1
EXHIBIT 10.32
FORM OF
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of the _____day of
___________, 1998, by and between [Name of Executive] ("Executive") and Coventry
Health Care, Inc. ("Employer"), a Delaware corporation with its principal place
of business at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 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 a [Office]. Executive hereby
agrees to such employment on and after the Date of Employment under the terms
and conditions hereinafter set forth.
2. DUTIES. As [Office], Executive shall report to the _______________
of Employer. Executive's powers and duties shall be those normally associated
with such position or as may be delegated or assigned to Executive by Employer's
Chief Operating Officer or the President and Chief Executive Officer or by the
Board of Directors of Employer. 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 the
date of closing of the Merger and the Capital Contribution as those terms are
defined in that certain Capital Contribution and Merger Agreement, as amended,
effective as of November 3, 1997, by and among Employer, Coventry Corporation,
Coventry Health Care, Inc., (a Maryland corporation), Principal Health,
Principal Holding Company and Principal Mutual Life Insurance Company, (the
"Date of Employment").
2
4. INITIAL TERM. Subject to the terms and conditions set forth herein,
Executive shall be employed hereunder for an initial term of one year 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 by either party.
5. BASE COMPENSATION. For all duties rendered and all hours worked by
Executive, Employer shall pay Executive a base salary ("Base Salary") of
[Compensation], 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:
EMPLOYER STOCK OPTIONS: Employer shall assume that certain
Non-Qualified Stock Option Agreement (the "Stock Option Agreement") between
Executive and Principal Health Care, Inc., an Iowa corporation ("Principal
Health"), as of the Closing of the Merger and the Capital Contribution as those
terms are defined in that certain Capital Contribution and Merger Agreement, as
amended, effective as of November 3, 1997, by and among Employer, Coventry
Corporation, Coventry Health Care, Inc., (a Maryland corporation), Principal
Health, Principal Holding Company and Principal Mutual Life Insurance Company,
which grants to Executive a nonqualified stock option to purchase ___________
shares of Common Stock of Principal Health Care, Inc., at an exercise price of
$14.50 per share, vesting at a rate of one-fourth of the shares per year over a
four-year vesting period commencing March 31, 1999, or in the event of a change
in control (as defined in Principal Health's 1997 Non-Qualified Stock Option
Plan). The Stock Option Agreement and Principal Health's 1997 Non-Qualified
Stock Option Plan are incorporated herein by reference.
OTHER BONUS COMPENSATION: Executive shall be eligible for an annual
bonus ("Bonus") potential of up to [50% to 70%]% of Base Compensation, which
shall be determined as follows: (i) up to 50% of the Bonus shall be based upon
achievement of budget and other operational performance factors, and (ii) all or
any part of the remaining 50% of the Bonus 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. The Bonus may be paid in
cash, stock or such other compensation and in such proportion as may be
determined from time to time by the Committee.
DISCRETIONARY CAR ALLOWANCE: Executive shall be entitled to a
discretionary car allowance of $600.00 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 15 below.
2
3
7. EXPENSES AND 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.
Executive shall also be reimbursed for expenses associated with Executive's
relocation to Employer's designated location. The extent and amount of such
expense shall be consistent with Employer's current relocation policy.
8. EXTENT OF SERVICE. Executive shall devote substantially all of her
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 13(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 her duties under this
Agreement.
9. TERMINATION OF EMPLOYMENT. Employer may terminate Executive's
employment hereunder with or without cause or for Good Cause (as defined in
Section 24 below), in the sole discretion of Employer, at any time during the
term of this Agreement. If the employment of Executive with Employer is
terminated by Employer for any reason other than Good Cause (as defined in
Section 24 below):
(a) Employer shall during the Severance Period (as defined in
Section 24 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 are 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) During the Severance Period Executive and her spouse and
family will continue to be covered by all Welfare Plans (as
defined in Section 24 below), maintained by Employer in which
she or her spouse or family were participating
3
4
immediately prior to the date of her termination as if she
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 her 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.
(c) Executive shall not be entitled to payments during the
Severance Period attributable to compensation for vacation
periods she would have earned had her employment continued
during the Severance Period or to unused vacation periods
accrued as of the date of termination of employment.
(d) 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 Section 9(a) and (b) hereof is contingent upon
Executive's compliance with Section 13 hereof.
10. TERMINATION BY EXECUTIVE. Executive may terminate her employment
hereunder at any time upon sixty (60) days prior written notice. Upon such
termination by Executive, the Employer shall pay the Executive only her Base
Salary due through the date on which her 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, except for the payout of
benefits already accrued under any Employee Benefit Plans or other employee
benefits.
