EMPLOYMENT AGREEMENT
This Agreement, effective as of October 13, 1999 (the "Effective
Date"), is made by and between Stephen J. Hemsley ("Executive") and United
HealthCare Corporation ("UnitedHealth Group" or the "Company") for the purpose
of setting forth the terms and conditions of Executive's employment by
UnitedHealth Group and to protect UnitedHealth Group's knowledge, expertise,
customer and provider relationships, and the confidential information
UnitedHealth Group has developed about its customers, providers, products,
operations, and services. Unless the context otherwise requires, when used in
this Agreement all references to "UnitedHealth Group" include any entity
affiliated with UnitedHealth Group.
1. EMPLOYMENT. UnitedHealth Group hereby employs Executive as the
President of UnitedHealth Group. Executive shall, during the term of his
employment hereunder and subject to the supervision and control of the Chief
Executive Officer of UnitedHealth Group, perform such duties, have such power,
and exercise such supervision and control with regard to the business of
UnitedHealth Group as are commonly associated with or appropriate to the office
of the President. Executive shall report to the Chief Executive Officer of
UnitedHealth Group. Executive accepts such employment on the terms and
conditions set forth in this Agreement and, except as specifically superseded by
this Agreement, subject to all of UnitedHealth Group's policies and procedures,
as changed from time-to-time, in regard to its employees generally. As of the
Effective Date, all other prior employment related agreements between Executive
and UnitedHealth Group shall terminate in their entirety and no longer be of any
force or effect, except for any outstanding stock options or restricted stock
grants which shall continue in accordance with their terms.
2. COMPENSATION.
(a) BASE SALARY. Executive shall initially be paid a base annual salary
in the amount of $750,000 payable bi-weekly in accordance with UnitedHealth
Group's then current payroll practices, less all applicable withholdings and
deductions. From time-to-time the Chief Executive Officer shall review
Executive's performance and shall consider increasing Executive's compensation.
(b) ANNUAL STOCK OPTIONS. Executive shall, each calendar year beginning
with 1999, receive nonqualified stock option grants to purchase a minimum of
150,000 shares of UnitedHealth Group's Common Stock (the "Annual Options"). The
exercise price for each share of common stock underlying the Annual Options
shall be the fair market value of one share of UnitedHealth Group Common Stock
at the time of the grant and vesting of the Annual Options shall be
in not more than four equal annual installments commencing the year after the
grant based on the achievement of performance goals as determined by the
Board of Directors or a committee thereof, provided that each Annual Option
shall be fully vested on the ninth anniversary of the date of grant and the
Annual Options shall be subject to certain adjustments customary for options
of this type and consistent with UnitedHealth Group's options then being
granted. Each Annual Option shall be in accordance with and subject to the
terms and conditions of the UnitedHealth Group Corporation Amended and
Restated 1991 Stock and Incentive Plan, or any substitute or similar
successor plan (the "Stock Plan"). Notwithstanding the foregoing provisions
of this Section 2(b), the Executive shall be eligible to receive additional
awards of options to purchase shares of UnitedHealth Group stock, as
determined by the Board of Directors or an authorized committee thereof, in
accordance with the normal practices of UnitedHealth Group.
(c) SPECIAL STOCK OPTION GRANT. In addition to the Annual Options
contemplated by Section 2(b) Executive shall also receive an option (the
"Special Option") to purchase 500,000 shares of UnitedHealth Group Common Stock.
The Special Option shall be substantially in the form of Exhibit 2(c) and shall
be subject to the terms and conditions of the Stock Plan. The exercise price for
the Special Option shall be $40.125 per share, subject to adjustment as provided
in the Stock Plan. The Special Option will expire on the tenth anniversary of
its issuance. The Special Option will become exercisable on the ninth
anniversary of its issuance, subject to acceleration upon the occurrence of
certain performance events as specified in the Special Option.
(d) BONUS AND STOCK PLANS. Executive shall be eligible to participate
in UnitedHealth Group's incentive bonus and other bonus plans and shall be
eligible to receive grants or awards pursuant to UnitedHealth Group's stock
option and other incentive plans, all in accordance with the terms and
conditions of those plans and on a basis consistent with that customarily
provided for senior officers at the highest level of UnitedHealth Group.
Executive shall be eligible for a target annual payment under UnitedHealth
Group's Management Leadership Results Plan or successor plan of at least 125
percent of his then-current base annual salary.
