<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-19442
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1118515
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 Connecticut Avenue - Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 852-1442
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of common
stock, par value $.01 per share, outstanding on November 7, 1996 was 76,168,167.
1
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OXFORD HEALTH PLANS, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1 Financial Statements
Consolidated Balance Sheets at September 30, 1996 and
December 31, 1995 ....................................................... 3
Consolidated Statements of Earnings for the Three Months and Nine
Months Ended September 30, 1996 and 1995 ................................ 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 ............................................. 5
Notes to Condensed Consolidated Financial Statements ...................... 6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 7
PART II - OTHER INFORMATION
ITEM 5 Other Information ............................................................. 10
ITEM 6 Exhibits and Reports on Form 8-K .............................................. 11
Signatures
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
OXFORD HEALTH PLANS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEP. 30, DEC. 31,
ASSETS 1996 1995
---------- --------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................... $ 110,207 58,450
Short-term investments - available-for-sale (at market value) ..... 721,763 310,197
Premiums receivable (net of allowance for doubtful
accounts of $2,460 in 1996 and $3,029 in 1995) ................... 139,962 96,278
Other receivables ................................................. 22,580 15,260
Prepaid expenses and other current assets ......................... 6,294 3,563
Deferred income taxes ............................................. 11,589 8,443
---------- --------
Total current assets ........................................... 1,012,395 492,191
Property and equipment, at cost (net of accumulated depreciation and
amortization of $58,651 in 1996 and $30,074 in 1995) .............. 106,558 97,414
Other noncurrent assets ............................................. 28,801 19,171
---------- --------
Total assets ................................................... $1,147,754 608,776
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical costs payable ............................................. $ 525,870 300,508
Trade accounts payable and accrued expenses ....................... 60,791 36,508
Income taxes payable .............................................. 6,700 1,428
Unearned premiums ................................................. 18,784 50,299
---------- --------
Total current liabilities ...................................... 612,145 388,743
---------- --------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares ...... -- --
Common stock, $.01 par value, authorized 200,000,000
shares; issued and outstanding 76,094,097 in 1996
and 34,390,401 in 1995 ........................................... 761 343
Additional paid-in capital ........................................ 364,266 116,639
Retained earnings ................................................. 163,792 96,167
Unrealized net appreciation of investments ........................ 6,790 6,884
---------- --------
Total stockholders' equity ..................................... 535,609 220,033
---------- --------
Total liabilities and stockholders' equity ..................... 1,147,754 608,776
========== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- ---------------------------
1996 1995 1996 1995
-------- ------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .............................. $797,623 471,625 2,158,573 1,206,089
Third-party administration, net .............. 2,383 3,247 7,911 8,941
Investment income, net ....................... 11,303 5,284 28,203 12,948
-------- ------- --------- ---------
Total revenues ............................. 811,309 480,156 2,194,687 1,227,978
-------- ------- --------- ---------
Expenses:
Health care services ......................... 639,917 368,120 1,730,149 938,625
Marketing, general and administrative ........ 123,554 85,705 343,867 222,884
-------- ------- --------- ---------
Total expenses ............................. 763,471 453,825 2,074,016 1,161,509
-------- ------- --------- ---------
Operating profit ............................... 47,838 26,331 120,671 66,469
Equity in net loss of affiliate ................ (1,500) (850) (3,550) (2,473)
Other income (expense), net .................... (126) 108 (36) 120
-------- ------- --------- ---------
Earnings before income taxes ................... 46,212 25,589 117,085 64,116
Provision for income taxes ..................... 19,562 10,496 49,460 27,302
-------- ------- --------- ---------
Net earnings ................................... $ 26,650 15,093 67,625 36,814
======== ======= ========= =========
Earnings per common and common equivalent share:
Primary ..................................... $ 0.33 0.21 0.86 0.50
Fully diluted ............................... $ 0.33 0.20 0.85 0.50
Weighted average shares of common stock and
common stock equivalents outstanding:
Primary .................................... 80,880 73,476 79,089 73,050
Fully diluted .............................. 81,362 74,306 79,459 73,904
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ..................................................... $ 67,625 36,814
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ................................. 31,220 15,142
Provision for doubtful accounts ............................... 1,617 2,171
Deferred income taxes ......................................... (3,081) (4,946)
Equity in net loss of affiliate ............................... 3,550 2,473
Other, net .................................................... 360 36
Changes in assets and liabilities:
Premiums receivable ......................................... (45,301) (79,941)
Other receivables ........................................... (7,320) (3,626)
Prepaid expenses and other current assets ................... (2,731) (2,014)
Other noncurrent assets ..................................... (1,406) 828
Medical costs payable ....................................... 225,362 112,126
Trade accounts payable and accrued expenses ................. 24,291 18,577
Income taxes payable ........................................ 19,855 7,698
Unearned premiums ........................................... (31,515) 23,790
Other, net .................................................. -- (107)
--------- --------
Net cash provided by operating activities ................. 282,526 129,021
--------- --------
Cash flows from investing activities:
Capital expenditures ............................................. (38,607) (56,473)
Purchases of available-for-sale securities ....................... (650,087) (164,134)
Sales and maturities of available-for-sale securities ............ 235,949 110,874
Maturity of long-term investment ................................. -- 13,505
Investments in unconsolidated affiliates ......................... (11,729) (6,625)
Other, net ....................................................... 251 (330)
--------- --------
Net cash used by investing activities ..................... (464,223) (103,183)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ........................... 220,541 --
Proceeds from exercise of stock options .......................... 12,913 7,847
--------- --------
Net cash provided by financing activities ................. 233,454 7,847
--------- --------
Net increase (decrease) in cash and cash equivalents ............... 51,757 33,685
Cash and cash equivalents at beginning of period ................... 58,450 35,344
--------- --------
Cash and cash equivalents at end of period ......................... $ 110,207 69,029
========= ========
Supplemental cash flow information - cash paid for income taxes .... $ 38,632 28,572
Supplemental schedule of noncash investing and financing activities:
Unrealized appreciation (depreciation) of short-term investments . (159) 13,013
Tax benefit realized on exercise of stock options ................ 14,583 14,418
Common stock issued for contingent performance grants ............ 8 45
One-for-one stock dividend ....................................... $ 348 167
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein
have been prepared by Oxford Health Plans, Inc. ("Oxford") and its subsidiaries
(collectively, the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures, normally included in the financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to SEC rules and regulations;
nevertheless, management of the Company believes that the disclosures herein are
adequate to make the information presented not misleading. The condensed
consolidated financial statements and notes should be read in conjunction with
the audited consolidated financial statements and notes thereto as of and for
each of the years in the three-year period ended December 31, 1995, included in
the Company's Form 10-K filed with the SEC in March 1996.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company with respect to the interim condensed consolidated
financial statements have been made. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full year.
(2) EARNINGS PER SHARE
On March 15, 1996, the Board of Directors approved a two-for-one split
of the Company's common stock effected by distribution of a dividend of one
share of common stock for each share of common stock outstanding on March 25,
1996. The two-for-one split was effectuated on April 1, 1996. Earnings per share
amounts in the accompanying consolidated statements of earnings have been
restated to reflect the stock split.
(3) PUBLIC OFFERING
On April 8, 1996, the Company completed a registered public offering of
5,227,272 newly issued post-split shares of common stock from which the Company
realized net proceeds of approximately $220 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table shows membership by product:
<TABLE>
<CAPTION>
As of September 30 Increase
------------------------ -----------------
1996 1995 Amount %
--------- -------- ------- -----
<S> <C> <C> <C> <C>
Membership:
Freedom Plan .................... 958,300 616,760 341,540 55.4 %
HMO ............................. 181,800 107,110 74,690 69.7 %
Medicare ........................ 113,400 56,050 57,350 102.3 %
Medicaid ........................ 147,600 94,000 53,600 57.0 %
--------- ------- -------
Total fully insured ............ 1,401,100 873,920 527,180 60.3 %
Third-party administration, net.. 41,100 44,100 (3,000) (6.8)%
========= ======= =======
Total membership ............... 1,442,200 918,020 524,180 57.1 %
========= ======= =======
</TABLE>
The following table provides certain statement of earnings data expressed as a
percentage of total revenues for the three months and nine months ended
September 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned ....................... 98.3 % 98.2 % 98.4 % 98.2 %
Third-party administration, net ....... 0.3 % 0.7 % 0.4 % 0.7 %
Investment income, net ................ 1.4 % 1.1 % 1.2 % 1.1 %
----- ----- ----- -----
Total revenues ....................... 100.0 % 100.0 % 100.0 % 100.0 %
----- ----- ----- -----
Expenses:
Healthcare services ................... 78.9 % 76.7 % 78.8 % 76.4 %
Marketing, general and administrative.. 15.2 % 17.8 % 15.7 % 18.2 %
----- ----- ----- -----
Total expenses ....................... 94.1 % 94.5% 94.5 % 94.6 %
----- ----- ----- -----
Operating earnings ...................... 5.9 % 5.5 % 5.5 % 5.4 %
Equity in net loss of affiliate and other (0.2)% (0.2)% (0.2)% (0.2)%
----- ----- ----- -----
Earnings before income taxes ............ 5.7 % 5.3 % 5.3 % 5.2 %
Provision for income taxes .............. 2.4 % 2.2 % 2.3 % 2.2 %
----- ----- ----- -----
Net earnings ............................ 3.3 % 3.1 % 3.0 % 3.0 %
===== ===== ===== =====
Medical-loss ratio ...................... 80.2 % 78.1 % 80.2 % 77.8 %
===== ===== ===== =====
Administrative expense as a percent
of operating revenue .................. 15.4 % 18.0 % 15.9 % 18.3 %
===== ===== ===== =====
</TABLE>
7
<PAGE> 8
RESULTS OF OPERATIONS
The three months ended September 30, 1996 compared with the three months ended
September 30, 1995
Total revenues for the quarter ended September 30, 1996 were $811.3
million, up 69% from $480.2 million during the same period in the prior year.
