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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED December 31, 1994
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Commission file number: 0-13253
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United HealthCare Corporation
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(Exact name of registrant as specified in its charter)
Minnesota 41-1321939
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value New York Stock Exchange, Inc.
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(Title of Each Class) (Name of Each Exchange
on which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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[Page One of Two]
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Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 13, 1995, was approximately $5,782,458,005* (based on the
last reported sale price of $43.25 per share on March 13, 1995, on the New York
Stock Exchange).
As of March 13, 1995, 172,943,352 shares of the registrant's Common Stock, par
value $.01 per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders of Registrant for the fiscal year ended December
31, 1994. Certain information therein is incorporated by reference into Part
II hereof.
Proxy Statement for the Annual Meeting of Shareholders of Registrant to be held
on May 10, 1995. Certain information therein is incorporated by reference into
Part III hereof.
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*Only shares of common stock held beneficially by directors and executive
officers of the Company and persons or entities filing Schedules 13G and
received by the Company have been excluded in determining this number.
[Page Two of Two]
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PART I
ITEM 1. BUSINESS
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United HealthCare Corporation/SM/ is a national leader in health care
management and has offered services to health care coverage purchasers and
providers since 1974. As of December 31, 1994, the Company served over three
million members through its owned and managed health plans and provided
specialty managed care products and services that cover over 23 million
participant lives through employers, employee groups, insurers, health
maintenance organization ("HMO") operators and other health care payors and
health care providers. Based on its experience with multiple HMO models, the
Company has developed a number of core capabilities, including medical
information management, health benefit administrative services, risk assessment
practices, benefit design, provider risk sharing and managed health care
delivery. With these capabilities, UHC provides both comprehensive managed care
services, such as HMO and carrier replacement products, and unbundled health
care management and cost containment products, such as mental health and
substance abuse benefit plans, utilization review services, specialized provider
networks and employee assistance programs. Prior to May 27, 1994, the Company
also provided management services for prescription drug benefit plans through
its Diversified Pharmaceutical Services, Inc. ("Diversified") subsidiary. On
May 27, 1994, the Company sold Diversified and no longer offers such services.
United HealthCare Corporation is a Minnesota corporation, incorporated in
January 1977. Unless the context otherwise requires, the terms "UHC" and
"Company" refer to United HealthCare Corporation and its subsidiaries. The
Company's executive offices are located at 300 Opus Center, 9900 Bren Road East,
Minnetonka, Minnesota 55343; telephone (612) 936-1300.
HEALTH PLANS AND RELATED OPERATIONS
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The Company has a majority ownership interest in a number of health plans.
With respect to these owned health plan operations, the Company assumes
underwriting risk in return for the premium revenue it receives. The Company
also provides administrative and other management services to health plans in
which the Company has no ownership interest or has a minority ownership
interest. With respect to these managed health plan operations, the Company
receives an administrative fee for providing its services and generally assumes
no responsibility for health care costs. The Company's health plans are usually
licensed as HMOs or insurers and provide comprehensive health care coverage for
a fixed annual fee or premium that does not vary with the extent of medical
services received by the member. In addition, these HMOs control medical and
hospital costs through contractual arrangements with independent providers of
health care services. Certain of these health plans employ health care
providers and directly deliver health care services to enrollees and other
individuals. Cost-effective delivery of health care services by both employed
and contracted health care providers is achieved by assuring appropriate use of
health care services, emphasizing preventive health services and encouraging the
reduction of unnecessary hospitalization and other unnecessary services.
During 1994, the Company acquired the following health plans and their
related operations: CAC-Ramsay Health Plans, Inc. in Miami, Florida; Complete
Health, Inc. in Birmingham, Alabama; Complete Health of Mississippi, Inc., in
Jackson, Mississippi, Complete Health of Tennessee, Inc., in Chattanooga,
Tennessee; Complete Health of Arkansas Inc., in Little Rock, Arkansas; and
Complete Health of Georgia, Inc. in Atlanta, Georgia. On January 3, 1995, the
Company acquired GenCare Health Systems, Inc., a St. Louis, Missouri, based
health plan, and its related operations and on February 28, 1995, the Company
acquired Group Sales and Services of Puerto Rico, Inc., a Puerto Rico based
health plan.