(e) SPECIAL BONUS. In recognition of Executive's strategic
accomplishments over the past two years, Executive shall be entitled to receive
a special one-time bonus in the amount of $600,000 (the "Special Bonus"). The
Special Bonus shall be paid in cash or UnitedHealth Group Common Stock, as
Executive elects upon reasonable notice to the Company. If Executive elects to
be paid in Common Stock the shares shall be valued at their closing price on the
date of payment. The Special Bonus shall be paid on January 4, 2000, subject
only to Executive's continued employment as of such date.
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(f) EMPLOYEE BENEFITS. Executive shall be eligible to participate in
UnitedHealth Group's other employee benefit plans, including without limitation,
any life, health, dental, short-term and long-term disability insurance coverage
and any retirement or savings plans, in accordance with the terms and conditions
of those plans and on a basis consistent with that customarily provided for
senior officers at the highest level of UnitedHealth Group. Executive shall also
receive other benefits consistent with his office and position, which benefits
shall include, without limitation, an expense allowance the amount of which
shall be determined by the Chief Executive Officer and acceptable to Executive,
to be used for security considerations, such as home and personal security, tax
planning and financial planning expenses.
(g) SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN. Prior to the end of 2000,
UnitedHealth Group shall use its best efforts to establish and provide Executive
a supplemental retirement benefit plan, the terms of which shall be reasonable
and customary for executives of a similar position in comparably sized companies
(the "Supplemental Retirement Plan").
(h) VACATION AND ILLNESS. Executive shall be entitled to paid vacation
and sick leave benefits each year in accordance with UnitedHealth Group's
then-current policies and on a basis consistent with that customarily provided
for senior officers at the highest level of UnitedHealth Group.
(i) ADDITIONAL INSURANCE. In addition to any other insurance to which
Executive is entitled under Section 2(f), UnitedHealth Group shall provide and
pay for, and Executive (or a trust designated by Executive) shall own, a life
insurance policy on Executive in an amount equal to $2,000,000 (the "Life
Insurance"). UnitedHealth Group shall also make available for Executive to
purchase, at Executive's expense, additional life insurance on Executive in an
amount equal to $1,000,000 (the "Supplemental Life Insurance"). UnitedHealth
Group shall also provide for Executive an individual supplemental long term "own
occupation" disability insurance policy, which may be self-insured by
UnitedHealth Group, providing for monthly disability income payments to
Executive equal to 80% of his annual base salary on the Effective Date of this
Agreement, reduced by any monthly payments to Executive under other individual
or group disability income plans or policies provided and paid for by
UnitedHealth Group (the "Supplemental Long-Term Disability Benefit"). To the
extent that such Supplemental Long-Term Disability Benefit is insured,
UnitedHealth Group will increase the compensation of Executive by the amount of
the insurance premiums and Executive (or UnitedHealth Group on behalf of
Executive) will pay such premiums. The Life Insurance and Supplemental Long-Term
Disability Benefit policies called for by this subsection shall be maintained
throughout the term of this Agreement and during the period for which payments
are being made under Section 3(d) and Section 3(g). Executive shall be deemed
permanently disabled for purposes of such policy
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if by reason of accident, illness, or injury he is unable to perform any of
the principal duties, responsibilities, or functions of his employment for a
period of 180 consecutive days (the "qualification period") or such shorter
period as provided in the policy for the Supplemental Long-Term Disability
Benefit. The monthly disability income payments to Executive shall begin
immediately after the running of the qualification period and shall continue
throughout the period of Executive's disability for the greater of five years
or until Executive reaches age sixty-five. UnitedHealth Group shall
compensate Executive on an after-tax basis for any additional income taxes
payable by Executive as a result of UnitedHealth Group's payment of premiums
with respect to the insurance policies described in this subsection.
3. TERM AND TERMINATION.
(a) TERM. The term of this Agreement shall begin on the Effective Date
and shall continue in full force and effect until terminated as set forth below.
(b) TERMINATION OF AGREEMENT.
(i) This Agreement and Executive's employment hereunder may be
terminated at any time by the mutual written agreement of the parties.
(ii) This Agreement and Executive's employment may be
terminated by UnitedHealth Group for any reason and at any time upon 30
days' prior written notice to Executive.
(iii) Executive may resign his employment and terminate this
Agreement without Good Reason (as defined below) upon 30 days' prior
written notice to UnitedHealth Group.
(iv) This Agreement and Executive's employment shall
automatically terminate upon the death or permanent disability (as
defined in Section 2(i) above) of Executive.