Net earnings for the third quarter of 1996 totaled $26.7 million, or 33 cents
per share, compared with $15.1 million, or 21 cents per share, for the third
quarter of 1995.
Total commercial premiums earned for the three months ended September 30,
1996 increased 60% to $568.3 million from $355.2 million for the same period in
the prior year. This increase is attributable to a 58% increase in member months
in the Company's commercial health care programs, including a 56% member months
increase in the Freedom Plan. Premium rates of commercial programs were slightly
higher in this quarter than in the third quarter of 1995 and 3.0% higher than in
the fourth quarter of 1995.
Premiums earned from government programs increased 97% to $229.3 million
in the third quarter of 1996 compared with $116.5 million in the third quarter
of 1995. Membership growth accounted for most of the change as member months of
Medicare programs increased 112% when compared with the prior year third
quarter, while member months of Medicaid programs increased by 60% over the
level of the prior year third quarter. Premiums per member per month in the
Company's Medicaid programs are now expected to decline at a rate slightly in
excess of 7% for the year. The Medicaid premium declines are largely associated
with significant reductions in reimbursement rates in New York. The Company
expects that its Medicaid enrollment in New York will decline as a percentage of
total Medicaid enrollment in future periods as a consequence of these reductions
and changes in eligibility rules.
Net third-party administration revenues for the three months ended
September 30, 1996 declined 26.6% to $2.4 million from $3.2 million for the same
period in the prior year. This decline is attributable to a 10% decrease in
member months and a 19% decrease in per member per month revenue.
Net investment income for the three months ended September 30, 1996
increased 114% to $11.3 million from $5.3 million for the same period in 1995
due to the increase in invested cash generated by cash flow from operations and
approximately $220 million of net proceeds from the Company's public offering in
April 1996.
The medical-loss ratio (health care services expense stated as a
percentage of premium revenues) was 80.2% for the third quarter of 1996 compared
with 78.1% for the third quarter of 1995. The increase is attributable to a
higher percent of membership in the Company's Medicare programs, greater than
expected pharmacy costs and decreased per member per month revenue in the
Company's Medicaid programs.
Marketing, general and administrative expenses totaled $123.6 million in
the third quarter of 1996 compared with $85.7 million in the third quarter of
1995. The increase over the third quarter of 1995 is primarily attributable to a
$17.5 million rise in payroll and benefits due to increased staffing, increased
costs associated with the growth in membership in the Company's plans, higher
broker commissions attributable to the increase in premiums earned, and expenses
related to enhancements to management information systems necessary to
accommodate increased transaction volume. These expenses as a percentage of
operating revenue were 15.4% during the third quarter of 1996 compared with
18.0% during the third quarter of 1995. The Company expects that its
administrative expenses will increase slightly in the fourth quarter of 1996 as
a consequence of increased costs associated with the conversion of its
information systems.
The Company's profitability is dependent, in part, on its ability to
predict and maintain effective control over health care costs (through, among
other things, appropriate benefit design, utilization review and case management
programs and its risk-sharing agreements with providers) while providing members
with quality health care. Factors such as utilization, new technologies and
health care practices, hospital costs, major epidemics, inability to establish
effective risk-sharing agreements with providers, government regulation, taxes
and other government charges, and numerous other external influences may affect
Oxford's ability to control such costs. The Company uses its medical cost
containment capabilities, such as claim auditing systems, physician tracking
systems and utilization review protocols, and improved channeling to the most
cost-effective providers with a view to reducing the rate of growth in health
care services expense. There can be no assurance that Oxford will be successful
in mitigating the effect of any or all of the above listed or other factors.
Accordingly, past financial performance is not necessarily a reliable indicator
of future performance, and investors should not use historical performance to
anticipate results or future period trends.
8
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The nine months ended September 30, 1996 compared with the nine months ended
September 30, 1995
Total revenues for the nine months ended September 30, 1996 were $2.19
billion, up 79% from $1.23 billion during the same period in the prior year. Net
earnings for the first nine months of 1996 totaled $67.6 million, or 86 cents
per share, compared with $36.8 million, or 50 cents per share, for the first
nine months of 1995.
Total commercial premiums earned for the nine months ended September 30,
1996 increased 69% to $1.56 billion from $921.8 million for the same period in
the prior year. This increase is attributable to a 69% increase in member months
in the Company's commercial health care programs, including a 70% member months
increase in the Freedom Plan.
Premiums earned from government programs increased 111% to $601.0 million
in the first nine months of 1996 compared with $284.3 million in the first nine
months of 1995. Membership growth accounted for most of the change as member
months of Medicare programs increased 141% when compared with the prior year
third quarter, while member months of Medicaid programs increased by 65% over
the level of the prior year third quarter. Premiums per member per month in the
Company's Medicaid programs are now expected to decline at a rate slightly in
excess of 7% for the year as a result of reductions in reimbursement rates in
New York.
Net third-party administration revenues for the nine months ended
September 30, 1996 decreased 11.5% to $7.9 million from $8.9 million for the
same period in the prior year. This decline is attributable to a 9.0% decrease
in member months and a 2.8% decrease in per member per month revenue.
Net investment income for the nine months ended September 30, 1996
increased 118% to $28.2 million from $12.9 million for the same period last year
due to the increase in invested cash generated by cash flow from operations and
approximately $220 million of net proceeds from the Company's public offering in
April 1996.
The medical-loss ratio was 80.2% for the first nine months of 1996
compared with 77.8% for the first nine months of 1995. The increase is
attributable to a higher percent of membership in the Company's Medicare
programs, greater than expected pharmacy costs and decreased per member per
month revenues in the Company's Medicaid programs.
Marketing, general and administrative expenses totaled $343.9 million in
the first nine months of 1996 compared with $222.9 million in the first nine
months of 1995. The increase over the first nine months of 1995 is primarily
attributable to a $55.7 million rise in payroll and benefits due to increased
staffing, increased costs associated with the growth in membership in the
Company's plans, higher broker commissions attributable to the increase in
premiums earned, and expenses related to enhancements to management information
systems necessary to accommodate increased transaction volume. These expenses as
a percent of operating revenue were 15.9% during the first nine months of 1996
compared with 18.3% during the first nine months of 1995.
See Item 5. "Other Information" concerning the impact of recently enacted
government regulations.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations of $282.5 million and the net proceeds of
approximately $220 million from the public offering in April 1996 of 5,227,272
newly issued post-split shares of common stock contributed to an increase in
cash and cash equivalents and short-term investments to $832.0 million as of
September 30, 1996 from $368.6 million at December 31, 1995.
The Company's capital expenditures for the first nine months of 1996
totaled $38.6 million. Such funds were used primarily for management information
systems and leasehold improvements related to business expansion. In the second
quarter of 1996, the Company also added approximately $55 million to the capital
reserves of its New York HMO subsidiary and approximately $15 million to the
capital reserves of its New Jersey HMO subsidiary to support the expanding
business of those subsidiaries.
Except for anticipated capital expenditures, the Company currently has no
definitive commitments for use of material cash resources. However, management
continually evaluates opportunities to expand the Company's managed care
services and health plan operations.
The Company's medical costs payable, which includes reserves for incurred
but not reported claims ("IBNR"), was $525.9 million as of September 30, 1996
and $300.5 million as of December 31, 1995. The
9
<PAGE> 10
Company estimates the amount of such reserves using standard actuarial
methodologies based upon historical data, including the average interval between
the date services are rendered and the date claims are paid, expected medical
cost inflation, seasonality patterns and increases in membership. The Company
believes that its reserves for IBNR are adequate in order to satisfy its
ultimate claim liability. However, the Company's rapid growth affects the
Company's ability to rely on historical information in making IBNR reserve
estimates.
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Item 5. "Other Information" contain certain forward-looking
statements, including statements concerning future earnings, premium rates,
enrollment, the effect of government regulation and medical and administrative
costs. Actual results could differ materially from those discussed. Factors that
could cause actual results to differ materially include government action,
termination or renegotiation of provider contracts on less favorable terms, the
effect of competition on premium rates and increasing medical costs. Additional
information concerning factors that could cause actual results to differ
materially from those in forward-looking statements is contained in the
Company's Annual Report on Form 10-K under the caption "Business-Cautionary
Statement Regarding Forward-Looking Statements."
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Recent Federal Legislation
The recently enacted Federal Health Insurance Portability and
Accountability Act of 1996, (i) insures portability of health insurance to
individuals changing jobs or moving to individual coverage by limiting
application of preexisting condition exclusions, (ii) guarantees availability of
health insurance to employees in the small group market and (iii) prevents
exclusion of individuals from coverage under group plans based on health status.
The provisions are effective beginning July 1, 1997. The Company is currently
subject to similar state law provisions in New York limiting preexisting
condition exclusions for new group and individual enrollees who had continuous
prior coverage and requiring issuance of group coverage to small group
employers. The Act also permits offering Medical Savings Account plans on a
pilot basis and includes programs targeting fraud and abuse. Recently enacted
Federal legislation mandates coverage for minimum hospital stays after
childbirth (consistent with many new state law requirements) and parity in
applying lifetime limits to mental health benefits.
