meyer was retained independently by the
Compensation Committee to provide recommendations for the CEO’s
compensation. The market for executive talent includes companies both
within and outside our industry or sector; therefore, the market data we utilize
includes, in the aggregate, hundreds of companies both within and outside our
industry. The committee considers general market data for similarly sized
companies, as well as industry specific data. The compensation committee
believes that including this broader range of companies is likely to provide a
more representative depiction of the overall competitive market for talent. For
comparison purposes, our annual revenues are slightly below the median revenues
of the larger sized health care companies included in our market data. Because
of the large variance in size among these companies, regression analysis is used
to adjust the compensation data for differences in revenues and this adjusted
value is used as the basis for comparison between us and the companies in our
market data. In circumstances where an employee was responsible for managing a
certain aspect of our business, the market data was adjusted using regression
analysis to estimate the size of the operations being managed by the employee
(e.g., a plan president).
All
elements of compensation are valued and reviewed in evaluating the relative
competitiveness of our compensation practices against both the market data and
the committee’s competitive objectives. In addition, the committee annually
reviews a tally sheet for each Named Executive Officer, which includes the
current value of all outstanding equity-based awards, deferrals, benefits and
perquisites, as well as potential payments under change in control
agreements. The Committee uses the tally sheets to analyze each Named
Executive Officer’s base salary, annual incentive target and long-term incentive
opportunity in relation to the market and each component of compensation as a
percentage of total compensation. The Committee noted that the
long-term incentive opportunity for many executives decreased significantly in
2008 as a result of the decrease in our company’s market price due to the
country’s financial crisis. Therefore, it was believed that retention
of key executives could be challenging without the right combination of base
salary, annual incentives and long-term incentive opportunities.
The
compensation committee has always viewed compensation as a total package that
includes base salary, performance-based bonus compensation, long-term equity
compensation, deferrals, benefits and
16
perquisites.
Because we do not provide a defined benefit pension plan or retiree health care
(except for the chief executive officer as provided for in his employment
agreement), the committee feels that it is important that executives are
compensated at levels that may exceed their counterparts in industries that
provide these types of benefits.
Base
Salaries
In
determining appropriate annual base salaries, in addition to reviewing market
data from Hewitt, the compensation committee considered:
|
•
|
the
chief executive officer’s recommendations as to compensation for all other
executive officers;
|
|
|
•
|
the
scope of responsibility, experience, time in position and individual
performance of each officer, including the chief executive
officer;
|
|
|
•
|
the
effectiveness of each executive’s leadership performance and potential to
enhance long-term stockholder value; and
|
|
|
•
|
internal
equity.
|
In
certain circumstances such as an external candidate or an executive with high
potential, base salary may be positioned above the competitive objectives, with
the appropriate supporting rationale. The compensation committee’s analysis is a
subjective process that utilizes no specific weighting or formula of the
aforementioned factors in determining executives’ base salaries.
Adjustments
to base salaries are determined based on merit and market. This requires a
detailed evaluation of individual performance, competitive market levels and
rates of increase, executive experience, internal equity, as well as our overall
salary budget. In 2008, Hewitt compared our base salaries to the market data
and, on average; our base salaries for 2008 were approximately equal to the 75th
percentile of the market data. In 2009, the Chairman, President and Chief
Executive Officer’s annual base salary remained at $1,000,000. Other Named
Executive Officers received base salary increases for 2009 in light of the
aforementioned factors. Since annual incentives (as discussed below)
are based on a percentage of base salary, base salary increases also have the
effect of increasing the size of annual incentive opportunity.
Annual
Incentives
The
compensation committee considers annual incentive compensation to be a
motivational method for encouraging and rewarding outstanding individual
performance that contributes to our overall performance. Awards under the bonus
plan are recommended to the board of directors by the compensation committee
based primarily upon:
|
•
|
meeting
the company’s earnings per share objective;
|
|
|
•
|
our
overall performance, including our performance versus our business
plan;
|
|
|
•
|
the
performance of the individual officer including the effectiveness of each
executive’s leadership performance and potential to enhance long-term
stockholder value;
|
|
|
•
|
targeted
bonus amounts which are based upon market data; and
|
|
|
•
|
the
recommendation of the chief executive
officer.
|
Annual
incentive compensation is designed to motivate executives to achieve higher
levels of success through formula driven targets. Executives are rewarded for
meeting annual operating plan objectives for a 12 month period that create
shareholder value. Specifically, the primary corporate financial measurements
for determining bonus eligibility are earnings per share, revenue growth targets
and pre-tax operating margins. Secondly, each business unit may have annual
operating plan objectives for a 15 month period consisting of a calendar year
plus the 1st quarter
of the following year, which determine bonus eligibility. Business unit bonuses
are based on meeting pre-established operating plan expectations. Finally,
individual performance is evaluated to determine the amount above or below the
targeted range that should be awarded based on
17
individual
contributions. The committee has previously exercised its discretion to pay
bonuses above and below the targeted range.
Target
percentages are positioned, on their own, to be competitive with the 50th
percentile of the market data. However, when applied to our base salaries they
create a total cash opportunity that is consistent with our competitive
objectives. Additional amounts are possible in the committee’s discretion, based
upon the executive’s achievement of above-target performance, which may allow an
executive to actually earn cash compensation near the high end of the range of
our competitive objectives.
The
compensation committee reviewed the chief executive officer’s performance during
2008 and recommended to the board of directors that an annual bonus of
$1,250,000 be awarded to Mr. Neidorff for the year. In making this
recommendation, the compensation committee recognized that certain non-operating
investment losses were not within the control of management and should be
subtracted from the financial measures the committee reviewed. The
Committee believed that these figures were critical in analyzing the ongoing
nature of the Company’s operations and measuring the Company’s performance more
consistently from year to year. Using these adjusted measures, the
company met its earnings per share goal. The Company also increased
pre-tax earnings by approximately 113% over 2007. In addition, the
Company’s revenue reached $3.4 billion, an increase of 21.5% from
2007. Finally, the company once again reported strong operating cash
flow. 100% of Mr. Neidorff’s 2008 bonus target of 125% of his annual
base was paid out as the committee considered the bonus pool available and award
sizes for other officers and employees. Other Named Executive
Officers also received an annual bonus based on each individual’s performance
and the performance of the company. Recognizing that pay for
performance is part of the company’s culture, in the past the committee has
withheld annual incentive bonuses when certain financial measures were not met,
most recently in 2006, or not paid out full target bonuses as was the case in
2007.
While Mr.
Neidorff’s base salary was not increased in 2009, the board of directors
recognized the need to continue to emphasize the committee’s strong belief in
pay for performance. Therefore, Mr. Neidorff’s bonus target for 2009
was increased from 125% of his annual base salary to 150% of his base salary
based on Pearl Meyers recommendation. For 2009, we will continue to
use similar objective performance measures stated above and also evaluate
individual performance for our annual incentive program. The compensation
committee believes that it has set the performance measures targets to provide
the appropriate level of motivation for participants based on market and
industry expectations.
Based
on the amounts of total compensation listed in the Summary Compensation Table,
annual bonus compensation represented from 14.2% to 33.0% of total compensation
for the Named Executive Officers in fiscal year 2008. The committee feels that
these amounts are reflective of the program’s objective to reward individual
performance that contributes to our overall performance in light of meeting the
targeted earnings per share amount.
Long-Term
Incentives
Our
long-term incentive compensation is designed to attract and retain key
executives, build an integrated management team, reward for innovation and
risk-taking, balance short-term thinking and share long-term successes while
aligning executive and shareholder interests.
