EXHIBIT 10(h)
EMPLOYMENT AGREEMENT
This Agreement is made effective this 19th day of May, 1998 (the
"Effective Date") by and between Xxxxxx X. Xxxxxx ("Executive") and United
HealthCare Services, Inc. ("UHS") (when used in this Agreement, UHS includes
any affiliated entity of UHS) for the purpose of setting forth certain terms
and conditions of Executive's employment by UHS and to protect UHS's
knowledge, expertise, customer relationships and the confidential information
UHS has developed about its customers, products, operations and services. As
of the Effective Date, this Agreement supersedes any prior employment-related
agreement or agreements between Executive and UHS or any subsidiary or
affiliate of UHS.
1. EMPLOYMENT AND DUTIES.
A. EMPLOYMENT. UHS hereby directly or through its subsidiaries
employs Executive. 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superseded by this Agreement, subject to all of UHS's policies and
procedures in regard to its employees.
B. DUTIES. Executive shall perform such duties as are commonly
associated with his position as the Chief Financial Officer of United
HealthCare Corporation ("UHC") or such other senior executive level
responsibilities as are reasonably assigned to Executive by his
supervisor from time-to-time. As Chief Financial Officer, Executive will
report directly to UHC's Senior Executive Vice President, such
executive's successor, or another member of UHC's Office of the
Chairman, excluding, however, any Chief Administrative Officer that may
from time to time be appointed by UHC and serve as a member of the Office
of the Chairman. Executive agrees to devote substantially all of his
business time and energy to the performance of his duties in a diligent
and proper manner. UHS acknowledges that Executive shall maintain his
permanent residence in Emmaus, Pennsylvania.
2. COMPENSATION.
A. BASE SALARY. Executive shall initially be paid a base annual
salary in the amount of $375,000 payable bi-weekly, less all applicable
withholdings and deductions. Executive shall receive a periodic
performance review from his supervisor and consideration for an increase
of such base salary.
B. BONUS AND STOCK PLANS. Executive shall be eligible to participate
in UHS's incentive compensation plans and its stock option and grant
plans, in accordance with the terms and conditions of those plans and
applicable laws and regulations. Without limiting the generality of the
foregoing, as long as Executive remains employed by UHS:
1. Executive will be entitled to participate in the UHC Management
Incentive Program. Executive's minimum initial participation will be 75%
of Executive's base annual salary. For 1998, Executive's payment, before
applicable withholding and deductions, shall not be less than $141,000.
For 1999, Executive's payment before applicable withholding and
deductions shall not be less than the sum of $141,000 and half of the
product of the "factor" applied to Executive's functional unit and
Executive's then participation factor.
2. Executive will be entitled to participate in the UHC Long Term
Incentive Plan. Executive's participation shall include UHS' start up
cycle and first cycle on a time-calculated pro rata basis beginning on
the Effective Date.
3. Executive will be entitled to participate in the UHC Stock Option
Plan from and after the Effective Date without any proration or other
limitation based on length of tenure. While not contractually binding, UHC
has advised Executive that currently executives comparable to Executive
annually receive options to purchase
approximately 25,000 shares of UHC Common Stock. Pursuant to the UHC
Stock Option Plan, Executive will receive an initial option grant to
purchase 75,000 shares of UHC Common Stock at an exercise price of
$32.25, which option grant will vest equally over a four-year period on
the anniversary of Executive's employment. Options granted to
Executive, including the initial option grant described above, will
fully vest upon Executive's retirement or any other termination of this
Agreement, other than a termination for Cause as herein defined. Options
granted to Executive, once vested, shall remain exercisable for the
remaining term of the option, subject to any forfeiture or "clawback"
provisions in any option. Any stock options granted to Executive will
provide that upon a UHC change of control all options granted to
Executive shall be deemed fully vested.
C. INITIAL BONUS. As an additional incentive payment, UHS agrees to
pay Executive a one-time payment of $30,000, less all applicable
withholding and deductions provided that Executive commences employment no
later than July 1, 1998. This payment will be made approximately one month
following the date on which Executive commences active employment hereunder.