Recent New York State Legislation
New York recently enacted the Health Care Reform Act of 1996 (the "Act").
Effective January 1, 1997, the Act allows all private health care payors to
negotiate payment rates for inpatient hospital services. Previously, only HMOs
could negotiate rates for these services. While non-HMO payors who compete with
the Company may pay negotiated hospital rates beginning next year, the Company
expects that it will continue to have competitive arrangements with hospitals in
its network in view of its position as one of the largest payors in the market.
Also, effective January 1, 1997, the Company will begin making payments to state
funding pools to finance hospital bad debt and charity care, graduate medical
education and other state programs under the Act. Previously, bad debt and
charity care and graduate medical education were financed by surcharges on
payments to hospitals for inpatient services. As contemplated by the Act, the
Company is in the process of negotiating adjustments to rates paid to network
hospitals in New York to reflect elimination of these surcharges. There can be
no assurance that the Company will reach agreement on these adjustments with all
contracted hospitals in New York or that agreement will be reached by January 1,
1997. The Company has filed increases in certain of its commercial premium rates
in New York of between 2% and 3.2% in addition to normal trend increases in view
of the potential increases in costs attributable to the Act.
The New York legislature also recently passed legislation related to
operation of managed care plans, which contains provisions relating to, among
other things, utilization review, consumer disclosure and right of hearing on
termination of physicians from health plan networks.
The Company is unable to determine the ultimate impact of the foregoing
legislation or of future legislation and regulatory changes. See the Company's
Annual Report on Form 10K, Item 1. "Business--Government Regulation, and
Cautionary Statement Regarding Forward-Looking Statements--Government
Regulation; Reimbursement."
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Document
10(a) Employment Agreement, dated August 14, 1996 between
Registrant and Stephen F. Wiggins.
10(b) Employment Agreement, dated August 14, 1996 between
Registrant and William M. Sullivan.
10(c) Employment Agreement, dated August 14, 1996 between
Registrant and Jeffery H. Boyd.
10(d) Employment Agreement, dated August 14, 1996 between
Registrant and Andrew B. Cassidy.
10(e) Employment Agreement, dated August 14, 1996 between
Registrant and Robert M. Smoler.
10(f) Employment Agreement, dated August 14, 1996 between
Registrant and David B. Snow Jr.
11 Computation of Net Earnings Per Share of Common Stock.
(b) Reports on Form 8-K
In a report on Form 8-K, dated August 6, 1996, and filed August 7,
1996, the Company reported, under Item 5. "Other Events," its second
quarter 1996 earnings press release.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OXFORD HEALTH PLANS, INC.
------------------------------------------
(Registrant)
November 8, 1996 /s/ STEPHEN F. WIGGINS
- ---------------- ------------------------------------------
Date STEPHEN F. WIGGINS, Chairman
and Chief Executive Officer
November 8, 1996 /s/ ANDREW B. CASSIDY
- ---------------- ------------------------------------------
Date ANDREW B. CASSIDY, Chief Financial Officer
12
<PAGE> 13
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
10(a) Employment Agreement, dated August 14, 1996 between Registrant
and Stephen F. Wiggins. 14
10(b) Employment Agreement, dated August 14, 1996 between Registrant
and William M. Sullivan. 34
10(c) Employment Agreement, dated August 14, 1996 between Registrant
and Jeffery H. Boyd. 54
10(d) Employment Agreement, dated August 14, 1996 between Registrant
and Andrew B. Cassidy. 74
10(e) Employment Agreement, dated August 14, 1996 between Registrant
and Robert M. Smoler. 94
10(f) Employment Agreement, dated August 14, 1996 between Registrant
and David B. Snow Jr. 114
11 Computation of Net Earnings Per Share of Common Stock. 134
</TABLE>
13
<PAGE> 1
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and Stephen F. Wiggins (the "Employee").
WHEREAS, the Employee is currently serving as Chairman and Chief
Executive Officer of the Corporation;
WHEREAS, the Employee and the Corporation have previously entered
into an employment agreement, dated August 13, 1991 (the "Prior Agreement"), and
desire to have this Agreement supersede and override the Prior Agreement;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as Chairman and Chief
Executive Officer of the Corporation. As Chairman and Chief Executive Officer,
the Employee shall render executive, policy and other management services to the
Corporation of the type customarily performed by persons serving in a similar
executive officer capacity, subject to the powers by law vested in the Board and
in the Corporation's stockholders. The Employee shall perform such other related
duties as the Board may from time to time reasonably direct. The Employee shall
be a full time employee of the Corporation; provided, that the Employee shall
have the right to devote time to other directorships and business endeavors, so
long as such activities do not materially impair the Employee's performance of
the duties of his office. During the term of this Agreement, there shall be no
material increase or decrease in the duties and responsibilities of the
Employee, unless the Corporation and the Employee otherwise agree in writing.
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The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all applicable laws and the Corporation's Certificate of
Incorporation and Bylaws, as they may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during
the Term a rate of annual base salary as follows: for the period through
December 31, 1996, a base salary at least equal to the Employee's base salary as
of the Effective Date. The Employee's base salary shall be reviewed at least
annually during the Term by the Board, and the Employee shall receive such base
salary increases, if any, as the Compensation Committee of the Board (the
"Committee") in its absolute discretion may determine, together with such
performance or merit increases, if any, as the Committee in its absolute
discretion may determine. Participation with respect to discretionary bonuses,
retirement and other employee benefit plans and fringe benefits shall not reduce
the base salary payable to the Employee under this Section 3. Such compensation
shall be payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or
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other amounts required to be withheld from compensation from time to time under
the Internal Revenue Code of 1986, as amended (the "Code"), or under any state
or municipal laws or regulations.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall be
entitled to an annual paid vacation of eight (8) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death through the
Term (in effect as of the date of death and without further renewal), an amount
equal to the Employee's base salary as of his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable
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expense account, the payment of reasonable expenses for attending annual and
periodic meetings of trade associations, and any other benefits which are
commensurate with the duties and responsibilities to be performed by the
Employee under this Agreement.
6. Termination of Employment. The Employee's employment hereunder
may be terminated under the circumstances set forth in paragraphs (a) through
(e) below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity due
to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint or re-elect the Employee to, his
positions as Chief Executive Officer or Chairman of the Board, except in
connection with termination of the Employee for Cause, or (ii) failure by
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the Corporation to comply with Section 3 hereof in any material respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good Reason) or the Corporation (other than for Cause) on or
after the Employee's normal retirement age under the terms of the Corporation's
pension plan (or, any other tax-qualified plan, if no pension plan exists);
provided, that, following a Change in Control such normal retirement age may not
be reduced for purposes of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in
twenty-four (24) equal monthly installments in conformity with the Corporation's
normal payroll periods, an amount equal to (x) the sum of the base salary earned
by the Employee from the Corporation and its subsidiaries during the
twelve-month period immediately preceding the Employee's Date of Termination,
plus the annual bonus earned by the Employee from the Corporation and its
subsidiaries in respect of the fiscal year immediately preceding the Employee's
Date of Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of this Agreement, a
"Change in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (A) had been directors
of the Corporation on the "look-back date" (as defined below) or (B) were
elected, or nominated for election, to the Board of Directors of the
Corporation with the affirmative votes of at least a majority of the
directors who had been directors of the Corporation on the "look-back
date" and who were still in office at the time of the election or
nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of paragraph (a)(i), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (2) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
For purposes of paragraph (a)(ii), the term "look-back date" shall mean
the later of (A) the date twenty-four (24) months prior to the change in
the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term "Change
in Control" shall not include either of the following events, if
undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(y) a transaction, the result of which is to
sell all or substantially all of the assets
of the Corporation to another corporation or
entity (the "surviving entity"); provided
that the voting power represented by the
surviving entity's securities (or other
equity interests) is owned directly or
indirectly by the stockholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the voting
power represented by the Corporation's
common stock
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immediately preceding such transaction; and
provided, further, that the surviving entity
expressly assumes this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a Change
in Control, "Good Reason" shall mean, without the Employee's express written
consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to three (3) times the sum of the highest (i) annual rate of base salary
of the Employee during the 3-year period immediately preceding the Employee's
Date of Termination and (ii) annual bonus earned by Employee in respect of the
three (3) fiscal years of the Corporation immediately preceding the year
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in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of three (3) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7(e)) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
imposed upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, the Employee retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the Gross-Up
Payment in the Employee's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up
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Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm
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shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Corporation. The Employee shall cooperate, to the extent his expenses are
reimbursed by the Corporation, with any reasonable requests by the Corporation
in connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Stephen F. Wiggins
8 Butlers Island Road
Darien, Ct 06820
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Secretary
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
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11. General Provisions.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
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(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof, including the Prior
Agreement. No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties. The prior approval by a two-thirds (2/3)
affirmative vote of the full Board shall be required in order for the
Corporation to authorize any amendments or additions to this Agreement, to give
any consents or waivers of provisions of this Agreement, or to take any other
action under this Agreement including any termination of the employment of the
Employee with or without Cause. For purposes of Board approval with respect
hereto, if the Employee is also a director of the Corporation, he shall abstain
from acting on matters pertaining to this Agreement and shall not be counted as
a Board member for purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
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(e) Arbitration. Except with respect to injunctive relief
under Section 8(b) hereof, any dispute or controversy under this Agreement shall
be settled exclusively by arbitration in Norwalk, Connecticut by three (3)
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitration award in any court
having jurisdiction. The Corporation shall bear all costs and expenses arising
in connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ William M. Sullivan
--------------------------
William M. Sullivan
President
Dated: August 13, 1996 /s/ Stephen F. Wiggins
--------------------------
Stephen F. Wiggins
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<PAGE> 1
EXHIBIT 10(B)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and William M.
