Preview of our top selling Chief Executive Officer (CEO) Employment Agreement
Coventry Health Care - CEO Employment Agreement
This Agreement is made the 30th of December, 1998, effective as of January 1, 1999, by and between Coventry Corporation, a Delaware corporation (the "Company"), with its principal place of business at 6705 Rockledge Drive, Suite 900, Bethesda, Maryland, 20817, and Allen F. Wise (the "Executive").
WHEREAS, the Company is engaged in the business of providing comprehensive health care services;
WHEREAS, the Company desires to employ the Executive to devote full time to the business of the Company and to continue as the President and Chief Executive Officer of the Company; and
WHEREAS, the Executive desires to be employed on the terms and subject to the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Employment Agreement, the parties hereby agree as follows:
1
POSITION AND RESPONSIBILITIES
During the Term of this Employment Agreement, the Executive shall perform such duties for such compensation and subject to such terms and conditions as are hereinafter set forth.
2
TERM AND DUTIES
2.1 Term: Extension. The term of this Employment Agreement (the "Term of this Employment Agreement") will commence as of January 1, 1999, and shall continue through December 31, 2001. On or after January 1, 2001, but no later than September 30, 2001, the Company and the Executive shall deliberate the possible extension of this Employment Agreement. If at the end of the term of this Employment Agreement a new employment contract is not executed, the term of this Employment Agreement will continue on a year-to-year basis in the absence of notice of either party. Termination of the Executive's employment pursuant to this Employment Agreement shall be governed by Sections 4 and 5.
2.2 Duties. As President and Chief Executive Officer, the Executive shall report to the Board of Directors and shall be responsible for the overall direction, administration and leadership of the Company, including, but not limited to, the establishment and implementation of policies and directives, formulation of long range plans, goals and objectives, effective management of employees, and such other powers and duties normally associated with such position or as may be delegated or assigned to the Executive by the Company's Board of Directors. During the term of the Agreement, the Executive shall also serve without additional compensation in such other offices of the Company or its subsidiaries or affiliates to which he
Page 1 2 may be elected or appointed by the Board of Directors of the Company or its subsidiaries or affiliates, respectively.
2.3 Location. The duties of the Executive shall be performed at such locations and places as may be directed by the Board of Directors.
3
COMPENSATION AND BENEFITS
3.1 Base Compensation. The Company shall pay the Executive a base salary ("Base Salary") of $600,000 per annum, subject to applicable withholdings. The Base Salary shall be payable in equal semi-monthly payments according to the customary payroll practices of the Company. The Base Salary shall be reviewed annually and shall be subject to increase according to the policies and practices adopted by the Board of Directors from time to time.
3.2 Bonus Compensation. The Executive shall be eligible for an annual bonus ("Bonus") potential of 100% of Base Compensation, which shall be determined as follows:
(a) up to 50% shall be based upon achievement of budget and other operational performance factors, and
(b) all or any part of the remaining 50% shall be granted in the sole discretion of the Compensation and Benefits Committee ("Committee") of the Board of Directors of the Company. The Executive's bonus and performance factors shall be determined on an annual basis by the Committee.
3.3 Additional Compensation. During the period of this Agreement and as a result of employment under this Agreement, the Executive shall receive or be eligible for the following additional compensation:
(a) Company Stock Options: On the effective date of this Agreement, the Executive will be granted a nonqualified stock option to purchase 150,000 shares of the Common Stock of the Company at an exercise price per share equal to the closing price per share of the Common Stock of the Company as reported on the NASDAQ National Market on the first trading day after the effective date of this Agreement. The option will vest at a rate of one-third of the shares at the end of each anniversary date of the grant, over the next three years beginning on the date of grant, or in the event substantially all of the capital stock or assets of the Company are sold or transferred or the Company is merged into or consolidated with another unaffiliated entity, then the option will become fully vested on the date of closing. The option will expire on January 1, 2009 unless sooner terminated by the Executive terminating his employment hereunder. The option shall be granted under and in accordance with the terms and conditions of the Company's Second Amended and Restated 1993 Stock Option Plan and a letter agreement between the Executive and the Company dated as of the effective date of this Agreement. Future stock option awards may be made in the number and with the terms established by the Board.