The following table provides certain information concerning the Company's
health plans at December 31, 1994:
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<TABLE>
<CAPTION>
Persons Served as of December 31, 1994
Primary -----------------------------------------------------
Name Location(s) Commercial(2) Medicaid Medicare Total
---- --------------------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Owned Health Plans (1)
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United HealthCare of Illinois(3) Chicago, IL 314,700 111,500 38,800 465,000
United HealthCare of Ohio, Inc/SM/.(4) Columbus, OH 181,100 46,800 1,300 229,200
Dayton, OH 194,500 - - 194,500
PrimeCare/SM/ Health Plan,Inc. Milwaukee, WI 171,400 56,100 - 227,500
CAC-Ramsay Health Plans,(R) Inc. (5) Miami, FL 99,500 58,100 40,300 197,900
United Health Plans New England, Inc./SM/ Warwick, RI 168,100 10,600 11,600 190,300
Complete Health, Inc. (5) Birmingham, AL 144,100 - 11,500 155,600
Physicians Health Plan/SM/ of Greater St. Louis, Inc. St. Louis, MO 142,300 - 1,700 144,000
United HealthCare of Georgia, Inc./SM/ Atlanta, GA 104,900 - - 104,900
United HealthCare of Utah/SM/ Salt Lake City, UT 81,800 2,300 - 84,100
Community Health Network of Louisiana, Inc. (6) Baton Rouge, LA 66,900 - 400 67,300
United HealthCare of the Midlands,Inc./SM/ Omaha, NE 58,300 - 3,300 61,600
Complete Health of Tennessee, Inc. Chattanooga, TN 30,800 - - 30,800
Complete Health of Georgia, Inc. Atlanta, GA 14,000 - - 14,000
Complete Health of Arkansas, Inc. Little Rock, AR 10,800 - - 10,800
Complete Health of Mississippi, Inc. Jackson, MS 7,300 - - 7,300
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Total Owned (7) (8) 1,790,500 285,400 108,900 2,184,800
Minority Owned or Managed Health Plans (9)
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Medica(10) Minneapolis, MN 488,700 43,700 76,700 609,100
Physicians HealthPlan/SM/ of North Carolina, Inc. Greensboro, NC 98,200 - - 98,200
Physicians Health Plan/SM/ of Mid Michigan, Inc.(11) Lansing, MI 87,200 3,200 - 90,400
Physicians Plus Insurance Company (12) Madison, WI 84,300 - - 84,300
Physicians Health Plan/SM/ of Northern Indiana,
Inc.(12) Fort Wayne, IN 49,200 - - 49,200
Physicians Health Plan/SM/ of Southwestern Michigan,
Inc.(11) Kalamazoo, MI 36,700 - - 36,700
Physicians Health Plan/SM/ of Western Michigan,
Inc.(11) Muskegon, MI 36,200 - - 36,200
Physicians Health Plan/SM/ of South Carolina, Inc. Columbia, SC 34,400 - - 34,400
Physicians Health Plan/SM/ of South Michigan, Inc. (11) Jackson, MI 25,500 - - 25,500
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Total Minority Owned or Managed(13) 940,400 46,900 76,700 1,064,000
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TOTAL HEALTH PLAN ENROLLMENT 2,730,900 332,300 185,600 3,248,800
========= ======= ======= =========
</TABLE>
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(1) Health plans in which the Company has a majority or greater ownership
interest and to which the Company provides management services.
(2) Includes individuals covered under self-insured health plans served by UHC
and utilizing the provider networks of the health plan; and individuals
covered under products offered by one of the Company's insurance company
subsidiaries and utilizing the health plan's provider network.
(3) Represents the combined operations of the Company's two Illinois health
plans: Chicago HMO Ltd. and Share Health Plan/SM/ of Illinois, Inc.
(4) Represents the combined operations of the Company's two Ohio health plans:
Physicians Health Plan of Ohio, Inc. and Western Ohio Health Care
Corporation, which have been merged since January 1,1994.