D. MOVING ALLOWANCE. UHS will provide Executive with relocation
benefits equal to $75,000 in accordance with UHS policies previously
provided to Executive. In addition, for a period of six months following
July 1, 1998, UHS will reimburse Executive for reasonable transition
expenses that Executive incurs. UHS will reimburse Executive the cost of
any federal and state income taxes payable with respect to the payments
made under this paragraph.
E. EMPLOYEE BENEFITS. The Executive shall be eligible to participate
in UHS's other employee benefit plans, including without limitation, any
life, health, dental, short-term and long-term disability insurance
coverages and any retirement plans, in accordance with the terms and
conditions of those plans and applicable laws and regulations. Without
limiting the generality of the foregoing, Executive will be entitled to
receive a monthly benefit payment of $1,200, a one-time payment of $750 for
business related expenses, and annual financial planning benefits up to
$6,000, all in accordance with the terms and conditions of such plans and
programs.
F. VACATION; ILLNESS. Executive shall be entitled to paid vacation
and sick leave each year in accordance with UHS's then-current policies.
3. TERM AND TERMINATION.
A. TERM. The term of this Agreement shall begin on the Effective
Date and shall continue unless and until terminated as set forth in
Section 3B.
B. TERMINATION OF AGREEMENT AND/OR EMPLOYMENT.
1. This Agreement may be terminated at any time by the mutual
written agreement of the parties.
2. UHS may terminate Executive's employment or terminate this
Agreement by giving written notice of termination which is received
by Executive at least 30 days before the effective date of
termination of employment or of this Agreement, as the case may be.
3. Executive may terminate his employment by giving written
notice of termination of employment which is received by UHS at
least 30 days before the effective date of termination of
employment.
4. This Agreement shall automatically terminate on the
effective date of the termination of Executive's employment or on
the date of Executive's death, retirement or permanent and total
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disability which renders Executive incapable of performing
Executive's duties. UHS has the sole discretion to determine
whether Executive is permanently or totally disabled with the
meaning of this Section 3B4.
X. XXXXXXXXX EVENTS AND COMPENSATION. In the event (i) Executive's
employment with UHS is terminated by UHS pursuant to Section 3B2 and
without Cause or (ii) a Change in Employment occurs which Executive
elects to treat as a termination of Executive's employment under
Section 3B2 ((i) and (ii) are collectively referred to as the "Severance
Events"), then:
1. For the "Severance Period," as hereinafter defined,
Executive shall receive biweekly payments equal to the greater of
(a)(i) the quotient of $1,000,000 and 36 if the Severence Event
occurs within 24 months of the Effective Date or (ii) the quotient
of $700,000 and 24 if the Severance Event occurs more than 24
months after the Effective Date but within 36 months of the
Effective Date and (b) an amount equal to 1/26 of (i) Executive's
annualized base salary at the effective date of termination, plus
(ii) one-half of the total of any bonus or incentive compensation
(but not including any special or one-time bonus or incentive
compensation payments) paid or payable to Executive for the two
most recent calendar years or other periods generally used by UHS
to determine such bonus or incentive compensation, or if Executive
has been eligible for such bonus or incentive compensation payments
for less than two such periods, the last such payment paid or
payable to Executive (the amounts paid pursuant to (a) or (b) are
referred to as the "Severance Compensation"). The Severance
Compensation shall be reduced by any compensation which Executive
receives or reasonably could have received in each biweekly period
as a result of employment or work as an independent contractor
elsewhere. Executive shall promptly disclose to UHS any such
compensation. For purposes of this Agreement, the "Severance
Period" shall equal: 18 months if a Severance Event occurs within
24 months of the Effective Date; 12 months if a Severance Event
occurs more than 24 but within 36 months of the Effective Date;
and such period of time as is consistent with UHS' then prevailing
severance policies for executive officers comparable to the Executive
if a Severance Event occurs more than 36 months after the Effective
Date. Any payments hereunder will be reduced by all applicable
withholdings or deductions required by law or Executive's elections
under any employee benefit plans which Executive continues to
participate in under Section 3C2. If a Severance Event occurs more
than 36 months after the Effective Date in connection with a change
of control of UHC Executive shall receive Severance Compensation
equal to the greater of $700,000 or such amount as is payable in
accordance with UHC's prevailing policies.