Sullivan (the "Employee").
WHEREAS, the Employee is currently serving as President and Chief
Operating Officer of the Corporation;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as President and Chief
Operating Officer of the Corporation. As President and Chief Operating Officer
of the Corporation, the Employee shall render executive, policy and other
management services to the Corporation of the type customarily performed by
persons serving in a similar executive officer capacity, subject to the powers
by law vested in the Board and in the Corporation's stockholders. The Employee
shall report to the Chief Executive Officer of the Corporation, and shall
perform such other related duties as the Chief Executive Officer may from time
to time reasonably direct or request. The Employee shall be a full time employee
of the Corporation; provided, that the Employee shall have the right to devote
time to other directorships and business endeavors, so long as such activities
do not materially impair the Employee's performance of the duties of his office.
During the term of this Agreement, there shall be no material increase or
decrease in the duties and responsibilities of the Employee, unless the
Corporation and the Employee otherwise agree in writing.
The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all
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<PAGE> 2
applicable laws and the Corporation's Certificate of Incorporation and Bylaws,
as they may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during
the Term a rate of annual base salary as follows: for the period through
December 31, 1996, a base salary at least equal to the Employee's base salary as
of the Effective Date. The Employee's base salary shall be reviewed at least
annually during the Term by the Board, and the Employee shall receive such base
salary increases, if any, as the Compensation Committee of the Board (the
"Committee") in its absolute discretion may determine, together with such
performance or merit increases, if any, as the Committee in its absolute
discretion may determine. Participation with respect to discretionary bonuses,
retirement and other employee benefit plans and fringe benefits shall not reduce
the base salary payable to the Employee under this Section 3. Such compensation
shall be payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or other amounts required to be withheld from
compensation from time to time under the Internal Revenue Code of 1986, as
amended (the "Code"), or under any state or
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<PAGE> 3
municipal laws or regulations.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall be
entitled to an annual paid vacation of four (4) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of three (3) months, an amount equal to the Employee's base salary as of
his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable expense account, the payment of reasonable expenses for
attending annual and periodic meetings of trade associations, and any other
benefits which are commensurate with the duties and responsibilities to be
performed by the Employee under this Agreement.
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<PAGE> 4
6. Termination of Employment. The Employee's employment hereunder
may be terminated under the circumstances set forth in paragraphs (a) through
(e) below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity due
to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint the Employee to, his positions as
President or Chief Operating Officer of the Corporation, except in connection
with termination of the Employee for Cause, or (ii) failure by the Corporation
to comply with Section 3 hereof in any material respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good
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<PAGE> 5
Reason) or the Corporation (other than for Cause) on or after the Employee's
normal retirement age under the terms of the Corporation's pension plan (or, any
other tax-qualified plan, if no pension plan exists); provided, that, following
a Change in Control such normal retirement age may not be reduced for purposes
of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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<PAGE> 6
(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in twelve
(12) equal monthly installments in conformity with the Corporation's normal
payroll periods, an amount equal to (x) the sum of the base salary earned by the
Employee from the Corporation and its subsidiaries during the twelve-month
period immediately preceding the Employee's Date of Termination, plus the annual
bonus earned by the Employee from the Corporation and its subsidiaries in
respect of the fiscal year immediately preceding the Employee's Date of
Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of this Agreement, a
"Change in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (A) had been directors
of the Corporation on the "look-back date" (as defined below) or (B) were
elected, or nominated for election, to the Board of Directors of the
Corporation with the affirmative votes of at least a majority of the
directors who had been directors of the Corporation on the "look-back
date" and who were still in office at the time of the election or
nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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<PAGE> 7
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of paragraph (a)(i), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (2) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
For purposes of paragraph (a)(ii), the term "look-back date" shall mean
the later of (A) the date twenty-four (24) months prior to the change in
the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term "Change
in Control" shall not include either of the following events, if
undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(y) a transaction, the result of which is to
sell all or substantially all of the assets
of the Corporation to another corporation or
entity (the "surviving entity"); provided
that the voting power represented by the
surviving entity's securities (or other
equity interests) is owned directly or
indirectly by the stockholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the voting
power represented by the Corporation's
common stock
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<PAGE> 8
immediately preceding such transaction; and
provided, further, that the surviving entity
expressly assumes this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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<PAGE> 9
an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a
Change in Control, "Good Reason" shall mean, without the Employee's express
written consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to two (2) times the sum of the highest (i) annual rate of base salary of
the Employee during the 3-year period immediately preceding the Employee's Date
of Termination and (ii) annual bonus earned by Employee in respect of the three
(3) fiscal years of the Corporation immediately preceding the year
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in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of two (2) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7(e)) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
imposed upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, the Employee retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the Gross-Up
Payment in the Employee's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up
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Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm
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shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Corporation. The Employee shall cooperate, to the extent his expenses are
reimbursed by the Corporation, with any reasonable requests by the Corporation
in connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
William M. Sullivan
Tokeneke Trail
Darien, Ct 06820
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Secretary
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<PAGE> 16
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
11. General Provisions.
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<PAGE> 17
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
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<PAGE> 18
(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties. The prior approval by a two-thirds (2/3) affirmative vote of the
full Board shall be required in order for the Corporation to authorize any
amendments or additions to this Agreement, to give any consents or waivers of
provisions of this Agreement, or to take any other action under this Agreement
including any termination of the employment of the Employee with or without
Cause. For purposes of Board approval with respect hereto, if the Employee is
also a director of the Corporation, he shall abstain from acting on matters
pertaining to this Agreement and shall not be counted as a Board member for
purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
(e) Arbitration. Except with respect to injunctive relief
under Section 8(b)
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<PAGE> 19
hereof, any dispute or controversy under this Agreement shall be settled
exclusively by arbitration in Norwalk, Connecticut by three (3) arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The Corporation shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ Jeffery H. Boyd
-----------------------------
Jeffery H. Boyd
Executive Vice President
Dated: August 14, 1996 /s/ William M. Sullivan
-----------------------------
William M. Sullivan
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<PAGE> 1
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and Jeffery H. Boyd (the "Employee").
WHEREAS, the Employee is currently serving as Executive Vice President,
General Counsel and Secretary of the Corporation;
WHEREAS, the Employee and the Corporation have previously entered into
an employment agreement, dated May 12, 1995 (the "Prior Agreement"), and desire
to have this Agreement supercede and override the Prior Agreement;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as Executive Vice President,
General Counsel and Secretary of the Corporation. As Executive Vice President,
General Counsel and Secretary, the Employee shall render executive, policy and
other management services to the Corporation of the type customarily performed
by persons serving in a similar executive officer capacity, subject to the
powers by law vested in the Board and in the Corporation's stockholders. The
Employee shall report to the Chief Executive Officer of the Corporation, and
shall perform such other related duties as the Chief Executive Officer may from
time to time reasonably direct or request. The Employee shall be a full time
employee of the Corporation; provided, that the Employee shall have the right to
devote time to other directorships and business endeavors, so long as such
activities do not materially impair the Employee's performance of the duties of
his office. During the term of this Agreement, there shall be no material
increase or decrease in the duties and responsibilities of the Employee, unless
the Corporation and the
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<PAGE> 2
Employee otherwise agree in writing.
The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all applicable laws and the Corporation's Certificate of
Incorporation and Bylaws, as they may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during the
Term a rate of annual base salary as follows: for the period through December
31, 1996, a base salary at least equal to the Employee's base salary as of the
Effective Date. The Employee's base salary shall be reviewed at least annually
during the Term by the Board, and the Employee shall receive such base salary
increases, if any, as the Compensation Committee of the Board (the "Committee")
in its absolute discretion may determine, together with such performance or
merit increases, if any, as the Committee in its absolute discretion may
determine. Participation with respect to discretionary bonuses, retirement and
other employee benefit plans and fringe benefits shall not reduce the base
salary payable to the Employee under this Section 3. Such compensation shall be
payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal
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<PAGE> 3
income tax, Federal Insurance Contribution Act tax, Federal Unemployment Act
tax, or other amounts required to be withheld from compensation from time to
time under the Internal Revenue Code of 1986, as amended (the "Code"), or under
any state or municipal laws or regulations.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall
be entitled to an annual paid vacation of four (4) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of three (3) months, an amount equal to the Employee's base salary as of
his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable
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<PAGE> 4
expense account, the payment of reasonable expenses for attending annual and
periodic meetings of trade associations, and any other benefits which are
commensurate with the duties and responsibilities to be performed by the
Employee under this Agreement.