Long-term
incentives are positioned at the lower end of the range of our competitive
objective, for two reasons:
|
•
|
This
keeps our total compensation opportunity in line with our competitive
objectives (that is, not every component of pay can be positioned at the
high end of the range, or else total compensation opportunity will exceed
the high end of the range).
|
|
|
•
|
Our
staffing model and business plan should provide, over a longer time
horizon, opportunities for greater than average wealth accumulation as
performance warrants.
|
During
the Compensation Committee’s review in December of 2008, it was noted that
long-term incentives that were granted to our Named Executive Officer’s in the
past were now positioned more towards
18
the
75th
percentile of similarly-sized organizations rather than the 50th
percentile which is our competitive objective. Therefore, the
committee considered this position when determining the size of the grants made
to the Named Executive Officer’s at that meeting.
Long-term
incentives are provided both through equity (stock options & restricted
stock units (RSUs)) and cash ensuring that the maximum number of shares of
common stock granted in any calendar year (excluding shares granted in
connection with an acquisition) does not exceed a level associated with
competitive practice.
Stock
options and RSU’s are designed to attract executive talent in a competitive
environment while motivating and building an integrated management team that can
balance short-term thinking with our long-term objectives. RSUs are also used to
motivate and retain key tenured executives as part of their long-term incentive
compensation while recognizing exceptional performance and rewarding successful
innovation and risk-taking through spot awards. Options and
RSU’s are normally granted at the annual December compensation committee
meeting, but may also be awarded at other compensation committee meetings
following a promotion, for extraordinary performance, or at time of hire for
eligible executives.
In order
to continue to align the interests of our Named Executive Officers and
stockholders, RSU’s granted in December of 2008 to our Named Executive Officers
require the company to meet certain revenue growth and pre-tax income targets in
2009. These targets must be met in order for the individual to have
accelerated vesting of these performance shares. Including the year
of performance, the RSU’s vest over a four year period unless the performance
parameters are met; then the vesting will occur over a three year
period. The board of directors determined the award sizes for each
Named Executive Officer by analyzing the competitive objectives listed above,
reviewing a tally sheet for each Named Executive Officer and evaluating the
individual’s 2008 performance.
Under the
2007 Long-Term Incentive Plan, executives will be rewarded cash for achieving
long-term (3 year) financial objectives of cumulative revenue growth and pre-tax
operating margin. This plan will be used for approximately 50% of total
long-term incentive awards. Cash awards are paid annually after completion of
each 3 year performance cycle and announced annually prior to the beginning of
each 3 year performance cycle. As discussed below, the committee adopted this
type of long-term cash plan, to among other things, complement our current 2003
Stock Incentive Plan and assist in managing annual dilution and supplementing
the number of shares available under the company’s 2003 Stock Incentive
Plan.
The use
of options and the long-term cash plan is intended to satisfy the requirements
for qualified performance-based compensation under Section 162(m) of the
Internal Revenue Code. The use of RSUs helps to reduce annual share usage under
the 2003 Stock Incentive Plan, as compared with stock options. The
use of performance based RSUs in 2008 does not currently satisfy Section 162(m)
of the Internal Revenue Code.
Based on
the amounts of total compensation listed in the Summary Compensation Table,
long-term variable compensation represented from 25.7% to 69.6% of total
compensation for the Named Executive Officers in fiscal year 2008, which is
consistent with general market practice as well as the committee’s overall
compensation objectives. As noted above, we traditionally grant awards which are
based upon the committee’s recommendation at the December board meeting and do
not “time” the granting of long-term incentives awards with respect to the
release of material non-public information and have not timed such grants for
the purpose of affecting the value of executive compensation.
Stock
Ownership Guidelines
In 2005,
we established stock ownership guidelines for our Named Executive Officers,
other officers and board of directors. We feel that ownership of our stock helps
align the interests of our executives and
19
shareholders,
and encourages executives to act in a manner that is expected to increase
shareholder value. The stock ownership guidelines for our Named Executive
Officers are as follows:
|
Named
Executive Officer
|
|
Minimum Ownership Requirement
as a Percentage
of Base Salary
|
|
Chairman,
President and Chief Executive Officer
|
|
5X
|
|
Executive
Vice President
|
|
2.5X
|
|
Senior
Vice President
|
|
2X
|
For those
who were executive officers in February 2005 when the stock share ownership
guidelines were implemented, the number of shares that should be owned by the
executive is determined based on their base salary and share price as of the
implementation. For executives hired or promoted to these positions or a higher
position after February 2005, the number of shares to be held would be
determined at the time they were hired or promoted. In all cases, an executive
would have five years to attain the level of stock ownership suggested under
these guidelines.
The
compensation committee will annually review the stock ownership levels of the
executive officers. Future stock awards will take into consideration the
executive’s level of attainment of the suggested stock ownership
amount.
Officers
who fail to achieve these ownership levels will not be eligible to receive any
stock-based awards until they achieve their required ownership level. Shares
owned directly by the officer (including those held as a joint tenant or as
tenant in common), restricted stock or RSUs, shares owned in a self-directed
IRA, “phantom shares” held in a deferred compensation plan and certain shares
owned or held for the benefit of a spouse or minor children are counted toward
the guidelines. Options and unvested RSUs are not counted toward meeting the
ownership guidelines. As of the close of the last fiscal year and the date of
this report, all officers subject to the guidelines are in compliance with them
or still have time to attain compliance in accordance with the guidelines. We
prohibit employees from hedging their stock ownership.
Our stock
ownership guidelines for members of our board of directors require them to own
10,000 shares of common stock, and each director has three years from the time
they are elected to the board to attain this level of ownership. As
of the close of the last fiscal year and the date of this report, all directors
are in compliance with these guidelines or still have time to attain compliance
in accordance with the guidelines. We prohibit directors from hedging
their stock ownership.
Other
Benefits
We
provide our Named Executive Officers with a defined contribution retirement
program. This defined contribution retirement program is the same program that
is provided generally to our employees. We also provide our Named Executive
Officers with a non-qualified defined contribution plan to make up for matching
contributions that are limited by compensation limits imposed on qualified
retirement plans under the Internal Revenue Code. We do not provide our Named
Executive Officers with a defined benefit retirement program. We also do not
provide retiree medical coverage to our Named Executive Officers, with the
exception to Mr. Neidorff, as specified in his employment
agreement.
With
respect to most other benefits, the benefits provided to Named Executive
Officers and other executive officers are comparable to those provided to the
majority of salaried and hourly Company employees. In order to ensure that their
tax returns are prepared timely and avoid any appearance of impropriety, we
require all Named Executive Officers to have their tax returns prepared or
reviewed by an independent certified public accounting firm. Due to this
requirement, costs related to these services are paid by us. In addition, each
Named Executive Officer has the option to use a financial advisor for fees that
in total do not exceed $11,000 annually for both tax preparation and financial
advisement.
The board
of directors believes that additional security is required for the position of
chairman and chief executive officer and other Named Executive Officers.
Pursuant to a policy implemented by our board, Mr. Neidorff is required to
use company provided aircraft for all air travel and we provide home security
services to Mr. Neidorff. Mr. Neidorff’s personal use of
company aircraft and home security services are fully
20
taxable
to him and are not grossed up to cover his personal income tax
liability. Home security services are also provided to our Named
Executive Officers and these costs are fully taxable to them and are also not
grossed up to cover any personal income tax liability.
Employment
Contracts, Termination of Employment Arrangements, and Change in Control
Arrangements
CEO
Employment Agreement
Michael
F. Neidorff serves as Chairman of our board of directors and our President and
Chief Executive Officer pursuant to an employment agreement dated
November 8, 2004. The term of the employment agreement extends until
November 8, 2014. Under this agreement, we currently pay Mr. Neidorff
an annual salary of $1,000,000, which is subject to an annual review by our
board of directors. Mr. Neidorff is eligible for an annual target bonus for
2008 of 125% of base salary and an annual target bonus beginning in 2009 of 150%
of base salary and a maximum annual bonus equal to not less than 200% of base
salary. The agreement also awarded Mr. Neidorff 1,000,000 restricted stock
units as of November 8, 2004. Of these restricted stock units, 60% vest in
2009 and the remaining 40% vest ratably beginning in 2010 and ending in 2014.
