Exhibit 10.3
XXXXXXX X. XXXXX, XX.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(As amended and restated September 16, 1998)
This Agreement is made as of the 16th day of September, 1998,
between TRIGON INSURANCE COMPANY, a Virginia corporation (the "Company"), and
XXXXXXX X. XXXXX, XX., of Richmond, Virginia ("Executive").
R E C I T A L S
Executive has been employed by the Company or its affiliates since
April 1, 1968. Since April 1, 1981, Executive has served as Chief Executive
Officer of the Company or of its affiliate, Consolidated Healthcare, Inc. The
Company and Executive are parties to an agreement dated January 2, 1998 (the
"Prior Agreement"). The parties desire to amend and restate the Prior Agreement
in the manner herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties agree as follows:
ARTICLE 1
EMPLOYMENT
1.1 Employment. The Company hereby employs Executive as Chairman of
the Board and Chief Executive Officer of the Company. Executive shall have the
powers, duties, and responsibilities that are customary to the position of Chief
Executive Officer and shall preside at all meetings of the Board of Directors of
the Company. Subject to approval by the Board, Executive shall select the
officers of the Company and each of its affiliates. Executive shall devote his
full business time and efforts to the business and affairs of the Company and
its affiliates; provided, however, that this provision shall not preclude
Executive from serving as a director of any other corporation or other
organization involving no conflict of interest with the interests of the
Company. All such directorships shall be disclosed to and reviewed by the
Executive Committee of the Company.
1.2 At Will Employment. Executive's employment hereunder is at will.
Executive may resign at any time, and the Company may discharge Executive at any
time, with or without cause.
ARTICLE 2
COMPENSATION AND BENEFITS
2.1 Base Salary. Executive's base salary for 1998 has been
determined by the Board of Directors upon recommendation from the Chair of the
Human Resources Committee.
2.2 Incentive Compensation. Executive shall also be eligible for
an award of incentive compensation each year.
2.3 Annual Reviews. Effective each January 1 during the term of this
Agreement, the Chairmen of the Executive and Human Resources, Compensation and
Employee Benefits Committees will review Executive's performance as Chief
Executive Officer and will recommend to the Board (i) such annual increase in
base salary as may be appropriate and in accordance with the Company's regular
salary administration program and (ii) such award of incentive compensation for
the prior year as may be appropriate. The Board will determine such annual
increase in base salary and such award of incentive compensation.
2.4 Participation in Employee Benefit Plans. While employed by the
Company, Executive shall be entitled to participate in the Company's
Non-Contributory Retirement Program, the Employees' Thrift Plan, the
split-dollar life insurance program, the group health insurance program, the
group term life insurance program, and the disability insurance program. In
addition, the Company shall provide to Executive an automobile and gasoline
allowance, tax and financial planning services, and reimbursement for club dues
and other business expenses.
ARTICLE 3
DISABILITY
3.1 Supplemental Disability Payment. If Executive becomes disabled
while employed by the Company and is entitled to receive benefits under the
Company's Long-Term Disability Program, then the Company will pay to Executive a
Monthly Supplemental Disability Benefit (as hereinafter defined) for so long as
Executive is entitled to receive disability payments under the Company's
Long-Term Disability Program (or under any similar disability program maintained
by the Company). The amount of the Monthly Supplemental Disability Benefit shall
be equal to the difference between (i) one-twelfth (1/12) of sixty percent (60%)
of Executive's annual base salary for the year in which Executive becomes
disabled and (ii) the amount of the monthly disability benefit payable to
Executive under the Company's Long-Term Disability Program.
ARTICLE 4
SEVERANCE PAYMENT AND EMPLOYMENT BENEFIT TRUST
4.1 Severance Payment.
(a) Upon a Termination Event, as defined in Section 4.1(b)
below, the Company will pay the Severance Payment, as defined in Section 4.1(c)
below, to Executive.