2. As of the effective date of termination of employment,
Executive shall cease to be eligible for all benefit plans
maintained by UHS, except as required by federal or state
continuation of coverage laws. If Executive elects continuation of
coverage under one or more benefit plans subject to such
continuation requirements, UHS shall, for the Severance Period, pay
on behalf of Executive an amount equal to UHS's employer
contribution for similarly situated active employees' coverages
under such benefit plans. During the Severance Period Executive's
share of coverage costs for such benefit plans shall be deducted
automatically through after-tax payroll deduction from the
Severance Compensation.
3. During the Severance Period UHS shall pay to an outplacement
firm selected by UHS an amount deemed reasonable by UHS for
outplacement and job search services for Executive.
4. Executive shall be paid a portion of the Management
Incentive Program payments for the year in which termination of
this Agreement occurs and shall also be entitled to a portion of
the payments under the Long-Term Incentive Plan. Payments shall be
prorated based on the time at which this Agreement terminates and
shall be paid promptly following their determination in accordance
with the plans.
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The payments and benefits to Executive under this Section 3C shall be the
sole liability of UHS to Executive in the event of a Severance Event and
shall replace and be in lieu of any payments or benefits which otherwise
might be owed by UHS under any other severance plan or program and such
payments and benefits may be conditioned by UHS upon receipt of a release
of claims from Executive.
D. DEFINITIONS AND PROCEDURE.
1. For purposes of this Agreement, "Cause" shall mean (a) the
refusal of Executive to follow the reasonable directions of UHS's
Board of Directors or Executive's supervisor or to perform any duties
reasonably required on material matters by UHS, (b) material
violations of UHS's Code of Conduct or (c) the commission of any
criminal act of fraud or dishonesty by Executive in connection with
Executive's employment by UHS. Prior to the termination of
Executive's employment under subsection (a) of this Cause definition,
UHS shall provide Executive with a 30 day notice specifying the basis
for Cause. If the Cause described in the notice is cured to UHS's
reasonable satisfaction prior to the end of the 30 day notice
period, Executive's employment shall not be terminated on that
basis.
2. For purposes of this Agreement a "Change in Employment"
shall be deemed to have occurred (a) if (i) Executive's duties are
materially adversely changed without Executive's prior consent or
(ii) Executive's salary or benefits are reduced other than as a
general reduction of salaries and benefits by UHS or (iii) without
terminating Executive's employment this Agreement is terminated by
UHS pursuant to Section 3B2, and (b) if in each case under
subsections (a) (i), (ii), and (iii), in the period beginning 60
days before the time the Change in Employment occurs, Cause does
not exist or if Cause does exist UHS has not given Executive
written notice that Cause exists. Executive may elect to treat a
Change in Employment as a termination of employment by UHS. To do
so Executive shall send written notice of such election to UHS
within 60 days after the date Executive receives notice from UHS or
otherwise is definitively informed of the events constituting the
Change in Employment. No Change in Employment shall be deemed to have
occurred if Executive fails to send the notice of election within
the 60 day period. Executive's failure to treat a particular
Change in Employment as a termination of employment shall not
preclude Executive from treating a subsequent Change in Employment
as a termination of employment. The effective date of a Change in
Employment termination shall be the date 30 days after UHS receives
the written notice of election.
4. PROPERTY RIGHTS, CONFIDENTIALITY, NON-SOLICIT AND NON-COMPETE PROVISIONS.
A. UHS'S PROPERTY.
1. Executive shall promptly disclose to UHS 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 UHS 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 UHS. Executive shall give
UHS any assistance it reasonably requires in order for UHS to
perfect, protect, and use its rights to inventions and works of
authorship.
