UNITED HEALTHCARE CORPORATION
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
AMENDED AND RESTATED EFFECTIVE MAY 14, 1997
SECTION 1. PURPOSE.
This plan shall be known as the "United HealthCare Corporation
Nonemployee Director Stock Option Plan" and is hereinafter referred to as the
"Plan." The purpose of the Plan is to promote the interests of United
HealthCare Corporation, a Minnesota corporation (the "Company"), by enhancing
its ability to attract and retain the services of experienced and
knowledgeable independent directors and by providing additional incentive for
these directors to increase their interest in the Company's long-term success
and progress.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee") of two
or more persons appointed by the Board of Directors of the Company. Grants
of stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic as described in Section 6. However, all questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Committee and such determination shall be final and binding
upon all persons having an interest in the Plan.
SECTION 3. PARTICIPATION IN THE PLAN.
Each director of the Company shall be eligible to participate in the
Plan unless such director is an employee of the Company or any subsidiary of
the Company.
SECTION 4. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 10 hereof, the stock to be subject
to options under the Plan shall be authorized but unissued shares of the
Company's common stock, par value $.01 per share (the "Common Stock").
Subject to adjustment as provided in Section 10 hereof, the maximum number of
shares with respect to which options may be exercised under this Plan shall
be 350,000 shares. If an option under the Plan expires, or for any reason is
terminated, any shares that have not been purchased upon exercise of
the option prior to the expiration or termination date shall again be
available for options thereafter granted during the term of the Plan.
SECTION 5. NONQUALIFIED STOCK OPTIONS.
All options granted under the Plan shall be nonqualified stock options
that do not qualify as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
Each option granted under this plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve,
which agreements shall comply with and be subject to the following terms and
conditions:
(a) ANNUAL OPTION GRANTS. Each eligible director of the
Company in office on the first business day immediately following each
annual meeting of the Company's shareholders (the "Annual Option Grant
Date") held during the term of the Plan shall be granted automatically
on the Annual Option Grant Date an option to purchase 4,000 shares of
Common Stock, provided that no director shall be granted an option with
respect to an Annual Option Grant Date if such director has been
granted an option under Section 6(b) hereof within 12 months of such
Annual Option Grant Date, and except that, in lieu thereof, each
eligible director of the Company who is in office on the Annual Option
Grant Date immediately following the 1995 annual meeting of shareholders
(the "1995 Annual Meeting"), shall be granted automatically (i) an
option to purchase 16,000 shares of Common Stock on the Annual Option
Grant Date following the 1995 Annual Meeting, (ii) an option to
purchase 8,000 shares of Common Stock on the Annual Option Grant Date
following the 1996 annual meeting of shareholders, and (iii) an option
to purchase 4,000 shares of Common Stock on each Annual Option Grant
Date thereafter. Each option granted pursuant to this Section 6(a)
shall have an exercise price as determined pursuant to Section 7 hereof.
(b) INITIAL OPTION GRANTS. Each eligible director of the
Company that is elected to the Board of Directors after the Annual
Option Grant Date following the 1995 Annual Meeting shall be granted
automatically on the date that the director is elected to the Board of
Directors an option to purchase 9,000 shares of Common Stock.
Notwithstanding Section 6(e), the options granted pursuant to this
Section 6(b) shall not be exercisable for a period of one year after
the date on which they were granted, but thereafter will become
exercisable as to one-third of the shares covered by the option on each
anniversary date of the option grant. Each option granted pursuant to
this Section 6(d) shall have an exercise price as determined pursuant
to Section 7 hereof.
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(c) OPTIONS NON-TRANSFERABLE. No option granted under the
Plan shall be transferable by the optionee otherwise than by will or by
the laws of descent and distribution as provided in Section 6(f)
hereof. During the lifetime of the optionee, the options shall be
exercisable only by such optionee. No option or interest therein may
be transferred, assigned, pledged or hypothecated by the optionee
during such optionee's lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar
process. The Committee shall have the authority to waive the
provisions of this Section with respect to any grant of options under
the Plan subject to such terms, conditions or limitations as they may,
in their discretion, impose.
(d) PERIOD OF OPTIONS. Options shall terminate upon the expiration
of 10 years from the date on which they were granted.
(e) EXERCISE OF OPTIONS.