(b) The term Termination Event shall mean the following: (i)
the termination of Executive's employment with the Company for any reason other
than by reason of Executive's resignation; and (ii) the termination of
Executive's employment with the Company by reason of Executive's resignation but
only if Executive shall have given the Company at least six (6) months prior
written notice of such resignation. The term Termination Event shall not include
the termination of Executive's employment with the Company by reason of
Executive's resignation if Executive shall not have given the Company at least
six (6) months prior written notice of such resignation.
(c) The term Severance Payment shall mean a payment in cash
equal to four times the Applicable Compensation of Executive as defined in
Section 4.1(d) below.
(d) The term Applicable Compensation of Executive shall mean
the highest amount of compensation (as defined in Section 4.1(e) below) earned
by Executive for any one of the three full calendar years ended immediately
preceding the Termination Event.
(e) The Compensation earned by Executive for any calendar year
shall mean (i) the amount of Executive's annual base salary for such calendar
year, without any reduction for any amounts that Executive may have deferred
under the Company's 401(k) Plan, 401(k) Restoration Plan, Deferred Benefit Plan
for Officers, or otherwise, (ii) the amount of any cash bonus or cash incentive
award (annual, long-term, or otherwise) that is earned for a period of
performance ending in such calendar year, even though such bonus or award may be
paid after such calendar year, and (iii) the fair market value (determined as of
the date of the award) of any bonus or incentive award (annual, long-term, or
otherwise) that is made in property other than cash and that is earned for a
period of performance ending in such calendar year, even though such bonus or
award may be made after such calendar year. For purposes of clause (iii) of the
preceding sentence, (i) the granting or vesting of stock options shall not be
deemed to be a bonus or incentive award, and (ii) in the case of any bonus or
incentive award made in restricted stock of the Company, the fair market value
of such stock shall be determined without regard to the restriction.
4.2 Establishment of Employment Benefit Trust. The Company has
established an Employment Benefit Trust (the "Trust") for the benefit of
Executive and other key executives of the Company. The form of Trust Agreement
is attached as Exhibit A. In order to provide benefits to Executive, the Company
has transferred to the Trust the assets and amounts specified in paragraph 4.3
and has instructed the trustee of the Trust to maintain such assets and amounts
in a separate account for the benefit of Executive (the "Account").
4.3 Assets and Amounts Transferred to the Trust.
(a) Prior to the execution of the Prior Agreement, the
Company transferred to the Trust all of the assets held in the account
established for Executive under the Agreement between the Company and Executive
dated December 12, 1990, and certain additional amounts that were authorized by
the Board of Directors on December 9, 1992, and were transferred to the Trust on
or about June 22, 1993.
(b) The strategy of the Company is to expand by acquiring,
merging, or affiliating with other Blue Cross and Blue Shield plans, insurance
companies, and managed care companies. If the Executive Committee or the Board
of Directors determines that Executive's duties have expanded because of such
acquisitions, mergers or affiliations or for other reasons, then the Executive
Committee or the Board of Directors may make additional contributions to the
Trust in recognition of such expanded duties.
4.4 Investment of Amounts Transferred to the Trust. The Company
shall from time to time appoint an investment manager (the "Investment Manager")
to invest and manage the assets of the Trust. The initial Investment Manager
will be Xxxxx X. Xxxxxx, Xx., President, Consolidated Investment Corporation.
The Company, acting through the Investment Manager, shall have sole discretion
to select investments for the Trust. Annually, the Investment Manager will
report the investments made in the Trust to the Chairman of the Executive
Committee and will confer with him about the investment policy for the Trust.
Executive shall have no right to have any particular investment made in the
Trust. The Company shall bear all risk of gain or loss with respect to the
investments made in the Trust. Such gains or losses shall not affect the amount
of the Severance Payment.