This provision shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of UHS
was used and which was developed entirely on the Executive's own
time and which (1) does not relate to the business of UHS or to
UHS's anticipated research or development, or (2) does not result
from any work performed by the Executive for UHS.
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2. Executive shall not remove any records, documents, or any other
tangible items (excluding Executive's personal property) from the
premises of UHS in either original or duplicate form, except as is
needed in the ordinary course of conducting business for UHS.
3. Executive shall immediately deliver to UHS, upon termination of
employment with UHS, or at any other time upon UHS'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 UHS's organization, strategies,
business and operations and UHS's past, current or potential
customers and suppliers. UHS considers such expertise, 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 UHS or as has been expressly
permitted in writing by UHS.
C. NON-SOLICITATION. During (i) the term of this Agreement, (ii) any
period for which Executive is receiving payments under Section 3C of
this Agreement, (iii) any period following the termination or
expiration of this Agreement during which Executive remains employed
by UHS 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 (y) directly or indirectly attempt to hire away any
then-current employee of UHS or a subsidiary of UHS or to persuade
any such employee to leave employment with UHS, or (z) directly or
indirectly solicit, divert, or take away, or attempt to solicit,
divert, or take away, the business of any person, partnership,
company or corporation with whom UHS (including any subsidiary or
affiliated company in which UHS has a more than 20% equity interest)
has established or is actively seeking to establish a business or
customer relationship.
D. NON-COMPETITION. During (i) the term of this Agreement, (ii) any
period for which Executive is receiving payments under Section 3C of
this Agreement, and (iii) any period following the termination or
expiration of this Agreement during which Executive remains employed
by UHS, Executive shall not, without UHS's prior written consent,
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 entity, in
any business in which UHS (including any subsidiary or affiliated
company in which UHS has a more than 20% equity interest) is
engaged. In the event that Executive elects to terminate Executive's
employment pursuant to Section 3B3, UHS may elect to have the
provisions of this Section 4D be in effect for up to 18 months
following the effective date of such resignation if, during the
period up to 18 months specified by UHS, UHS pays Executive biweekly
payments equal to 1/26 of the Severance Compensation. UHS must send
written notice of such election within 10 days after it receives
written notice of the termination of employment. Executive shall use
reasonable efforts to find appropriate employment or work as an
independent contractor not inconsistent with this Section 4D and a
biweekly payment shall be reduced by any compensation which
Executive receives or reasonably could have received in that
biweekly period as a result of employment or work as an independent
contractor elsewhere. Executive shall promptly disclose to UHS any
such compensation.
5. MISCELLANEOUS.
A. ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their successors and assigns,
but may not be assigned by either party without the prior written
consent of the other party, except that UHS in its sole discretion
may assign this Agreement to an entity controlled by UHS at the time
of the assignment. If UHS subsequently loses or gives up control of
the entity to which this
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Agreement is assigned, such entity shall become UHS for all purposes
under this Agreement, beginning on the date on which UHS loses or
gives up control of the entity. Any successor to UHS shall be deemed
to be UHS for all purposes of this Agreement.
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.
UHS: 300 Opus Center
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
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 the Executive and UHS 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/she has received adequate consideration from UHS to enter
into this Agreement.
G. DISPUTE RESOLUTION AND REMEDIES. Any dispute arising between
the parties relating to this Agreement and future agreements or to
Executive's employment by UHS shall be resolved by binding
arbitration pursuant to the Rules of the American Arbitration
Association. In no event may the arbitration be initiated more than
one year after the date one party first gave written notice of the
dispute to the other party. The arbitrators shall not ignore or vary
the terms of this Agreement and shall be bound by and apply
controlling law, but may not in any case award any
punitive or exemplary damages. The parties acknowledge that
Executive's failure to comply with the Confidential Information,
Non-Solicitation and Non-Competition provisions of this Agreement
will cause immediate and irreparable injury to UHS 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.
H. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
or be deemed or construed to confer any rights or benefits upon any
person other than the parties.
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THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE
ENFORCED BY THE PARTIES.
UNITED HEALTHCARE SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
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