(v) This Agreement and Executive's employment may be
terminated by UnitedHealth Group for Cause (as defined below)
immediately upon written notice to Executive.
(vi) This Agreement and Executive's employment may be
terminated by Executive for Good Reason upon 30 days' prior written
notice from Executive to UnitedHealth Group specifying such Good
Reason, provided that such notice is given within 120 days after the
initial occurrence of such Good Reason, and provided further that the
events
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giving rise to Good Reason shall not have been remedied as of the date
of such notice.
(c) TERMINATION OF EMPLOYMENT BY UNITEDHEALTH GROUP FOR CAUSE. If
Executive's employment with UnitedHealth Group is terminated by UnitedHealth
Group under Section 3(b)(v) for Cause then, upon termination of the Executive's
employment:
(i) All cash compensation payable to Executive shall
cease.
(ii) All options to purchase shares of UnitedHealth Group
stock shall terminate.
(iii) All accrued and unpaid vacation to the date of
termination shall be paid to Executive.
(iv) Executive's participation in the health care
coverage, life insurance, or other employee benefit
plans of UnitedHealth Group shall terminate in
accordance with applicable law and those plans' terms
and conditions. Executive shall receive any benefits
payable under Sections 2(f) and (g) of this
Agreement, including commencement of the benefit
under the Supplemental Retirement Plan, within sixty
days of such termination.
(d) TERMINATION OF EMPLOYMENT BY UNITEDHEALTH GROUP WITHOUT CAUSE OR BY
EXECUTIVE FOR GOOD REASON. If Executive's employment with UnitedHealth Group is
terminated by UnitedHealth Group under Section 3(b)(ii) without Cause or if
Executive's employment with UnitedHealth Group is terminated by Executive under
Section 3(b)(vi) for Good Reason then upon termination of Executive's
employment:
(i) If such termination does not occur within one year of
a Change in Control (as defined below) or, in the
case of a termination for Good Reason under clause
(F) of the definition of Good Reason, within 30
months after the Change of Control, then for a period
of 12 months following the effective date of the
termination of employment, Executive shall receive
biweekly payments equal to 1/26 of two times the sum
of (A) Executive's annualized highest base salary,
plus (B) the average of the bonus or incentive
compensation paid or payable to Executive for the two
most recent calendar years (excluding any special or
one-time bonus or incentive compensation payments),
less all applicable withholdings or deductions.
Provided, however, in the event of any anticipated
tax law change during the payment period that would
increase Executive's taxes on
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such income, Executive may elect to take and
receive his remaining compensation under this
Section 3(d)(i), discounted at a market rate to
the present value thereof, in a single lump sum
payable within thirty days after written request
therefor setting forth such anticipated tax law
change.
(ii) If such termination occurs within one year of a
Change in Control (as defined below) or, in the case
of a termination for Good Reason under clause (F) of
the definition of Good Reason, within 30 months after
a Change in Control, then for a period of 12 months
following the effective date of the termination of
employment, Executive shall receive biweekly payments
equal to 1/26 of three times the sum of (A)
Executive's annualized highest base salary plus (B)
the greater of (1) the annual bonus that would be
payable to Executive under any incentive compensation
plans in which Executive then participates at
Executive's then-current target level, or (2) the
average of the bonus or incentive compensation paid
or payable to Executive for the two most recent
calendar years (excluding any special or one-time
bonus or incentive compensation payments), less all
applicable withholdings or deductions. Provided,
however, in the event of any anticipated tax law
change during the payment period that would increase
Executive's taxes on such income, Executive may elect
to take and receive his remaining compensation under
this Section 3(d)(ii), discounted at a market rate to
the present value thereof, in a single lump sum
payable within thirty days after written request
therefor setting forth such anticipated tax law
change.
(iii) If such termination does not occur within one year of
a Change in Control or, in the case of a termination
for Good Reason under clause (F) of the definition of
Good Reason, within 30 months after a Change in
Control, then at the time of termination the Board of
Directors, or duly authorized committee, of the
Company shall give consideration to vesting otherwise
unvested options held by Executive and shall also
give consideration to the period of time following
termination during which Executive may exercise
options held by Executive. If such termination occurs
within one year of a Change in Control, or, in the
case of a termination for Good Reason under clause
(F) of the definition of Good Reason, within 30
months after a Change in Control, all options not
otherwise vested, including the Special Option issued
pursuant to Section 2(c), shall vest upon the change
in Control and shall remain exercisable for a period
of three years following termination.