Mr. Neidorff has agreed not to compete with us or solicit any of our
employees during the term of his employment and for 12 months thereafter.
Mr. Neidorff’s employment may be terminated by us for cause or permanent
disability or by Mr. Neidorff for good reason. If Mr. Neidorff is
terminated by us without cause or if he terminates for good reason, he is
entitled to receive salary continuation for a period of 36 months or the
remaining term of the agreement, whichever is shorter (but not less than six
months), lifetime health and dental coverage to which he would be entitled under
the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, lifetime
life insurance coverage, lifetime medical insurance for him and his eligible
dependents, full acceleration of any unexercised stock options or other equity
awards held by him, and acceleration of a portion of unvested restricted stock
units awarded pursuant to the agreement based on certain stipulations. Upon a
change in control during the term of this agreement, any unvested restricted
stock units and any unexercised stock options or other equity awards held by
Mr. Neidorff will vest in full. Mr. Neidorff is eligible for a
gross-up payment if any parts or amounts payable under his employment
agreement are deemed to be "excess parachute payments" within the meaning of
Section 280G of the Code or similar provision. Mr. Neidorff’s
agreement was amended twice in the past twelve months; (1) to eliminate the
non-compete and non-solicitation requirements if there was a “hostile change in
control” as defined in his agreement and (2) to add language to the agreement to
make it compliant with Internal Revenue Section 409A.
Severance
and Change in Control Agreements
Carol E.
Goldman, Mark W. Eggert, William N. Scheffel and Eric R. Slusser serve as
executive officers pursuant to executive severance and change in control
agreements (the agreements). Under these agreements, 2009 annual salaries are
$425,000, $570,000, $595,000 and $545,000 to Ms. Goldman and Messrs. Eggert,
Scheffel and Slusser, respectively.
The
agreements generally provide that, if within 24 months following a change in
control (as defined), the executive’s employment is terminated by us other than
for cause (as defined in the agreements) or by the executive for good reason (as
defined), the executive will receive a cash payment equal to the sum of
(1) an amount equal to 24 months of salary, (b) the average of the
executive’s last two annual bonuses multiplied by two, and (c) a prorated
annual bonus for the year in which the termination occurs. The executive also
will receive 18 months of medical coverage. The executive’s existing equity
awards will vest in full at the time of a change in control.
The
agreements also generally provide that, if an executive’s employment is
terminated by us other than for cause or by the executive for good reason in the
absence of a change in control, the executive will receive 12 months of salary
continuation, a prorated annual bonus for the year in which the termination
occurs, 12 months of medical coverage and 12 months of continued vesting of the
executive’s existing equity awards. If any parts or amounts payable
under the executive's employment agreement are deemed to be "excess
21
parachute
payments" within the meaning of Section 280G of the Code or similar provision,
the company may be required to pay the executive an additional cash
amount (gross-up payment).
In the
agreements, the executives agree to non-competition and non-solicitation
provisions that extend through the first anniversary of termination of
employment, unless the termination was due to a “hostile takeover” as defined in
the agreement.
The board
has determined that it is in our best interests and our shareholders to assure
that we will have the continued dedication of the executive, notwithstanding the
possibility, threat, or occurrence of a change in control. The board believes it
is imperative to diminish the inevitable distraction of the executive by virtue
of the personal uncertainties and risks created by a pending or threatened
change in control, to encourage the executive’s full attention and dedication to
us, and to provide the executive with compensation and benefits arrangements
upon a change in control which (i) will satisfy the executive’s
compensation and benefits expectations and (ii) are competitive with those
of other major corporations.
Deductibility
of Executive Compensation
Section 162(m)
of the Internal Revenue Code generally disallows a tax deduction to a publicly
traded company for compensation in excess of $1 million paid to our chief
executive officer and its four other most highly compensated executive officers.
Some types of compensation, including qualified performance-based compensation,
will not be subject to the deduction limit if specified requirements are met. In
general, we structure and administer our stock incentive plans in a manner
intended to comply with the performance-based exception to Section 162(m).
Additionally, we intend that our Short-Term Executive Compensation Plan complies
with the performance-based exception to Section 162(m). Nevertheless, there
can be no assurance that compensation attributable to awards granted under our
stock option plans or our Short-Term Executive Compensation Plan will be treated
as qualified performance-based compensation under Section 162(m). In
addition, the compensation committee reserves the right to use its judgment to
authorize compensation payments that may be subject to the limit when the
compensation committee believes such payments are appropriate and in the best
interests of us and our stockholders, after taking into consideration changing
business conditions and the performance of its employees.
The
following table summarizes the compensation of our Named Executive Officers for
the fiscal years ended December 31, 2008, 2007 and 2006. Additional
description of each component of compensation for our Named Executive Officers
is included elsewhere in this Proxy Statement under the caption, “Compensation
Discussion and Analysis.”
|
Name &
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($) 1
|
Option
Awards
($) 2
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||
|
Michael F. Neidorff
|
2008
|
$
|
1,000,000
|
$
|
1,250,000
|
$
|
4,718,780
|
3
|
$
|
1,387,338
|
$
|
418,365
|
4
|
$
|
8,774,483
|
|||||||
|
Chairman,
President and Chief Executive Officer
|
2007
|
1,000,000
|
1,000,000
|
3,977,009
|
3
|
2,296,518
|
477,224
|
8,750,751
|
||||||||||||||
|
2006
|
950,000
|
—
|
3,931,941
|
3
|
2,767,140
|
397,228
|
8,046,309
|
|||||||||||||||
|
Eric
R. Slusser
|
2008
|
525,000
|
325,000
|
237,147
|
178,340
|
267,205
|
5
|
1,532,692
|
||||||||||||||
|
Executive
Vice President and Chief Financial Officer
|
2007
|
228,365
|
275,000
|
59,427
|
86,297
|
63,986
|
713,075
|
|||||||||||||||
|
Mark
W. Eggert
|
2008
|
550,000
|
455,000
|
180,189
|
174,719
|
18,424
|
6
|
1,378,332
|
||||||||||||||
|
Executive
Vice President, Health Plan Business Unit
|
||||||||||||||||||||||
|
Carol E. Goldman
|
2008
|
400,000
|
325,000
|
149,217
|
218,395
|
54,371
|
7
|
1,146,983
|
||||||||||||||
|
Executive
Vice President and Chief Administrative Officer
|
2007
|
375,000
|
170,000
|
84,044
|
285,068
|
25,603
|
939,715
|
|||||||||||||||
|
2006
|
325,000
|
32,058
|
23,546
|
285,078
|
18,719
|
684,401
|
||||||||||||||||
|
William N. Scheffel
|
2008
|
575,000
|
500,000
|
231,221
|
391,044
|
27,750
|
8
|
1,725,015
|
||||||||||||||
|
Executive
Vice President, Specialty Business Unit
|
2007
|
510,000
|
350,000
|
107,571
|
467,477
|
26,362
|
1,461,410
|
|||||||||||||||
|
2006
|
425,000
|
11,947
|
29,458
|
436,650
|
22,498
|
925,553
|
||||||||||||||||
________________________________
|
1
|
The
amounts reported as Stock Awards reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year ended
December 31, 2008, 2007 and 2006 in accordance with Statement of
Financial Accounting Standards No. 123 (revised 2004), or SFAS 123R,
of stock awards granted under the 2003 Stock Incentive Plan and
thus may include amounts from awards granted in and prior to the presented
year. Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. Assumptions used in the calculation of this amount
for fiscal years ended December 31, 2008, 2007 and 2006 are included
in footnote 15 to the Company’s audited financial statements for the
fiscal year ended December 31, 2008, included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission
on February 23, 2009. Assumptions used in the
calculation of this amount for fiscal years ended December 31, 2005
and 2004, are included in footnote 12 to the Company’s audited
financial statements for the fiscal year ended December 31, 2005,
included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission
on February 24, 2006.There can be no assurance that the
grant date fair value of Stock Awards will ever be
realized.
|
|
2
|
The
amounts reported as Option Awards reflect the dollar amount
recognized for financial statement reporting purposes for the fiscal year
ended December 31, 2008, 2007 and 2006 in accordance with SFAS
123R of option awards granted under our stock plans and thus
include amounts from awards granted in and prior to the presentation year.