4.5 Fees, Expenses, and Taxes. The Company shall pay the fees and
expenses of the Investment Manager for its services and the fees and expenses of
the trustee of the Trust for its services. All fees, commissions, and expenses
resulting from transactions made in the Trust shall be paid from assets held in
the Trust to the extent such assets are available, but if such assets are
insufficient to pay such sums, such sums shall be paid by the Company from its
other funds. Income taxes incurred by the Company as the result of transactions
made in the Trust shall be paid by the Company and shall not be charged to the
Trust.
4.6 Distribution of the Assets in the Trust.
(a) Upon the happening of a Termination Event, the trustee of
the Trust may either (i) transfer assets held in the Trust for Executive's
Benefit to Executive in kind to the extent of the Severance Payment; or (ii)
sell all or any part of such assets and distribute the sales proceeds to
Executive to the extent of the Severance Payment. If any asset distributed to
Executive in kind does not have a readily ascertainable fair market value, the
Company may at its expense have such asset appraised by an independent
appraiser, and the Company and Executive agree to be bound by such appraisal for
all purposes under this Agreement (including federal and state income tax
filings). To the extent the value of such assets transferred to Executive in
kind or such proceeds distributed to Executive (as the case may be) is
insufficient to fund the Severance Payment, the Company shall pay the balance of
the Severance Payment to Executive in immediately available funds. To the extent
that the value of such assets or such proceeds distributed to Executive or such
proceeds (as the case may be) exceeds the Severance Payment, such assets or such
proceeds (as the case may be) shall be distributed to the Company. If the
Termination Event is the result of the death of Executive, then the distribution
under this paragraph shall be made to Executive's personal representative.
(b) In consideration of the Severance Payment to Executive,
Executive agrees that he will not, prior to the expiration of four (4) years
following the termination of his employment, become an officer, director, or
employee of, or consultant to, or 10% or more owner of, any entity that competes
with the Company in any business in which the Company is engaged as of the date
of the termination of Executive's employment; provided, however, that if the
Company terminates Executive's employment without cause, then this covenant not
to compete shall not be applicable. For purposes of this Agreement, termination
without cause means termination for any reason other than continued neglect by
Executive of his duties hereunder or willful misconduct by Executive in the
performance of his duties hereunder. Executive agrees that in the event of a
breach by Executive of this covenant not to compete, the Company's remedies at
law will be inadequate and that the Company will be entitled to appropriate
equitable relief, including an injunction restraining such breach. If Executive
so requests, the Executive Committee is authorized to determine, by written
communication to Executive, that a particular activity that Executive proposes
to engage in does not constitute competition with the Company within the meaning
of this paragraph and such determination shall be conclusive and binding on the
parties to this Agreement.
4.7 Beneficial Ownership. Unless and until the assets held in the
Account are distributed to Executive pursuant to Section 4.6(a) of this
Agreement, beneficial ownership of all assets in the Account shall remain with
the Company, and Executive shall have no property interest in any such assets.
ARTICLE 5
RETIREMENT AND SUPPLEMENTAL RETIREMENT BENEFITS
5.1 Normal Retirement. If Executive's employment with the Company
has not sooner terminated, then he shall retire as of the end of the month in
which he attains the age of 61 (that is to say, on March 31, 2001).
5.2 Early Retirement. Executive may at his option elect early
retirement effective as of the end of any month following the date on which he
attains the age of 56 (that is to say, beginning March 31, 1996) by giving the
Company written notice of such election at least one hundred twenty (120) days
before the effective date of such retirement.
5.3 Participation in Existing Retirement Programs. Executive is a
participant in the Company's Non-Contributory Retirement Program (herein
referred to as the "Retirement Program") and in the Company's Supplemental
Retirement Program for Certain Employees (herein referred to as the
"Supplemental Retirement Program").
