Exhibit 10(n)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of the Effective
Date between UHC Management Company, Inc. (the "Company") and Xxxxx X. Xxxxxx
("Executive").
RECITALS:
The Board of Directors of the Company (the "Board of Directors")
recognizes that outstanding management of the Company is essential to
advancing the best interests of the Company, its shareholders and its
subsidiaries. The Company desires to employ Executive and Executive has
agreed to be employed by the Company under the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
undertakings contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company will employ Executive, and Executive
accepts employment by the Company, for the period beginning on the date the
proposed merger transaction between United HealthCare Corporation and The
MetraHealth Companies ("Metra") closes ("Effective Date") and ending on
December 31, 1998 (the "Employment Period"), according to the terms of this
Agreement. This Agreement shall never be of any effect in the event the
proposed merger transaction does not close.
2. DUTIES.
(a) The Company and Executive agree that during the Employment
Period Executive will have such authority and perform such executive duties
as are commensurate with his position. Executive will support the Chief
Executive Officer of the Company in carrying out his responsibilities as
Chief Executive Officer.
(b) Executive (i) will devote his knowledge, skill and best
efforts on a full-time basis to performing his duties and obligations to the
Company (with the exception of absences on account of illness or vacation in
accordance with the Company's policies and civic and charitable commitments
not involving a conflict with the Company's business), and (ii) will comply
with the directions and orders of the Board of Directors and Chief Executive
Officer of the Company with respect to the performance of his duties.
3. COMPENSATION AND BENEFITS.
(a) During the Employment Period, the Company will pay to
Executive the following salary and incentive awards for services rendered to
the Company:
(i) An annualized base salary of not less than $300,000.
Executive's performance will be evaluated at least annually and
annual increases in Executive's base salary will be considered
based on Executive's performance.
(ii) Executive shall be eligible to participate in the
Company's management incentive compensation plan in accordance with
the terms and conditions of that plan. Executive's management
incentive plan target will be 100% of his base salary. For
calendar year 1995 Executive shall be paid whatever incentive
compensation he would have received under his employment agreement
with Metra, which for 1995 will not be less than $181,000.
(b) During the Employment Period, Executive will be eligible to
participate in a similar manner as other senior executives of the Company in
such employee benefit plans and programs as may be established and maintained
by the Company for its senior management employees.
(c) Executive shall be eligible to participate in the Company's
stock option and stock grant plans in accordance with the terms and
conditions of those plans.
4. TERMINATION OF EMPLOYMENT.
(a) BY THE COMPANY WITHOUT CAUSE. If the Company terminates
Executive's employment without Cause (as defined in paragraph (c) below)
during the Employment Period, the Company will pay Executive severance pay as
follows:
(i) (A) If the Company terminates Executive's employment
without Cause on or before November 14, 1995, Executive will
receive severance pay equal to two years of both base salary and
management incentive plan payments, plus a prorated management
incentive plan payment for the fraction of the management
incentive plan payment period ending on Executive's termination
of employment and any management incentive plan payments
remaining unpaid from the preceding year under the terms of the
management incentive plan. The severance pay will be paid over
a two year period in equal biweekly installments.
(B) If the Company terminates Executive's employment
without Cause after November 14, 1995, Executive will receive
severance pay equal to one year of both base salary and
management incentive plan payments, plus a prorated management
incentive plan payment for the fraction of the management
incentive plan payment period ending on Executive's
termination of employment and any management incentive plan
payments remaining unpaid from the proceeding year under the
terms of the management incentive plan. The severance pay
will be paid over a one year period in equal biweekly
installments.
(ii) The Company will continue coverage under the Company's
group health plan for Executive and his eligible dependents for the
period during which Executive is entitled to receive severance
benefits pursuant to (i). Notwithstanding the foregoing, if the
Company determines that giving such continued coverage could
adversely affect the tax qualification or tax treatment of a
benefit plan, or otherwise have adverse legal ramifications to the
Company, the Company may reimburse Executive for the cost of COBRA
coverage for himself and his eligible dependents, and if
Executive's severance
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payments extend beyond the period of his COBRA coverage, pay
Executive a lump sum cash amount that reasonably approximates the
after-tax value to Executive of the balance of his continued
coverage through the severance payment period, in lieu of giving
credit and continued coverage.