(iv) Executive shall be entitled to continue participation
in the health care coverage as provided in Section
3(i) below and in the other life insurance or other
employee benefit plans of UnitedHealth Group
including, without limitation, the Supplemental
Retirement established
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under Section 2(g) of this Agreement and the Life
Insurance, the Supplemental Long-Term Disability
Benefit provided under Section 2(i) of this
Agreement, according to and if permitted by
applicable law and those plans' terms and
conditions. If Executive cannot be covered under
any of UnitedHealth Group's group plans or
policies, UnitedHealth Group shall reimburse
Executive for his full cost of obtaining
comparable alternative group or individual
coverage elsewhere, less any contribution that
Executive would have been required to make under
UnitedHealth Group's group plans or policies.
UnitedHealth Group shall compensate Executive on
an after-tax basis for any additional income taxes
payable by Executive as a result of UnitedHealth
Group's payment of premiums with respect to the
insurance policies described in this subsection.
Executive shall receive any benefits payable under
Section 2(f) of this Agreement, as well as the
supplemental retirement benefit payable under
Section 2(g), within sixty days of such
termination.
(v) UnitedHealth Group shall pay a reasonable amount for
outplacement and job search services for Executive by
a firm selected by the Executive and mutually
acceptable to UnitedHealth Group.
(vi) All accrued and unpaid vacation to the date of
termination shall be paid to the Executive.
(vii) In the event any of the payments, the acceleration of
vesting of stock options or the provision of any
other benefits under this Agreement or the Special
Option are "parachute payments" within the meaning
of, and the regulations, rulings and procedures
under, Sections 280G and 4999 of the Internal Revenue
Code of 1986, as the same from time to time may be
amended (the "Code"), or other related or successor
sections and provisions of the Code at any time
applicable thereto, and become subject to excise
taxes under Section 4999 of the Code, UnitedHealth
Group will pay Executive the amount of such excise
taxes plus all federal, state, and local taxes
applicable to UnitedHealth Group's payment of such
excise taxes, including any additional excise taxes
due under Section 4999 of the Code with respect to
payments made pursuant to this Section 3(d)(vii). All
determinations required by this Section 3(d), upon
termination of Executive's employment and at
UnitedHealth Group's sole expense, shall forthwith be
made by UnitedHealth Group's regularly engaged
independent public accounting firm. In determining
the amount of excise tax which would be payable by
the Executive pursuant to Section 4999 of the Code,
such accounting firm shall take into consideration
and apply all non-includible, excludable and exempt
amounts of compensation in accordance with Section
280G of the Code. The parties shall cooperate fully
by promptly providing such accounting firm all
information required to
7
complete such determinations. Such determinations
shall be set forth in a written statement and
analysis thereof issued by such accounting firm
which shall be promptly furnished to and shall be
binding upon the parties. In the event Executive
is subject to any audit with respect to the amount
of such excise taxes, Executive and UnitedHealth
Group will mutually cooperate in contesting such
audit; provided that UnitedHealth Group will pay
the cost of such contest and will reimburse
Executive on an after tax basis for any additional
excise taxes payable as a result of such audit and
for any income taxable to Executive as a result of
UnitedHealth Group paying the cost of such audit
and any additional excise taxes. In the event any
such audit results in a refund, Executive will
turn over the refund to UnitedHealth Group less
any income taxes incurred by Executive in respect
of the receipt of the refund.
(e) TERMINATION OF EMPLOYMENT BY EXECUTIVE WITHOUT GOOD REASON. If
Executive's employment with UnitedHealth Group is terminated by Executive under
Section 3(b)(iii) without Good Reason then upon termination of Executive's
employment:
(i) All cash compensation payable to Executive shall cease.
(ii) Executive shall be entitled to continue participation in
the health care coverage as provided in Section 3(i) below and
Executive's participation in the life insurance or other employee
benefit plans of UnitedHealth Group, including, without limitation, the
Supplemental Retirement Plan, Life Insurance, and the Supplemental
Long-Term Disability Benefit, shall terminate in accordance with
applicable law and those plans' terms and conditions. Executive shall
receive any benefits payable under Section 2(f) of this Agreement, as
well as the benefit under the Supplemental Retirement Plan, within 60
days of such termination.
(iii) All accrued and unpaid vacation to the date of
termination shall be paid to the Executive.