Pursuant to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. Assumptions used
in the calculation of this amount for fiscal years ended December 31,
2008, 2007 and 2006 are included in footnote 15 to the Company’s
audited financial statements for the fiscal year ended December 31,
2008, included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 23, 2009.
Assumptions used in the calculation of this amount for fiscal years ended
December 31, 2005 and 2004, are included in footnote 12 to the
Company’s audited financial statements for the fiscal year ended
December 31, 2005, included in the Company’s Annual Report on Form
10-K filed with the Securities and Exchange Commission
on February 24, 2006. There can be no assurance that
the grant date fair value of Option Awards will ever be
realized.
|
|
3
|
The
amount reported as stock awards for Mr. Neidorff represents the
expense recorded in 2008, 2007 and 2006, respectively, for the restricted
stock awards granted to Mr. Neidorff in 2004, 2007 and 2008. The full
grant date fair value of the 2004 award was previously disclosed in the
Summary Compensation Table in 2004.
|
|
4
|
All
other compensation includes $172,923 of personal use of company provided
aircraft. Pursuant to the policy established by our board, our Chairman,
President and Chief Executive Officer is required to use company provided
aircraft for all travel, a taxable benefit to Mr. Neidorff pursuant
to the applicable Internal Revenue Service regulations. For flights on
corporate aircraft, aggregate incremental cost is calculated based on a
cost-per-flight-hour charge developed by a nationally recognized and
independent service. This flight-hour charge reflects the direct operating
costs of the aircraft, including fuel, additives and lubricants, airport
fees and assessments, as well as aircraft landing and parking, customs and
permit fees, in-flight supplies and food, and flight planning and weather
services. In addition, the flight-hour charge provides for periodic engine
and auxiliary power unit overhauling, outside labor and maintenance parts
for the airframe, engine and avionics, crew travel expenses and other
miscellaneous costs. The other amounts included in other compensation for
Mr. Neidorff include $125,442 in life insurance benefits, $79,000 for
security services, nonqualified deferred compensation match, tax
preparation fees and 401K match.
|
|
5
|
All
other compensation includes $192,291 for relocation expenses, $47,523 for
security services, nonqualified deferred compensation match, as well as
401k match, tax preparation services and life insurance
benefits.
|
|
6
|
All
other compensation includes tax preparation and financial planning fees as
well as life insurance benefits.
|
|
7
|
All
other compensation includes security services, tax preparation fees,
personal aircraft usage as well as life insurance
benefits.
|
|
8
|
All
other compensation includes nonqualified deferred compensation
match.
|
The
following table provides information on 2008 grants of stock options and
restricted stock units under the 2003 Stock Incentive Plan, as well as 2008
cash-based grants under the 2007 Long-Term Incentive Plan to each of our Named
Executive Officers. The portion of these stock awards that was expensed on our
statement of operations in 2008 is shown in the Summary Compensation Table. The
vesting provisions of the equity awards are included in the footnotes to the
Outstanding Equity Awards at Fiscal Year-End Table.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
All Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units (#)
2
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Closing
Market Price on Date of Grant
($/Sh)
|
||||||||||||||||||||
|
Name
|
Grant
Date
|
Threshold ($) | Target ($) |
Maximum
($)
|
Grant
Date
Fair Value ($) 3
|
|||||||||||||||||||
|
Michael
F. Neidorff
|
10/27/2008
|
$
|
1
|
$
|
1,500,000
|
$
|
1
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
12/10/2008
|
—
|
—
|
—
|
100,000
|
—
|
—
|
—
|
1,691,000
|
||||||||||||||||
|
Eric
R. Slusser
|
10/27/2008
|
1
|
525,000
|
1
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
12/9/2008
|
—
|
—
|
—
|
10,000
|
—
|
—
|
—
|
179,200
|
||||||||||||||||
|
Mark
W. Eggert
|
10/27/2008
|
1
|
550,000
|
1
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
12/9/2008
|
—
|
—
|
—
|
20,000
|
—
|
—
|
—
|
358,400
|
||||||||||||||||
|
Carol
E. Goldman
|
10/27/2008
|
1
|
400,000
|
1
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
12/9/2008
|
—
|
—
|
—
|
20,000
|
—
|
—
|
—
|
358,400
|
||||||||||||||||
|
William
N. Scheffel
|
10/27/2008
|
1
|
575,000
|
1
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
12/9/2008
|
—
|
—
|
—
|
20,000
|
—
|
—
|
—
|
358,400
|
||||||||||||||||
_________________________
|
1
|
Grants
under the 2007 Long-term Incentive Plan were made by the Board of
Directors in October 2008, and established at
target. Performance conditions, as well as thresholds and
maximums related to the grant are expected to be approved by the Board of
Directors or Compensation Committee prior to the annual
meeting.
|
|
2
|
All
2008 stock grants were made under the 2003 Stock Incentive
Plan.
|
|
3
|
The
Grant Date Fair Value is determined in accordance with SFAS 123R.
Assumptions used in the calculation of this amount are included in
footnote 15 to the Company’s audited financial statements for the
fiscal year ended December 31, 2008, included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission
on February 23, 2009. There can be no assurance that the
Grant Date Fair Value of Stock Awards will ever be
realized.
