Document:

Exhibit 10.12

Exhibit 10.12

 

Coventry Health Care, Inc. (“Coventry”)

 

Summary of Director Compensation

 

Non-employee directors of Coventry are compensated pursuant to  the 2006 Directors Compensation Program for non-employee directors, previously filed as Exhibit 10.13 to Coventry Current Report on Form 8-K, filed on November 10, 2005 (the “Program”), which authorizes Coventry to make certain compensatory awards to non-employee directors pursuant to Coventry’s 2004 Incentive Plan and allows non-employee directors to defer portions of their compensation in accordance with Coventry’s Deferred Compensation Plan for Non-Employee Directors.  The following table summarizes the components and amounts of the compensation package paid offered to eligible non-employee directors in 2006 and 2007.

 

	
            Compensation Components
 	
            Board or Committee
 	
            Compensation
  
	
            Annual Compensation for Attendance at Regular Board Meetings1 (paid/vested/deferred quarterly in arrears in accordance with the Program and includes compensation for five regularly scheduled Board meetings)
 	
            Board
 	
            $                   225,000
 
	
            Annual Committee Chair Retainer 
 (Paid annually in arrears)                                    
 	
            Lead Director
 	
            $                     10,000
 
	
             
 	
            Chair of Audit Committee
 	
            10,000
 
	
             
 	
            Chair of Comp Committee
 	
            10,000
 
	
             
 	
            Chair of N/CG Committee
 	
            5,000
 
	
            Attendance at In-Person Special Meeting   
 	
            Board
 	
            $                       3,000
 
	
             
 	
            Audit Committee
 	
            3,000
 
	
             
 	
            Comp Committee
 	
            3,000
 
	
             
 	
            N/CG Committee
 	
            1,500
 
	
            Participation in a Special Telephonic Meeting                             
 	
            Board
 	
            $                       1,000
 
	
             
 	
            Audit Committee
 	
            1,000
 
	
             
 	
            Comp Committee
 	
            1,000
 
	
             
 	
            N/CG Committee
 	
            500
 
	
            Reimbursement of Reasonable Travel Expenses                                       
 	
            All Directors
 	
            Actual Costs
 
	
            New Director Stock Option Grant            
 	
            New Director
 	
            10,000 options to acquire shares which vest in equal amounts over four years
 
	
            Health and Basic Life Insurance Coverage                              
 	
            All Non-employee Directors
 	
                                                                                                                              
 
	
             
 	
            (voluntary participation)
 	
                                                                                                                              
 

 

Subject to the terms of the Program, non-employee directors may elect the form and the timing of their compensation on an individual basis as summarized in the table below. All elections of the form of payment must be made in multiples of 25%.  The table below summarizes the forms of compensation each individual non-employee director may select as well as certain material terms related to those forms of compensation. 

 

 

	
            Payment

“Form” 2
 	
            Maximum Allocation
 	
            Payment

“Current”
 	
            Payment

“Deferred”
 	
            Vesting
 
	
            Cash
 	
            50%3
 	
            Paid at the end of each quarter
 	
            Credited at the end of each quarter4
 	
            None
 

 

_________________________

1 Any non-employee directors who become eligible to participate in the Program after January 1 will receive a pro rata portion of the Annual Compensation.  

2   Value of stock options, restricted stock awards and stock units determined in accordance with SFAS 123R.

3 Percentage limit may be waived with the approval of the Chairman of the Compensation Committee

4 Deferred cash will be credited quarterly with interest based on the Company’s borrowing rate set at the beginning of each year (2005 rate is approximately 5%)

 

 

	
            Restricted Stock/
 Stock Units
 	
            100%
 	
            Granted at beginning of year
 	
            Stock Units deferred until termination of service or unforeseeable emergency

 
 	
            Quarterly over the year of service
 
	
            Stock Options
 	
            100%
 	
            Granted at beginning of year
 	
            Exercisable when vested and subject to a 10 year term
 	
            Quarterly over the year of serviceExhibit 10.14

Exhibit 10.14

 

Coventry Health Care, Inc. (“Coventry”)

 

Summary of Named Executive Officer Compensation

 

Base Salary

 

The following table sets forth the current base salaries provided to Coventry’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers (“Named Executive Officers”):

 

 

	
            Executive Officer
  	
            Current Salary
  
	
            Dale B. Wolf, Chief Executive Officer
 	
            $925,000
 
	
            Shawn M. Guertin, Executive Vice President, Chief Financial Officer, and Treasurer
 	
            $525,000
 
	
            Thomas P. McDonough, President
 	
            $885,000
 
	
            Harvey C. DeMovick, Jr., Executive Vice President, Customer Service Operations, and Chief Information Officer
 	
            $600,000
 
	
            Francis S. Soistman, Jr., Executive Vice President, Government & Individual Plans
 	
            $575,000
 

 

 

Executive Management Incentive Plan

 

2006 Criteria and Incentives

 

Coventry’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated officers are also eligible to receive a non-equity incentive award each year under Coventry’s Executive Management Incentive Plan (the 2006 Executive Management Incentive Plan (the “2006 EMIP”) which was previously filed as Exhibit 10.25 to Coventry’s Current Report on Form 8-K filed on January 12, 2006.  For fiscal year 2006, incentives under the 2006 EMIP were based on the attainment of budgeted EPS (earnings per share) and year-over-year EPS growth.  The incentives paid to Coventry’s Chief Executive Officer and other named executive officers for performance in fiscal year 2006 are set forth below:

