EMPLOYMENT AGREEMENT
This Agreement, effective as of October 16, 1998 (the "Effective Date"), is
made by and between Xxxxxxxx X. Xxxxx ("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 60,000 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 Except as specifically superseded by this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
CEO, Health Plans 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 $400,000, 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
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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).
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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 280G 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.
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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
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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.
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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.
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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:
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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/ Xxxxxxxx X. Xxxxx
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Its Senior Vice President,
Human Resources
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This memorandum of understanding, effective as of October 16, 1998, supplements
and amends the employment agreement, effective as of October 16, 1998, between
Xxxxxxxx Xxxxx and United HealthCare Services, Inc. as set forth below.
1. The parties agree that Section 3(D)(i) is amended in its entirety
to read:
United HealthCare (a) terminates this Agreement and Executive's
employment without Cause, as hereinafter defined, or (b) a Change
in Employment, as hereinafter defined occurs (collectively a
"Termination without Cause"), or
2. The parties confirm that a change in responsibility, in and of
itself will not constitute a Change in Employment, acknowledging
that so long as Executive retains senior executive level
functional, administrative, or operational responsibility no
Change of Employment shall have occurred solely as a result of
such change in responsibility or title.
3. For purposes of the non-competition provisions of Section 4(E),
the parties concur that employment in the health care industry
is not absolutely prohibited by Section 4(E), it being the
intent of the parties in Section 4 (E) to limit Executive's
future employment by managed care, health care insurance,
physician management, or other, similar type of organization.
4. The references in Section 4(E) to "24 months" are amended to
read "12 months."
In all other respects the parties reaffirm and agree to be bound by the
provisions of the Employment Agreement, effective as of the date set forth
above.
United HealthCare Services, Inc. Executive
By /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxxx X. Xxxxx
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Its Senior Vice President, Xxxxxxxx X. Xxxxx
Human Resources