|
The
following table shows the number of shares covered by exercisable and
unexercisable options and unvested RSUs held by our Named Executive Officers on
December 31, 2008:
|
Name
|
Option
Awards
|
Stock
Awards
|
|||||||||||||
|
Number of Securities
Underlying
Unexercised
Options
(#
Exercisable)
|
Number
of Securities
Underlying
Unexercised
Unearned
Options
(# Unexercisable)
|
Option
Exercise
Price
1
($)
|
|
Option
Expiration
Date
|
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
|
Market
Value of
Shares or Units
of Stock That
Have Not
Vested ($)
|
|||||||||
|
Michael
F. Neidorff
|
10,210
|
—
|
$
|
7.57
|
|
7/24/2012
|
1,000,000
|
3
|
$
|
19,710,000
|
|||||
|
254,036
|
—
|
13.58
|
|
8/26/2013
|
100,000
|
4
|
1,971,000
|
||||||||
|
200,000
|
—
|
13.98
|
|
12/16/2013
|
100,000
|
5
|
1,971,000
|
||||||||
|
180,000
|
—
|
17.85
|
|
7/27/2014
|
—
|
—
|
|||||||||
|
200,000
|
—
|
25.40
|
|
12/13/2015
|
—
|
—
|
|||||||||
|
66,667
|
33,333
|
2
|
25.21
|
|
12/12/2016
|
—
|
—
|
||||||||
|
Eric
R. Slusser
|
15,000
|
60,000
|
6
|
21.97
|
7/9/2017
|
20,000
|
7
|
394,200
|
|||||||
|
—
|
—
|
—
|
—
|
20,000
|
8
|
394,200
|
|||||||||
|
—
|
—
|
—
|
—
|
10,000
|
5
|
197,100
|
|||||||||
|
Mark
W. Eggert
|
15,000
|
60,000
|
9
|
22.23
|
11/13/2017
|
20,000
|
10
|
394,200
|
|||||||
|
—
|
—
|
—
|
—
|
10,000
|
8
|
197,100
|
|||||||||
|
—
|
—
|
—
|
—
|
20,000
|
5
|
394,200
|
|||||||||
|
Carol
E. Goldman
|
7,500
|
—
|
7.57
|
|
7/24/2012
|
8,800
|
15
|
173,448
|
|||||||
|
20,000
|
—
|
13.58
|
|
8/26/2013
|
10,000
|
8
|
197,100
|
||||||||
|
6,056
|
—
|
13.98
|
|
12/16/2013
|
20,000
|
5
|
394,200
|
||||||||
|
6,000
|
3,000
|
11
|
16.65
|
|
5/4/2014
|
—
|
—
|
||||||||
|
32,000
|
8,000
|
12
|
26.07
|
|
12/8/2014
|
—
|
—
|
||||||||
|
6,000
|
4,000
|
13
|
25.40
|
|
12/13/2015
|
—
|
—
|
||||||||
|
2,000
|
3,000
|
14
|
25.21
|
|
12/12/2016
|
—
|
—
|
||||||||
|
William
N. Scheffel
|
34,486
|
—
|
15.35
|
|
12/1/2013
|
11,000
|
17
|
216,810
|
|||||||
|
24,000
|
6,000
|
11
|
16.65
|
|
5/4/2014
|
20,000
|
8
|
394,200
|
|||||||
|
40,000
|
10,000
|
12
|
26.07
|
|
12/8/2014
|
20,000
|
5
|
394,200
|
|||||||
|
15,000
|
10,000
|
16
|
32.06
|
|
7/26/2015
|
—
|
—
|
||||||||
|
6,000
|
4,000
|
13
|
25.40
|
|
12/13/2015
|
—
|
—
|
||||||||
|
4,000
|
6,000
|
14
|
25.21
|
|
12/12/2016
|
—
|
—
|
||||||||
_____________________
|
1
|
The
option price for each grant is equal to the previous day’s closing market
price.
|
|
2
|
The
options vest on December 12, 2009.
|
|
3
|
600,000
shares vest on November 8, 2009 and 80,000 shares vest each on November 8,
2010, 2011, 2012, 2013 and 2014.
|
|
4
|
The
shares vest in three equal installments beginning on February 20, 2009 and
continuing annually on the anniversary of the grant date beginning on
December 12, 2009.
|
|
5
|
If
performance conditions for 2009 are met, the shares vest in three equal
annual installments beginning in February 2010. If performance
conditions are not met, the shares vest in four equal annual installments
beginning in February 2010.
|
|
6
|
The
options vest in four equal annual installments on the anniversary of the
grant date beginning on July 9, 2009.
|
|
7
|
The
shares vest in four equal annual installments on the anniversary of the
grant date beginning on July 9, 2009.
|
|
8
|
The
shares vest in four equal installments beginning on February 20, 2009 and
continuing annually on the anniversary of the grant date beginning on
December 12, 2009.
|
|
9
|
The
options vest in four equal annual installments on the anniversary of the
grant date beginning on November 12, 2009.
|
|
10
|
The
shares vest in four equal annual installments on the anniversary of the
grant date beginning on November 12, 2009.
|
|
11
|
The
options vest on May 4, 2009.
|
|
12
|
The
options vest on December 8, 2009.
|
|
13
|
The
options vest in two equal annual installments on the anniversary of the
grant date beginning on December 13, 2009.
|
|
14
|
The
options vest in three equal annual installments on the anniversary of the
grant date beginning on December 12, 2009.
|
|
15
|
1,600
shares vest in two equal annual installments on the anniversary of the
grant date beginning on December 13, 2009; 7,200 shares vest in three
equal annual installments on the anniversary of the grant date beginning
on December 12, 2009.
|
|
16
|
The
options vest in two equal annual installments on the anniversary of the
grant date beginning on July 26, 2009.
|
|
17
|
2,000
shares vest in two equal annual installments on the anniversary of the
grant date beginning on December 13, 2009; 9,000 shares vest in three
equal annual installments on the anniversary of the grant date beginning
on December 12, 2009.
|
The
following table shows the number of shares of Centene stock acquired by our
Named Executive Officers in 2008 upon exercise of options or vesting of
RSUs:
|
Name
|
Option
Awards
|
Stock
Awards
|
|||||||||
|
Number of Shares
Acquired on Exercise (#)
|
Value Realized on
Exercise
($)2
|
Number of Shares
Acquired on Vesting (#)
|
Value Realized on
Vesting
($)4
|
||||||||
|
Michael
F. Neidorff
|
9,799
|
3
|
$
|
112,493
|
—
|
$
|
—
|
||||
|
Eric
R. Slusser
|
—
|
—
|
5,000
|
3
|
89,100
|
||||||
|
Mark
W. Eggert
|
—
|
—
|
5,000
|
3
|
85,600
|
||||||
|
Carol
E. Goldman
|
17,359
|
4
|
196,479
|
3,200
|
3
|
51,432
|
|||||
|
William
N. Scheffel
|
2,000
|
3
|
140
|
4,000
|
3
|
64,290
|
|||||
_____________________
|
1
|
All
options exercised and stock awards vested are reflected in basic shares
outstanding.
|
|
2
|
Amounts
presented are on a pre-tax basis.
|
|
3
|
These
options or stock units were exercised or vested and the resulting shares
held, resulting in a deferral in the value realized.
|
|
4
|
15,000
of these options were exercised and the resulting shares held, resulting
in a deferral in the value
realized.
|
Under the
Company’s Deferred Compensation Plan, the Named Executive Officers may
contribute any designated percentage of salary and / or bonus into the plan
which serves as an excess savings plan when tax limitations are reached under
our tax qualified 401(k) plan. The following table shows the change in the
Nonqualified Deferred Compensation balances for our Named Executive Officers for
the fiscal year ended December 31, 2008:
|
Name
|
|
Executive
Contributions in
Last
FY ($) 1
|
|
Registrant
Contributions in
Last
FY ($) 2
|
|
Aggregate
Earnings
(Losses)
in Last
FY ($) 3
|
|
Aggregate
Withdrawals/
Distributions ($)
|
Aggregate Balance
at
Last FYE ($) 4
|
|||||||
|
Michael
F. Neidorff
|
|
$
|
60,000
|
|
$
|
23,100
|
|
$
|
(155,384)
|
|
$
|
—
|
$
|
488,236
|
||
|
Eric
R. Slusser
|
31,500
|
9,860
|
2,161
|
—
|
55,211
|
|||||||||||
|
Mark
W. Eggert
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
|
Carol
E. Goldman
|
|
24,000
|
|
6,969
|
|
(43,374)
|
|
—
|
72,101
|
|||||||
|
William
N. Scheffel
|
|
55,500
|
|
20,850
|
|
(68,318)
|
|
—
|
159,308
|
|||||||
_____________________
|
1
|
Executive
contributions are included in the Salary column in the Summary
Compensation Table.
|
|
2
|
Registrant
contributions are included in the Other Compensation column in the Summary
Compensation Table.
|
|
3
|
The
company does not pay above market interest or preferential dividends on
investments in the Deferred Compensation
Plan.
|
|
4
|
The
Aggregate Balance at Last Fiscal Year-End column includes money the
company owes these individuals for salaries and incentive compensation
they earned in prior years but did not receive because they elected to
defer receipt of it and save it for retirement. For fiscal 2008, the
amounts described in footnote 1 are included in the Summary Compensation
Table as described in footnote 1. For fiscal 2007, the following aggregate
amounts of executive contributions were included in the Summary
Compensation Table: Mr. Neidorff -$60,000; Mr. Slusser-$7,673; Ms.