(f) TERMINATION OF EMPLOYMENT IN THE EVENT OF DEATH. If Executive's
employment with UnitedHealth Group is terminated under Section 3(b)(iv) due to
the death of Executive then upon termination of Executive's employment:
(i) For a period of twelve months from the date of Executive's
death Executive's beneficiaries shall receive (A) biweekly payments
equal to 1/26 of Executive's annualized highest base salary as of the
date of Executive's employment termination, plus (B) the average of the
bonus or incentive compensation paid or payable to Executive for the
two most recent calendar years (excluding any special or one-time bonus
or incentive
8
compensation payments), less all applicable withholdings or
deductions. Provided, however, in the event of any anticipated tax
law change during the payment period that would increase Executive's
taxes on such income, Executive's beneficiaries may elect to take and
receive his remaining compensation under this Section 3(f)(i),
discounted at a market rate to the present value thereof, in a single
lump sum payable within thirty days after written request therefor
setting forth such anticipated tax law change.
(ii) Executive's beneficiaries shall be entitled to receive
all proceeds from the Life Insurance and Supplemental Life Insurance,
if any, provided in accordance with this Agreement and any benefit
payable under Section 2(f) of this Agreement, as well as the benefits
under the Supplemental Retirement Plan. Executive's spouse and
dependent children under age 25 shall continue to receive health care
coverage as provided in Section 3(i) of this Agreement.
(iii) Any stock options or grants awarded Executive under any
of UnitedHealth Group's stock option or grant or similar stock plans,
other than the Special Option issued pursuant to Section 2(c), shall
vest immediately upon Executive's death and shall be exercisable by
Executive's beneficiaries during a period of three years following the
termination.
(iv) All accrued and unpaid vacation to the date of
termination shall be paid to the Executive's estate.
(g) TERMINATION OF EMPLOYMENT IN THE EVENT OF DISABILITY. If
Executive's employment with UnitedHealth Group is terminated under Section
3(b)(iv) due to the permanent disability of Executive then upon termination of
Executive's employment:
(i) For a period of twelve months from the effective date of
Executive's disability Executive shall receive (A) biweekly payments
equal to 1/26 of Executive's annualized highest base salary as of the
date of Executive's employment termination, plus (B) the average of the
bonus or incentive compensation paid or payable to Executive for the
two most recent calendar years (excluding any special or one-time bonus
or incentive compensation payments), less all applicable withholdings
or deductions. Provided, however, in the event of any anticipated tax
law change during the payment period that would increase Executive's
taxes on such income, Executive may elect to take and receive his
remaining compensation under this Section 3(g)(i), discounted at a
market rate to the present value thereof, in a single lump sum payable
within thirty days after written request therefor setting forth such
anticipated tax law change.
9
(ii) Executive, his spouse and children under 25 shall
continue to receive health care coverage in accordance with Section
3(i) of this Agreement. Executive shall receive the Supplemental
Long-Term Disability Disability Benefit under Section 2(i) and any
disability benefits provided under any other employee benefit plans or
compensation policies of UnitedHealth Group to executive officers of
similar rank in accordance with applicable law and those plans' terms
and conditions. Executive shall receive any benefits payable under
Section 2(f) of this Agreement and the benefit under the Supplemental
Retirement Plan within sixty (60) days of such termination.
(iii) Any stock options or grants awarded Executive under any
of UnitedHealth Group's stock option or grant or similar stock plans,
other than the Special Option issued pursuant to Section 2(c) shall
vest immediately and shall be exercisable during the period of three
years following the termination.
(iv) All accrued and unpaid vacation to the date of
termination shall be paid to the Executive.
(h) DEFINITIONS. For purposes of this Agreement:
(i) "Cause" means (A) the willful and continued failure by
Executive substantially to perform his duties hereunder (other than any
such failure resulting from his disability or from termination by
Executive for Good Reason), after a written demand for substantial
performance is delivered to Executive that specifically identifies the
manner in which Executive has not substantially performed his duties,
and Executive has not remedied such failure within a reasonable time
after receipt of such written notice; (B) a violation of UnitedHealth
Group's Code of Conduct that is materially detrimental to UnitedHealth
Group and that Executive has not remedied within a reasonable time
after receipt of a written notice from UnitedHealth Group that
specifically identifies such violations; (C) the conviction of
Executive of a felony; or (D) any other willful and material breach of
this Agreement by Executive that Executive has not remedied within a
reasonable time after receipt of a written notice from UnitedHealth
Group that specifically identifies such breach. For purposes of this
paragraph, no act, or failure to act, on Executive's part will be
deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that his action or omission
was in the best interest of UnitedHealth Group.
