EMPLOYMENT AGREEMENT
This Agreement, effective as of October 16, 1998 (the "Effective
Date"), is made by and between Xxxxx X. Xxxxxx ("Executive") and United
HealthCare Services, Inc. ("United HealthCare") for the purpose of setting forth
the terms and conditions of Executive's employment by United HealthCare, or an
affiliate or subsidiary of United HealthCare, and to protect United HealthCare's
knowledge, expertise, customer relationships and the confidential information
United HealthCare has developed about its customers, products, operations and
services. Unless the context otherwise requires, when used in this Agreement
"United HealthCare" includes any entity affiliated with United HealthCare.
WHEREAS, as additional consideration for entering into this Agreement
Executive shall receive, upon execution of this Agreement, a nonqualified stock
option to purchase 50,000 shares of United HealthCare Corporation ("UHC") common
stock with a grant date the same as the Effective Date pursuant to the terms of
the UHC Amended and Restated 1991 Stock and Incentive Plan.
WHEREAS, Executive and United HealthCare desire to enter into this
Agreement, which shall supersede any and all other prior employment-related
agreements between Executive and United HealthCare.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
1. EMPLOYMENT AND DUTIES; TERMINATION OF PRIOR AGREEMENTS.
A. EMPLOYMENT. United HealthCare hereby employs Executive, either
directly or through an affiliate or subsidiary of United HealthCare,
and Executive hereby accepts such employment on the terms and
conditions set forth in this Agreement. Except as specifically
superseded by this Agreement, Executive's employment hereunder shall be
subject to all of United HealthCare's policies and procedures in regard
to its employees. Executive's employment hereunder shall begin on the
Effective Date and shall continue until terminated as set forth in
Section 3 hereof.
B. DUTIES. Executive shall initially hold the executive level position
of General Counsel and perform the duties associated therewith.
Executive shall perform such other executive level responsibilities as
are reasonably assigned Executive from time to time. Executive agrees
to devote substantially all of Executive's business time and energy to
the performance of Executive's duties in a diligent and proper manner.
C. TERMINATION OF PRIOR AGREEMENTS. As of the Effective Date all other
prior employment related agreements between Executive and United
HealthCare will terminate in their entirety and no longer be of any
force or effect.
2. COMPENSATION.
A. BASE SALARY. Executive shall initially be paid a base annual salary
in the amount of $300,000, payable bi-weekly, less all applicable
withholdings and deductions (the "Initial Base Salary"). Executive
shall receive a periodic performance review and consideration for an
increase in the Initial Base Salary.
B. BONUS AND STOCK PLANS. Executive shall be eligible to participate in
the incentive compensation plans and the stock option and grant plans
maintained by United HealthCare or an affiliate or subsidiary of United
HealthCare, in the sole discretion of United HealthCare and in
accordance with the terms and conditions of those plans and applicable
laws and regulations.
C. EMPLOYEE BENEFITS. Executive shall be eligible to participate in the
employee benefit plans maintained by either United HealthCare or an
affiliate or subsidiary of United HealthCare, including without
limitation, any life, health, dental, short-term and long-term
disability insurance coverages and any retirement plans, in the sole
discretion of United HealthCare and in accordance with the terms and
conditions of those plans and applicable laws and regulations.
D. VACATION; ILLNESS. Executive shall be eligible for paid vacation and
sick leave each year in accordance with the then-current policies of
either United HealthCare or an affiliate or subsidiary of United
HealthCare, in the sole discretion of United HealthCare and in
accordance with the terms and conditions of those plans and applicable
laws and regulations.
3. TERM AND TERMINATION.
A. TERM. The term of this Agreement shall begin on the Effective Date
and shall continue until terminated as set forth in Section 3B.
B. TERMINATION OF AGREEMENT.
1. BY MUTUAL AGREEMENT. This Agreement and Executive's
employment hereunder may be terminated at any time by the
mutual written agreement of the parties.
2. BY UNITED HEALTHCARE. United HealthCare may terminate this
Agreement and Executive's employment hereunder on 30 days'
written notice.
3. BY EXECUTIVE. Executive may terminate this Agreement and
Executive's employment hereunder on 30 days' written notice.