(iii) Any unvested stock options or grants awarded
Executive shall continue to vest for a period of two years from the
last day of Executive's employment, in accordance with those
grants' or options' pre-established vesting schedule.
(iv) For purposes of subparagraphs (i) and (ii), Executive's
annual base salary will be calculated at the highest rate in effect
for Executive at any time during the twelve month period preceding
the time of his termination of employment, and Executive's
management incentive payment will be calculated at a rate equal to
the management incentive payment paid or payable to Executive for
the fiscal year preceding his termination of employment.
(b) BY EXECUTIVE FOR GOOD REASON. If Executive voluntarily
terminates employment with the Company during the Employment Period for Good
Reason (as defined in this subsection (b)), Executive will be entitled to
receive the benefits described in subsection (a) for termination by the
Company without Cause. Subject to the provisions of this subsection (b),
these benefits will be provided if Executive voluntarily terminates
employment after (i) the Company reduces Executive's base salary from the
level in effect during the preceding fiscal year, (ii) Executive is not in
good faith considered for management incentive payments as described in
Section 3 (a)(ii), (iii) the Company fails to provide benefits as required by
Section 3 (b), (iv) the Company demotes Executive to a position that is not a
senior management position of comparable scope and responsibility (other than
on account of Executive's disability, as defined in Section 5 below) or (v)
the Company relocates Executive's place of employment to a location more than
100 miles from Reston, Virginia. In order for this subsection (b) to be
effective: (1) Executive must give written notice to the Company indicating
that Executive intends to terminate employment under this section (b), (2)
Executive's voluntary termination under this subsection must occur within 60
days after he has actual knowledge of an event described in clause (i), (ii),
(iii), (iv) or (v) above, or within 60 days after the last in a series of
such events, and (3) the Company must have failed to remedy the event
describe in clause (i), (ii), (iii), (iv) or (v), as the case may be, within
30 days after receiving Executive's written notice. If the Company remedies
the event described in clause (i), (ii), (iii), (iv) or (v), as the case may
be, within 30 days after receiving Executive's written notice, Executive may
not terminate employment under this subsection (b) on account of the event
specified in Executive's notice.
(c) BY THE COMPANY FOR CAUSE OR THE EXECUTIVE WITHOUT GOOD REASON.
If Executive's employment is terminated by the Company for Cause or if
Executive voluntarily terminates employment without Good Reason, as described
in subsection (b) above, this Agreement will immediately terminate. For
purposes of this Agreement, the term "Cause" means (i) the repeated material
failure or refusal of Executive to follow the reasonable directions of
Company's Board of Directors or Executive's supervisor or to adequately
perform any duties reasonably required by Company, (ii) material violations
of Company's Code of Conduct or (iii) the commission of any criminal act or
act of fraud or dishonesty by Executive in connection with Executive's
employment by Company. In the event that Company terminates Executive's
employment under subsection (i) of this Cause definition, Company shall
specify in the notice of termination the basis for Cause. If the Cause
described in the notice is cured to Company's reasonable
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satisfaction prior to the end of the 30 day notice period, the notice of
termination of employment shall be withdrawn.
(d) Notwithstanding the foregoing, the amount of severance
benefits under this Agreement will be reduced by 80% of any compensation
earned by Executive from another employer (including self-employment) if
Executive is employed by another employer (including self-employment) during
the period which Executive receives severance benefits.
(e) The amounts under this Agreement will be paid in lieu of
severance benefits under any severance plan or program maintained by the
Company.
