EMPLOYMENT
AGREEMENT
This Employment Agreement
(“Agreement”) is made the 30th of April 2009, effective
as of January 26, 2009, by and between Coventry Health Care, Inc.,
a Delaware corporation (the “Company”) and Allen F.
Wise (the “Executive”).
WHEREAS, the Company employs the
Executive as its Chief Executive Officer and the parties desire to
enter into this Agreement to set forth the terms of such
employment.
In consideration of the mutual
covenants contained in this Agreement, the parties hereby agree as
follows:
1. TERM AND DUTIES
1.1 The
term of the Executive’s employment commenced on January 26,
2009 and shall continue through December 31, 2010 (the
“Initial Term”), and will continue on a year-to-year
basis thereafter (each such year a “Renewal Term”),
until the Executive’s employment is terminated as outlined in
Section 4 herein.
1.2 The
Executive shall serve as Chief Executive Officer, shall report to
the Board of Directors of the Company (the “Board”) 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 Board. During the Initial Term or any Renewal
Term, the Executive shall also serve, without additional
compensation, in such other offices of the Company or its
subsidiaries or affiliates to which he may be elected or
appointed.
2. COMPENSATION AND
BENEFITS
2.1 The
Company shall pay the Executive a base salary (“Base
Salary”) of not less than Six Hundred Thousand Dollars
($600,000) per annum, subject to applicable withholdings. The Base
Salary shall be payable in accordance with the customary payroll
practices of the Company. The Base Salary shall be reviewed
annually and shall be subject to increase by the Compensation
Committee of the Board of Directors (the “Committee”)
from time to time.
2.2 The
Executive shall be eligible for an annual bonus
(“Bonus”) in accordance with the Company’s
performance-based plan for the purposes of Section 162(m) of the
Internal Revenue Code, as amended (the “Code”), which
is currently administered as the Company’s Executive
Management Incentive Plan. During the Initial Term, the
Executive’s target annual bonus shall equal 300% of his base
salary and in no event will such bonus exceed 200% of such target
amount.
2.3 The
Executive will be entitled to participate in all employee benefit
plans or programs and receive all benefits to which any salaried
employee is eligible under any existing or future plan or program
for salaried employees, including, without limitation, all plans
developed for executive officers of the Company. These plans or
programs may include group health care, dental care, vision care,
life or other insurance, tax qualified retirement, savings, thrift
and profit sharing plans, sick leave plans, travel or accident
insurance, disability insurance, and contingent compensation plans,
including capital accumulation programs, deferred compensation
plans, 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.
2.4 The
Executive will be entitled to four (4) weeks of annual paid
vacation.
2.5 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 upon proper documentation in accordance
with Company policies. In his sole discretion, the Executive may
elect to use aircraft owned by AW, LLC for business related travel
in lieu of using the Company’s private aircraft. In such
cases, the Company, upon receipt of proper documentation from the
Executive, will reimburse the Executive the stated hourly and other
associated costs for the use of such aircraft but only to the
extent such all-in hourly costs do not exceed six thousand five
hundred dollars ($6,500).
2.6 On
the date hereof, the Company shall pay the Executive a sign-on
bonus in cash of $2,750,000. Subject to the Executive’s
continued employment as Chief Executive Officer of the Company
through January 4, 2010, the Company, on such date, shall pay the
Executive an additional cash bonus of $2,750,000.
2.7 On
January 4, 2010 and subject to the Executive’s employment as
Chief Executive Officer with the Company through such date, the
Company shall grant the Executive 300,000 performance share units
under the Company’s then-effective 2004 Incentive Plan (the
“Incentive Plan”) which will vest on December 31, 2010
upon the attainment of certain performance targets to be set by the
Committee in connection with such grant. On April 8, 2009, the
Company granted the Executive 300,000 performance share units under
the Incentive Plan, which will vest on December 31, 2009 subject to
the attainment of certain performance targets and 1,000,000
nonqualified stock options (500,000 of which will vest on December
31, 2009 and 500,000 of which will vest on December 31,
2010).
3. DEATH AND DISABILITY
COMPENSATION
3.1 In
the event of the Executive’s death during the Initial or
Renewal Term, the Agreement terminates and all payments under the
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 a lump sum payment equal to the
target annual incentive bonus of Executive set by the Committee
under the Company’s Executive Management Incentive Plan for
the year in which the Executive’s death occurs;
(b) for
thirty-six (36) months following the date of the Executive’s
death, the Company shall pay the cost of medical, dental, and
vision premiums as in effect at the date of the Executive’s
death for Executive’s surviving spouse, subject to a formal
election by the spouse;
(c) 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
Agreement;
(d) if
the Executive’s death occurs prior to December 31, 2009, 50%
of all unvested outstanding stock options will vest. If the
Executive’s death occurs on or after December 31, 2009, all
unvested outstanding stock options will fully vest. If so vested,
such stock options will remain exercisable until the earlier of
twenty-four (24) months from the date of death or the expiration of
the term of such option pursuant to the underlying award agreement;
and
(e) upon
the Executive’s death, any unvested performance share units
will vest in full.