4. DEATH, DISABILITY, ETC. This Agreement and Executive's
employment by United HealthCare shall terminate immediately
upon Executive's death. This Agreement and Executive's
employment hereunder shall automatically terminate in the
event of a permanent and total disability which renders
Executive incapable of
performing Executive's duties, with or without reasonable
accommodation. United HealthCare has the sole discretion to
determine whether Executive is permanently or totally disabled
with the meaning of this Section 3B4, and the effective date
on which Executive was rendered so disabled.
C. EMPLOYEE BENEFITS. On the effective date of the termination of this
Agreement and Executive's employment by United HealthCare, Executive
shall cease to be eligible for all employee benefit plans maintained by
United HealthCare, except as required by federal or state continuation
of coverage laws ("COBRA Benefits"). If Executive elects COBRA
Benefits, Executive shall pay the entire cost of such benefits either
through after-tax payroll deductions from the cash component of any
severance compensation Executive receives or directly if Executive does
not receive such severance compensation or if such severance
compensation ceases.
X. XXXXXXXXX EVENTS AND BENEFITS. If a Severance Event, as hereinafter
defined, occurs, Executive shall receive the severance benefits set
forth in this Section 3D for a period of 12 months from the effective
date of the applicable Severance Event (the "Severance Period"). For
purposes of this Agreement a Severance Event shall occur if and when:
(i) United HealthCare (a) terminates this Agreement and
Executive's employment without Cause, as hereinafter defined,
or (b) terminates this Agreement without terminating
Executive's employment and Executive elects to treat such
termination of this Agreement as a Change in Employment, as
hereinafter defined (collectively a "Termination without
Cause"), or
(ii) Within two years following a Change in Control, as hereinafter
defined, either (a) United HealthCare terminates this
Agreement and Executive's employment without Cause, or (b) a
Change in Employment occurs and Executive elects to treat such
Change in Employment as a termination of Executive's
employment (collectively a "Termination following a Change in
Control").
1. SEVERANCE COMPENSATION. Executive shall receive the following
severance compensation (the "Severance Compensation"):
a) TERMINATION WITHOUT CAUSE. Subject to Section 3D(1)(b)
below, upon a Termination without Cause Executive shall
receive biweekly payments equal to 1/26 of two times the sum
of (1) Executive's annualized base salary as of the date of
the Severance Event, less all applicable withholdings or
deductions required by law and Executive's COBRA Benefit
payments, if any, plus (2) one-half of the total of any 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), 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 (excluding any
special or one-time bonus or incentive compensation payments).
-3-
b) TERMINATION FOLLOWING A CHANGE IN CONTROL. Upon a
Termination following a Change in Control, Executive shall
receive biweekly payments equal to 1/26 of three times the sum
of (1) Executive's highest annualized base salary during the 2
year period immediately preceding the Severance Event, less
all applicable withholdings or deductions required by law and
Executive's COBRA Benefit payments, if any, plus (2) the
greater of (i) all bonuses that would be payable to Executive
under any incentive compensation plans in which Executive then
participates at Executive's then-current target level, or (ii)
one-half of the total of any 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), 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 (excluding any special or one-time bonus or
incentive compensation payments.
2. CASH PAYMENT. Executive shall receive a one-time cash payment within
a reasonable time following commencement of the Severance Period in an
amount equal to the portion of the premiums that United HealthCare, or
its affiliate or subsidiary, as applicable, subsidizes for
employee-only health, dental and group term life benefit coverages (the
"Cash Payment"). The Cash Payment shall cover the Severance Period and
shall be determined as of the effective date of the applicable
Severance Event.
3. JOB SEARCH FEES. For a period not to exceed the Severance Period,
United HealthCare shall pay to an outplacement firm selected by United
HealthCare an amount deemed reasonable by United HealthCare for
outplacement and job search services for Executive.
4. EXCISE TAX PAYMENT. If any portion of the Severance Compensation
payable upon a Termination following a Change in Control constitutes an
Excess Parachute Payment, as hereinafter defined, such that an Excise
Tax, as hereinafter defined, is due, Executive shall receive a one-time
cash payment in an amount sufficient to cover (a) the full cost of the
Excise Tax plus (b) Executive's federal, state and city income,
employment and Excise Tax on this one-time cash payment and on all such
iterative payments so that Executive is made entirely whole for the
impact of the Excise Tax (collectively the "Gross-Up Payment"). United
HealthCare shall calculate these amounts on a timely and accurate
basis, and for this purpose Executive shall be deemed to be in the
highest marginal rate of federal, state and city taxes. The Gross-Up
Payment shall be made within 30 days following the effective date of
Executive's employment termination. For purposes of this Agreement the
term "Excess Parachute Payment" shall have the meaning set forth in
Section 28OG of the Internal Revenue Code of 1986, as amended (the
"Code"). For purposes of this Agreement the term "Excise Tax" shall
mean the tax imposed on an Excess Parachute Payment pursuant to
Sections 280G and 4999 of the Code.