(ii) "Change in Control" means (A) the acquisition by an
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2)
10
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the then
outstanding shares of common stock of UnitedHealth Group (the
"Outstanding Common Stock"); (B) individuals who, as of the date
hereof, constitute UnitedHealth Group's Board of Directors (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the UnitedHealth Group Board of Directors, provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by
UnitedHealth Group's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or
consents; (C) the approval by the stockholders of UnitedHealth Group
of a reorganization, merger or consolidation, in each case, with
respect to which the beneficial owners of the Outstanding Common
Stock immediately prior to such reorganization, merger or
consolidation, beneficially own, directly or indirectly, less than
two-thirds of the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation; or (D) the approval by the stockholders of
UnitedHealth Group of (i) a complete liquidation or dissolution of
UnitedHealth Group or (ii) the sale or other disposition of all or
substantially all of the assets of UnitedHealth Group.
(iii) "Good Reason" means (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position
(including status, offices, titles and reporting relationships),
authority, duties or responsibilities as contemplated by Section 1 or
any other action by UnitedHealth Group which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by UnitedHealth Group promptly
after receipt of notice thereof given by Executive; (B) the failure by
UnitedHealth Group to elect Executive to the position of the President
or any other action by UnitedHealth Group which results in the
diminution of Executive's position, authority, duties, or
responsibilities, excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by Group promptly
after receipt of notice thereof given by Executive; (C) any failure of
UnitedHealth Group
11
to pay base salary or incentive compensation or to grant Annual
Options in accordance with Section 2(a), (b) and (d) or any failure
by UnitedHealth Group to maintain or provide the plans, programs,
policies and practices, or benefits described in Section 4(f), (g),
(h) and (i) on the most favorable basis such plans programs,
policies and practices were maintained and benefits are provided to
Executive on the Effective Date; (D) UnitedHealth Group's requiring
Executive to be based at any office or location other than its
principal executive offices at its current location in Minnetonka,
Minnesota or within twenty-five miles of such current location,
except for travel reasonably required in the performance of the
Executive's responsibilities; (E) any purported termination by
UnitedHealth Group of Executive's employment otherwise than as
expressly permitted by this Agreement; (F) the resignation or
termination of William W. McGuire, M.D., as Chief Executive Officer
of UnitedHealth Group for any reason, provided, however, that the
initial occurrence of Good Reason by reason of Dr. McGuire's
termination or resignation shall not exist for the purposes of this
clause (F) until twelve months after the effective date of such
resignation or termination by Dr. McGuire; (G) any other material
breach of this Agreement by UnitedHealth Group that is not remedied
within a reasonable time after written notice from Executive to
UnitedHealth Group that specifically identifies such breach; or (H)
any failure by UnitedHealth Group to comply with and satisfy Section
5(a) of this Agreement. For purposes of the definition of "Good
Reason," any good faith determination of "Good Reason" made by the
Executive on or after the Change of Control Date shall be conclusive.
(i) HEALTH CARE CONTINUATION COVERAGE. Notwithstanding any other
provision of this Agreement to the contrary, if Executive's employment is
terminated for any reason other than by UnitedHealth Group for Cause,
UnitedHealth Group shall continue to provide, at no cost to Executive, health
care coverage for Executive and his wife until each of them has reached age 65
and for his dependent children until they attain age 25, as in effect on the
date of termination. UnitedHealth Group's obligation so to provide health care
coverage shall cease at such time as Executive becomes eligible for health care
coverage from another employer. If Executive, his wife, or his dependent
children under the age of 25 cannot be covered under any of UnitedHealth Group's
group plans or policies, UnitedHealth Group shall reimburse Executive for his
full cost of obtaining comparable alternative group or individual coverage
elsewhere, less any contribution that Executive would have been required to make
under UnitedHealth Group's group health plans or policies. UnitedHealth Group
shall compensate Executive on an after-tax basis for any additional income taxes
payable by Executive as a result of UnitedHealth Group's payment of premiums
with respect to the insurance policies described in this subsection.
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4. PROPERTY RIGHTS, CONFIDENTIALITY, NON-SOLICIT AND NON-COMPETE
PROVISIONS.
(a) PROPERTY RIGHTS.
(i) Executive shall promptly disclose to UnitedHealth Group in
writing all inventions, discoveries, and works of authorship, whether
or not patentable or copyrightable, which are conceived, made,
discovered, written, or created by Executive alone or jointly with
another person, group, or entity, whether during the normal hours of
employment at UnitedHealth Group or on Executive's own time, during the
term of this Agreement. Executive assigns all rights to all such
inventions and works of authorship to UnitedHealth Group. Executive
shall give UnitedHealth Group any of the assistance it reasonably
requires in order for UnitedHealth Group to perfect, protect and use
its rights to inventions and works of authorship.