6. Termination of Employment. The Employee's employment hereunder may
be terminated under the circumstances set forth in paragraphs (a) through (e)
below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity
due to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint the Employee to, his positions as
Executive Vice President, General Counsel or Secretary of the Corporation,
except in connection with termination of the Employee for Cause, or
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<PAGE> 5
(ii) failure by the Corporation to comply with Section 3 hereof in any material
respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good Reason) or the Corporation (other than for Cause) on or
after the Employee's normal retirement age under the terms of the Corporation's
pension plan (or, any other tax-qualified plan, if no pension plan exists);
provided, that, following a Change in Control such normal retirement age may not
be reduced for purposes of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in twelve
(12) equal monthly installments in conformity with the Corporation's normal
payroll periods, an amount equal to (x) the sum of the base salary earned by the
Employee from the Corporation and its subsidiaries during the twelve-month
period immediately preceding the Employee's Date of Termination, plus the annual
bonus earned by the Employee from the Corporation and its subsidiaries in
respect of the fiscal year immediately preceding the Employee's Date of
Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a)Change in Control Defined. For purposes of this Agreement, a "Change
in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (A) had been directors
of the Corporation on the "look-back date" (as defined below) or (B) were
elected, or nominated for election, to the Board of Directors of the
Corporation with the affirmative votes of at least a majority of the
directors who had been directors of the Corporation on the "look-back
date" and who were still in office at the time of the election or
nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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<PAGE> 7
which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the total voting power
represented by the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of paragraph (a)(i), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act,
but shall exclude (1) a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or of a parent or
subsidiary of the Corporation or (2) a corporation owned directly or
indirectly by the stockholders of the Corporation in substantially the
same proportions as their ownership of the common stock of the
Corporation.
For purposes of paragraph (a)(ii), the term "look-back date" shall mean
the later of (A) the date twenty-four (24) months prior to the change
in the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term
"Change in Control" shall not include either of the following events,
if undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is to change
the state of the Corporation's incorporation; or
(y) a transaction, the result of which is to sell all or
substantially all of the assets of the Corporation to
another corporation or entity (the "surviving
entity"); provided that the voting power represented
by the surviving entity's securities (or other equity
interests) is owned directly or indirectly by the
stockholders of the Corporation immediately following
such transaction in substantially the same
proportions as their ownership of the voting power
represented by the Corporation's common stock
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<PAGE> 8
immediately preceding such transaction; and provided,
further, that the surviving entity expressly assumes
this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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<PAGE> 9
an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a Change
in Control, "Good Reason" shall mean, without the Employee's express written
consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to two (2) times the sum of the highest (i) annual rate of base salary of
the Employee during the 3-year period immediately preceding the Employee's Date
of Termination and (ii) annual bonus earned by Employee in respect of the three
(3) fiscal years of the Corporation immediately preceding the year
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in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of two (2) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section 7(e)) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes imposed upon the Gross-Up Payment and any interest or
penalties imposed with respect to such taxes, the Employee retains an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the
Payments and (y) the product of any deductions disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income and
the highest applicable marginal rate of federal income taxation for the
calendar year in which the Gross-Up
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Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly
paid by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm
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<PAGE> 14
shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Corporation. The Employee shall cooperate, to the extent his expenses are
reimbursed by the Corporation, with any reasonable requests by the Corporation
in connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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<PAGE> 15
the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Jeffery H. Boyd
83 Riverside Avenue
Riverside, CT 06878
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Chief Executive Officer
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<PAGE> 16
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
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<PAGE> 17
11. General Provisions.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
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<PAGE> 18
(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof, including the Prior
Agreement. No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties. The prior approval by a two-thirds (2/3)
affirmative vote of the full Board shall be required in order for the
Corporation to authorize any amendments or additions to this Agreement, to give
any consents or waivers of provisions of this Agreement, or to take any other
action under this Agreement including any termination of the employment of the
Employee with or without Cause. For purposes of Board approval with respect
hereto, if the Employee is also a director of the Corporation, he shall abstain
from acting on matters pertaining to this Agreement and shall not be counted as
a Board member for purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
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<PAGE> 19
(e) Arbitration. Except with respect to injunctive relief
under Section 8(b) hereof, any dispute or controversy under this Agreement shall
be settled exclusively by arbitration in Norwalk, Connecticut by three (3)
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitration award in any court
having jurisdiction. The Corporation shall bear all costs and expenses arising
in connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ William M. Sulivan
--------------------------
William M. Sullivan
President
Dated: August 14, 1996 /s/ Jeffery H. Boyd
--------------------------
Jeffery H. Boyd
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<PAGE> 1
EXHIBIT 10(d)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and Andrew B. Cassidy (the "Employee").
WHEREAS, the Employee is currently serving as Chief Financial Officer
of the Corporation;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as Chief Financial Officer of
the Corporation. As Chief Financial Officer, the Employee shall render
executive, policy and other management services to the Corporation of the type
customarily performed by persons serving in a similar executive officer
capacity, subject to the powers by law vested in the Board and in the
Corporation's stockholders. The Employee shall report to the Chief Executive
Officer of the Corporation, and shall perform such other related duties as the
Chief Executive Officer may from time to time reasonably direct or request. The
Employee shall be a full time employee of the Corporation; provided, that the
Employee shall have the right to devote time to other directorships and business
endeavors, so long as such activities do not materially impair the Employee's
performance of the duties of his office. During the term of this Agreement,
there shall be no material increase or decrease in the duties and
responsibilities of the Employee, unless the Corporation and the Employee
otherwise agree in writing.
The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all applicable laws and the Corporation's Certificate of
Incorporation and Bylaws, as they
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<PAGE> 2
may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during
the Term a rate of annual base salary as follows: for the period through
December 31, 1996, a base salary at least equal to the Employee's base salary as
of the Effective Date. The Employee's base salary shall be reviewed at least
annually during the Term by the Board, and the Employee shall receive such base
salary increases, if any, as the Compensation Committee of the Board (the
"Committee") in its absolute discretion may determine, together with such
performance or merit increases, if any, as the Committee in its absolute
discretion may determine. Participation with respect to discretionary bonuses,
retirement and other employee benefit plans and fringe benefits shall not reduce
the base salary payable to the Employee under this Section 3. Such compensation
shall be payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or other amounts required to be withheld from
compensation from time to time under the Internal Revenue Code of 1986, as
amended (the "Code"), or under any state or municipal laws or regulations.
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<PAGE> 3
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall
be entitled to an annual paid vacation of four (4) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of three (3) months, an amount equal to the Employee's base salary as of
his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable expense account, the payment of reasonable expenses for
attending annual and periodic meetings of trade associations, and any other
benefits which are commensurate with the duties and responsibilities to be
performed by the Employee under this Agreement.
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<PAGE> 4
6. Termination of Employment. The Employee's employment hereunder may
be terminated under the circumstances set forth in paragraphs (a) through (e)
below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity
due to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint the Employee to, his position as Chief
Financial Officer, except in connection with termination of the Employee for
Cause, or (ii) failure by the Corporation to comply with Section 3 hereof in any
material respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good
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<PAGE> 5
Reason) or the Corporation (other than for Cause) on or after the Employee's
normal retirement age under the terms of the Corporation's pension plan (or, any
other tax-qualified plan, if no pension plan exists); provided, that, following
a Change in Control such normal retirement age may not be reduced for purposes
of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in twelve
(12) equal monthly installments in conformity with the Corporation's normal
payroll periods, an amount equal to (x) the sum of the base salary earned by the
Employee from the Corporation and its subsidiaries during the twelve-month
period immediately preceding the Employee's Date of Termination, plus the annual
bonus earned by the Employee from the Corporation and its subsidiaries in
respect of the fiscal year immediately preceding the Employee's Date of
Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a)Change in Control Defined. For purposes of this Agreement, a "Change
in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds
(2/3) of the incumbent directors are directors who either (A) had been
directors of the Corporation on the "look-back date" (as defined below)
or (B) were elected, or nominated for election, to the Board of
Directors of the Corporation with the affirmative votes of at least a
majority of the directors who had been directors of the Corporation on
the "look-back date" and who were still in office at the time of the
election or nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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<PAGE> 7
which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the total voting power
represented by the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets. For purposes of paragraph (a)(i), the term "person"
shall have the same meaning as when used in sections 13(d) and 14(d) of
the Exchange Act, but shall exclude (1) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or of
a parent or subsidiary of the Corporation or (2) a corporation owned
directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of the common stock
of the Corporation. For purposes of paragraph (a)(ii), the term "look-back
date" shall mean the later of (A) the date twenty-four (24) months prior
to the change in the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term "Change
in Control" shall not include either of the following events, if
undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is to change
the state of the Corporation's incorporation; or
(y) a transaction, the result of which is to sell all or
substantially all of the assets of the Corporation to
another corporation or entity (the "surviving
entity"); provided that the voting power represented
by the surviving entity's securities (or other equity
interests) is owned directly or indirectly by the
stockholders of the Corporation immediately following
such transaction in substantially the same
proportions as their ownership of the voting power
represented by the Corporation's common stock
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<PAGE> 8
immediately preceding such transaction; and provided,
further, that the surviving entity expressly assumes
this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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<PAGE> 9
an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a Change
in Control, "Good Reason" shall mean, without the Employee's express written
consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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<PAGE> 10
such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to two (2) times the sum of the highest (i) annual rate of base salary of
the Employee during the 3-year period immediately preceding the Employee's Date
of Termination and (ii) annual bonus earned by Employee in respect of the three
(3) fiscal years of the Corporation immediately preceding the year
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<PAGE> 11
in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of two (2) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section 7(e)) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes imposed upon the Gross-Up Payment and any interest or
penalties imposed with respect to such taxes, the Employee retains an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the
Payments and (y) the product of any deductions disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income and
the highest applicable marginal rate of federal income taxation for the
calendar year in which the Gross-Up
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<PAGE> 12
Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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<PAGE> 13
(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly
paid by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm
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<PAGE> 14
shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Corporation. The Employee shall cooperate, to the extent his expenses are
reimbursed by the Corporation, with any reasonable requests by the Corporation
in connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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<PAGE> 15
the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Andrew B. Cassidy
3054 Cypress Creek Dr. E.
Ponte Verde Beach, FL 32082
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Secretary
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<PAGE> 16
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
11. General Provisions.
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<PAGE> 17
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
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<PAGE> 18
(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties. The prior approval by a two-thirds (2/3) affirmative vote of the
full Board shall be required in order for the Corporation to authorize any
amendments or additions to this Agreement, to give any consents or waivers of
provisions of this Agreement, or to take any other action under this Agreement
including any termination of the employment of the Employee with or without
Cause. For purposes of Board approval with respect hereto, if the Employee is
also a director of the Corporation, he shall abstain from acting on matters
pertaining to this Agreement and shall not be counted as a Board member for
purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
(e) Arbitration. Except with respect to injunctive relief
under Section 8(b)
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<PAGE> 19
hereof, any dispute or controversy under this Agreement shall be settled
exclusively by arbitration in Norwalk, Connecticut by three (3) arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The Corporation shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ William M. Sullivan
-------------------------
William M. Sullivan
President
Dated: August 14, 1996 /s/ Andrew B. Cassidy
-------------------------
Andrew B. Cassidy
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<PAGE> 1
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and Robert M. Smoler (the "Employee").
