TRANSITION AND RETIREMENT
AGREEMENT
THIS
TRANSITION AND RETIREMENT AGREEMENT (the “Agreement”)
entered into on September 22, 2004, by and between COVENTRY HEALTH
CARE INC., a Delaware corporation (the “Company”), with
its principal office in Bethesda, Maryland, and Allen F. Wise, a
resident of Potomac, Maryland (:Executive”).
WHEREAS,
Executive is the Chief Executive Officer of the Company and a
member of its Board of Directors (the “Board”) and is
the subject of an employment agreement entered into with the
Company on December 18, 2000 (the “Prior Agreement”);
and
WHEREAS,
Executive has announced his intention to retire on August 21, 2007
(the “Retirement Date”) and Executive and the Board
have determined that it is in the best interest of the Company for
Executive to cease to be Chief Executive Officer on January 1,
2005, be employed by the Company as its non-executive Chairman,
assist his successor to achieve success in his new position and
then retire on the Retirement Date; and
WHEREAS,
in consideration of the years of valuable service provided by
Executive to the Company and his agreement to cooperate with the
Company in transitioning his duties to his successor and to provide
the Company with covenants against competition, solicitation of
employees and disclosure of confidential information, both parties
desire to enter into an agreement that will reflect the
compensation and other benefits to which Executive will be entitled
by reason of his retirement and the other agreements between the
parties;
NOW,
THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1.
Effectiveness of the Agreement . Except as specifically
provided herein, the Prior Agreement shall remain in effect until
December 31, 2004, and from and after that date shall be superceded
by this Agreement and be of no further force or effect.
2.
Transition of Duties and Retirement . Effective on January
1, 2005, Executive shall resign all positions (including without
limitation all officer and director positions) with the Company and
its subsidiaries except that Executive shall be the non-executive
Chairman (“Chairman”) of the Company and shall remain a
member of the Board for his current term and all subsequent terms
for which he is elected by the shareholders of the Company. In his
role as Chairman, executive shall continue as an employee of the
Company and shall perform those duties reasonably requested of him
by the Board or the Company’s Chief Executive Officer within
the scope of Executive’s business experience and expertise,
except that such duties shall not conflict with any subsequent
business activities that Executive, in his sole discretion,
determines to pursue. Executive and the Company agree that
Executive shall retire on the Retirement Date and that Executive
shall then be considered to have retired for all Company purposes,
including all plans, benefits and programs which the Company
maintains or has maintained and in which Executive participated
during the term of his employment by the Company. Until the
Retirement Date, Company shall furnish Executive with secretarial
support comparable to the level he currently enjoys for up to 15
hours per week.
3.
Payments, Benefits and Indemnification .
(a)
Pursuant to the prior Agreement, Executive shall continue to serve
as President and Chief Executive Officer and receive his regular
base salary, annual incentive and long-term incentives and continue
to participate in all benefit plans and programs of the Company and
to receive all perquisites through December 31, 2004. On and after
January 1, 2005, the Company shall provide Executive with the
compensation, benefits and perquisites set forth on Exhibit A to
this Agreement, which is incorporated herein by reference.
Executive and the Company acknowledge that Exhibit A is a complete
and accurate summary of Executive’s expected rights and
benefits under the Company’s benefit plans and programs due
to Executive under this Agreement.
(b)
All of Executive’s options to purchase shares of the Company
shall continue to vest in accordance with their terms and shall be
fully vested and non-forfeitable on the Retirement Date. All such
options shall be exercisable upon retirement as provided by their
terms and the Company’s Amended and Restated 1998 Stock
Incentive Plan.
(c)
The restricted stock awards granted to Executive in 2002 and 2003
shall continue to vest in accordance with their terms and shall be
fully vested and non-forfeitable on the Retirement Date. If the
performance conditions designated for the restricted stock awards
granted to Executive in 2004 are met, those awards shall continue
to vest in accordance with their terms and shall be fully vested in
June, 2007.
(d)
Executive shall continue during the term of this Agreement and
after the Retirement Date to retain his rights to indemnification
by the Company, or through any insurance purchased by the Company,
to the maximum extent that Executive would have been entitled to
indemnification at any time during his employment by the Company as
set forth in Section 6.1 of the Prior Agreement.
(e)
As soon as practicable following the execution of this Agreement,
the Company shall pay Executive’s counsel all documented
legal fees and expenses arising in representing Executive in the
preparation of this Agreement and, particularly, in advising
Executive as to the consequences to him of Sections 3 and 4 of this
Agreement.
4.
Restrictive Covenants.
(a)
Confidential Information . The provisions of Section 5.3 of
the Prior Agreement shall continue in full force and
effect.
(b)
Non-Compete . Executive will not “Compete with the
Company,” as defined in Section 5.4 of the Prior Agreement,
prior to the Retirement Date.
(c)
Non-Solicitation . Prior to the Retirement Date, without the
Company’s permission, Executive will not solicit ,
hire or encourage any managerial or higher level employee of the
Company, or of any of its affiliates or subsidiaries, to accept
employment with an entity other than the Company un