(i) Options granted under the Plan shall not be exercisable
for a period of six months after the date on which they were granted,
but thereafter will be exercisable in full at any time or from time
to time during the term of the option, provided that options
granted under the Plan may become fully exercisable upon a
director's resignation from the Board of Directors or death of the
optionee.
(ii) The exercise of any option granted hereunder shall only be
effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant to
such exercise will not violate any federal or state securities or
other laws. An optionee desiring to exercise an option may be
required by the Company, as a condition of the effectiveness of any
exercise of an option granted hereunder, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held
for his or her own account without a view to any distribution
thereof, that the certificates for such shares shall bear an
appropriate legend to that effect and that such shares will not be
transferred or disposed of except in compliance with applicable
federal and state securities laws.
(iii) An optionee electing to exercise an option shall give
written notice to the Company of such election and of the number
of shares subject to such exercise. The full purchase price of such
shares shall be tendered with such notice of exercise. Payment shall
be made to the Company in cash (including check, bank draft or money
order).
(f) Effect of Death. If the optionee shall die prior to the time the
option is fully exercised, such option may be exercised at any time within
one year after his or her death by the personal representatives or
administrators of the optionee or by
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any person or persons to whom the option is transferred by will or the
applicable laws of descent and distribution, to the extent of the full
number of shares the optionee was entitled to purchase under the option
on the date of death and subject to the condition that no option shall
be exercisable after the expiration of the term of the option.
SECTION 7. OPTION EXERCISE PRICE.
The option exercise price per share for the shares covered by each
option shall be equal to the "fair market value" of a share of Common Stock
as of the date on which the option is granted. For the purposes of the Plan,
the fair market value of the Common Stock on a given date shall be the
closing price of the Common Stock on such date on the New York Stock
Exchange, Inc. (the "NYSE") Composite Tape, if the Common Stock is then being
traded on the NYSE. If on the date as of which the fair market value is
being determined the Common Stock is not publicly traded, the Committee shall
make a good faith attempt to determine such fair market value and, in
connection therewith, shall take such actions and consider such factors as it
deems necessary or advisable.
SECTION 8. TIME FOR GRANTING OPTIONS.
Unless the Plan shall have been discontinued as provided in Section 12
hereof, the Plan shall terminate upon the expiration of 10 years from the
date upon which it takes effect as provided in Section 11 hereof. No option
may be granted after such termination, but termination of the Plan shall not,
without the consent of the optionee, alter or impair any rights or
obligations under any option theretofore granted.
SECTION 9. LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan,
shall constitute, or be evidence of, any agreement or understanding,
express or implied, that the Company will retain a director for any
period of time, or at any particular rate of compensation.
(b) NO SHAREHOLDER RIGHTS FOR OPTIONS. An optionee shall have
no rights as a shareholder with respect to the shares covered by options
until the date of the issuance to such optionee of a stock certificate
therefor, and no adjustment will be made for cash dividends or other
rights for which the record date is prior to the date such certificate
is issued.
SECTION 10. ADJUSTMENTS TO COMMON STOCK.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend (of whatever
amount), stock split or other
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change in the corporate structure, appropriate adjustments in the Plan and
outstanding options shall be made. In the event of any such changes,
adjustments shall include, where appropriate, changes in the aggregate number
of shares subject to the Plan, the number of shares subject to outstanding
options and the option exercise prices thereof in order to prevent dilution
or enlargement of option rights.
SECTION 11. EFFECTIVE DATE OF THE PLAN.
The Plan shall take effect immediately upon its approval by the
affirmative vote of the holders of a majority of the shares present in person
or by proxy and voted at a duly held meeting of shareholders of the Company.
SECTION 12. AMENDMENT OF THE PLAN.
The Board may suspend or discontinue the Plan or revise or amend it in
any respect whatsoever; provided, however, that without approval of the
shareholders of the Company no revision or amendment shall be made that (a)
absent such shareholder approval, would cause Rule 16b-3, as promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act", or any successor rule or regulation
thereto, to become unavailable with respect to the Plan, or (b) requires the
approval of the Company's shareholders under any rules or regulations of the
NYSE that are applicable to the Company. The Board shall not alter or impair
any option theretofore granted under the Plan without the consent of the
holder of the option.
SECTION 13. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Minnesota and construed
accordingly.
SECTION 14. COMPLIANCE WITH EXCHANGE ACT.
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so
comply, such provision or action shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee.
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