 

 

	
            Executive Officer
  	
            Incentive for 2006
 
	
            Dale B. Wolf, Chief Executive Officer
 	
            $     1,625,000
 
	
            Shawn M. Guertin, Executive Vice President, Chief Financial Officer, and Treasurer
 	
             

$        450,000
 
	
            Thomas P. McDonough, President
 	
            $2,400,000 (1)
 
	
            Harvey C. DeMovick, Jr., Executive Vice President, Customer Service Operations, and Chief Information Officer
 	
            $        575,000
 
	
            Francis S. Soistman, Jr., Executive Vice President, Government & Individual Plans
 	
            $        650,000
 

 

(1) Includes $1,700,000 special incentive for First Health integration and $700,000 EMIP.

 

2007 Criteria

 

Pursuant to Coventry’s 2007 Executive Management Incentive Plan (the “2007 EMIP”), which was previously filed as Exhibit 10.1 to Coventry’s Current Report on Form 8-K, filed on November 7, 2006, the Compensation Committee of Coventry’s Board of Directors approved the incentive criteria for fiscal year 2007 under the 2007 EMIP.  For fiscal year 2007, incentives under the 2007 EMIP will be predicated on budgeted earnings per share targets and year-over-year EPS growth.

 

2003 Deferred Compensation Plan and 2004 Mid-Term Executive Retention Program

 

In addition to their base salaries and incentives, Coventry’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers were also eligible to receive an annual cash and stock equivalent allocation to an account under the 2003 Deferred Compensation Plan, effective July 1, 2003, a copy of which is filed as Exhibit 10.18.3 to Coventry’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed on August 12, 2003, and the 2004 Mid-Term Executive Retention Program, effective July 1, 2004, a copy of which is filed as Exhibit 10.26 to Coventry’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on March 16, 2005.  The EPS goals for the 2004 and 2005 program years were met, and the three plan years all vested July 1, 2006.  The accounts were paid in cash, equal to the June 30, 2006 stock value and investment value of
the cash account as of that date.  The following payouts were made on July 7, 2006:

 

	
            Executive Officer
  	
            Payments in 2006
 
	
            Dale B. Wolf, Chief Executive Officer
 	
            $  6,730,375
 
	
            Shawn M. Guertin, Executive Vice President, Chief Financial Officer, and Treasurer
 	
            $    949,499
 
	
            Thomas P. McDonough, President
 	
            $  6,376,064
 
	
            Harvey C. DeMovick, Jr., Executive Vice President, Customer Service Operations, and Chief Information Officer
 	
            $ 2,405,521
 
	
            Francis S. Soistman, Jr., Executive Vice President, Government & Individual Plans
 	
            $ 1,738,439
 

 

 

2006 Mid-Term Executive Retention Program

 

In addition to their base salaries and incentives, Coventry’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers are also eligible to receive an annual cash and stock equivalent allocation to an account under the 2006 Mid-Term Executive Retention Program, effective July 1, 2006, a copy of which is filed as Exhibit 10.1 to Coventry’s Current Report on Form 8-K filed on May 24, 2006.  The amount of the allocation is a percentage of base salary and incentive earned for the prior year and ranges from 0% to 55%, based on performance.  Each account will fully vest on July 1, 2009 and will be paid out in cash, subject to the attainment of pre-

 

established performance criteria for each performance period.  In the event the performance criteria are not met in any period, the award for that period is forfeited.  For the twelve month period ended December 31, 2006, the performance criteria were based on the attainment of budgeted EPS.  The performance criteria for the twelve months ended December 31, 2006 was met, and the participants were credited the following amounts in accounts under the 2006 Mid-Term Executive Retention Program:

 

 

	
            Executive Officer
  	
            2006 Allocation
 	
            2006 Stock Equivalent Allocation
 
	
            Dale B. Wolf, Chief Executive Officer
 	
            $ 1,147,500
 	
            $    401,610
 
	
            Shawn M. Guertin, Executive Vice President, Chief Financial Officer, and Treasurer
 	
            $    323,750
 	
            $    113,302
 
	
            Thomas P. McDonough, President
 	
            $    621,250
 	
            $    217,448
 
	
            Harvey C. DeMovick, Jr., Executive Vice President, Customer Service Operations, and Chief Information Officer
 	
            -0-
 	
            -0-
 
	
            Francis S. Soistman, Jr., Executive Vice President, Government & Individual Plans
 	
            $    393,750
 	
            $     137,804
 

 

Other Benefit Plans and Arrangements

 

In addition to their base salaries and incentives, Coventry’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers are also eligible to:

 

	
             
 	
            •
 	
            Participate in Coventry’s long-term incentive plan under its 2004 Incentive Plan, a copy of which is filed as Exhibit 10.17 to Coventry’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on March 16, 2005, which can be in the form of stock options, stock appreciation rights, restricted stock, performance awards, other stock-based awards or cash; and
 

 

	
             
 	
            •
 	
            Participate in Coventry’s 401(k) Restoration and Deferred Compensation Plan, as amended, a copy of which is filed as Exhibit 10.31 to Coventry’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on March 16, 2005, Exhibit 10 to Coventry’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed on August 9, 2005, and Exhibit 10.29.3 to Coventry’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed herewith.

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