-4-
This Section 3D shall be the sole liability of United HealthCare to
Executive upon the termination of this Agreement and Executive's
employment hereunder, and shall replace and be in lieu of any payments
or benefits which otherwise might be owed Executive under any other
severance plan or program maintained by United HealthCare. Such
compensation and benefits shall be conditioned on receipt by United
HealthCare of a separation agreement and a release of claims by
Executive on terms and conditions acceptable to United HealthCare in
its sole discretion.
E. DEFINITIONS AND PROCEDURES.
1. CAUSE. For purposes of this Agreement "Cause"
shall mean (a) the refusal of Executive to follow the
reasonable direction of the Board of Directors of
United HealthCare or Executive's supervisor or to
perform any duties reasonably required on material
matters by United HealthCare, (b) material violations
of United HealthCare's Code of Conduct or (c) the
commission of any criminal act or act of fraud or
dishonesty by Executive in connection with
Executive's employment by United HealthCare. Prior to
the termination of Executive's employment under
subsection (a) of this definition of Cause, United
HealthCare shall provide Executive with a 30 day
notice specifying the basis for Cause. If the Cause
described in the notice is cured to United
HealthCare's reasonable satisfaction prior to the end
of the 30 day notice period, Executive's employment
hereunder shall not be terminated on that basis.
2. CHANGE IN CONTROL. For purposes of this Agreement
"Change in Control" shall mean (a) the acquisition by
any person, entity or "group," within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), other than
United HealthCare or any employee benefit plan of
United HealthCare, of beneficial ownership (as
defined in the Exchange Act) of 20% or more of the
common stock of UHC or the combined voting power of
UHC's then-outstanding voting securities in a
transaction or series of transactions not approved in
advanced by a vote of at least three-quarters of the
directors of UHC; (b) a change in 50% or more of the
directors of UHC in any 12 month period; (c) the
approval by the shareholders of UHC of a
reorganization, merger, consolidation, liquidation or
dissolution of UHC or of the sale (in one transaction
or a series of related transactions) of all or
substantially all of the assets of UHC other than a
reorganization, merger, consolidation, liquidation,
dissolution or sale approved in advance by a vote of
at least three-quarters of the directors; (d) the
first purchase under any tender offer or exchange
offer (other than an offer by UHC) pursuant to which
shares of UHC common stock are purchased; or (e) at
least a majority of the directors of UHC determine in
their sole discretion that there has been a change of
control of UHC.
3. CHANGE IN EMPLOYMENT. For purposes of this
Agreement a "Change in Employment" shall be deemed to
have occurred (a) if (i) Executive's duties are
materially and adversely changed without Executive's
prior consent, (ii) Executive's salary or benefits
are reduced other than as a general reduction of
salaries and
-5-
benefits by United HealthCare, (iii) without
terminating Executive's employment United HealthCare
terminates this Agreement, or (iv) the geographic
location for the performance of Executive's duties
hereunder is moved more than 50 miles from the
geographic location at the Effective Date without
Executive's prior consent, and (b) if in each case
under subsections (a) (i), (ii), (iii) and (iv), in
the period beginning 90 days before the time the
Change in Employment occurs, Cause does not exist or
if Cause does exist United HealthCare has not given
Executive written notice that Cause exists.
Notwithstanding the foregoing, an isolated,
insubstantial or inadvertent action by United
HealthCare, which is remedied by United HealthCare
within 30 days after receipt of notice thereof by
Executive, shall not constitute a Change in
Employment. Executive may elect to treat a Change in
Employment as a termination of this Agreement and
Executive's employment hereunder. To do so Executive
shall send written notice of such election to United
HealthCare within 90 days after the date Executive
receives notice from United HealthCare 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 90 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 United HealthCare receives the written notice
of election.
4. PROPERTY RIGHTS, CONFIDENTIALITY, NON-DISPARAGEMENT, NON-SOLICIT AND
NON-COMPETE PROVISIONS.