Page 2 3
(b) Benefits. The Executive will be entitled to participate in all employee benefit plans or programs and receive all benefits and perquisites to which any salaried employee is eligible under any existing or future plan or program established by the Company for salaried employees, including, without limitation, all plans developed for executive officers of the Company. The Executive will participate to the extent permissible under the terms and provisions of such plans or programs in accordance with program provisions. These plans or programs may include group hospitalization, health care, dental care, life or other insurance, tax qualified pension, car allowance, savings, thrift and profit sharing plans, termination pay programs, sick leave plans, travel or accident insurance, disability insurance, and contingent compensation plans, including capital accumulation programs, restricted stock programs, stock purchase programs and stock option plans. Nothing in this Agreement will preclude the Company from amending or terminating any of the plans or programs applicable to salaried employees or executive officers. The Executive will be entitled to four (4) weeks of annual paid vacation.
3.4 Business Expenses. The Company will reimburse the Executive for all reasonable travel and other expenses incurred by the Executive in connection with the performance of his duties and obligations under this Employment Agreement upon the Executive's submitting proper documentation in accordance with the Company policies for expense reimbursement. In addition, in lieu of charging any auto mileage for business use, the Executive will be provided a leased automobile, and all reasonable operating costs, including insurance, gas, maintenance, and repairs, will be paid by the Company. To the degree that the Executive is accountable for any income taxes arising from this Section, he will have sole responsibility for calculating and paying such taxes.
3.5 Withholding. The Company may directly or indirectly withhold from any payments under this Employment Agreement all federal, state, city or other taxes that shall be required pursuant to any law or governmental regulation.
4
DEATH AND DISABILITY COMPENSATION
4.1 Payment in Event of Death. In the event of the death of the Executive during the Term of this Employment Agreement, the Company's obligation to make payments under this Employment Agreement shall cease as of the date of death, except for the following benefits to be paid to the Executive's beneficiaries:
(a) any earned but unpaid base salary and bonus (pro-rated for that year);
(b) for thirty-six (36) months following the date of the Executive's death, the Company shall reimburse the Executive's designated beneficiary for the cost of the designated beneficiary's medical and dental insurance as in effect at the date of the Executive's death;
Page 3 4
(c) the exercisability of stock options granted to the Executive shall be governed by any applicable stock option agreements and the terms of the respective stock option plans; and
(d) the Executive's designated beneficiary will be entitled to receive the proceeds of any life or other insurance or other death benefit programs provided or referred to in this Employment Agreement.
4.2 Payment in Event of Disability. Notwithstanding the disability of the Executive, the Company will continue to pay the Executive pursuant to Section 3 hereof during the Term of this Employment Agreement, unless the Executive's employment is earlier terminated in accordance with this Employment Agreement. In the event the disability continues for a period of three (3) months, the Company may thereafter terminate this Employment Agreement and the Executive's employment. Following such termination, the Company will pay the Executive amounts equal to the following:
(a) his regular installments of Base Salary, as of the time of termination, for a period not to exceed the commencement of payments under any Company provided long-term disability plan;
(b) a lump sum payment equal to the average annual bonus compensation for the two (2) calendar years immediately preceding the year of termination due to disability, prorated for the year the disability occurs;
(c) for thirty-six (36) months following the date of the Executive's termination due to disability, the Company shall reimburse the Executive for the cost of the Executive's medical and dental insurance as in effect at the date of the Executive's termination; and
(d) if the Executive is receiving disability benefits under the Company's qualified long-term disability program, the Executive will receive a monthly payment equal to 60% multiplied by pre-disability earnings (as defined by the qualified long-term disability plan) less any monthly benefit paid under the qualified long-term disability program. Such payments shall continue to the earlier of 1) age 62, or 2) cessation of payments under the Company's qualified long-term disability program.
(e) the exercisability of stock options granted to the Executive shall be governed by any applicable stock option agreements and the terms of the respective stock option plans.
4.3 Responsibilities in the Event of Disability. During the period the Executive is receiving payments following his disability and as long as he is physically and mentally able to do so, the Executive will furnish information and assistance to the Company and from time to time will make himself available to the Company to undertake assignments consistent with his position or prior position with the Company and his physical and mental health. If the Company fails to make a payment or provide a benefit required as part of this
Page 4 5 Employment Agreement, the Executive's obligation to provide information and assistance will cease.
4.4 Definition of Disability. For purposes of this Employment Agreement, the term "disability" will have the same meaning as is attributed to such term, or any substantially similar term, in the Company's long-term disability income plan as in effect from time to time. The Company's group long-term disability policy in existence at the time of disability shall be considered to be a part of this Agreement.
5
TERMINATION OF EMPLOYMENT
Notwithstanding anything herein to the contrary, this Employment Agreement and the Executive's employment with the Company may be terminated by the Company at any time, subject to the terms and provisions of this Section 5.