5. DISABILITY OR DEATH.
(a) If Executive becomes disabled (as defined below) during the
Employment Period while he is employed by the Company, Executive shall be
entitled to receive continued base salary at the annual rate in effect on the
date of his disability during the remaining Employment Period while he
remains disabled, including a prorated management incentive payment for the
fraction of the management incentive payment measuring period ending on the
date of Executive's disability, plus any management incentive payment
remaining unpaid from the preceding year under the terms of the management
incentive plan. These payments shall be reduced by any amounts that Executive
receives from Company paid for disability insurance, his compensation from
other employment, or from worker's compensation, Social Security or
governmental programs relating to disability. Except as provided in this
Section 5, all of the rights and benefits of Executive under this Agreement
shall cease immediately upon the date of Executive's disability, except that
Executive shall receive any management incentive payment remaining unpaid
from the preceding year under the terms of the management incentive plan.
The term "disability" means a condition, resulting from mental or physical
incapacity, bodily injury or disease, that renders, and for a six consecutive
month period has rendered, Executive unable to perform any and every duty
pertaining to his employment with the Company. A return to work of less than
14 consecutive days will not be considered an interruption in Executive's six
consecutive months of disability. Disability will be determined by the
Company on the basis of medical evidence satisfactory to the Company.
(b) If Executive dies during the Employment Period while he is
employed by the Company, the Company will pay to the personal representative
of Executive's estate Executive's base salary for the month in which his
death occurs, plus a prorated management incentive payment for the fraction
of the management incentive payment measuring period ending on the date of
Executive's death, plus any management incentive payment remaining unpaid
from any preceding year under the terms of the management incentive plan.
Insofar as practicable, the prorated management incentive payment will be
paid within 90 days after the end of the management incentive payment
measuring period. Except for the foregoing payments, this Agreement
terminates on the date of Executive's death.
(c) Except as provided in (a) above, the foregoing benefits will
be provided in addition to any death and other benefits provided under any
Company benefit plan in which Executive participates.
6. CONFIDENTIAL INFORMATION. Executive agrees that during and after
the term of this Agreement Executive shall keep confidential all confidential
information and trade secrets of the Company, or any subsidiaries or
affiliates of the Company and shall not disclose such information to any
person
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without the prior approval of the Company, or use such information for any
purpose other than in the course of fulfilling his duties pursuant to this
Agreement. Upon termination of this Agreement, Executive shall return any
documents, records, data, books or materials of or pertaining to the Company
or its subsidiaries or affiliates in his possession or control and any of his
work papers in his possession or control containing confidential information
or trade secrets. The Company acknowledges that Executive already has
substantial experience and expertise in the health insurance and managed
health care business, and use of that experience and expertise in other
employment will not be deemed a violation of this Agreement.
7. NON-COMPETITION.
(a) Executive agrees that (i) until the expiration of the
Employment Period under Section 1, and (ii) for a period of two years after
the last day of Executive's employment if Executive's employment is
terminated by the Company without Cause (as provided in Section 4(a)) or
Executive voluntarily terminates his employment for Good Reason (as provided
in Section 4(b)), in either case on or before November 14, 1995, or for a
period of one year if the termination occurs after November 14, 1995,
Executive agrees not to engage, directly or indirectly (whether as officer,
director, employee, consultant or by ownership or otherwise) in a competitive
business in the Company's market area.
(b) Executive agrees that if (i) Executive's employment is
terminated by Company for Cause, (ii) Executive terminates his employment
without Good Reason, or (iii) upon termination of this agreement at the end
of the term, Company shall have the option of electing to pay Executive the
periodic payments set forth in Section 4 (a) (i) for up to one year and that
if Company so elects, Executive agrees not to engage, directly or indirectly
(whether as officer, director, employee, consultant or by ownership or
otherwise) in a competitive business in the Company's market area for so long
as Company is making those periodic payments to Executive.
(c) Notwithstanding the foregoing, nothing in this Agreement shall
prohibit or penalize the ownership by Executive of investments in shares of a
competitive business that are registered under Section 12 of the Securities
Exchange Act of 1934 and constitute, together with all such investments owned
by any immediate family member of affiliate of, or person acting in concert
with, Executive, less than 5% of the outstanding registered investments in
such business. As used herein, the term "competitive business" means a
business entity that markets health insurance, managed health care, health
maintenance organizations, or the administration of health insurance
programs, and the term "market area" means any state or possession in which
the Company is engaged in business on the date of the Executive's termination
of employment.