WHEREAS, the Employee is currently serving as Executive Vice
President of the Corporation;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as Chief Executive Officer of
the New York Region and Executive Vice President of the Corporation. As Chief
Executive Officer of the New York Region and Executive Vice President, the
Employee shall render executive, policy and other management services to the
Corporation of the type customarily performed by persons serving in a similar
executive officer capacity, subject to the powers by law vested in the Board and
in the Corporation's stockholders. The Employee shall report to the President
and Chief Operating Officer of the Corporation, and shall perform such other
related duties as the President and Chief Operating Officer may from time to
time reasonably direct or request. The Employee shall be a full time employee of
the Corporation; provided, that the Employee shall have the right to devote time
to other directorships and business endeavors, so long as such activities do not
materially impair the Employee's performance of the duties of his office. During
the term of this Agreement, there shall be no material increase or decrease in
the duties and responsibilities of the Employee, unless the Corporation and the
Employee otherwise agree in writing.
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<PAGE> 2
The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all applicable laws and the Corporation's Certificate of
Incorporation and Bylaws, as they may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during
the Term a rate of annual base salary as follows: for the period through
December 31, 1996, a base salary at least equal to the Employee's base salary as
of the Effective Date. The Employee's base salary shall be reviewed at least
annually during the Term by the Board, and the Employee shall receive such base
salary increases, if any, as the Compensation Committee of the Board (the
"Committee") in its absolute discretion may determine, together with such
performance or merit increases, if any, as the Committee in its absolute
discretion may determine. Participation with respect to discretionary bonuses,
retirement and other employee benefit plans and fringe benefits shall not reduce
the base salary payable to the Employee under this Section 3. Such compensation
shall be payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or
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<PAGE> 3
other amounts required to be withheld from compensation from time to time under
the Internal Revenue Code of 1986, as amended (the "Code"), or under any state
or municipal laws or regulations.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall be
entitled to an annual paid vacation of four (4) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of three (3) months, an amount equal to the Employee's base salary as of
his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable expense account, the payment of reasonable expenses for
attending annual and periodic
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<PAGE> 4
meetings of trade associations, and any other benefits which are commensurate
with the duties and responsibilities to be performed by the Employee under this
Agreement.
6. Termination of Employment. The Employee's employment hereunder may
be terminated under the circumstances set forth in paragraphs (a) through (e)
below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity due
to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint the Employee to, his positions as Chief
Executive Officer of the New York Region or Executive Vice President of the
Corporation, except in connection with termination of the Employee for Cause, or
(ii) failure by the Corporation to comply with Section 3 hereof in
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<PAGE> 5
any material respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good Reason) or the Corporation (other than for Cause) on or
after the Employee's normal retirement age under the terms of the Corporation's
pension plan (or, any other tax-qualified plan, if no pension plan exists);
provided, that, following a Change in Control such normal retirement age may not
be reduced for purposes of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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<PAGE> 6
(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in twelve
(12) equal monthly installments in conformity with the Corporation's normal
payroll periods, an amount equal to (x) the sum of the base salary earned by the
Employee from the Corporation and its subsidiaries during the twelve-month
period immediately preceding the Employee's Date of Termination, plus the annual
bonus earned by the Employee from the Corporation and its subsidiaries in
respect of the fiscal year immediately preceding the Employee's Date of
Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of this Agreement, a
"Change in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (A) had been directors
of the Corporation on the "look-back date" (as defined below) or (B) were
elected, or nominated for election, to the Board of Directors of the
Corporation with the affirmative votes of at least a majority of the
directors who had been directors of the Corporation on the "look-back
date" and who were still in office at the time of the election or
nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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<PAGE> 7
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of paragraph (a)(i), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (2) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
For purposes of paragraph (a)(ii), the term "look-back date" shall mean
the later of (A) the date twenty-four (24) months prior to the change in
the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term "Change
in Control" shall not include either of the following events, if
undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(y) a transaction, the result of which is to
sell all or substantially all of the assets
of the Corporation to another corporation or
entity (the "surviving entity"); provided
that the voting power represented by the
surviving entity's securities (or other
equity interests) is owned directly or
indirectly by the stockholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the voting
power represented by the Corporation's
common stock
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<PAGE> 8
immediately preceding such transaction; and
provided, further, that the surviving entity
expressly assumes this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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<PAGE> 9
an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a Change
in Control, "Good Reason" shall mean, without the Employee's express written
consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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<PAGE> 10
such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to two (2) times the sum of the highest (i) annual rate of base salary of
the Employee during the 3-year period immediately preceding the Employee's Date
of Termination and (ii) annual bonus earned by Employee in respect of the three
(3) fiscal years of the Corporation immediately preceding the year
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<PAGE> 11
in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of two (2) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7(e)) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
imposed upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, the Employee retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the Gross-Up
Payment in the Employee's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up
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<PAGE> 12
Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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<PAGE> 13
(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly
paid by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm
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<PAGE> 14
shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Corporation. The Employee shall cooperate, to the extent his expenses are
reimbursed by the Corporation, with any reasonable requests by the Corporation
in connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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<PAGE> 15
the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Robert M. Smoler
17 Pequot Trail
Westport, CT 06880
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Secretary
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<PAGE> 16
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
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<PAGE> 17
11. General Provisions.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
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<PAGE> 18
(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties. The prior approval by a two-thirds (2/3) affirmative vote of the
full Board shall be required in order for the Corporation to authorize any
amendments or additions to this Agreement, to give any consents or waivers of
provisions of this Agreement, or to take any other action under this Agreement
including any termination of the employment of the Employee with or without
Cause. For purposes of Board approval with respect hereto, if the Employee is
also a director of the Corporation, he shall abstain from acting on matters
pertaining to this Agreement and shall not be counted as a Board member for
purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
(e) Arbitration. Except with respect to injunctive relief
under Section 8(b)
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<PAGE> 19
hereof, any dispute or controversy under this Agreement shall be settled
exclusively by arbitration in Norwalk, Connecticut by three (3) arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The Corporation shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ William M. Sullivan
------------------------------------
William M. Sullivan
President
Dated: August 14, 1996 /s/ Robert M. Smoler
------------------------------------
Robert M. Smoler
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<PAGE> 1
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 14, 1996 (the "Effective Date"), by and
between OXFORD HEALTH PLANS, INC. (the "Corporation"), having a principal office
in Darien, Connecticut, and David B. Snow, Jr. (the "Employee").
WHEREAS, the Employee is currently serving as Executive Vice
President of the Corporation;
WHEREAS, the Employee and the Corporation have previously entered
into an employment agreement, dated March 29, 1993 (the "Prior Agreement"), and
desire to have this Agreement supersede and override the Prior Agreement;
WHEREAS, the Board of Directors of the Corporation (the "Board") has
approved and authorized the Corporation's entry into this Agreement with the
Employee; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the continued employment relationship of the
Corporation and the Employee;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Corporation and the Employee agree as follows:
1. Employment. The Employee is employed as Executive Vice President
of the Corporation. As Executive Vice President, the Employee shall render
executive, policy and other management services to the Corporation of the type
customarily performed by persons serving in a similar executive officer
capacity, subject to the powers by law vested in the Board and in the
Corporation's stockholders. The Employee shall report to the President and Chief
Operating Officer of the Corporation, and shall perform such other related
duties as the President and Chief Operating Officer may from time to time
reasonably direct or request. The Employee shall be a full time employee of the
Corporation; provided, that the Employee shall have the right to devote time to
other directorships and business endeavors, so long as such activities do not
materially impair the Employee's performance of the duties of his office. During
the term of this Agreement, there shall be no material increase or decrease in
the duties and responsibilities of the Employee, unless the Corporation and the
Employee otherwise
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<PAGE> 2
agree in writing.
The Employee shall perform his duties and responsibilities under this
Agreement faithfully, diligently and to the best of the Employee's ability, and
in compliance with all applicable laws and the Corporation's Certificate of
Incorporation and Bylaws, as they may be amended from time to time.
2. Term. The initial term of employment under this Agreement shall be
for a period of two (2) years commencing on the Effective Date (the "Term").