(5) Includes the operations of a wholly owned subsidiary of the named health
plan which is a separately licensed HMO.
(6) Health plan in which the Company has a controlling interest due to its
combined ownership and management interests.
(7) On January 3, 1995, the Company acquired GenCare Health Systems, Inc., a
St. Louis, Missouri based health plan whose December 31, 1994 total
enrollment was 197,900, and whose January 31, 1995 total enrollment was
230,000. On February 28, 1995, the Company acquired Group Sales and
Services of Puerto Rico, Inc., a Puerto Rico based health plan whose
December 31, 1994 total enrollment was 133,900 and whose January 31, 1995
total enrollment was 135,100.
(8) Total owned health plan revenues represented 89% of UHC's total revenues
for 1994.
(9) Health plans in which the Company has a minority or no ownership interest
and to which the Company provides management services.
(10) Medica includes the combined operations of the health plans previously
known as Physicians Health Plan/SM/ of Minnesota and Share/SM/, both of
which were provided management services by the Company prior to their
affiliation in 1991.
(11) Health plans which operate in separate geographic locations but under one
HMO license.
(12) The Company's management agreement with the named health plan will expire
in 1995.
(13) Total minority owned or managed health plan revenues represented less than
5% of UHC's total revenues for 1994.
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A number of the Company's health plans' enrollee health care coverage contracts
commence, expire or renew, as the case may be, as of January 1 of each year.
Accordingly, those health plans' January 31 enrollment figures in any year may
differ from the prior year's December 31 enrollment figures. Total owned health
plan enrollment as of January 31, 1995, was: Commercial - 2,132,700; Medicaid -
291,300; Medicare -111,200; and Total - 2,535,200, including GenCare. Total
minority owned or managed health plan enrollment as of January 31, 1995, was:
Commercial - 1,012,500, Medicaid - 50,100, Medicare - 76,600, and Total -
1,139,200.
Management Services. UHC's responsibilities as a manager for both owned and
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managed health plans generally include the installation, maintenance and
operation of management information systems and the provision of claims
processing, marketing, contracting, financial and accounting services. For the
management services it provides to health plans, UHC generally receives a fee
based on a percentage of the gross revenues of each health plan. Under certain
management agreements, the Company may receive additional management services
fees based on performance parameters during a contract year. In health plans in
which the Company has a majority ownership interest, UHC records in its
consolidated financial statements the premium revenues and related medical
services costs. In these health plans, the Company may also participate
directly with health care providers in economic incentives relating to the
efficient use of specialty care referrals, hospitalization and other services.
Provider Network Management. The Company provides management and related
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services to health plans operating modified fee-for-service HMO products,
capitated network model HMO products and staff model HMOs. Physicians
participating in modified fee-for-service model HMOs are generally compensated
for each treatment or service provided to an HMO enrollee. UHC's modified fee-
for-service model HMOs contract with a large number of independent health care
providers in many office locations. The Company's capitated model HMOs
generally contract with designated primary care (family practice, internal
medicine and pediatric) physicians or physician groups to provide or arrange
medical care for HMO enrollees for a fixed capitation fee for each enrollee who
selects that physician or group. This capitation payment does not vary with the
nature or extent of services provided to the enrollee. The Company's staff
model HMOs employ health care providers, primarily primary care physicians, and
generally contract with independent specialist physicians. All of the Company's
health plans emphasize controlling health care costs and promoting the quality
of health care delivered by focusing medical utilization and cost controls on
referrals, hospitalization and other services, and utilizing claims and practice
pattern information for quality assessment.
Risk Assessment. Underwriting is the process by which a health plan assesses
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the risk of enrolling members and groups and re-enrolling groups, and
establishes the appropriate or necessary premium charges. The setting of
premium rates directly affects a health plan's profitability and marketing
success. The Company has developed underwriting guidelines, administered by a
corporate underwriting staff, which are used to determine the rates to be
charged prospective employer groups. The ability and extent to which an
individual's health status may be used in determining whether to accept
prospective members or groups or to set premium rates is subject to increasing
state regulation and often varies by type of product.
The profitability of the Company as a health care management company
depends in large part on effectively predicting and managing health care costs.