5.4 Enhanced Supplemental Retirement Benefit at Normal Retirement.
If Executive's continuous employment with the Company continues until March 10,
2001, then in addition to the benefit that Executive receives under the
Supplemental Retirement Program, the Company shall pay to Executive a
nonqualified unfunded supplemental retirement benefit (the "Enhanced
Supplemental Retirement Benefit") in the amount described below. The amount of
the Enhanced Supplemental Retirement Benefit shall be equal to the difference
between (i) the retirement benefit that Executive would have received under the
Retirement Program if (a) earnings used in computing benefits under the
Retirement Program included nonqualified deferred compensation in the year in
which the amounts were deferred, (b) the limitations of Sections 401(a)(17) and
415 of the Internal Revenue Code did not apply to the calculation and amount of
such benefit, (c) Executive had remained in the employ of the Company and
received credited service until March 31, 2005, and (d) Executive had received
earnings from the Company from the date of termination of employment until March
31, 2005 at an annual rate equal to the Annual Compensation of Executive as
defined in Section 4.1(d) above, and (ii) the sum of the retirement benefits
that Executive actually receives under the Retirement Program and under the
Supplemental Retirement Program.
5.5 Reduced Enhanced Supplemental Retirement Benefit at Early
Retirement. If Executive's continuous employment with the Company terminates at
any time on or after March 10, 1996 but before March 10, 2001, then the Company
shall pay Executive that percentage of the Enhanced Supplemental Retirement
Benefit reflected in the following schedule:
Percentage of
Enhanced Supplemental
Retirement Date Retirement Benefit
--------------- ------------------
March 10, 1996 - March 9, 1997 80%
March 10, 1997 - March 9, 1998 84%
March 10, 1998 - March 9, 1999 88%
March 10, 1999 - March 9, 2000 92%
March 10, 2000 - March 9, 2001 96%
March 10, 2001 - or thereafter 100%
5.6 Calculation and Payment of Enhanced Supplemental Retirement
Benefits. The enhanced supplemental retirement benefits payable to Executive
pursuant to Sections 5.4 and 5.5 of this Agreement shall be calculated and paid
to Executive at the same time and in the same manner that benefits are
calculated and paid to Executive under the Supplemental Retirement Program.
5.7 Other Retirement Benefits. If Executive retires from the
Company, then irrespective of when such retirement occurs, Executive shall be
entitled to all retirement benefits that are made generally available to retired
executive officers of the Company, including health care coverage and group term
life insurance benefits.
ARTICLE 6
WELFARE BENEFITS
6.1 As used in this Agreement, "Welfare Plan" means any health plan,
dental plan, disability plan, survivor income plan, life insurance plan or other
welfare benefit plan as defined in Section 3(1) of the Employee Retirement
Income Security Act of 1974, currently or hereafter made available by the
Company in which the Executive is eligible to participate.
6.2 If Executive's employment is terminated by the Company, then the
Company will, subject to the provisions of Section 6.3, continue the coverage of
Executive and his dependents under all Welfare Plans in which they participated
immediately before the termination of Executive's employment for a period of
three years following the termination of Executive's employment.
6.3 Notwithstanding Section 6.2, (i) if the Company amends or
terminates any Welfare Plan in which Executive is participating in a manner that
is generally applicable to all executives of the Company, then such amendment or
termination shall also be applicable to Executive, (ii) Executive shall continue
to contribute to the cost of the Welfare Plans on substantially the same basis
as he did before the termination of his employment, (iii) if Executive's
continued participation in any Welfare Plan is not possible because of the terms
of the plan or any provision of law, then the Company will at its expense
provide Executive with an alternative benefit of substantially equal value and
utility through cash payments, an alternative insurance arrangement, or
otherwise, and (iv) the obligation of the Company to continue Executive's
coverage under any Welfare Plan shall cease if Executive becomes covered under a
welfare plan sponsored by a subsequent employer that provides substantially
equal or greater benefits.
6.4 If Executive's employment is terminated by the Company, then in
lieu of the welfare benefits provided for in Section 6.2, Executive may, at his
option, elect to receive a lump sum amount in cash such that, after Executive
pays any taxes on such lump sum amount, Executive will retain on an after-tax
basis an amount equal to the present value of such benefits. Any such election
must be made by Executive by written notice provided to the Company within 60
days after the date on which Executive's employment is terminated. Present value
shall be determined using a discount rate equal to the Federal mid-term rate
under Section 1274(d) of the Code.
