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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 1, 2005
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Commission File Number 0-31014
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HEALTHEXTRAS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-2181356
(STATE OF OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
800 KING FARM BOULEVARD
ROCKVILLE, MARYLAND 20850
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(301) 548-2900
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
/_/ Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 240.14d-2(b))
/_/ Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
/_/ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
/_/ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
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(i) On July 1, 2005, the Registrant entered into new employment agreements
with David T. Blair, Chief Executive Officer, Michael P. Donovan, Chief
Financial Officer, and Nick Grujich, Executive Vice President and Chief
Operating Officer of the Registrant. Mr. Blair is the son of Thomas L.
Blair, a member of the Board of Directors and a significant stockholder
of the Registrant. The employment agreements are for three year terms
commencing on July 1, 2005 and provide for initial annual base salaries
for Messrs. Blair, Donovan and Grujich of $350,000, $280,000 and
$237,500, respectively. In addition to base salary, the employment
agreements provide for, among other things, eligibility for a
discretionary incentive cash bonus, participation by the executives in
employee benefit plans maintained generally for employees as well as
those maintained for other senior executives, an automobile allowance
and other fringe benefits and reimbursement for reasonable expenses
incurred in performance of the executive's duties.
Upon an executive's termination for cause or upon the executive's
voluntary termination, the executive shall be entitled only to such
compensation and benefits as shall have accrued through the date of the
executive's termination or resignation, as the case may be. In the
event that an executive's employment is terminated by the Registrant
without cause or by the executive for good reason, as defined in the
agreement and including death or permanent disability, then the
executive shall receive payment of his base salary, automobile
allowance and continuation of health benefits for the longer of the
remaining term of the agreement or twelve months, and any earned but
unpaid incentive bonus and other benefits to which the executive is
entitled under employee benefit plans. In the event of a termination of
an executive's employment without cause by the Registrant or for good
reason by the executive, as defined in the agreement, within 18 months
after a change in control of the Registrant, as defined in the
agreement, the executive shall be entitled to the benefits he would
receive upon such termination generally, except that in lieu of the
amount for base salary, the executive shall be entitled to two times
the executive's base salary. However, if payments to an executive after
a change in control would be subject to the payment of an excise tax as
a "golden parachute" payment, the amounts payable under the agreement
will be reduced to an amount not subject to such excise tax. The
executive also will be subject to a Confidentiality and Non-Competition
Addendum pursuant to which, among other things, for two years after the
termination of his employment, he will not solicit in any manner any
business of the type performed by the Registrant from clients of the
Registrant.
Under the agreements, a change in control is defined to include the
following events: (i) individuals who are considered "Incumbent
Directors" cease within any twenty-four month period to constitute at
least a majority of the Board of Directors of the Company; (ii) any
person is or becomes a beneficial owner, directly or indirectly, of
securities representing 35% of the combined voting power of the
Company's then outstanding voting securities unless such person's
acquisition of 35% or more of such securities is approved in advance by
a majority of the Incumbent Board or certain other limited exceptions
apply; (iii) consummation of a merger or similar business combination
requiring shareholder approval unless 50% or more of the total voting
power of the surviving corporation (or at least 90% of the voting
securities of a parent corporation that owns at least 90% of the voting
securities of such surviving corporation), are held essentially in the
same proportion by the holders of Company securities immediately prior
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to such business combination; (iv) the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or
the consummation of a sale of all or substantially all of the Company's
assets; or (v) the occurrence of any other event that the Board
determines constitutes a change in control. Incumbent Directors are
directors who were directors of the Company as of June 7, 2005 and
certain other directors whose election or nomination for election to
the Board was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board.
"Good reason" for an executive to terminate his employment under the
agreement includes, in addition to death and permanent disability,
assignment to the executive of any duties inconsistent with executive's
position and the failure by the Company to honor the terms of the
agreement, other than certain minor actions contrary to the agreement.
In addition, after a change in control, good reason also includes (i)
any requirement that executive be based more than fifty miles from the
executive's primary office location and more than fifty miles from the
executive's principal residence at the time of the change in control or
travel substantially more frequent than prior to the change in control
and (ii) failure to continue to provide executive benefits
substantially equivalent to those provided prior to the change in
control.
(ii) In addition, on July 1, 2005, the Registrant granted awards of stock
under the 2003 HealthExtras, Inc. Equity Incentive Plan (the "Equity
Incentive Plan") as follows: (a) 60,000 shares to David T. Blair, Chief
Executive Officer, (b) 30,000 shares to Michael P. Donovan, Chief
Financial Officer, and (c) 30,000 shares to Kevin C. Hooks, Executive
Vice President and President of CatalystRx, the Registrant's wholly
owned subsidiary.
The awards vest in equal annual installments on July 1, 2006, 2007 and
2008 and are subject to Award Agreements substantially in the form
attached as exhibit 10.1 hereto, as well as the Equity Incentive Plan.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
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(a) Financial statements of business acquired: Not Applicable
(b) Pro forma financial information: Not Applicable
(c) Exhibits:
EXHIBIT NO. DESCRIPTION
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10.1 Form of Restricted Stock Award Agreement under 2003
HealthExtras, Inc. Equity Incentive Plan
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHEXTRAS, INC.
Dated: July 8, 2005 By: /s/ Thomas M. Farah
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Thomas M. Farah
Secretary and General Counsel