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CONFIDENTIAL
EMPLOYMENT AGREEMENT
AGREEMENT dated as of June 9, 1998, by and between OXFORD HEALTH
PLANS, INC. (the "Corporation"), having a principal office in Norwalk,
Connecticut, and Xxx X. Xxxxxx (the "Employee").
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 beginning June 22, 1998 (the "Effective Date"). 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 of the
Corporation may from time to time reasonably direct or request. The Employee
shall be a full time employee of the Corporation.
The Employee shall perform her 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 four (4) years commencing on the Effective Date (the "Term");
provided however, that the Employee successfully completes a pre-employment drug
test and reference, credit and criminal check. 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. (a) Base Salary. The Corporation agrees to pay the
Employee during the Term an annual base salary ("Base Salary") of $400,000. The
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Base Salary shall be reviewed at least annually during the Term by the Board,
and the Employee shall receive such increases in Base Salary, 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. The Base Salary shall be payable to the Employee in equal
installments in conformity with the Corporation's normal payroll periods.
(b) Bonus. During the Term, the Employee shall be eligible to receive
an annual performance bonus (in an amount no greater than 100% of the earned
Base Salary for the year in which such performance is measured) consistent with
the Corporation's management incentive program, as recommended by the Chief
Executive Officer of the Corporation and approved by the Committee and the
Chairman of the Corporation; provided however, that for the years 1998, 1999,
2000 and 2001 such bonus shall be guaranteed in an amount equal to 100% of the
Employee's Base Salary, and shall be payable in a manner consistent with the
payment of bonuses for other senior officers.
(c) Sign-on Bonus. As soon as practical after commencement of
employment, but in no event later than thirty (30) days from the Effective Date,
and subject to the execution by the Employee of this Agreement and the
Corporation's standard Confidentiality and Non-Competition Agreement, the
Corporation shall pay the Employee a sign-on bonus in the amount of $300,000.
(d) Options. Subject to the approval of the Committee and the
execution by the Employee of this Agreement, upon the Effective Date, the
Corporation shall grant the Employee an option to acquire 200,000 shares of the
Corporation's common stock pursuant to the terms and conditions of the
Corporation's 1991 Stock Option Plan (the "Plan"). In addition, upon the date of
the Corporation's 1998 Annual Shareholders Meeting (the "Meeting") and subject
to shareholder approval of amendments to the Plan at the Meeting which will make
this grant permissible under the Plan (the "Amendments"), the Corporation shall
grant the Employee an option to acquire an additional 100,000 shares of the
Corporation's common stock pursuant to the terms and conditions of the Plan as
so amended. In each case, the options shall be granted with an exercise price
equal to the fair market value of such common stock at the close of business on
the date of grant, vesting in four equal annual installments over the four years
from date of grant. In the event that the Corporation's stockholders fail to
approve such Amendments, the Corporation shall make a mutually acceptable
alternative compensation arrangement, providing comparable economic value to the
Employee.
(e) Relocation Expenses. In connection with commencement of
employment with the Corporation, the Corporation shall provide the Employee,
upon the execution
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and delivery by the Employee of a relocation expense reimbursement agreement
that authorizes the Corporation to seek reimbursement of any relocation expenses
or benefits provided to the Employee if the Employee leaves the employment of
the Corporation for any reason (other than due to death, termination by the
Corporation without Cause or termination by you for good reason) within one year
of relocation, with a relocation package to include the following: (1)
reimbursement, up to a maximum of $125,000 for costs associated with the sale of
the Employee's home in California and the purchase of a new home in Connecticut,
(2) a temporary living expense allowance of up to $5,000 per month for a period
ending on the earlier of the date of the purchase of a new home in Connecticut
and the first anniversary of the Effective Date, for which the Employee may seek
reimbursement for various miscellaneous direct expenses associated with
temporary living costs such as a furnished apartment, utilities, phone xxxx and
food costs, (3) costs incurred in connection with the moving of Employee's
personal property and household goods from the California residence to the new
residence provided that (x) in the case of clause (3) reimbursement shall be
made only if the Employee uses the Corporation's relocation company services,
and (y) in all events reimbursement shall be made only upon presentation of
satisfactory receipts in accordance with the Corporation's normal business
expenses reimbursement practices and procedures, and (4) the Employee shall be
entitled to be reimbursed for round trip business class airline tickets every
two weeks for travel to and from California for a period ending on the
three-month anniversary of the Effective Date, and for one additional trip back
to California to close on the sale of her home. The amount provided and
reimbursed under this paragraph (f) shall be on a grossed-up basis such that
after taking into account federal and state income taxes on such amounts, the
net after tax recovery by the Employee equals the amount of expenses incurred.
Notwithstanding the foregoing, the Employee shall not be entitled to the
benefits provided under this Section 3(d) after the expiration of the first
anniversary of the Effective Date.
(f) Relocation Loan. As soon as practical after commencement of
employment, but in no event later than thirty (30) days from the Effective Date,
the Corporation shall lend to the Employee the sum of $400,000.00 (the "Loan").
The Loan shall be evidenced by a Promissory Note (the "Note") containing terms
and in a form mutually acceptable to the Employee and the Corporation. Among
other things, the Note will provide that: (1) the Loan shall bear the lowest
interest rate permitted by federal law to avoid the imputation of income, (2)
the Loan shall be repaid in four equal annual installments of principal,
together with accrued interest, and (3) the Loan will be forgiven if the
Employee is terminated without Cause following a Change of Control. The Employee
has the option of paying back the principal plus any accrued interest at any
time. In addition, the Employee agrees to pledge/mortgage ____________ to secure
her obligations under the Note and execute any security/mortgage agreements or
other documents which the Corporation requires in connection with said
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pledge/mortgage.
