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EXHIBIT 10.33
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of the 13 day of March,
1998, by and between Xxxxxx XxXxxxxxx ("Executive") and Coventry Corporation
("Employer"), a Delaware corporation with its principal place of business at 000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX 00000.
W I T N E S S E T H:
WHEREAS, Executive desires to enter into an employment relationship
with Employer and Employer desires to employ Executive; and
WHEREAS, Executive and Employer desire to set forth in a written
agreement the terms and conditions of such employment.
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. EMPLOYMENT. On the Date of Employment (as defined in Section 3
below), Executive shall be engaged by Employer as its Executive Vice President.
Executive hereby agrees to such employment on and after the Date of Employment
under the terms and conditions hereinafter set forth.
2. DUTIES. As Executive Vice President, Executive shall report to the
President and Chief Executive Officer of Employer and shall be responsible for
such powers and duties normally associated with such position or as may be
delegated or assigned to Executive by Employer's President and Chief Executive
Officer. During the term of this Agreement, Executive shall also serve without
additional compensation in such other offices of the Employer or its
subsidiaries or affiliates to which he may be elected or appointed by the Board
of Directors of Employer or its subsidiaries or affiliates, respectively.
3. DATE OF EMPLOYMENT. Executive's employment shall commence on April
1, 1998 (the "Date of Employment").
4. INITIAL TERM. Subject to the terms and conditions set forth herein,
Executive shall be employed hereunder for an initial term of three years
beginning on the Date of Employment. If at the end of the initial term a new
employment contract is not executed, the term of this Agreement shall continue
on a year-to-year basis in the absence of notice of either party.
5. BASE COMPENSATION. For all duties rendered by Executive, Employer
shall pay Executive a base salary ("Base Salary") of Four Hundred Thousand
Dollars ($400,000), annually, to be reviewed on an annual basis based upon the
performance of Executive. The Base Salary shall be paid to Executive in
accordance with Employer's normal payroll policies.
6. ADDITIONAL COMPENSATION. During the period of this Agreement and as
a result of employment under this Agreement, Executive shall receive or be
eligible for the following additional compensation:
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EMPLOYER STOCK OPTIONS: Executive will be granted a nonqualified stock
option to purchase 300,000 shares of Common Stock of Employer at an exercise
price per share equal to the closing price per share of the Common Stock of
Employer as reported on The Nasdaq National Market on either the date Executive
accepted Employer's offer of employment or the Date of Employment, whichever
date has the lower closing price. The option will vest at a rate of one-fourth
of the shares per year over a four-year vesting period beginning on the date of
grant. The option will expire on the tenth anniversary of the Date of Employment
unless sooner terminated by Executive terminating his employment hereunder. The
option shall be granted under and in accordance with the terms and conditions of
Employer's 1997 Stock Incentive Plan and a letter agreement between Executive
and Employer dated the date of grant.
EMPLOYER RESTRICTED STOCK AWARD: At the Date of Employment, Executive
will be granted a restricted stock award of 100,000 shares of Common Stock of
Employer which shall vest in equal one-fourth increments over a three-year
period. The first increment shall vest at the end of six months from the Date of
Employment, and the remaining three increments shall vest on the first, second
and third anniversary of the Date of Employment. The restricted stock award
shall be granted under and in accordance with the terms and conditions of
Employer's 1997 Stock Incentive Plan and a restricted stock award agreement
between Executive and Employer dated the Date of Employment.
BONUS COMPENSATION: Executive shall be eligible for an annual bonus
("Bonus") potential of up to 75% of Base Compensation, which shall be determined
as follows: (i) up to 50% shall be based upon achievement of budget and other
operational performance factors, and (ii) all or any part of the remaining 50%
shall be granted in the sole discretion of the Compensation and Benefits
Committee (the "Committee") of the Board of Directors of Employer. Executive's
bonus and performance factors shall be determined on an annual basis by the
Committee. Executive shall receive a guaranteed 1998 Bonus in the amount of
$150,000, payable at the time other executive bonuses are paid for 1998
performance; but only if Executive begins his employment with Employer on April
1, 1998.
