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AGREEMENT
This Agreement is entered into as of the 17th day of June, 1999, by and
between Xxxxx X. XxXxxxx ("Executive") and Coventry Health Care, Inc., a
Delaware corporation with its principal place of business at 0000 Xxxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 ("Employer").
WHEREAS, Executive and Employer have entered into an employment
relationship and desire to enter into a written agreement in which Executive
agrees to confidentiality, non-competition, non-solicitation and other
provisions during the term of his employment and during a severance period
thereafter in exchange for severance compensation in the event Executive is
terminated without cause by Employer.
NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. RESTRICTIVE COVENANTS.
(a) Confidential Information. Executive agrees not to disclose,
either during the time he is employed by the Employer or following termination
of his employment hereunder for any reason, to any person (other than a person
to whom disclosure is necessary in connection with the performance of his
duties as an employee of Employer) any material confidential information
concerning the Employer or any of its affiliates, including, but not limited
to, strategic plans, customer lists, contract terms, financial costs, pricing
terms, sales data or business opportunities whether for existing, new or
developing businesses.
(b) Non-Competition. During the term of employment and for a period
of twelve months following termination of employment for any reason (the
"Severance Period"), Executive will not directly or indirectly own, manage,
operate, control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, or aid or assist anyone else
in the conduct of, any business which is in competition with any business
conducted by Employer or any of its affiliates in any state in which Employer
or any of its affiliates is conducting business on the date of Executive's
termination of employment, provided that ownership of 5% or less of the voting
stock of any public corporation shall not constitute a violation hereof.
(c) Non-Solicitation. During the term of Executive's employment and
during the Severance Period, Executive will not (i) directly or indirectly
solicit from any entity, organization or person that is doing business with
Employer or any of its affiliates, or from which the Employer or any of its
affiliates was soliciting business at the time of the termination of employment
or of which Executive knew or had reason to know that Employer or any of its
affiliates was going to solicit business at the time of Executive's
termination, or (ii) employ, solicit for employment, or advise or recommend to
any other persons that they employ or solicit for employment, any employee of
Employer or any of its affiliates.
(d) Consultation. Executive shall, at Employer's written request
during the Severance Period, cooperate with Employer in concluding any matters
in which Executive was involved during the term of his employment and will make
himself available for consultation with Employer at reasonable times on matters
of importance to Employer.
2. TERMINATION OF EMPLOYMENT. Employer may terminate Executive,
with or without cause, at any time during the term of his employment. If
Executive's employment is terminated by Employer for any reason other than Good
Cause (as defined in Section 8 below):
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(a) Employer shall during the Severance Period, continue to pay
Executive an amount equal to (i) Executive's base salary at the time of
termination of employment; and (ii) that portion of Executive's Bonus based on
achievement of budget and other operational performance factors, if the
criteria is met. Such amount will be paid during the Severance Period in monthly
or other installments, similar to those being received by Executive at the date
of termination of employment, and will commence as soon as practicable
following the date of termination.
(b) During the Severance Period Executive and his spouse and family
will continue to be covered by all Welfare Plans (as defined in Section 8
below), maintained by Employer in which he or his spouse or family were
participating immediately prior to the date of his termination as if he
continued to be an employee of Employer; provided that, if participation in any
one or more of such Welfare Plans is not possible under the terms thereof,
Employer will provide substantially identical benefits to the extent possible.
If, however, Executive obtains employment with another employer during the
Severance Period, such coverage shall be provided until the earlier of: (i) the
end of the Severance Period or (ii) the date on which the Executive and his
spouse and family can be covered under the plans of a new employer without
being excluded from full coverage because of any actual pre-existing condition.
Executive's eligibility for, and the Employer match to, the 401(k) Plan (the
"401(k) Plan"), the Supplemental Executive Retirement Plan (the "SERP") and/or
any other retirement savings program in which the Employee participates shall
end at the date of termination of employment. Employee's balances in the SERP
shall be distributed to him as soon as practicable, less tax withholdings,
according to the terms of the SERP.