Because the Company's HMOs provide services on a prepaid basis, with premiums
per member usually fixed for one-year periods, unexpected cost increases or
unexpected utilization during the contract period cannot be immediately
incorporated into the premium structure. If an unexpectedly high number of the
Company's HMO members experience conditions requiring expensive medical
treatment, such as premature births, heart transplants or severe trauma, the
Company's profitability may be affected. In addition, changes in health care
regulations and practices, inflation, new technologies, major epidemics, natural
disasters, and other factors affecting the delivery and cost of health care
which are beyond the Company's control may adversely affect the Company's
ability to predict and control health care costs.
Medicare. Certain of the Company's health plans provide Medicare-eligible
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persons with a wide range of health services through specifically designed
Medicare benefits programs. Medicare is a federal program designed to provide
health care coverage for the elderly. The Company's Medicare benefit programs
may
4
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carry certain disadvantages, such as higher comparative medical costs and levels
of utilization as compared to non-Medicare members, government regulatory and
reporting requirements, the possibility of reduced or insufficient government
reimbursement in the future and higher marketing and advertising costs
associated with selling to individuals rather than groups.
Medicare programs are offered by the health plans pursuant to a risk
contract, a cost contract or a health care pre-payment plan ("HCPP") arrangement
between the health plan and the federal Medicare funding agency ("HCFA"). Under
a risk contract, in addition to the payment of a small premium by the member in
some cases, the health plan is reimbursed on a fixed per member per month basis
by the federal government for the projected cost of health services. The health
plan then bears the risk that the actual costs of health services may exceed the
per member per month amount. The Company believes that its risk contract
Medicare programs are attractive to Medicare beneficiaries because they provide
for broad benefit coverage; eliminate Medicare required copayments, deductibles,
coinsurance amounts and disallowed charges and substantially reduce the member's
administrative responsibilities. A health plan with a Medicare risk contract
must maintain at least 50% of its total enrollment in non-Medicare programs.
Under a Medicare cost contract, the health plan pays physicians and other
health care providers for services provided to the health plan's members and is
then reimbursed by the federal government. Under some forms of cost contracts,
the federal government may continue to pay hospitals directly for inpatient
services. Revenues and potential opportunities for profits under a cost
contract may often be less than under a risk contract, but the risk of adverse
financial results to the health plan is usually reduced.
As of December 31, 1994, approximately 185,600 enrollees in the Company's
health plans were covered by a Medicare benefits program and 14% of the
Company's 1994 revenues was associated with such programs.
Medicaid. The Medicaid population represents another market for health plans
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managed or owned by the Company. Medicaid is a joint federal and state program
designed to provide health care coverage for the indigent. The prepaid Medicaid
programs generally operate similarly to Medicare risk contracts and carry
similar risks. In addition, a health plan offering a Medicaid related program
must maintain at least 25% of its total enrollment in non-Medicaid and non-
Medicare programs. A number of states have recently undertaken or indicated an
intent to undertake an expansion and/or reform of their Medicaid managed care
programs.
As of December 31, 1994, approximately 332,300 enrollees in the Company's
health plans were covered under Medicaid prepaid contracts and 11% of the
Company's 1994 revenues was associated with such programs.
Insurance Products. Through its subsidiaries United Health and Life Insurance
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Company ("UHL"), United Health and Life Insurance Company of Ohio, United Health
and Life Insurance Company of Illinois and Ramsay Life and Health Insurance
Company, UHC offers several health insurance products in conjunction with health
plan products on a carrier replacement basis. These products permit employers
to replace multiple health care policies and vendors with a single health care
plan. These subsidiaries also offer reinsurance and other insured products on a
selective basis to most of the Company's health plans and to employers and other
sponsoring groups offering self-funded health care benefit plans. The Company's
insurance subsidiaries are licensed to sell group life, accidental death and
dismemberment, short-term disability and health insurance products in a total of
41 states and the District of Columbia.
