Document:

exv10w7

Exhibit 10.7

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made the 17th day of May 2009, effective
as of February 2, 2009, by and between Coventry Health Care, Inc., a Delaware corporation (the
“Company”) and Harvey C. DeMovick (the “Executive”).

     WHEREAS, the Company employs the Executive 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 February 2, 2009 and shall continue
through March 25, 2012 (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 in the capacity of an Executive Vice President of the Customer
Service, IT and Medicare Divisions with Coventry Health Care, Inc., shall report to the Chief
Executive Officer of the Company and shall be responsible for 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 Chief Executive Officer. 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 Chief Executive Officer 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 Teen, the Executive’s target annual bonus shall equal 75% of his
base salary.

     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 eligible for four (4) weeks of annual paid vacation.

     2.5 The Executive will be offered a Relocation Package.

     2.6 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.

     2.7 The Executive will receive a new hire equity grant having a market value of $8 million
dollars based on the closing price of the Company’s stock on March 24, 2009. The equity grant will
consist of 689,655 time vested options, 310,345 performance based restricted shares, and 18,062
performance share units paid in cash. The options and restricted shares will vest in equal thirds
over a three (3) year period, commencing on March 24, 2009, with vesting for each tranche of
restricted shares and the performance share units subject to the attainment of the performance
criteria established for that particular year.

 

 

In 2009, the Corporate Goal EPS Achievement schedule will be used, with a cap at Target EPS, as
outlined below:

<$1.80 = 0 payout

$1.80 = 80% payout

$1.90 = 90% payout

$2.00 = 100% payout cap

The performance criteria for each of the next two years will be based on the same annual
performance goals established for the other executives in the company, with a cap at Target.

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 under the Company’s Executive Management Incentive Plan for the year
in which the Executive’s death occurs;

          (b) for twelve (12) 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) 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 restricted shares and 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 under the Company’s Executive Management Incentive Plan for the year
in which the Executive’s termination due to disability occurs;

          (b) for twelve (12) 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) 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 two (2) 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 restricted shares and
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 sixty (60) days prior written notice. However, except
in the case of a two (2) year period following a Change in Control (hereinafter defined), if the
Executive suffers a Termination Without Cause (hereinafter defined) or a Constructive Termination
(hereinafter defined), the Company will pay the Executive the following:

          (a) his then-current Base Salary paid through the balance of the then current contract term
but no more than one (1) year;

          (b) for twelve months (12) 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;

          (c) if the Executive’s Termination Without Cause or Constructive Termination Executive will
receive twelve (12) months accelerated vesting of all outstanding unvested stock options. Any
unvested restricted shares and performance units will receive prorated vesting based upon
attainment of the performance criteria for year termination occurs and the number of months worked
during that year.

     4.2 If the Executive suffers a Termination Without Cause or Constructive Termination within
two (2) years following a Change in Control, the Company will pay to the Executive the following:

          (a) his then-current Base Salary paid through the date of termination plus a lump sum payment
equal to his Base Salary and target annual incentive bonus under the Company’s Executive Management
Incentive Plan for the year in which the termination occurs for the lesser of one (1) year or the
balance of the then current contract term;

          (b) for twelve (12) 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;

          (c) all of the Executive’s unvested outstanding stock options will vest; and

          (d) upon the Executive’s termination under this Section 4.2, any of the Executive’s unvested
restricted shares and performance share units will vest in full.

     4.3 The Executive may terminate his employment hereunder at any time during the term of this
Agreement with sixty (60) days prior written notice. If the Executive suffers a Termination with
Cause or the Executive terminates his employment with the Company not due to a Constructive
Termination, death or disability (as defined in Section 3.4) (a “Voluntary Termination”), then the
Company will not be obligated to pay the Executive any amounts of compensation or benefits
following the date of termination, except earned but unpaid Base Salary through the date of
termination, which will be paid in a lump sum. The stock options and any other outstanding equity
awards granted to the Executive shall be governed by the applicable award agreements and incentive
plans.

     4.4 For purposes of this Employment Agreement, the following terms have the following
meanings:

          (a) “Change in Control” shall occur if at any time, substantially all of the assets of the
Company are sold or transferred by sale, merger or otherwise, to an entity which is not a direct or
indirect subsidiary of the Company, or if any “person” (as such term is used in Sections 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 35% or more of the combined
voting power of the then existing outstanding securities of the Company.