(c) Executive shall not be entitled to payments during the
Severance Period attributable to compensation for vacation periods he would
have earned had his employment continued during the Severance Period or to
unused vacation periods accrued as of the date of termination of employment.
(d) During the Severance Period Executive shall not be entitled to
reimbursement for fringe benefits such as car allowance, dues and expenses
related to any club memberships, and expenses for professional services.
Compensation under Section 2(a) and (b) is contingent upon Executive's
compliance with Section 1.
3. TERMINATION BY EXECUTIVE. Executive may terminate his
employment with Employer at any time upon sixty (60) days prior written notice.
Upon such termination by Executive, the Employer shall pay the Executive only
his base salary due through the date on which his employment is terminated at
the rate in effect at the time of notice of termination. The Employer shall
then have no further obligation to Executive under this Agreement, except for
the payout of benefits already accrued under any Employee benefit plans or
other employee benefits.
4. SETOFF.
(a) With respect to Section 2, payments or benefits payable to or
with respect to Executive or his spouse pursuant to this Agreement shall be
reduced by the amount of any claim of Employer against Executive or his spouse
or any debt or obligation of Executive or his spouse owing to Employer.
(b) With respect to Section 2, payments or benefits payable to or
with respect to Executive pursuant to this Agreement shall be reduced by any
amount Executive may earn or receive from employment with another employer or
other professional services rendered. Employee shall notify
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Employer immediately in writing of the date upon which such services or other
work commenced and shall provide Employer with such documentation as Employer
shall require to determine the amount of any such setoff. Employee's failure to
provide such written notice and documentation as required herein shall
immediately release Employer from its obligations under this Agreement and
Employer shall have the right to recover all amounts payable hereunder.
5. DEATH. If Executive dies during the Severance Period:
(a) All amounts payable hereunder to Executive shall, during the
remainder of the Severance Period, be paid to his surviving spouse. On the
death of the survivor of Executive and his spouse, no further benefits will be
paid under the Agreement.
(b) The spouse and family of Executive shall, during the remainder
of the Severance Period, be covered under all Welfare Plans made available by
Employer to Executive or his spouse immediately prior to the date of his death
to the extent possible.
Any benefits payable under this Section 5 are in addition to any other benefit
due to Executive or his spouse or beneficiaries from Employer.
6. ENTIRE AGREEMENT. This instrument contains the entire agreement
of the parties and supersedes all other prior agreements, employment contracts
and understandings, both written and oral, express or implied, with respect to
the subject matter of this Agreement and may not be changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
7. APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of Maryland, without giving effect to the principles of conflicts of
law thereof.
8. DEFINITIONS. For purposes of this Agreement:
(a) "Good Cause" shall be deemed to exist if, and only if:
(i) Executive engages in material acts or omissions constituting
dishonesty, breach of fiduciary obligation or intentional
wrongdoing, malfeasance or non-compliance with written
directives approved by the Board of Directors which are
demonstrably injurious to Employer;
(ii) Executive is convicted of a violation involving fraud or
dishonesty; or
(iii) Executive fails to satisfy the conditions and requirements of
his employment with Employer, and such failure by its nature is
incapable of being cured, or such failure remains uncured for
more than 30 days following receipt by Executive of written
notice from Employer specifying the nature of the failure and
demanding the cure thereof. For purposes of this paragraph
(iii), inattention by Executive to his duties shall be deemed a
failure of cure.
Without limiting the generality of the foregoing, if Executive acted in good
faith and in a manner he reasonably believed to be in, and not opposed to, the
best interest of Employer and had no reasonable
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cause to believe his conduct was unlawful in connection with any action taken
by Executive in connection with his duties, it shall not constitute Good Cause.
(b) "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Employer in which Executive is
eligible to participate.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
/s/ XXXXX X. XXXXXXX
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Xxxxx X. XxXxxxx
COVENTRY HEALTH CARE, INC.
By:/s/ XXXXXX X. XXXXXXXXX
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Xxxxxx X. XxXxxxxxx
Executive Vice President and
Chief Operating Officer
XxXxxxx
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