LONG TERM COMPENSATION: Executive shall be eligible to participate in a
three-year long term incentive compensation plan awarding up to $3,000,000.
Payment under the plan will be paid in accordance with a formula and based upon
the achievement by Executive of mutually agreed upon performance criteria,
including, but not limited to, reductions in per member per month administrative
expenses and other expense ratios and attainment of earnings per share targets
for Coventry Corporation and its successor corporation, Coventry Health Care,
Inc. The terms and conditions of the plan will be mutually agreed upon by
Employer and Executive within sixty (60) days from the Date of Employment and
will be included as an amendment to this Agreement.
SIGNING BONUS: In lieu of payment by Employer of a search fee for
retaining Executive and the costs of relocating Executive, at his option, from
Virginia to Maryland, Executive shall receive a signing bonus of Two Hundred
Fifty Thousand Dollars ($250,000), to be payable in cash within 30 days from the
Date of Employment.
DISCRETIONARY EXPENSE ALLOWANCE: Executive shall be entitled to a
discretionary expense allowance of $900.00 per month.
OTHER BENEFITS: Executive will be eligible for participation in any
employee benefit programs available to officers of Employer from time to time as
provided in Section 16 below.
7. EXPENSES AND COSTS OF RELOCATION. Executive shall be reimbursed for
ordinary and necessary business expenses incurred by Executive on behalf of
Employer and its subsidiaries or affiliates upon presentation of vouchers in
accordance with the usual and customary procedure of Employer in relation to
such expense items, except that Employer may elect, at its option, to pay such
expense items directly rather than reimburse Executive therefor.
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Executive shall also be reimbursed for expenses associated with the
relocation of Executive to Employer's designated location during the term of
this Agreement. The extent and amount of such expense shall be consistent with
the Executive Relocation Policy in effect at the time of relocation.
8. EXTENT OF SERVICE. Executive shall devote substantially all of his
working time, attention and energies to the business of the Employer and shall
not, during the term of this Agreement, take, directly or indirectly, an active
role in any other business activity without the prior written consent of the
Employer; but, except as provided in Section 14(b), this Section shall not
prevent Executive from serving as a director of other entities not affiliated
with Employer, from making real estate or other investments of a passive nature
or from participating in the activities of a nonprofit charitable organization
where such participation does not require a substantial amount of time and does
not adversely affect Executive's ability to perform his duties under this
Agreement.
9. TERMINATION OF EMPLOYMENT. Employer may terminate this Agreement
with or without cause at any time during the term of this Agreement. If the
employment of Executive with Employer is terminated (i) by Employer for any
reason other than Good Cause (as defined in Section 25 below) or (ii) by
Executive for Good Reason (as defined in Section 25 below), the following
provisions will apply:
(a) Employer shall during the Severance Period (as defined in
Section 25 below), 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 of employment.
(b) Upon the date of termination of employment, Executive shall
fully vest in the 100,000 shares of Employer's Common Stock
granted pursuant to a restricted stock award on the Date of
Employment.
(c) During the Severance Period Executive shall continue to vest
in stock options granted to Executive during the term of his
employment in accordance with the terms of each letter
agreement awarding such stock options. For this purpose only,
Executive shall be deemed to be an employee of Employer during
the Severance Period.
(d) During the Severance Period Executive and his spouse and
family will continue to be covered by all Welfare Plans (as
defined in Section 25 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, Supplemental Executive Retirement Plan
and/or any other retirement savings program in which the
Employee participates shall end at the date of termination of
employment.
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(e) 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.
(f) During the Severance Period Executive shall not be entitled
to reimbursement for fringe benefits such as car allowance,
dues and expenses related to club memberships, and expenses
for professional services.
Compensation under Sections 9(a), (b), (c) and (d) hereof is contingent
upon Executive's compliance with Section 14 hereof.