A. UNITED HEALTHCARE'S PROPERTY.
1. ASSIGNMENT OF PROPERTY RIGHTS. Executive shall promptly
disclose to United HealthCare 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 United HealthCare 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
United HealthCare. Executive shall give United HealthCare any
assistance it reasonably requires in order for United
HealthCare 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
United HealthCare was used and which was developed entirely on
the Executive's own time and which (1) does not relate to the
business of United HealthCare or to United HealthCare's
anticipated research or development, or (2) does not result
from any work performed by the Executive for United
HealthCare.
-6-
2. NO REMOVAL OF PROPERTY. Executive shall not remove any
records, documents, or any other tangible items (excluding
Executive's personal property) from the premises of United
HealthCare in either original or duplicate form, except as is
needed in the ordinary course of conducting business for
United HealthCare.
3. RETURN OF PROPERTY. Executive shall immediately deliver to
United HealthCare, upon termination of employment with United
HealthCare, or at any other time upon United HealthCare'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 employment Executive
will develop, become aware of and accumulate expertise, knowledge and
information regarding United HealthCare's organization, strategies,
business and operations and United HealthCare's past, current or
potential customers and suppliers. United HealthCare 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 United HealthCare or as has been
expressly permitted in writing by United HealthCare. This Section 4B
shall survive the termination of this Agreement.
C. NON-DISPARAGEMENT. Executive agrees that he will not criticize,
make any negative comments or otherwise disparage or put in disrepute
United HealthCare, or those associated with United HealthCare, in any
way, whether orally, in writing or otherwise, directly or by
implication in communication with any person, including but not limited
to customers or agents of United HealthCare. This Section 4C shall
survive the termination of this Agreement.
D. NON-SOLICITATION. During (i) the term of this Agreement, (ii) the
Severance Period or any period in which Executive receives severance
compensation pursuant to United HealthCare' election under Section 4E,
as applicable (iii) any period following the termination or expiration
of this Agreement during which Executive remains employed by United
HealthCare 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 United HealthCare or a subsidiary of United HealthCare or
to persuade any such employee to leave employment with United
HealthCare, 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 United HealthCare
(including any subsidiary or affiliated company in which United
HealthCare has a more than 20% equity interest) has established or is
actively seeking to establish a business or customer relationship. This
Section 4D shall survive the termination of this Agreement.
-7-
E. NON-COMPETITION. During (i) the term of this Agreement, (ii) the
Severance Period or any period in which Executive receives severance
compensation pursuant to United HealthCare' election under this
Section 4E, as applicable, and (iii) any period following the
termination or expiration of this Agreement during which Executive
remains employed by United HealthCare, Executive shall not, without
United HealthCare'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 United
HealthCare (including any subsidiary or affiliated company in which
United HealthCare has more than a 20% equity interest) is engaged. If
Executive terminates this Agreement, and as of such termination or
within 90 days of such termination Executive also terminates
Executive's employment by United HealthCare, United HealthCare may
elect to have the provisions of this Section 4E be in effect for up to
24 months following the effective date of Executive's employment
termination if, during the period up to 24 months specified by United
HealthCare, United HealthCare pays Executive severance compensation
equal to biweekly payments of 1/26 of the Severance Compensation and
the Cash Payment. United HealthCare must send written notice of such
election within 10 days after it receives written notice of
Executive's termination of employment. This Section 4E shall survive
the termination of this Agreement.
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 United HealthCare in its sole discretion
may assign this Agreement to an entity controlled by United HealthCare
at the time of the assignment. If United HealthCare subsequently loses
or gives up control of the entity to which this Agreement is assigned,
such entity shall become United HealthCare for all purposes under this
Agreement, beginning on the date on which United HealthCare loses or
gives up control of the entity. Any successor to United HealthCare
shall be deemed to be United HealthCare 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.
United HealthCare: 300 Opus Center
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Executive:
-8-
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 United HealthCare.
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
Executive has received adequate consideration from United HealthCare 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
United HealthCare shall be resolved by binding arbitration pursuant to
United HealthCare' Employment Arbitration Policy. The arbitrators shall
not ignore or vary the terms of this Agreement and shall be bound by
and apply controlling law. 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 United HealthCare 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.
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 as of the Effective Date set forth above.
United HealthCare Services, Inc. Executive
By /s/ Xxxxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxx
------------------------------------ ------------------------------------
Its Senior Vice President Xxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
Human Resources
-9-