This provision shall not apply to an invention, discovery, or work of
authorship for which no equipment, supplies, facility, or trade secret
information of UnitedHealth Group was used and which was developed
entirely on the Executive's own time and which does not relate to the
business of UnitedHealth Group, to UnitedHealth Group's anticipated
research or development, or does not result from any work performed by
Executive for UnitedHealth Group.
(ii) Executive shall not remove any records, documents, or any
other tangible items (excluding Executive's personal property) from the
premises of UnitedHealth Group in either original or duplicate form,
except as is needed in the ordinary course of conducting business for
UnitedHealth Group.
(iii) Executive shall immediately deliver to UnitedHealth
Group, upon termination of employment with UnitedHealth Group, or at
any other time upon UnitedHealth Group's request, any property,
records, documents, and other tangible items (excluding Executive's
personal property) in Executive's possession or control, including data
incorporated in word processing, computer, and other data storage
media, and all copies of such records, documents, and information,
including all Confidential Information, as defined below.
(b) CONFIDENTIAL INFORMATION. During the course of his employment
Executive will develop, become aware of, and accumulate expertise, knowledge,
and information regarding UnitedHealth Group's organization, strategies,
business, and operations and UnitedHealth Group's past, current, or potential
customers, providers, and suppliers. UnitedHealth Group considers such
expertise,
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knowledge, and information to be valuable, confidential, and proprietary, and
it shall be considered Confidential Information for purposes of this
Agreement. During this Agreement and at all times thereafter Executive shall
not use such Confidential Information or disclose it to other persons or
entities except as is necessary for the performance of Executive's duties for
UnitedHealth Group or as has been expressly permitted in writing by
UnitedHealth Group. Provided, however, that the foregoing covenant shall not
apply to any information possessed by Executive prior to his employment by
UnitedHealth Group, or to any information which is in or has entered the
public domain or has been disclosed within any industry segment in which
UnitedHealth Group or any subsidiary or affiliated company of UnitedHealth
Group operates by or pursuant to the authority of UnitedHealth Group or any
subsidiary or affiliated company of UnitedHealth Group.
(c) NON-SOLICITATION. During (i) the term of this Agreement, (ii) any
period for which Executive is entitled to receive payments under Section 3 of
this Agreement, notwithstanding any lump-sum payment that Executive might
receive under Section 3(d)(i) or (ii), (iii) any period following the
termination of this Agreement in which Executive remains employed by
UnitedHealth Group, and (iv) for a period of one year after the last day of the
latest of any period described in (i), (ii) or (iii), Executive shall not
directly or indirectly attempt to hire away any then-current employee of
UnitedHealth Group or a subsidiary of UnitedHealth Group or to persuade any such
employee to leave employment with UnitedHealth Group.
(d) NON-COMPETITION.
(i) During (A) the term of this Agreement, (B) any period for
which Executive is entitled to receive payments under Section 3 of this
Agreement, notwithstanding any lump-sum payment that Executive might
receive under Section 3(d)(i) or (ii), and (C) any period following
termination of this Agreement in which Executive remains employed by
UnitedHealth Group (the "Restriction Period"), Executive shall not
directly or indirectly solicit, divert, or take away from UnitedHealth
Group, or attempt to solicit, divert, or take away from UnitedHealth
Group, the business of any person, partnership, company, or corporation
with which UnitedHealth Group has established a business or customer
relationship; PROVIDED, HOWEVER, that this Section 4(d)(i) shall apply
only to the business(es) in which UnitedHealth Group was engaged prior
to or planned to be engaged in within six months after the termination
of this Agreement.
(ii) During the Restriction Period, without UnitedHealth
Group's prior written consent, Executive shall not engage or
participate, either individually or as an employee, consultant or
principal, partner, agent, trustee, officer or director of a
corporation, partnership, or other business
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entity, in any business in which UnitedHealth Group or any of the
UnitedHealth Group Companies is engaged; PROVIDED, HOWEVER, that
this Section 4(d)(ii) shall apply only to businesses whose primary
business is in competition with a material business of UnitedHealth
Group as of the date of termination of this Agreement.