          (b) “Constructive Termination” means termination by the Executive which follows (1) a
reassignment of duties, responsibilities, title, or reporting relationships that are not at least
the equivalent of his then current position as set forth in Section 1.2, or an involuntary material
reduction in the compensation and benefits provided herein, (2) the intentional or material breach
by the Company of this Agreement, or (3) a involuntary reassignment, after a Change of Control, to
a geographic location more than fifty (50) miles from the Executive’s primary office location. The
Executive shall have a period of ninety (90) days after the occurrence of a condition defined in
4.5(b)(1) to (4) herein to notify the Company in writing that such condition constitutes grounds
for a Constructive Termination, after which the Company shall have thirty (30) days to cure the
condition. If the Company fails to cure the condition within this thirty (30) day period, the
Executive’s subsequent voluntary resignation within ninety (90) days following the occurrence of
the underlying condition shall constitute a Constructive Termination. The Executive’s failure to
resign within the ninety (90) day period shall be deemed to be an irrevocable waiver of the right
to assert Constructive Termination for such condition.

          (c) “Termination With Cause” means termination by the Company, acting in good faith, by
written notice to the Executive specifying the event relied upon for such termination, due to; (i)
the Executive’s indictment or conviction of a felony,

 

 

(ii) the Executive’s intentional perpetration of a fraud, theft, embezzlement or other act of
dishonesty or (iii) the Executive’s intentional breach of a trust or fiduciary duty which
materially adversely affects the Company or its shareholders.

          (d) “Termination Without Cause” means termination by the Company other than due to the
Executive’s death or disability or Termination With Cause.

5. OTHER DUTIES OF THE EXECUTIVE

     5.1 The Executive shall devote substantially all of his working time to the business of the
Company and during the Initial Term or any Renewal Term shall not take, directly or indirectly, an
active role in any other business without the prior written consent of the Company; but except as
provided in Section 5.4, this Section shall not prevent the Executive from serving as a director of
other entities not affiliated with the Company, from making real estate or other investments of a
passive nature or from participating in the activities of a charitable organization where such
participation does not adversely affect the Executive’s ability to perform his duties under this
Agreement.

     5.2 The Executive will, upon reasonable notice, during or after the Initial Term or any
Renewal Term, furnish information as may be in his possession and cooperate with the Company as may
reasonably be requested in connection with any claims or legal actions in which the Company is or
may become a party. The Executive shall receive reasonable compensation for the time expended by
him pursuant to this Section 5.2 after termination of employment hereunder.

     5.3 The Executive acknowledges that certain information pertaining to the business and
operations of the Company, such as strategic plans, product development, financial costs, pricing
terms, sales data or new or developing business opportunities (“Confidential Information”) is
confidential and is a unique and valuable asset of the Company. Access to and knowledge of this
Confidential Information are essential to the performance of the Executive’s duties under this
Agreement. The Executive will not during the term of this Agreement or following termination of his
employment, except to the extent reasonably necessary in the performance of his duties under this
Agreement, give to any person, firm, association, corporation or governmental agency any
Confidential Information except as required by law. The Executive will not make use of this
Confidential Information for his own purposes or for the benefit of any person or organization
other than the Company. The Executive will also use his best efforts to prevent the disclosure of
this Confidential Information by others. All records, memoranda, etc. relating to the business of
the Company whether made by the Executive or otherwise coming into his possession will remain the
property of the Company.

     5.4 The Executive will not Compete with the Company (as hereinafter defined) at any time while
he is employed by the Company. Except after a Change in Control or after non- renewal under Section
1.1, in the event of Termination Without Cause or Constructive Termination pursuant to Section 4.1,
the Executive will not Compete with the Company for a period of one (1) year from the date of such
termination. In the event of a termination after a Change in Control that gives rise to payments to
the Executive under Section 4.2, the Executive will not Compete with the Company for one (1) year
from the date of termination. In the event of a Voluntary Termination in which the Executive only
receives payment as defined under Section 4.3, or which follows a Company non-extension notice
delivered pursuant to Section 1.1, there will be no restriction on the Executive’s right to Compete
with the Company after the date his employment terminates. For the purposes of this Section 5.4,
the term “Compete with the Company” means action by the Executive, direct or indirect, either as an
officer, director, stockholder, owner, partner, employee or in any other capacity, resulting in the
Executive having any legal or equitable ownership or other financial or non-financial interest in
or employment with, any HMO, managed care or health insurance business within a fifty (50) mile
radius of any location where the Company or any subsidiary or affiliate of the Company conducts
such business at the date of a termination of the Executive’s employment; provided, however, that
the term “Compete with the Company” shall not include ownership (without any more extensive
relationship) of a less than a five percent (5%) interest in any publicly-held corporation or other
business entity. The Executive acknowledges that the covenants contained herein are reasonable as
to geographic and temporal scope. The Executive acknowledges that his breach or threatened or
attempted breach of any provision of this Section 5.4 may cause irreparable harm to the Company not
compensable in monetary damages and that the Company may be entitled, in addition to all other
applicable remedies, to a temporary and permanent injunction and a decree for specific performance
of the terms of this Section 5.4.