Goldman-$11,136; Mr. Scheffel -$30,207. For fiscal 2006, the following
aggregate amounts of executive and Company contributions were included in
the Summary Compensation Table: Mr. Neidorff -$56,978; Ms.
Goldman-$13,000; Mr. Scheffel -$25,500. For prior years, all amounts
contributed by a named executive officer in such years have been
|
|
|
reported
in the Summary Compensation Table in our previously filed proxy statements
in the year earned, to the extent the executive was named in such proxy
statements and the amounts were so required to be reported in such
tables.
|
The
following table summarizes the compensation of our non-employee directors for
the fiscal year ended December 31, 2008:
|
Name
|
|
Fees Earned or Paid
in
Cash ($)
|
|
Stock Awards ($) 1
|
|
Option Awards ($) 2
|
|
Total
($)
|
||||
|
Steve
Bartlett
|
|
$
|
—
|
|
$
|
207,949
|
|
$
|
—
|
|
$
|
207,949
|
|
Robert
K. Ditmore
|
|
—
|
|
219,615
|
|
—
|
|
219,615
|
||||
|
Frederick
H. Eppinger
|
|
—
|
|
207,949
|
|
46,391
|
|
254,340
|
||||
|
Richard
A. Gephardt
|
|
103,333
|
|
91,282
|
|
44,484
|
|
239,099
|
||||
|
Pamela
A. Joseph
|
—
|
225,817
|
38,038
|
263,885
|
||||||||
|
John
R. Roberts
|
|
—
|
|
231,282
|
|
501
|
|
231,783
|
||||
|
David
L. Steward
|
|
—
|
|
219,615
|
|
—
|
|
219,615
|
||||
|
Tommy
G. Thompson
|
|
—
|
|
219,615
|
|
—
|
|
219,615
|
||||
_____________________
|
1
|
The
amounts reported as Stock Awards reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year ended
December 31, 2008, in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004), or SFAS 123R, of stock
awards granted under the 2003 Stock Incentive Plan and Non-Employee
Directors Deferred Stock Compensation Plan, and thus may include amounts
from awards granted in and prior to 2008. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. Assumptions used in the calculation of
these amounts are included in footnote 15 to the Company’s audited
financial statements for the fiscal year ended December 31, 2008,
included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 23,
2009. There can be no assurance that the grant date fair value of
Stock Awards will ever be realized. Further detail of the stock
awards included herein is discussed
below.
|
|
2
|
The
amounts reported as Option Awards reflect the dollar amount
recognized for financial statement reporting purposes for the fiscal year
ended December 31, 2008, in accordance with SFAS 123R
of option awards granted under our stock plans and thus include
amounts from awards granted in and prior to 2008. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. Assumptions used in the calculation of
this amount for fiscal years ended December 31, 2008, 2007 and 2006
are included in footnote 15 to the Company’s audited financial
statements for the fiscal year ended December 31, 2008, included in
the Company’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on February 23, 2009. There can be no
assurance that the grant date fair value of Option Awards will ever
be realized. Further discussion of the option awards included herein is
discussed below.
|
Non-employee
directors currently receive a quarterly retainer fee of $31,250, provided that
the director elects 100% payment pursuant to the Company’s Non-Employee
Directors Deferred Stock Compensation Plan. Directors not making this election
receive a quarterly retainer fee of $25,000. In addition, the
chairman of the Audit Committee receives a quarterly retainer fee of $7,500 and
the chairman of the Compensation Committee, the Nominating and Governance
Committee, and Government and Regulatory Affairs Committee each receives a
quarterly fee of $3,750. All cash fees are eligible for deferral
under the Non-Employee Directors Deferred Stock Compensation Plan. Expense
recognized in conjunction with the deferred stock election is included in the
“Stock Awards” column in the Director Compensation Table above.
Each new
non-employee director, as of the date on which such director is first elected to
the board, is granted an option under our 2003 Stock Incentive Plan to purchase
10,000 shares of our common stock vesting in three equal annual installments
commencing on the first anniversary of the grant date. Additionally, each
non-employee director receives a grant, as of the date of each annual meeting of
stockholders, or when first elected to the board, of restricted shares of our
common stock having a deemed value of $100,000 (or equivalent equity-based
incentives payable in common stock). During the year ended December 31,
2008, each of the eight non-employee directors were granted restricted shares
with a grant date fair market value of $100,000.
The
following table shows the number of shares covered by exercisable and
unexercisable options and unvested RSUs held by our board of directors on
December 31, 2008:
|
Option
Awards
|
Stock
Awards
|
||||||||
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#
Exercisable)
|
|
Number
of Securities Underlying Unexercised Options (#
Unexercisable)
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|||
|
Steve
Bartlett
|
|
|
—
|
|
|
—
|
|
|
7,168
|
|
Robert
K. Ditmore
|
|
|
32,500
|
|
|
—
|
|
|
7,168
|
|
Frederick
H. Eppinger
|
|
6,667
|
|
3,333
|
|
7,168
|
|||
|
Richard
A. Gephardt
|
|
6,667
|
|
3,333
|
|
7,168
|
|||
|
Pamela
A. Joseph
|
3,334
|
6,666
|
7,168
|
||||||
|
John
R. Roberts
|
|
10,000
|
|
5,000
|
|
7,168
|
|||
|
David
L. Steward
|
|
25,000
|
|
—
|
|
7,168
|
|||
|
Tommy
G. Thompson
|
|
10,000
|
|
—
|
|
7,168
|
|||
Directors
are reimbursed for all reasonable expenses incurred in connection with their
service. Directors who are also our employees receive no additional compensation
for serving on our board of directors.
In
addition, the board has in the past granted, and may in the future grant, stock
options and other equity awards to both employee and non-employee directors
under our stock plans. For example, in December 2008, the Board of
Directors approved the grant of 5,000 options to John R.
Roberts. These options vest in five equal annual installments
beginning on the anniversary of the grant date on December 10,
2009.
The
section below describes the payments that may be made to our Named Executive
Officers upon termination or a change in control. Generally, pursuant to our
executive agreements, a change in control is deemed to occur:
|
•
|
If
any individual, entity or group (other than a group which includes the
executive) acquires 40% or more of the voting power of our outstanding
securities;
|
|
•
|
If
a majority of the incumbent board of directors are replaced. For these
purposes, the incumbent board of directors means the directors who were
serving as of the effective date of the applicable executive agreement and
any individual who becomes a director subsequent to such date whose
election or nomination for election was approved by a majority of such
directors, other than in connection with a proxy
contest; or
|
|
•
|
Upon
the consummation of a merger or consolidation of the Company with another
person, other than a merger or consolidation where the individuals and
entities who were beneficial owners, respectively, of our outstanding
voting securities immediately prior to such merger or consolidation own
50% or more of the then-outstanding shares of the combined voting power of
the then-outstanding voting securities of the corporation resulting from
such merger or consolidation.
|
The
amounts presented below assume the termination or change in control occurred as
of December 31, 2008. The applicable agreements are discussed in the
Compensation Discussion and Analysis under the heading- “Employment Contracts,
Termination of Employment Arrangements, and Change in Control Arrangements”
included on page 19 of this Proxy Statement.