11. SETOFF.
(a) With respect to Section 9, payments or benefits payable to or
with respect to Executive or her spouse pursuant to this
Agreement shall be reduced by the amount of any claim of
Employer against Executive or her spouse or any debt or
obligation of Executive or her 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 or other professional
services, except as expressly provided in Section 9(b).
Employee
4
5
shall notify Employer immediately in writing of the date upon
which such services or other work commenced and shall provide
Employer with such documentation as Employer shall require to
determine the amount of any such setoff. Employee's failure to
provide such written notice and documentation as required
herein shall immediately release Employer from its obligations
under this Agreement and Employer shall have the right to
recover all amounts paid hereunder.
12. 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 her surviving
spouse. On the death of the survivor of Executive and her
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 her spouse
immediately prior to the date of her death to the extent
possible.
Any benefits payable under this Section 12 are in addition to any other
benefit due to Executive or her spouse or beneficiaries from Employer,
including, but not limited to, payments under any Incentive Plans.
13. RESTRICTIVE COVENANTS.
(a) Confidential Information. Executive agrees not to disclose,
either during the time she is employed by the Employer or
following termination of her employment hereunder, to any
person (other than a person to whom disclosure is necessary in
connection with the performance of her 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 have any 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
5
6
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. In the
event Executive enters into any of the foregoing arrangements
in competition with Employer or any Affiliate of Employer,
Executive shall forfeit all rights to further payments and
other benefits under Section 9, above, on and after the date
Executive enters into competition with Employer. Such
forfeiture shall be Employer's sole remedy against Executive
for violation of this Section 13(b).
(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 her employment and will make
herself 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. In the event of voluntary
termination by Executive, Employer agrees to pay Executive a
reasonable fee for any such consultation services requested by
Employer; provided, however, Executive agrees to cooperate
with Employer, at no cost to Employer, in concluding any
matters in which Executive was involved during the term of her
employment.
(e) Enforcement. Executive and the Employer acknowledge and agree
that Subsections (a), (c) and (d) contained in this Section 13
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 13 shall not
terminate upon Executive's termination of her
6
7
employment with the Employer or upon the termination of this
Agreement under any other provision of this Agreement.
14. VACATION. During each year of this Agreement, Executive shall be
entitled to vacation accrued in accordance with corporate policies currently in
effect from time to time.
15. HEALTH AND WELFARE BENEFITS; PROFIT-SHARING PLANS. In addition to
the benefits specifically provided for herein, Executive and her 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.
16. EXECUTIVE ASSIGNMENT. No interest of Executive or her 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 her spouse or other
beneficiary, including claims for alimony, support, separate maintenance, and
claims in bankruptcy proceedings.
17. BENEFITS UNFUNDED. Except as required by law, all rights of
Executive and her 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 her spouse or other beneficiary shall have any
interest in or rights against any specific assets of Employer, and Executive and
her spouse or other beneficiary shall have only the rights of a general
unsecured creditor of Employer.
18. 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 her 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.
19. 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.
20. 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 her are unique and
7
8
personal, and Executive may not assign any of her rights or
delegate any of her duties or obligations under this
Agreement.
21. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and, with the exception of the terms and conditions set forth in
Exhibit B to that certain Employment Agreement between Executive and Principal
Health Care, Inc. dated as of October 1, 1997, 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.
22. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Maryland, without giving effect to the principles of conflicts of law
thereof.
23. 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.
24. 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.
(b) "Good Cause" shall be deemed to exist if, and only if:
(i) Executive is indicted or convicted of a felony;
(ii) Executive is involved in the commission of theft or
embezzlement of Employer's property or similar acts
involving moral turpitude; or
(iii) Executive willfully fails to substantially perform
her material duties under this Agreement (excluding
nonperformance resulting from Executive's
disability), which willful failure is not cured
within (30) days after written notice from the
President of the Company specifying the act of
willful nonperformance or within such longer period
(but no longer than ninety (90) days in any event) as
is reasonably required to cure such willful
nonperformance.
Without limiting the generality of the foregoing, if
Executive acted in good faith and in a manner she reasonably
believed to be in, and not opposed to, the best interest of
Employer and had no reasonable cause to believe her conduct
8
9
was unlawful in connection with any action taken by Executive
in connection with her duties, it shall not constitute Good
Cause.
(c) "Severance Period" shall mean the period beginning on the date
the Executive's employment with Employer terminates without
Good Cause under circumstances described in Section 9 and
ending on the date that follows eighteen months thereafter.
(d) "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.
25. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original.
26. SEVERABILITY. In the event that 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 13(b) is determined by a court of
competent jurisdiction to be invalid due to overbreadth, such Section 13(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.
---------------------------------------
[Executive]
COVENTRY HEALTH CARE, INC.
By:
---------------------------------------
Xxxxx X. Xxxx
President and Chief Executive Officer
9