8. NONSOLICITATION. Executive agrees that (i) during the Employment
Period, and (ii) for the longer of a one-year period after Executive's
termination of employment for any reason, and any period with respect to
which the Company is required to make payments pursuant to Section 4(a) or
4(b) or elects to make payments pursuant to Section 7(b), Executive will not
(a) induce or attempt to induce, directly or indirectly, any of the Company's
employees to terminate their employment with the Company nor (b) solicit the
sale of any product or service that constitutes a competitive business to any
entity which on the date of Executive's termination of employment was
purchasing (or with which substantial negotiations were then in progress for
the purchase of) the Company's services or products.
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9. INDEMNIFICATION. The Company will pay all reasonable fees and
expenses, if any, (including, without limitation, legal fees and expenses)
that are incurred by Executive to enforce this Agreement and that result from
an actual or threatened breach of this Agreement by the Company.
10. PAYMENT OF COMPENSATION AND TAXES. All amounts payable under this
Agreement (other than stock-related compensation, which will be paid
according to the terms of the Company's stock incentive plan) will be paid in
cash, subject to required income and payroll tax withholdings.
11. ASSIGNMENT. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the
successors and assigns of the Company. If the Company is consolidated or
merged with or into another corporation, or if another entity purchases all
or substantially all of the Company's assets, the surviving or acquiring
corporation will succeed to the Company's rights and obligations under this
Agreement. Executive's rights under this Agreement may not be assigned or
transferred in whole or in part, except that the personal representative of
Executive's estate will receive any amounts payable under this Agreement
after the death of Executive. The Company may arrange for one or more of its
affiliates to act as the Company for purposes of administering and providing
Executive's compensation and benefits under this Agreement.
12. RIGHTS UNDER THE AGREEMENT. The right to receive benefits under
this Agreement will not give Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable
from the general assets of the Company, and there will be no required funding
of amounts that may become payable under the Agreement. Executive will for
all purposes be a general creditor of the Company. The interest of Executive
under the Agreement cannot be assigned, anticipated, sold, encumbered or
pledged and will not be subject to the claims of Executive's creditors. The
foregoing provisions of this Section 12 shall not apply to the extent (if
any) that they conflict with the rights of the Executive under the stock
option plans referred to in Section 3(c).
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between the Company and Executive with respect to the
matters referred to herein and supersedes all prior agreements and
understandings between Executive and the Company or any affiliate of the
Company, including Metra, except as specifically noted herein, with respect
to the employment of Executive after the Effective Date and any other matters
referred to herein.
14. NOTICE. Any written notice required to be given by one party to
the other party hereunder shall be deemed effective if mailed by registered
mail:
To the Company c/o:
UHC Management Company, Inc.
0000 Xxxx Xx X
Xxxxxxxxxx, XX 00000
Attention: Vice President Human Resources
with a copy to: General Counsel
To Executive at:
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00000 Xxxxxxxxxx Xx.
Xxxxxxx, XX 00000
or such other address as may be stated in notice given under this Section 14.
15. DISPUTE RESOLUTION AND REMEDIES. Any dispute arising between the
parties relating to this Agreement or to Executive's employment by Company
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 interpret
and construe this Agreement pursuant to 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 Confidentiality, Nonsolicitation and
Non-Competition provisions of this Agreement will cause immediate and
irreparable injury to Company 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.
16. MISCELLANEOUS. To the extent not governed by federal law, this
Agreement will be construed in accordance with the laws of the State of
Minnesota, without reference to its conflict of law rules. No provisions of
this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and the writing is signed
by Executive and the Company. A waiver of any breach of or compliance with
any provision or condition of this Agreement is not a waiver of similar or
dissimilar provisions or conditions. The invalidity or unenforceability of
any provision of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, which will remain in
full force and effect. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement.
WITNESS the following signatures.
UHC Management Company, Inc.
Dated 6/25/95 By: /S/XXXXX X. XXXXX
---------------------- -------------------------
Executive
Dated 6/25/95 /S/ XXXXX X. XXXXXX
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