3.2 Notwithstanding
the short-term disability of the Executive, the Company will
continue to pay the Executive pursuant to Section 2 hereof during
the Initial Term or any Renewal Term, unless the Executive’s
employment is earlier terminated in accordance with this Agreement.
In the event the Executive becomes disabled (as defined by the
Company’s long-term disability plan), the Executive’s
employment will be terminated and the Company will pay the
Executive the following:
(a) any
earned but unpaid Base Salary and a lump sum payment equal to the
target annual incentive bonus of Executive set by the Committee
under the Company’s Executive Management Incentive Plan for
the year in which the Executive’s termination due to
disability occurs;
(b) for
thirty-six (36) months following the date of the Executive’s
termination due to disability, the cost of the Executive’s
(or his spouse’s in the event of Executive’s death
during such period) medical, dental, and vision insurance premiums
in effect at the date of the Executive’s termination, subject
to a formal election by the Executive;
(c) if
the Executive’s disability occurs prior to December 31, 2009,
50% of all of the Executive’s unvested outstanding stock
options will vest. If the Executive’s disability occurs on or
after December 31, 2009, all of the Executive’s unvested
outstanding stock options will fully vest. If so vested, such stock
options will remain exercisable until the earlier of five (5) years
from the date of disability or the end of the term under the
applicable award agreement; and
(d) upon
the Executive’s disability, any of the Executive’s
unvested performance share units will vest in full.
3.3 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.
3.4 For
purposes of this Agreement, the term “disabled” or
“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 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.
4. TERMINATION OF
EMPLOYMENT
4.1 The
Company may terminate this Agreement with or without cause at any
time during the Initial or Renewal Term of the Agreement with
ninety (90) days prior written notice. However, except in the case
of a two (2) year period following a Change in Control (hereinafter
defined) and if during the Initial Term or annual Renewal Term, the
Executive suffers a Termination Without Cause (hereinafter defined)
or a Constructive Termination (as hereinafter defined), the Company
will pay the Executive the following:
(a) his
then-current Base Salary until the date of termination plus the pro
rata portion (based upon the number of full months elapsed during
the performance period) of the annual incentive bonus of Executive
under the Company’s Executive Management Incentive Plan for
the then-current year if the performance criteria set by the
Committee is achieved;
(b) a
lump sum severance payment on the date of termination equal to the
greater of (i) if one year or less remains under the term of this
Agreement, the sum of (a) the annual amount of the
Executive’s then-current Base Salary plus (b) the target
annual incentive bonus of Executive set by the Committee under the
Company’s Executive Management Incentive Plan for the
then-current year or (ii) if more than one year remains under the
term of this Agreement, the sum of (a) the annual amount of the
Executive’s then-current Base Salary plus (b) the target
annual incentive bonus of Executive set by the Committee under the
Company’s Executive Management Incentive Plan for the
then-current year, multiplied by a fraction, the numerator of which
is the number of days remaining in the term of this Agreement and
the denominator of which is 365;
(c) for
twenty-four (24) months following such Termination Without Cause or
Constructive Termination, the cost of the Executive’s
medical, dental, and vision insurance in effect at the date of
termination, subject to a formal election by the
Executive;
(d) if
the Executive’s Termination Without Cause or Constructive
Termination occurs prior to December 31, 2009, 50% of all of the
Executive’s unvested outstanding stock options will vest. If
the Executive’s termination under this Section 4.1 occurs on
or after December 31, 2009, all of the Executive’s unvested
outstanding stock options will fully vest. If so vested, such stock
options will remain exercisable until the earlier of five (5) years
from the date of disability or the end of the term under the
applicable award agreement; and
(e) upon
the Executive’s termination under this Section 4.1, the pro
rata portion (based upon the number of full months elapsed during
the performance period) of the Executive’s total number of
performance share units which are subject to vesting during the
applicable performance period will vest and be settled with a cash
payment provided that the performance trigger set by the Committee
for the vesting of those performance share units has been
achieved.
4.2 If
the Executive suffers a Termination Without Cause or
Constructive