ARTICLE 7
ADDITIONAL PAYMENT FOR EXCISE TAXES
7.1 If Executive receives any amount from the Company, pursuant to
this Agreement or otherwise, that is determined to be an "excess parachute
payment" subject to the excise tax imposed by ss. 4999 of the Internal Revenue
Code, then the Company will pay to Executive an additional amount (herein
referred to as a "Gross-Up Payment") such that, after Executive has paid all
federal and state income and excise taxes imposed on such excess parachute
payment and on such Gross-Up Payment, Executive will retain an after-tax amount
equal to the amount that Executive would have retained if such excise tax had
not been imposed.
7.2 When Executive's employment with the Company terminates, the
amount of any Gross-Up Payment that the Company is required to pay under Section
7.1 shall be determined by the independent certified public accounting firm then
regularly employed by the Company. Within 15 business days following the
termination of Executive's employment, or earlier if requested by the Company,
the accounting firm shall deliver to the Company and Executive a report
calculating in reasonable detail the amount of any Gross-Up Payment required by
Section 7.1. The amount of the required Gross-Up payment as so determined by the
accounting firm shall be binding on the Company and Executive, and within 10
business days following receipt of the report from the accounting firm, the
Company will pay the required Gross-Up Payment to Executive. If the accounting
firm determines that no Gross-Up Payment is required because no excise tax is
payable by Executive, it shall furnish Executive a written opinion to that
effect. All fees and expenses of the accounting firm shall be paid by the
Company.
7.3 Because of uncertainties in the application of ss. 4999 of the
Internal Revenue Code, it is possible that the amount of the Gross-Up Payment as
initially determined by the accounting firm pursuant to Section 7.2 may be
inadequate to comply with the requirements of Section 7.1. If at any time
Executive is required to pay any additional excise tax not covered by the
initial Gross-Up Payment, then the Company will immediately pay to Executive an
additional Gross-Up Payment so that the requirements of Section 7.1 are complied
with.
ARTICLE 8
MISCELLANEOUS
8.1 Termination of Prior Agreements. This Agreement supersedes all
prior agreements respecting the subject matter of Executive's employment,
written or oral; provided, however, that nothing herein shall affect the Salary
Deferral Agreement between the Company and Executive dated December 13, 1989.
8.2 Legal Fees. If any dispute arises in connection with this
Agreement or the enforcement or interpretation of Executive's rights under this
Agreement, the Company shall pay all reasonable legal fees and expenses incurred
by Executive in connection with such dispute, irrespective of the outcome of
such dispute.
8.3 Rights Not Exclusive. Executive's rights under this Agreement
are not exclusive, and, except as provided in Section 8.1, nothing in this
Agreement shall limit any rights that Executive may have under any other plan,
contract, arrangement, custom, policy, practice or program of the Company.
8.4 Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or mailed, registered
or certified mail, as follows:
(a) If to the Company, to:
Chairman of the Executive Committee
Trigon Insurance Company
0000 Xxxxxxx Xxxx Xxxx
Post Office Box 27401
Xxxxxxxx, Xxxxxxxx 00000
(b) If to Executive, to his last address shown on the
records of the Company.
8.5 Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
and successors, including, without limitation, any person acquiring directly or
indirectly all or substantially all of the assets of the Company, whether by
merger, consolidation, sale, or otherwise, but neither this Agreement nor any
right hereunder may be otherwise assigned or transferred by either party hereto.
8.6 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Virginia.
8.7 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
TRIGON INSURANCE COMPANY
By: ______________________________
Xxxxxx X. Xxxx, Chairperson
Human Resources, Compensation
and Employee Benefits Committee
______________________________
Xxxxxxx X. Xxxxx, Xx.