5.1 Termination Without Cause; Constructive Termination.
5.1.1 Without a Change in Control. If the Executive suffers a Termination Without Cause (hereinafter defined) or a Constructive Termination (as hereinafter defined), the Company will continue to pay the Executive the following:
(a) for a period of twenty-four (24) months after Termination Without Cause or Constructive Termination, a monthly amount equal to 200% of the sum of the Executive's combined (i) Base Salary as in effect at the time of the termination and (ii) the average Bonus for the two (2) calendar years immediately preceding the year of termination, divided by twenty-four (24); and
(b) for twenty-four (24) months following such Termination Without Cause or Constructive Termination, the Company shall reimburse the Executive for the cost of the Executive's medical and dental insurance as in effect at the date of termination. In addition, the Executive will receive twelve (12) months additional vesting credit for all stock options and restricted stock awards.
5.1.2 Upon a Change in Control. If the Executive suffers a Termination Without Cause or Constructive Termination within one (1) year following a Change in Control, the Company will pay to the Executive the following:
(a) in a lump sum upon such termination an amount equal to the sum of (i) 200% of the Executive's combined (A) Base Salary as in effect at the time of the termination and (B) average Incentive Bonus for the two (2) calendar years immediately preceding the year of termination, and (ii) to the extent that such foregoing amount or any other payment in the nature of compensation (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder ("Section 280G")) to or for the benefit to the Executive (or any part of such amount or other payment) constitutes an "excess parachute payment" within the meaning of Section 280G, the amount, if
Page 5 6 any, of (A) such "excess parachute payment" multiplied by a fraction, the numerator of which is the number one (1.00) and the denominator of which is (I) the number (1.00) minus (II) the effective tax rate under Section 280G applicable to the Executive expressed as decimal, minus (B) the amount of such "excess parachute payment";
(b) for twenty-four (24) months following such Termination upon a Change of Control, the Company shall reimburse the Executive for the cost of the Executive's medical and dental insurance as in effect at the date of termination; and
(c) all stock options and all restricted stock granted to the Executive shall vest in full following such Termination upon a Change of Control.
5.2 Termination With Cause; Voluntary Termination. If the Executive suffers a Termination with Cause or the Executive terminates his employment with the Company not due to a Change of Control (a "Voluntary Termination"), then the Company will not be obligated to pay the Executive any amounts of compensation or benefits following the date of termination. However, earned but unpaid Base Salary through the date of termination will be paid in a lump sum. The exercisability of stock options granted to the Executive shall be governed by any applicable stock option agreements and the terms of the respective stock option plans.
5.3 Definitions. For purposes of this Employment Agreement, the following terms have the following meanings:
5.3.1 A "Change in Control" shall occur if an event or series of events occurs after the effective date of this Employment Agreement which would constitute either a change in ownership of the Company, within meaning of Section 280G, or a change in the ownership of a substantial portion of the Company's assets, within the meaning of Section 280G, but for purposes of this definition, the fair market value threshold for determining "substantial portion of the Company's assets" shall be "greater than 50%."
5.3.2 "Constructive Termination" means termination of the Executive's employment by the Executive (a) from a declined reassignment of duties, responsibilities, title, or reporting relationships that are not the equivalent of his then current position as set forth herein Section 2.2 or compensation or (b) the intentional or material breach by the Company of this Agreement or (c) the continuous and material involvement of the Board in the management of the Company, on a level not warranted by exceptional circumstances, that is clearly greater than that previously exercised by the Board. The Executive shall have a period of ninety (90) days after termination of his employment to assert against the Company that he suffered a Constructive Termination, and after the expiration of such ninety (90) day period, the Executive shall be deemed to have irrevocably waived the right to such assertion.
5.3.3 "Termination With Cause" means termination of the Executive's employment by the Company, acting in good faith, by written notice to the Executive specifying the event relied upon for such termination, due to the Executive's conviction for a felony, the Executive's perpetration of a fraud, embezzlement or other act of dishonesty or the Executive's
Page 6 7 breach of a trust or fiduciary duty which materially adversely affects the Company or its shareholders.
5.3.4 "Termination Without Cause" means termination of the Executive's employment by the Company other than due to the Executive's death or disability or Termination With Cause.
6
OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE TERM OF THIS EMPLOYMENT AGREEMENT
6.1 Extent of Service. The Executive shall devote substantially all of his working time, attention and energies to the business of the Company and shall not, during the te...
View agreement details