Michael
F. Neidorff
|
Executive
Benefits and
Payments
Upon Terminations
|
Voluntary
Termination
|
Involuntary
Not for Cause
or
Voluntary
with
Good
Reason
Termination
|
For
Cause
Termination
|
Retirement
|
Death
|
Disability
|
Change
in
Control
|
||||||||||||||
|
Severance
|
$ | — | $ | 6,750,000 | $ | — | $ | — | $ | — | $ | — | $ | 6,750,000 | |||||||
|
Pro
rata Bonus Payment
|
— | 1,250,000 | — | — | 1,250,000 | 1,250,000 | 1,250,000 | ||||||||||||||
|
Unvested
Restricted Stock
|
— | 11,826,000 | — | — | 21,681,000 | 21,681,000 | 21,681,000 | ||||||||||||||
|
Long-term
Incentive Plan Payment
|
— | 4,896,000 | — | 551,004 | 4,896,000 | 4,896,000 | 4,896,600 | ||||||||||||||
|
Welfare
Benefits Values
|
— | — | — | — | 5,000,000 | — | — | ||||||||||||||
|
Excise
Tax & Gross-Up
|
— | — | — | — | — | — | 8,267,243 | ||||||||||||||
Eric
R. Slusser
|
Executive
Benefits and
Payments
Upon Terminations
|
Voluntary
Termination
|
Involuntary
Not for Cause
Termination
|
For
Cause
Termination
|
Death
|
Disability
|
Change in
Control
|
|||||||||||||||||
|
Severance
|
$ | — | $ | 525,000 | $ | — | $ | — | $ | — | $ | 1,837,500 | |||||||||||
|
Pro
rata Bonus Payment
|
— | 393,750 | — | — | — | 393,750 | |||||||||||||||||
|
Unvested
Restricted Stock
|
— | 98,550 | — | — | — | 591,300 | |||||||||||||||||
|
Long-term
Incentive Plan Payment
|
— | 197,100 | — | 174,484 | 174,484 | 1,344,200 | |||||||||||||||||
|
Welfare
Benefits Values
|
— | 12,475 | — | 850,000 | — | 141,665 | |||||||||||||||||
|
Outplacement
|
— | 10,000 | — | — | — | 10,000 | |||||||||||||||||
|
Excise
Tax & Gross-Up
|
— | — | — | — | — | 1,548,187 | |||||||||||||||||
Mark
W. Eggert
|
Executive
Benefits and
Payments
Upon Terminations
|
Voluntary
Termination
|
Involuntary
Not for Cause
Termination
|
For
Cause
Termination
|
Death
|
Disability
|
Change in
Control
|
|||||||||||||||||
|
Severance
|
$ | — | $ | 550,000 | $ | — | $ | — | $ | — | $ | 1,925,000 | |||||||||||
|
Pro
rata Bonus Payment
|
— | 412,500 | — | — | — | 412,500 | |||||||||||||||||
|
Unvested
Restricted Stock
|
— | 98,550 | — | — | — | 788,400 | |||||||||||||||||
|
Long-term
Incentive Plan Payment
|
— | 98,550 | — | 202,035 | 202,035 | 747,100 | |||||||||||||||||
|
Welfare
Benefits Values
|
— | 12,475 | — | 750,000 | — | 117,986 | |||||||||||||||||
|
Outplacement
|
— | 10,000 | — | — | — | 10,000 | |||||||||||||||||
|
Excise
Tax & Gross-Up
|
— | — | — | — | — | 1,370,722 | |||||||||||||||||
Carol
E. Goldman
|
Executive
Benefits and
Payments
Upon Terminations
|
Voluntary
Termination
|
Involuntary
Not for Cause
Termination
|
For
Cause
Termination
|
Death
|
Disability
|
Change in
Control
|
|||||||||||||||||
|
Severance
|
$ | — | $ | 400,000 | $ | — | $ | — | $ | — | $ | 970,000 | |||||||||||
|
Pro
rata Bonus Payment
|
— | 300,000 | — | — | — | 300,000 | |||||||||||||||||
|
Unvested
Stock Option Spread
|
— | 9,180 | — | — | — | 9,180 | |||||||||||||||||
|
Unvested
Restricted Stock
|
— | 63,072 | — | — | — | 567,648 | |||||||||||||||||
|
Long-term
Incentive Plan Payment
|
— | 98,550 | — | 82,651 | 82,651 | 617,100 | |||||||||||||||||
|
Welfare
Benefits Values
|
— | — | — | 1,000,000 | — | 158,334 | |||||||||||||||||
|
Outplacement
|
— | 10,000 | — | — | — | 10,000 | |||||||||||||||||
|
Excise
Tax & Gross-Up
|
— | — | — | — | — | 817,337 | |||||||||||||||||
William
N. Scheffel
|
Executive
Benefits and
Payments
Upon Terminations
|
Voluntary
Termination
|
Involuntary
Not for Cause
Termination
|
For
Cause
Termination
|
Death
|
Disability
|
Change in
Control
|
|||||||||||||||||
|
Severance
|
$ | — | $ | 575,000 | $ | — | $ | — | $ | — | $ | 1,500,000 | |||||||||||
|
Pro
rata Bonus Payment
|
— | 431,250 | — | — | — | 431,250 | |||||||||||||||||
|
Unvested
Stock Option Spread
|
— | 18,360 | — | — | — | 18,360 | |||||||||||||||||
|
Unvested
Restricted Stock
|
— | 78,840 | — | — | — | 611,010 | |||||||||||||||||
|
Long-term
Incentive Plan Payment
|
— | 197,100 | — | 187,341 | 187,341 | 1,329,200 | |||||||||||||||||
|
Welfare
Benefits Values
|
— | 12,475 | — | 550,000 | — | 111,461 | |||||||||||||||||
|
Outplacement
|
— | 10,000 | — | — | — | 10,000 | |||||||||||||||||
|
Excise
Tax & Gross-Up
|
— | — | — | — | — | 1,495,186 | |||||||||||||||||
Compensation Committee Interlocks and Insider
Participation
During
fiscal year 2008, none of our executive officers served as a director or member
of the Compensation Committee, or other committee serving an equivalent
function, of any other entity that has one or more of its executive officers
serving as a member of our board of directors or Compensation Committee. None of
the current members of our Compensation Committee has ever been an officer or
employee of Centene or any of our subsidiaries
The
following table sets forth information regarding ownership of our common stock
as of February 27, 2009 for:
|
•
|
each
person, entity or group of affiliated persons or entities known by us to
beneficially own more than 5% of our outstanding common
stock;
|
|
•
|
each
of our Named Executive Officers, directors (three of whom are nominated
for re-election); and
|
|
•
|
all
of our executive officers and directors as a
group.
|
|
Beneficial
Ownership
|
||||||||||||
|
Name
and Address of Beneficial Owner
|
Outstanding
Shares
|
Shares
Acquirable
Within 60 Days
|
Total
Beneficial
Ownership
|
Percent
Ownership
|
Shares
Not
Acquirable
Within 60 Days1
|
|||||||
|
FRM
LLC
|
4,286,142
|
—
|
4,286,142
|
9.9
|
—
|
|||||||
|
82
Devonshire Street
Boston,
Massachusetts 02109
|
||||||||||||
|
Renaissance
Technologies
|
3,354,600
|
—
|
3,354,600
|
7.8
|
—
|
|||||||
|
800
Third Avenue, 33th Floor
New
York, New York 10022
|
||||||||||||
|
T.