This Agreement shall be extended automatically for two (2) additional years on
the second anniversary date of the Effective Date and on each second anniversary
of the Effective Date thereafter, unless either the Corporation or the Employee
gives contrary written notice to the other not less than three (3) months in
advance of such anniversary of the Effective Date. References herein to the Term
shall refer both to such initial term and such successive terms. Upon a "Change
in Control" (as defined in Section 7(a)) of the Corporation, the Term shall be
extended to two (2) years from the date of such Change in Control, unless notice
to terminate the Term has been properly provided prior to the date of such
Change in Control, and such Change in Control date shall be treated as the
Effective Date for purposes of renewals of this Agreement. The Term shall end
upon the termination of the Employee's employment under this Agreement.
3. Compensation. The Corporation agrees to pay the Employee during
the Term a rate of annual base salary as follows: for the period through
December 31, 1996, a base salary at least equal to the Employee's base salary as
of the Effective Date. The Employee's base salary shall be reviewed at least
annually during the Term by the Board, and the Employee shall receive such base
salary increases, if any, as the Compensation Committee of the Board (the
"Committee") in its absolute discretion may determine, together with such
performance or merit increases, if any, as the Committee in its absolute
discretion may determine. Participation with respect to discretionary bonuses,
retirement and other employee benefit plans and fringe benefits shall not reduce
the base salary payable to the Employee under this Section 3. Such compensation
shall be payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
4. Withholding Obligation. The Corporation shall have the ability to
withhold from the compensation otherwise due to the Employee under this
Agreement any federal
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<PAGE> 3
income tax, Federal Insurance Contribution Act tax, Federal Unemployment Act
tax, or other amounts required to be withheld from compensation from time to
time under the Internal Revenue Code of 1986, as amended (the "Code"), or under
any state or municipal laws or regulations.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall be
entitled to an annual paid vacation of four (4) weeks per year or such longer
period as the Committee may approve. The Employee shall schedule the timing of
paid vacations in a reasonable manner. The Employee shall also be entitled to
such other leave, with or without compensation, as shall be mutually agreed upon
by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit Plans.
During the Term, the Employee shall be entitled to participate in the
Corporation's 1991 Stock Option Plan, annual incentive compensation plan, the
Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan and any
other plan of the Corporation or its subsidiaries relating to stock options,
stock appreciation, stock purchases, pension, thrift, deferred compensation,
profit sharing, group life insurance, medical coverage, education or other
retirement or employee benefits that the Corporation may adopt for the benefit
of its executive employees.
(c) Disability. If the Employee shall become disabled or
incapacitated during the Term to the extent that he is unable to perform his
duties and responsibilities hereunder, he shall be entitled to receive
disability benefits of the type currently provided to him, or, if more favorable
to the Employee, benefits of the type provided for other executive employees in
similar positions with the Corporation.
(d) Death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of three (3) months, an amount equal to the Employee's base salary as of
his date of death.
(e) Other Benefits. During the Term, the Employee shall be
entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable
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<PAGE> 4
expense account, the payment of reasonable expenses for attending annual and
periodic meetings of trade associations, and any other benefits which are
commensurate with the duties and responsibilities to be performed by the
Employee under this Agreement.
6. Termination of Employment. The Employee's employment hereunder may
be terminated under the circumstances set forth in paragraphs (a) through (e)
below:
(a) Death. The Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Employee's incapacity due
to physical or mental illness, the Employee shall have been absent from his
duties hereunder on a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur before or after the end of such six (6)
month period) shall not have returned to the performance of his duties hereunder
on a full-time basis, the Corporation may terminate the Employee's employment
hereunder for "Disability."
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Except as provided in Section
7(b) hereof following a Change in Control, termination for Cause shall mean
termination because the Employee (i) engages in the following conduct in
connection with his employment with the Corporation: personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit, breach
of a restrictive covenant against competition, disclosure of confidential
information of the Corporation, consistent intentional failure to perform stated
duties after notice, or (ii) willfully violates any law, rule, or regulation
(other than traffic violations or similar offenses), which willful violation
materially impacts the Employee's performance of his duties to the Corporation.
(d) Good Reason. The Employee may terminate his employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate his employment hereunder (other than for Good Reason or
for Retirement) during the ninety-day period following a Change in Control.
Except as provided in Section 7(c) hereof following a Change in Control, for
purposes of this Agreement "Good Reason" shall mean any (i) removal of the
Employee from, or failure to re-appoint the Employee to, his position as
Executive Vice President, except in connection with termination of the Employee
for Cause, or (ii) failure by the Corporation to comply with
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<PAGE> 5
Section 3 hereof in any material respect.
(e) Retirement. For purposes of this Agreement, "Retirement"
shall mean termination of the Employee's employment by either the Employee
(other than for Good Reason) or the Corporation (other than for Cause) on or
after the Employee's normal retirement age under the terms of the Corporation's
pension plan (or, any other tax-qualified plan, if no pension plan exists);
provided, that, following a Change in Control such normal retirement age may not
be reduced for purposes of this Agreement without the consent of the Employee.
(f) Date of Termination. For purposes of this Agreement, "Date
of Termination" means (1) the effective date on which the Employee's employment
by the Corporation terminates as specified in a Notice of Termination by the
Corporation or the Employee, as the case may be, or (2) if the Employee's
employment terminates by reason of death, the date of death of the Employee.
Notwithstanding the previous sentence, (i) if the Employee's employment is
terminated for Disability (as defined in Section 6(b)), then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received, and (ii) if the Employee's employment
is terminated by the Corporation other than for Cause, then such Date of
Termination shall be no earlier than thirty (30) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of employment
hereunder, the Corporation shall pay the Employee, within ten (10) days
following his Date of Termination, a lump sum cash amount equal to the sum of
(i) the Employee's unpaid base salary through the Date of Termination, (ii) any
bonus payments which have become payable (other than deferred amounts), to the
extent not theretofore paid, and (iii) any vacation pay owed with respect to
accrued, but unused, vacation.
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<PAGE> 6
(h) Termination Without Cause, For Good Reason or Upon Failure
to Renew. In addition to the payments set forth in Section 6(g) hereof, in the
event that the Employee's employment with the Corporation terminates either (1)
prior to a Change in Control or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of a notice of
non-renewal of the Term by the Corporation provided during such two-year
period), as a result of (i) a termination by the Employee for Good Reason, (ii)
a termination by the Corporation without Cause (other than for Retirement or
Disability) or (iii) notice by the Corporation of non-renewal of the Term (other
than for Retirement), then the Corporation shall pay to the Employee, in twelve
(12) equal monthly installments in conformity with the Corporation's normal
payroll periods, an amount equal to (x) the sum of the base salary earned by the
Employee from the Corporation and its subsidiaries during the twelve-month
period immediately preceding the Employee's Date of Termination, plus the annual
bonus earned by the Employee from the Corporation and its subsidiaries in
respect of the fiscal year immediately preceding the Employee's Date of
Termination, divided by (y) twelve (12).
7. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of this Agreement, a
"Change in Control" shall be deemed to have taken place if:
(i) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act")), directly or indirectly, of securities
of the Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting securities;
(ii) a change in the composition of the Board of Directors of
the Corporation occurs, as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (A) had been directors
of the Corporation on the "look-back date" (as defined below) or (B) were
elected, or nominated for election, to the Board of Directors of the
Corporation with the affirmative votes of at least a majority of the
directors who had been directors of the Corporation on the "look-back
date" and who were still in office at the time of the election or
nomination;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation
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<PAGE> 7
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve (A) a plan of
complete liquidation of the Corporation or (B) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of paragraph (a)(i), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (2) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
For purposes of paragraph (a)(ii), the term "look-back date" shall mean
the later of (A) the date twenty-four (24) months prior to the change in
the composition of the Board and (B) the Effective Date.
Any other provision of this Section 7(a) notwithstanding, the term "Change
in Control" shall not include either of the following events, if
undertaken at the election of the Corporation:
(x) a transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(y) a transaction, the result of which is to
sell all or substantially all of the assets
of the Corporation to another corporation or
entity (the "surviving entity"); provided
that the voting power represented by the
surviving entity's securities (or other
equity interests) is owned directly or
indirectly by the stockholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the voting
power represented by the Corporation's
common stock
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<PAGE> 8
immediately preceding such transaction; and
provided, further, that the surviving entity
expressly assumes this Agreement.
Notwithstanding anything in this Agreement to the contrary, if
the Employee's employment terminates prior to a Change in Control, and the
Employee reasonably demonstrates that such termination was at the request or
suggestion of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"), then for
all purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of employment.
(b) Cause. During the two-year period following a Change in
Control, "Cause" shall mean (i) the willful and continued failure of the
Employee to substantially perform his duties with the Corporation (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such failure subsequent to the Employee being delivered a
notice of termination without Cause by the Corporation or delivering a notice of
termination for Good Reason to the Corporation) after a written demand for
substantial performance is delivered to the Employee by the Board which
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee's duties, or (ii) the willful
engaging by the Employee in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Corporation or its subsidiaries.
For purpose of this paragraph (b), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Corporation,
shall be conclusively presumed to be done, or omitted to be done, by the
Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (2/3) of the entire Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
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<PAGE> 9
an event set forth in clause (i) or (ii) has occurred and specifying the
particulars thereof in detail. Following a Change in Control, the Corporation
must notify the Employee of any event constituting Cause within ninety (90) days
following the Corporation's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(c) Good Reason. During the two-year period following a Change
in Control, "Good Reason" shall mean, without the Employee's express written
consent, the occurrence of any of the following events:
(1) (i) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Corporation no longer being a
publicly traded entity, and does not involve any other event set forth
in this paragraph (c), or (ii) a material and adverse change in the
Employee's reporting responsibilities, titles or offices (other than
membership on the Board) with the Corporation as in effect immediately
prior to such Change in Control;
(2) a reduction by the Corporation in the Employee's rate of
annual base salary or annual target bonus opportunity (including any
adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the
Employee is located at the time of the Change in Control or (ii) travel
on the Corporation's business to an extent substantially greater than
the travel obligations of the Employee immediately prior to such Change
in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which the Employee is participating
immediately prior to such Change in Control, or the taking of any
action by the Corporation which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any
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<PAGE> 10
such plan, unless the Employee is permitted to participate in other
plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare
benefit plans), or (ii) provide the Employee with paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Corporation and its affiliated companies as in effect
for the Employee immediately prior to such Change in Control; or
(5) the failure of the Corporation to obtain the assumption
agreement from any successor as contemplated in Section 11(a) hereof.