10. TERMINATION BY EXECUTIVE. Executive may terminate his employment
hereunder at any time upon sixty (60) days prior written notice. Upon such
termination by Executive for other than Good Reason, 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; provided, however, Employer shall have the option of paying Executive
in accordance with the provisions of Section 9, above, if Employer desires to
continue to enforce Executive's continuing obligations under Sections 14(b), (c)
and (d) below.
11. OTHER PAYMENT. If Executive is not elected by the Board of
Directors of Employer to the position and responsibilities of Chief Executive
Officer or Chief Operating Officer of Employer, or its successor, within
eighteen (18) months from the Date of Employment and Executive shall have been
continuously employed by Employer during that period of time, Employer shall pay
Executive One Million Dollars ($1,000,000), to be payable either in a lump sum
or in installments, as Employer and Executive mutually determine.
12. SETOFF.
(a) With respect to Section 9, 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 valid 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 9, 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 during the Severance Period,
except as expressly provided in Section 9(d).
13. 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 13 are in addition to any other
benefit due to Executive or his spouse or beneficiaries from Employer,
including, but not limited to, payments under any Incentive Plans.
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14. 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, 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 or to any person specifically authorized by the
Board of Directors 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 provided
hereunder and during 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 any have financial interest in, or aid
or assist anyone else in the conduct of, any business which is
in competition with any business conducted by the Employer or
any Affiliate of Employer in any state in which the Employer
or any Affiliate of Employer is conducting business on the
date of termination or expiration of this Agreement, 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 employment provided for
hereunder and during the Severance Period, Executive will not
(i) directly or indirectly solicit business which could
reasonably be expected to conflict with the interest of
Employer or any Affiliate of Employer from any entity,
organization or person which has contracted with the Employer
or any Affiliate of Employer, which has been doing business
with the Employer or any Affiliate of Employer, from which the
Employer or any Affiliate of Employer was soliciting business
at the time of the termination of employment or from which
Executive knew or had reason to know that Employer or any
Affiliate of Employer was going to solicit business at the
time of termination of employment, or (ii) employ, solicit for
employment, or advise or recommend to any other persons that
they employ or solicit for employment, any employee of the
Employer or any Affiliate of Employer.
(d) Consultation. Executive shall, at the Employer's written
request, during the Severance Period cooperate with the
Employer in concluding any matters in which Executive was
involved during the term of his employment and will make
himself available for consultation with the Employer on other
matters otherwise of interest to the Employer. The Employer
agrees that such requests shall be reasonable in number and
will consider Executive's time required for other employment
and/or employment search.
(e) Enforcement. Executive and the Employer acknowledge and agree
that any of the covenants contained in this Section 14 may be
specifically enforced through injunctive relief but such right
to injunctive relief shall not preclude the Employer from
other remedies which may be available to it.
(f) Continuing Obligation. Notwithstanding any provision to the
contrary or otherwise contained in this Agreement, the
agreement and covenants contained in this Section 14 shall not
terminate upon Executive's termination of his employment with
the Employer or upon the termination of this Agreement under
any other provision of this Agreement; provided, however, in
the event of Executive's voluntary termination for other than
Good Reason, the obligations under Sections 14(b), (c) and (d)
shall terminate upon Executive's termination of employment
unless Employer elects to pay Executive the termination
benefits set forth in Section 9, above.
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15. VACATION. During each year of this Agreement, Executive shall be
entitled to vacation accrued for executives in accordance with corporate
policies of Employer that are in effect from time to time.
16. HEALTH AND WELFARE BENEFITS; PROFIT-SHARING PLANS. In addition to
the benefits specifically provided for herein, Executive and his family shall be
entitled to participate in all health and welfare benefit plans maintained by
the Employer for executive or managerial employees generally according to the
terms of such plans. Executive shall be entitled to participate in any
profit-sharing, retirement or similar plans established by Employer in which
executive or managerial employees of Employer participate, including any such
plan intended to comply with Section 401(k) of the Internal Revenue Code of
1986, as amended, and any such plan providing supplemental executive retirement
benefits.