(iii) Executive's obligations under this Section 4(d) shall
remain in effect only so long as UnitedHealth Group continues to make
the payments and provide the benefits specified in Section 3(d)
notwithstanding any lump sum payment that Executive might receive under
Section 3(d)(i) or (ii) (though UnitedHealth Group shall have no option
to discontinue such payments on its own).
(iv) If Executive elects to terminate Executive's employment
pursuant to Section 3(b)(iii), UnitedHealth Group may elect to have the
provisions of this Section 4(d) be in effect for up to 12 months
following the effective date of such resignation if during such period
UnitedHealth Group makes the payments specified in Section 3(d)(i). To
be effective UnitedHealth Group shall notify Executive of its intention
to make payments hereunder within ten days following Executive's notice
of resignation.
5. MISCELLANEOUS.
(a) ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective legal and personal
representatives, heirs, successors, and assigns, but may not be assigned by
either party (except by operation of law upon death or disability of Executive
and except that UnitedHealth Group may assign its obligations hereunder to a
wholly owned subsidiary provided that such assignment shall not relieve
UnitedHealth Group of its obligations under this Agreement) without the prior
written consent of the other party. UnitedHealth Group will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of its business and/or assets to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that UnitedHealth Group is required to perform under this Agreement if no
such succession had taken place. As used in this Agreement, "UnitedHealth Group"
shall mean each as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(b) NOTICES. All notices under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered by hand or mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
party to receive the same at the address set forth below or at such other
address as may have been furnished by proper notice.
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UnitedHealth Group: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: General Counsel
Executive:
(c) ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to its subject matter and may be amended or modified
only by a subsequent written amendment executed by the parties. This Agreement
replaces and supersedes any and all prior employment or employment related
agreements and understandings, including any letters or memos which may have
been construed as agreements, between Executive and UnitedHealth Group or any of
its subsidiaries and affiliated companies.
(d) CHOICE OF LAW. This Agreement shall be construed and interpreted
under the applicable laws and decisions of the State of Minnesota.
(e) WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy under this Agreement shall operate as a
waiver; nor shall any single or partial exercise of any right or remedy preclude
any other or further exercise of any right or remedy.
(f) ADEQUACY OF CONSIDERATION. Executive acknowledges and agrees that
he has received, prior to or contemporaneously with the Effective Date, adequate
consideration from UnitedHealth Group to enter into this Agreement.
(g) DISPUTE RESOLUTION AND REMEDIES. Any dispute arising between the
parties relating to this Agreement or to Executive's employment by UnitedHealth
Group shall be resolved by binding arbitration held in the City of Minneapolis
pursuant to the Rules of the American Arbitration Association, except as
hereinafter expressly modified. If the disputing and responding parties are
unable to agree upon a resolution within forty-five business days after the
responding party's receipt of written notice from the disputing party setting
forth the nature of the dispute, within the following ten business days the
disputing and responding parties shall select a mutually acceptable single
arbitrator to resolve the dispute or, if the parties fail or are unable to do
so, each shall within the following ten business days select a single
arbitrator, and the two so selected shall select a third arbitrator within the
following ten business days. Such single arbitrator or, as the case may be,
panel of three arbitrators acting by majority decision, shall resolve the
dispute within sixty days after the date such arbitrator, or the last of them so
selected, is selected, or as soon thereafter as practicable. If either party
refuses or fails to select an arbitrator within the time therefor, the other
party may do so on such
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refusing or failing party's behalf. The arbitrators shall have no power to
award any punitive or exemplary damages or may construe or interpret but
shall not ignore or vary the terms of this Agreement and shall be bound by
controlling law. The parties acknowledge that Executive's failure to comply
with the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to UnitedHealth Group
and that therefore the arbitrators, or a court of competent jurisdiction if
an arbitration panel cannot be immediately convened, will be empowered to
provide injunctive relief, including temporary or preliminary relief, to
restrain any such failure to comply. The party not prevailing in the
proceeding shall bear the costs and expenses thereof, including without
limitation, the reasonable attorneys' fees of the prevailing party. The
arbitration award or other resolution may be entered as a judgment at the
request of the prevailing party by any court of competent jurisdiction in
Minnesota or elsewhere.
(h) SURVIVAL. The provision of Sections 2(f), 2(g), 2(i), 3(c)-3(i), 4
and 5 shall survive any termination of this Agreement.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES.
IN WITNESS WHEREOF, this Agreement has been signed by the parties
hereto on the date set forth below.
UnitedHealth Group Stephen J. Hemsley
By:
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Date: Date:
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