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.
5. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee shall be
eligible for an annual paid vacation of four (4) weeks per calendar 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
eligible for 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 eligible 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, profit sharing, group life
insurance, AD&D coverage, health coverage (including medical, dental, vision and
prescription drug 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 she is unable to perform her
duties and responsibilities hereunder, she shall be eligible to receive
disability benefits of the type currently provided to her, 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 her estate, in
substantially equal monthly installments, from the date of her death for a
period of three (3) months, an amount equal to the Employee's Base Salary as of
her date of death.
(e) Other Benefits. During the Term, the Employee shall be
eligible to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including a car allowance
of $450.00 per month, a reasonable expense account, reimbursement for reasonable
expenses actually incurred by you for financial planning services, up to a
maximum of $10,000 per year, 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
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may be terminated under the circumstances set forth in paragraphs (a) through
(e) below:
(a) Death. The Employee's employment hereunder shall terminate
upon her 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 her 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 her 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 her employment with the Corporation: personal dishonesty
established to the satisfaction of the Board of Directors, willful misconduct
established to the satisfaction of the Board of Directors, breach of fiduciary
duty involving personal profit, breach of a restrictive covenant against
competition, disclosure of confidential information of the Corporation without
the Corporation's consent and that is not otherwise available to the public and
for which disclosure is not otherwise compelled by any law, rule, regulation,
regulatory agency or court of jurisdiction, consistent intentional failure to
perform stated duties after notice and forty-five (45) days to cure 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 her duties to the Corporation.
(d) Good Reason. The Employee may terminate her employment
hereunder with or without Good Reason; provided, however, that the Employee
agrees not to terminate her 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 the occurrence of the
following without the Employee's consent: (i) a significant diminution by the
Corporation of the Employee's role with the Corporation, or a significant
detrimental change in the nature and/or scope of the Employee's duties and
responsibilities with the Corporation, in each case other than for Cause or
Disability, (ii) a reduction in the Employee's Base Salary or guaranteed bonus
opportunity, in each case other than for Cause or Disability, or (iii) the
Corporation's requiring the Employee to report to an officer of the Corporation
other than the Corporation's Chief Executive Officer. For purposes of this
Agreement, "Good Reason" shall not exist until after Employee has given the
Company notice of the applicable event within 90 days of such event and which is
not remedied within 30
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days after receipt of written notice from Employee specifically delineating such
claimed event and setting forth Employee's intention to terminate employment if
not remedied; provided, that if the specified event cannot reasonably be
remedied within such 30-day period and the Company commences reasonable steps
within such 30-day period to remedy such event and diligently continues such
steps thereafter until a remedy is effected, such event shall not constitute
"Good Reason" provided that such event is remedied within 60 days after receipt
of such written notice.
(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. Unless otherwise required by law,
upon any termination of employment hereunder, the Corporation shall pay the
Employee, within ten (10) days following her 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.
(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), in each case 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
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Corporation shall (1) pay to the Employee an amount (the "Severance Amount")
equal to two (2) times 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 (provided that the
Severance Amount shall not be less than $1.6 million). Such Severance Amount
shall be paid in twenty-four (24) equal monthly installments in conformity with
the Corporation's normal payroll periods, and (2) continue to provide, for a
period of one (1) year 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.
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 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.
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(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 her 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
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;
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(2) a reduction by the Corporation in the Employee's rate of
annual Base Salary or annual 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 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
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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 (i) the highest annual rate of Base Salary of the Employee
during the 3-year period immediately preceding the Employee's Date of
Termination and (ii) the highest annual bonus earned by Employee in respect of
the three (3) fiscal years of the Corporation immediately preceding the year in
which the Employee's Date of Termination occurs (provided, that if the Employee
has not been employed by the Corporation for such three-fiscal-year period, the
greater of (x) the annual bonus (without regard to any reduction that would give
rise to Good Reason) for the year in which the Employee's Date of Termination
occurs and (y) the amount otherwise determined under this clause (ii) without
regard to this parenthetical), (2) cause each option to immediately vest and
become exercisable in full, and (3) 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
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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 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.
(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
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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 her 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 her 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 she voluntarily terminates
her 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, she 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
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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 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.
(c) Notwithstanding anything in this Agreement to the
contrary, the provisions of the Confidentiality and Non-Competition Agreement
dated as of _____________, 1998 between the Employee and the Company (the
"Non-Competition Agreement") shall be unaffected by the terms of this Agreement.
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:
Xxx X. Xxxxxx
0000 Xxxxxx Xxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
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If to the Corporation:
Oxford Health Plans, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Secretary
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.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of her 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 her 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
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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.
(b) Indemnification of Employee. The By-Laws of the
Corporation provide for indemnification of its officers and directors under the
circumstances and conditions specified therein. The Employee is eligible for
this coverage and any other indemnification coverage normally provided to
similarly situated executives of the Corporation. Moreover, 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, except that the terms
and conditions of the Confidentiality and Non-Competition Agreement shall be
unaffected by the provisions of this 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, she 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: ___________________________
Xx. Xxxxxx Xxxxxx, CEO
Dated: _________________________
_______________________________ Dated: ________________________
Xxx X. Xxxxxx
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