     5.5 The Executive agrees that, following his termination of employment, he shall not, in any
communications with the press or other media or in any communications with any potential or actual
stockholder, lender, investor, customer, client or supplier of the Company of any of its
affiliates, criticize, ridicule or make any statement that disparages or is derogatory of the
Company or any of its affiliates or any of their respective directors, officers or employees. The
foregoing will not apply to any non-public oral statements made by the Executive to the Company or
to any of the Company’s representatives or any compelled testimony or production, either by legal
process, subpoena or otherwise; provided, however, in the event that the Executive is requested
pursuant to, or required by, applicable law, regulation, or legal process to testify or otherwise
respond to a request for information from any governmental authority, the Executive will notify the
Company promptly (to the extent allowed by any such law, regulation or legal process) so that the
Company may seek a protective order or other appropriate remedy.

     5.6 The Executive agrees that for a period of one (1) year following the Employee’s
termination of employment (whether voluntary or involuntary), he shall not, directly or indirectly,
personally or as an employee, officer, director, partner,

 

 

member, owner or consultant, induce, select, recruit or hire any employee of the Company or
otherwise interfere with the employment relationship of any person employed by the Company.

6. INDEMNIFICATION OF EXECUTIVE

     The Company shall indemnify the Executive and shall reimburse the Executive’s expenses under
the circumstances described, and to the maximum extent provided under the mandatory and the
permissive indemnification and expense reimbursement provisions of Delaware law. The provisions of
this Section 7.1 shall continue in full force and effect after Executive ceases to serve as an
officer, director, employee or in any other capacity with the Company or any of its affiliates and
shall inure to the benefit of his heirs, executors or administrators.

7. MISCELLANEOUS

     7.1 This Agreement contains the entire understanding between the Company and the Executive
with respect to the subject matter and supersedes any prior employment or severance agreements
between the Company and its affiliates and the Executive.

     7.2 This Agreement may not be modified or amended except in writing signed by the parties. No
term or condition of this Agreement will be deemed to have been waived except in writing by the
party charged with waiver. A waiver shall operate only as to a specific term or condition waived
and will not constitute a waiver for the future or act on anything other than that which is
specifically waived.

     7.3 Any payments to be made by the Company to the Executive hereunder shall be made net of any
applicable tax withholdings.

     7.4 This Agreement shall be deemed to conform to all requirements of the Securities and
Exchange Act of 1934, as amended, and all requirements of the Code, including but not limited to
Sections 280G and 409A of the Code. It is intended that (i) each payment or installment of payments
provided under this Agreement is a separate “payment” for purposes of Section 409A of the Code and
(ii) that the payments satisfy, to the greatest extent possible, the exemptions from the
application of Section 409A of the Code, including those provided under Treasury Regulations
1.409A-1(b)(4) (regarding short-term deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two
year exception), and 1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay).
Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on
the date of the Executive’s “separation from service” (as such term is defined under Treasury
Regulation 1.409A-1(h)) or at such other time that the Company determines to be relevant, the
Executive is a “specified employee” (as such term is defined under Treasury Regulation
1.409A-1(i)(1)) of the Company and (ii) that any payments to be provided to the Executive pursuant
to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of
the Code or any other taxes or penalties imposed under Section 409A of the Code (the “Section 409A
Taxes”) if provided at the time otherwise required under this Agreement, then such payments shall
be delayed until the date that is six (6) months after the date of the Executive’s separation from
service with the Company, or such shorter period that, as determined by the Company, is sufficient
to avoid the imposition of Section 409A Taxes. Any payments delayed pursuant to this Section 7.3
shall be made in a lump sum on the first day of the seventh month following the Executive’s
separation from service, or such earlier date that, as determined by the Company, is sufficient to
avoid the imposition of any Section 409A Taxes.