Any event or condition described in Section 7(c)(1) through
(4) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
Third Party, shall constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had occurred immediately
prior to the occurrence of such event or condition) notwithstanding that it
occurred prior to the Change in Control. An isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the Employee shall not
constitute Good Reason. The Employee's right to terminate employment for Good
Reason shall not be affected by the Employee's incapacity due to mental or
physical illness and the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason. Following a Change in Control, the Employee must
provide notice of termination of employment within ninety (90) days of the
Employee's knowledge of an event constituting Good Reason or such event shall
not constitute Good Reason under this Agreement.
(d) In addition to the payments set forth in Section 6(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to two (2) times the sum of the highest (i) annual rate of base salary of
the Employee during the 3-year period immediately preceding the Employee's Date
of Termination and (ii) annual bonus earned by Employee in respect of the three
(3) fiscal years of the Corporation immediately preceding the year
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<PAGE> 11
in which the Employee's Date of Termination occurs and (2) continue to provide,
for a period of two (2) years following the Date of Termination, the Employee
(and the Employee's dependents if applicable) with the same level of medical,
dental, accident, disability and life insurance benefits upon substantially the
same terms and conditions (including cost of coverage to the Employee) as
existed immediately prior to the Employee's Date of Termination (or, if more
favorable to the Employee, as such benefits and terms and conditions existed
immediately prior to the Change in Control); provided, that, if the Employee
cannot continue to participate in the Corporation plans providing such benefits,
the Corporation shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted. Notwithstanding the
foregoing, in the event the Employee becomes reemployed with another employer
and becomes eligible to receive welfare benefits from such employer, the welfare
benefits described herein shall be secondary to such benefits during the period
of the Employee's eligibility, but only to the extent that the Corporation
reimburses the Employee for any increased cost and provides any additional
benefits necessary to give the Employee the benefits hereunder.
(e)(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7(e)) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
imposed upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, the Employee retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the Gross-Up
Payment in the Employee's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up
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<PAGE> 12
Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in which
the Gross-Up Payment is to be made, (B) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income. The
payment of a Gross-Up Payment under this Section 7(e) shall in no event be
conditioned upon the Employee's termination of employment or the receipt of
severance benefits under this Agreement.
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<PAGE> 13
(ii) Subject to the provisions of Section 7(e)(i), all
determinations required to be made under this Section 7(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is requested by the Corporation (collectively, the "Determination"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation and the Corporation shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. The Gross-Up Payment under this Section
7(e) with respect to any Payment shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion to
such effect, and to the effect that failure to report the Excise Tax, if any, on
the Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm
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<PAGE> 14
shall determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Corporation to or for
the benefit of the Employee. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Employee for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by the Employee to or for the
benefit of the Corporation. The Employee shall cooperate, to the extent his
expenses are reimbursed by the Corporation, with any reasonable requests by the
Corporation in connection with any contests or disputes with the Internal
Revenue Service in connection with the Excise Tax.
8. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if he voluntarily terminates
his employment with the Corporation prior to the end of the term of this
Agreement, unless such termination either is approved by the Board or is within
the two-year period following a Change in Control, he shall not, for a period of
one (1) year following such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust,
venture, or corporation, whether as sole proprietor, partner,
shareholder, agent, officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business principally and
directly engaged in the operation of health maintenance organizations
or the health insurance business or in the management of specialty
medical care through case rate contracting; which business operates in
a geographic area in which, at the time of such termination of
employment, the Corporation is conducting business or plans to conduct
business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of
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<PAGE> 15
the Employee or (ii) any limited partnership interest in such an
entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 8, the Employee acknowledges that the
Corporation's remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
9. Payment Obligation Absolute. Except with respect to
continued welfare benefits under Section 7(d), the Corporation's obligation to
pay the Employee the compensation and other benefits provided herein shall be
absolute and unconditional and shall not be affected by an circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Employee. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.
10. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
David B. Snow, Jr.
23 Cedargate Rd.
Darien, CT 06820
If to the Corporation:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Secretary
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
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11. General Provisions.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary or estate), all of the
obligations of the Corporation hereunder. Failure of the Corporation to obtain
such assumption prior to the effectiveness of any such merger or sale of assets,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle the Employee to compensation and other benefits from the
Corporation in the same amount and on the same terms as the Employee would be
entitled hereunder if the Employee's employment were terminated following a
Change in Control under Section 7(d) hereof. For purposes of implementing the
foregoing, the date on which any such merger or sale of assets becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
-17-
<PAGE> 18
(b) Indemnification of Employee. In the event the employment
of the Employee is terminated by the Corporation without Cause or by the
Employee for Good Reason hereof and the Corporation fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to indemnification for all reasonable costs (as such costs are
incurred), including attorneys' fees and disbursements, incurred by the Employee
in taking action to collect such amounts or otherwise to enforce this Agreement,
plus interest on all such amounts at the annual rate of one percent above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the time payment is due until payment is made to
the Employee. The Employee shall also be entitled to interest (at the rate
described in the immediately preceding sentence) on such reasonable costs
incurred from the date the Employee delivers a receipt to the Corporation for
such costs until the date they are reimbursed to the Employee. Such
indemnification and interest shall be in addition to all rights to which the
Employee is otherwise entitled under this Agreement.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof including the Prior
Agreement. No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties. The prior approval by a two-thirds (2/3)
affirmative vote of the full Board shall be required in order for the
Corporation to authorize any amendments or additions to this Agreement, to give
any consents or waivers of provisions of this Agreement, or to take any other
action under this Agreement including any termination of the employment of the
Employee with or without Cause. For purposes of Board approval with respect
hereto, if the Employee is also a director of the Corporation, he shall abstain
from acting on matters pertaining to this Agreement and shall not be counted as
a Board member for purposes of the two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
-18-
<PAGE> 19
(e) Arbitration. Except with respect to injunctive relief
under Section 8(b) hereof, any dispute or controversy under this Agreement shall
be settled exclusively by arbitration in Norwalk, Connecticut by three (3)
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitration award in any court
having jurisdiction. The Corporation shall bear all costs and expenses arising
in connection with any arbitration proceeding pursuant to this Section 11(e).
(f) Employment with Subsidiaries. Employment with the
Corporation for purposes of this Agreement shall include employment with any
subsidiary of the Corporation.
(g) Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
(h) Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: /s/ William M. Sullivan
------------------------------------
William M. Sullivan
President
Dated: July 25, 1996 /s/ David B. Snow, Jr.
------------------------------------
David B. Snow, Jr.
-20-
<PAGE> 1
EXHIBIT 11
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER SHARE OF COMMON STOCK (a)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Net earnings .................................... $26,650 15,093 67,625 36,814
======= ====== ====== ======
Weighted average number of shares of common
stock and common stock equivalents:
Weighted average number of shares outstanding 75,890 67,802 73,404 67,044
Dilutive effect of stock options ............ 4,990 5,674 5,685 6,006
------- ------ ------ ------
Weighted average number of common stock
and common stock equivalents .................. 80,880 73,476 79,089 73,050
======= ====== ====== ======
Earnings per common and common equivalent share . $ .33 .21 .86 .50
======= ====== ====== ======
FULLY-DILUTED:
Net earnings .................................... $26,650 15,093 67,625 36,814
======= ====== ====== ======
Weighted average number of shares of common
stock and common stock equivalents:
Weighted average number of shares outstanding 75,890 67,802 73,404 67,044
Dilutive effect of stock options ............ 5,472 6,504 6,055 6,860
------- ------ ------ ------
Weighted average number of common stock
and common stock equivalents .................. 81,362 74,306 79,459 73,904
======= ====== ====== ======
Earnings per common and common equivalent share . $ .33 .20 .85 .50
======= ====== ====== ======
</TABLE>
(a) All share and per share amounts in the earnings per share computation have
been shown giving retroactive effect to the two-for-one stock split in
March 1996.
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE CONSOLIDATED STATEMENT
OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30,1996 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000865084
<NAME> OXFORD HEALTH PLANS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 110,207
<SECURITIES> 721,763
<RECEIVABLES> 142,422
<ALLOWANCES> 2,460
<INVENTORY> 0
<CURRENT-ASSETS> 1,012,395
<PP&E> 165,209
<DEPRECIATION> 58,651
<TOTAL-ASSETS> 1,147,754
<CURRENT-LIABILITIES> 612,145
<BONDS> 0
0
0
<COMMON> 761
<OTHER-SE> 534,848
<TOTAL-LIABILITY-AND-EQUITY> 1,147,754
<SALES> 2,166,484
<TOTAL-REVENUES> 2,194,687
<CGS> 1,730,149
<TOTAL-COSTS> 1,730,149
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 117,085
<INCOME-TAX> 49,460
<INCOME-CONTINUING> 67,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,625
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.85
</TABLE>