17. EXECUTIVE ASSIGNMENT. No interest of Executive or his spouse or any
other beneficiary under this Agreement, or any right to receive any payment or
distribution hereunder, shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation or encumbrance
of any kind, nor may such interest or right to receive a payment or distribution
be taken, voluntarily or involuntarily, for the satisfaction of the obligations
or debts of, or other claims against, Executive or his spouse or other
beneficiary, including claims for alimony, support, separate maintenance, and
claims in bankruptcy proceedings.
18. BENEFITS UNFUNDED. All rights of Executive and his spouse or other
beneficiary under this Agreement shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
Employer for payment of any amounts due hereunder. Neither Executive nor his
spouse or other beneficiary shall have any interest in or rights against any
specific assets of Employer, and Executive and his spouse or other beneficiary
shall have only the rights of a general unsecured creditor of Employer.
19. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail to his residence in the case of Executive, or to its principal office in
the case of the Employer and the date of receipt shall be deemed the date which
such notice has been provided.
20. WAIVER OF BREACH. The waiver by either party of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by the other party.
21. ASSIGNMENT. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. The Executive acknowledges that the services to be
rendered by him are unique and personal, and Executive may not assign any of his
rights or delegate any of his duties or obligations under this Agreement.
22. 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.
23. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Tennessee, without giving effect to the principles of conflicts of law
thereof.
24. HEADINGS. The sections, subjects and headings of this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
25. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" shall have the meaning set forth in Rule 144(a)(1)
promulgated under the Securities Act of 1933, as amended.
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(b) "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 materially breaches this Agreement (other
than by engaging in acts or omissions enumerated in
paragraphs (i) and (ii) above), or materially fails
to satisfy the conditions and requirements of his
employment with Employer, and such breach or failure
by its nature is incapable of being cured, or such
breach or failure remains uncured for more than 30
days following receipt by Executive of written notice
from Employer specifying the nature of the breach or
failure and demanding the cure thereof. For purposes
of this paragraph (iii), inattention by Executive to
his duties shall be deemed a breach or 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 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.
(c) "Good Reason" shall exist if there is a material reduction in
the position, nature or scope of Executive's authority or a
material reduction in Executive's compensation, without
Executive's prior written consent. Good Reason shall also
exist if as a result of a change in control of Employer any of
the foregoing events occur. A change in control shall include
the following occurrences:
(i) the acquisition of at least a majority of the
outstanding shares of Common Stock (or securities
convertible into Common Stock) of Employer by any
person, entity or group (as used in Section 13(d)(3)
and Rule 13d-5(b)(1) under the Exchange Act);
(ii) the merger or consolidation of Employer with or into
another corporation or other entity, or any share
exchange or similar transaction involving Employer
and another corporation or other entity, if as a
result of such merger, consolidation, share exchange
or other transaction, the persons who owned at least
a majority of the Common Stock of Employer prior to
the consummation of such transaction do not own at
least a majority of the Common Stock of the surviving
entity after the consummation of such transaction;
(iii) the sale of all, or substantially all, of the assets
of Employer; or
(iv) any change in the composition of the Board of
Directors of Employer as a result of a contested
election such that persons who at the beginning of
any period of up to two years constituted at least a
majority of the Board of Directors of Employer, or
persons whose nomination was approved by such
majority, cease to constitute at least a majority of
the Board of Directors of Employer at the end of such
period.
(d) "Severance Period" shall mean the period beginning on the date
the Executive's employment with Employer terminates without
Good Cause or Executive terminates his employment with Good
Reason under circumstances described in Section 9 and ending
12 months thereafter.
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(e) "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.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original.
27. SEVERABILITY. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
affected thereby. In the event that Section 14(b) is determined by a court of
competent jurisdiction to be invalid due to overbreadth, such Section 14(b)
shall be constructed as narrowly as necessary to be enforceable.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
/s/Xxxxxx XxXxxxxxx
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Xxxxxx XxXxxxxxx
COVENTRY CORPORATION
By: /s/Xxxxx X. Xxxx
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Xxxxx X. Xxxx
President and Chief Executive Officer
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