     7.5 Should any part of this Agreement be declared invalid for any reason, such invalidity
shall not affect the validity of any remaining portion hereof and such remaining portion shall
continue in full force and effect as if this Agreement had been originally executed without
including the invalid part. Should any covenant of this Agreement be unenforceable because of its
geographic scope or term, its geographic scope or term shall be modified to such extent as may be
necessary to render such covenant enforceable.

     7.6 Titles and captions in no way define, limit, extend or describe the scope of this
Agreement nor the intent of any provision thereof.

     7.7 This Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.

     7.8 This Agreement has been executed and delivered in the State of Maryland and its validity,
interpretation, performance and enforcement shall be governed by the laws of that state.

Any dispute among the parties hereto shall be settled by arbitration in Bethesda, Maryland, in
accordance with the rules then obtaining of the American Arbitration Association and judgment upon
the award rendered may be entered in any court having jurisdiction thereof. All provisions hereof
are for the protection and are intended to be for the benefit of the parties hereto and enforceable
directly by each party. Each party hereto agrees that the remedy at law of the other party for any
actual or threatened breach of this Employment Agreement would be inadequate and that the other
party shall be entitled to specific performance hereof or injunctive

 

 

relief or both, by temporary or permanent injunction or such other appropriate judicial remedy,
writ or orders as may be decided by a court of competent jurisdiction in addition to any damages
which the complaining party may be legally entitled to recover.

     7.9 All notices, requests, consents and other communications hereunder shall be in writing and
shall be deemed to have been made when delivered or mailed first-class postage prepaid by
registered mail, return receipt requested, or when delivered if by hand, overnight delivery service
or confirmed facsimile transmission to the following:

     (i) If to the Company, at 6705 Rockledge Drive, Suite 900, Bethesda, Maryland, 20817,
Attention: Chairman of the Compensation Committee, or at such other address as may have been
furnished to the Executive by the Company in writing; or

     (ii) If to the Executive, at 6705 Rockledge Drive, Suite 900, Bethesda, Maryland, 20817,
or to the Executive’s primary home address on record with the company, or such other address
as may have been furnished to the Company by the Executive in writing.

     7.10 This Agreement shall be binding on the parties’ successors, heirs and assigns.

     7.11 The terms of this Agreement were developed consistent with current applicable tax laws
and regulations. In the event there are any future changes to these laws and regulations affecting
the terms of this Agreement and, as a result, either party hereunder is adversely impacted, both
parties agree to cooperate to protect the current interests of each to the maximum extent possible.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	EXECUTIVE	 	COVENTRY HEALTH CARE, INC.	 	
	 
	 	 	 	 	 	 
	By:

	 	/s/ Harvey C. DeMovick
	 	/s/ Allen F. Wise	 	 
	 

	 	 
	 	 	 	 
	 

	 	Harvey C. DeMovick
	 	Allen F. Wise	 	 
	 

	 	 	 	Chief Executive Officerexv10w11

Exhibit 10.11

COVENTRY HEALTH CARE, INC. (“COVENTRY”)

Summary of 2010 Executive Management Incentive Plan

2010 Criteria and Incentives

     The Compensation Committee of Coventry’s Board of Directors approved the incentive criteria
for fiscal year 2010 under the 2010 EMIP, filed herein as Exhibit 10.12. For fiscal year 2010, as
with fiscal year 2009, incentives under the 2010 EMIP will be predicated on attainment of budgeted
earnings per share targets. Coventry’s Chief Executive Officer, Chief Financial Officer, and three
other most highly compensated officers are eligible to receive a non-equity incentive award under
Coventry’s 2010 EMIP. The bonus target awards for achievement of performance criteria in fiscal
year 2010 are set forth below:

	 	 	 	 	 
	 	 	Bonus Target Awards
	Named Executive Officers	 	for 2010*
	Allen F. Wise, Chief Executive Officer
	 	 	300	%
	Harvey C. DeMovick, Jr., Executive Vice President
	 	 	75	%
	Thomas C. Zielinski, Executive Vice President and General Counsel
	 	 	75	%
	John J. Stelben, Interim Chief Financial Officer and Treasurer
	 	 	50	%
	James E. McGarry, Senior Vice President
	 	 	70	%

 

			
	*	 	As a percentage of base compensation.

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