Rowe Price Associates, Inc.
|
3,111,500
|
—
|
3,111,500
|
7.2
|
—
|
|||||||
|
100
East Pratt Street
Baltimore,
Maryland 21202
|
||||||||||||
|
Wellington
Management Company, LLP
|
2,252,408
|
—
|
2,252,408
|
5.2
|
—
|
|||||||
|
75
State Street
Boston,
Massachusetts 02109
|
||||||||||||
|
Michael
F. Neidorff
|
242,051
|
910,913
|
1,152,964
|
2.6
|
1,228,519
|
|||||||
|
Robert
K. Ditmore
|
338,163
|
2
|
58,960
|
397,123
|
3
|
*
|
—
|
|||||
|
William
N. Scheffel
|
33,608
|
123,486
|
157,094
|
*
|
82,000
|
|||||||
|
Carol
E. Goldman
|
23,750
|
79,556
|
103,306
|
*
|
54,521
|
|||||||
|
David
L. Steward
|
12,373
|
51,460
|
63,833
|
3
|
*
|
—
|
||||||
|
John
R. Roberts
|
18,373
|
4
|
37,643
|
56,016
|
3
|
*
|
5,000
|
|||||
|
Steve
Bartlett
|
21,173
|
25,238
|
46,411
|
3
|
*
|
—
|
||||||
|
Tommy
G. Thompson
|
9,873
|
34,227
|
44,100
|
3
|
*
|
—
|
||||||
|
Frederick
H. Eppinger
|
5,792
|
27,949
|
33,741
|
3
|
*
|
3,333
|
||||||
|
Pamela
A. Joseph
|
7,554
|
17,862
|
25,416
|
3
|
*
|
6,666
|
||||||
|
Eric
R. Slusser
|
8,377
|
15,000
|
23,377
|
*
|
108,053
|
|||||||
|
Mark
W. Eggert
|
5,065
|
15,000
|
20,065
|
*
|
107,500
|
|||||||
|
Richard
A. Gephardt
|
6,102
|
13,835
|
19,937
|
3
|
*
|
3,333
|
||||||
|
All
directors and executive officers as a group (20 persons)
|
759,106
|
1,547,229
|
2,306,335
|
5.2
|
1,893,375
|
|||||||
_____________________
|
*
|
Represents
less than 1% of outstanding shares of common
stock.
|
|
1
|
The
share numbers in the column labeled “Shares Not Acquirable Within 60 Days”
reflect the number of shares underlying options and restricted stock units
which are unvested and will not vest within 60 days of February 27, 2009.
The share numbers also include the number of phantom shares acquired
through the Company’s deferred compensation plan. Those shares are not
considered to be beneficially owned under the rules of the
SEC.
|
|
2
|
Mr. Ditmore’s
outstanding shares include 80,050 shares owned by family members, family
partnerships or trusts. Mr. Ditmore disclaims beneficial ownership
except to the extent of his pecuniary interest
therein.
|
|
3
|
Shares
beneficially owned by Messrs. Bartlett, Ditmore, Eppinger, Roberts,
Steward, Thompson and Ms. Joseph include 18,070, 19,292, 14,114, 20,475,
19,292, 17,059 and 7,360, respectively, restricted stock units acquired
through the Non-Employee Directors Deferred Stock Compensation
Plan.
|
|
4
|
Mr.
Roberts’ outstanding shares include 13,373 shares owned by a revocable
trust. Mr. Roberts disclaims beneficial ownership except to the
extent of his pecuniary interest
therein.
|
As of
February 27, 2009, there were 43,185,370 shares of our common stock outstanding.
Beneficial ownership is determined in accordance with the rules of the SEC. To
calculate a stockholder’s percentage of beneficial ownership, we include in the
numerator and denominator those shares underlying options beneficially owned by
that stockholder that are vested or that will vest within 60 days of February
27, 2009. Options held by other stockholders, however, are disregarded in the
calculation of beneficial ownership. Therefore, the denominator used in
calculating beneficial ownership among our stockholders may differ.
Unless
otherwise indicated, the persons or entities identified in this table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, except to the extent authority is shared by spouses under
applicable community property laws. The address of our officers and directors is
in care of Centene Corporation, 7711 Carondelet Avenue, St. Louis, Missouri
63105.
No
director, executive officer, affiliate or owner of record, or beneficial owner
of more than five percent of any class of our voting securities, or any
associate of such individuals or entities, is a party adverse to us or any of
our subsidiaries in any material proceeding or has any material interest adverse
to us or any of our subsidiaries.
Of
Mr. Neidorff’s 1,228,519 shares not acquirable within 60 days, 1,000,000
were granted in the form of restricted stock units, payable in shares of common
stock, pursuant to the executive employment agreement with Mr. Neidorff
dated November 8, 2004. The shares vest between 2009 and 2014. Subject to
such vesting, the restricted stock units and all of the related shares of common
stock shall be distributed to Mr. Neidorff on the later of
(a) January 15 of the first calendar year following termination of
Mr. Neidorff’s employment and (b) the date that is six months after
Mr. Neidorff’s “separation of service” as defined in the Internal Revenue
Code.
All other
shares not acquirable within 60 days represent options to purchase shares of
common stock or restricted stock units and vest in accordance with our standard
vesting provisions or phantom shares in our deferred compensation program which
will be settled in cash or other non-company securities.
Information
with respect to the outstanding shares beneficially owned by FRM LLC is based on
Schedule 13G filed with the SEC on February 17, 2009 by such
firm. FRM LLC reports that Edward C. Johnson and FRM LLC each has
sole power to dispose of 4,157,662 shares, Pyramis Global Advisors Trust
Company, an indirect, wholly owned subsidiary of FRM is the beneficial owner of
62,140; and FIL Limited, is the beneficial owner of 66,340 shares.
Information
with respect to the outstanding shares beneficially owned by Renaissance
Technologies LLC is based on Schedule 13G filed with the SEC on
February 13, 2009 by such firm. Renaissance Technologies LLC
reports that James H. Simons beneficially owns the 3,354,600 shares, of which it
holds sole voting power over 3,228,100 shares, sole dispositive power
over 3,316,900 shares, and shared dispositive power over 37,700
shares.
Information
with respect to the outstanding shares beneficially owned by T. Rowe Price
Associates, Inc. (Price Associates) is based on Schedule 13G filed with the SEC
on February 12, 2009 by such firm. Price Associates beneficially owns
3,111,500 shares, of which it holds sole voting power over 657,900 shares and
sole dispositive power over 3,111,500 shares. The securities are
owned by various individual and institutional investors which Price Associates
serves as investment advisor with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial
owner of such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities.
Information
with respect to the outstanding shares beneficially owned by Wellington
Management Company, LLP. is based on Schedule 13G filed with the SEC on
February 17, 2009 by such firm. Wellington
32
Management
Company, LLP beneficially owns 2,252,408 shares. Of the shares Wellington
Management Company, LLP owns, it has shared voting power over 1,500,408 shares
and shared dispositive power over 2,252,408 shares.
Directors,
executive officers and beneficial owners of more than ten percent of our common
stock are required by Section 16(a) of the Securities Exchange Act to file
reports with the SEC detailing their beneficial ownership of our common stock
and other equity securities and reporting changes in such beneficial ownership.
We are required to disclose any late filings of such reports. To our knowledge,
based solely on our review of copies of reports furnished to us and written
representations by the persons required to file these reports that no other
reports were required, all Section 16(a) filing requirements during 2008
were complied with on a timely basis, except that, due to administrative error,
Michael Neidorff failed to file a Form 4 on January 2, 2008, reporting a gift of
16,000 shares. This transaction was reported on a Form 4 on March 6,
2009.
If a
Named Executive Officer or member of the Board of Directors wants to sell shares
of the company’s stock, we require them to sell through a Rule 10b5-1 Sales Plan
in order to afford themselves affirmative defenses, protections and safeguards
provided by Rule 10b5-1 promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”).
Some
banks, brokers and other nominee record holders may be participating in the
practice of “householding”. This means that only one copy of either the proxy
notice or this proxy statement, our 2008 Summary Annual Report to Stockholders
and Annual Report on Form 10-K may have been sent to multiple stockholders
sharing an address unless the stockholders provide contrary instructions. We
will promptly deliver a separate copy of these documents to you if you call,
write or e-mail us at:
Centene
Corporation
7711
Carondelet Avenue
St.
Louis, Missouri 63105
Attn:
Keith H. Williamson, Secretary
(314)
725-4477
kwilliamson@centene.com
If you
want to receive separate copies of our proxy statements and annual reports to
stockholders in the future, or if you are receiving multiple copies and would
like to receive only one copy for your household, you should contact your bank,
broker or other nominee record holder, or you may contact us at the above
address, phone number or e-mail address.
33