Self-funded Products. The Company has developed self-funded products for
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employers who desire the cost containment aspects of an HMO product and want to
self-insure the health care cost risk. The Company uses the provider networks
it has developed in connection with its HMO products for these self-funded
products. The provider contracts for these products are with individual
physicians or groups of physicians as well as health care facilities and are
generally on a standardized fee-for-service basis. Self-funded products offer
employers and other sponsoring groups access to a provider network and the
administrative and utilization review services associated with an HMO product,
but the risks of health care utilization generally are borne by the sponsoring
group.
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SPECIALTY MANAGED CARE SERVICES
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Through its experience in providing comprehensive health care management
services and in response to increasing market demand for greater choice and
flexibility in the design of health care coverage products and funding
arrangements, the Company has developed core capabilities which have enabled it
to introduce competitive products to facilitate the efficient delivery of health
care services. These products are offered independently of the Company's owned
and managed health plans through its specialty managed care services operations.
The Company also makes these products available to its owned and managed health
plans where feasible.
With respect to its specialty managed care services, the Company receives
fees for the provision of services, primarily administrative in nature, and
generally assumes no responsibility for health care costs except in the case of
its former subsidiary, Diversified, and its United Behavioral Systems, Inc.
("UBS") subsidiary. Prior to the sale of Diversified in May 1994, Diversified
accepted health care cost responsibility for the managed delivery of
pharmaceutical benefit programs for some of its customers (primarily health
plans owned by the Company). In addition, through UBS, the Company assumes some
responsibility for health care costs for the provision of mental
health/substance abuse services and thus recognizes premium-like revenue and
medical services expense.
As of December 31, 1994, the Company's specialty managed care products were
available to a total of approximately 23 million participant lives, 81% of whom
were not enrolled in one of the Company's owned health plans. One person may be
covered by more than one specialty managed care service and therefore may
account for more than one of these participant lives. The Company offers the
following specialty managed care services to HMOs, preferred provider
organizations ("PPOs"), insurers, providers, Blue Cross/Blue Shield plans, third
party administrators, employers and government agencies.
Care Management Services. The Company's care management business unit offers
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products providing customers and members with utilization management and benefit
administration services, access to a national network of health care facilities
for transplant-related services and workers compensation and disability claims
management services.
Care Management and Benefit Administration Services. The Company's
Healthmarc and HealthPro programs offer insurers, employers, labor union health
and welfare funds and governmental entities unbundled cost and utilization
review and case management services. These services include prior, concurrent
and retrospective review of hospital admissions and certain ambulatory services,
second opinion programs, case management, specialist referrals and discharge
planning. These services emphasize patient and provider education as a means of
assisting clients in managing their health care costs. As of December 31, 1994,
these programs were provided to approximately three million individuals, 99% of
whom were not enrolled in any of the Company's owned health plans.
The Company's recently introduced Total Care Management program offers
those employers, labor union health and welfare funds and governmental entities
who do not have access to the Company's health plans an alternative - access to
bundled managed care services. These services include utilization management,
medical information and education, claims payment, networks, mental
health/sustance abuse services, and other related services. These services can
provide health plan-like results to those clients who have constituencies
outside health plan service areas.
Transplant Network. The Company's United Resource Networks ("URN") program
offers clients access to an international network of health care facilities for
transplant-related services and transplant case management services. URN
negotiates fixed, competitive rates for high-cost, low-frequency health care
services such as organ and tissue transplants. URN's network is utilized by
UHC's health plans and is also sold to non-affiliated insurance companies and
health plans, third party administrators, government agencies and self-funded
employers. In addition, URN's United TransReview/SM/ product provides clients
with recommendations about whether particular individuals are appropriate
candidates for transplantation. As of December 31, 1994, URN's products were
available to approximately 16 million individuals, approximately 86% of whom
were individuals not enrolled in any of the Company's owned health plans.
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Workers Compensation and Disability Management Services. UHC's workers'
compensation management services include the operations of FOCUS Healthcare
Management(registered trademark), Inc. ("FOCUS"), a subsidiary acquired by the
Company in January 1994, and UHC's former Workers Compensation/Casualty
Services ("WCCS") division. The Company's workers' compensation and disability
management services tailor the Company's broad managed care resources into
products and services intended to apply managed care concepts, such as
utilization review and use of specialized preferred provider networks, to
workers compensation and casualty insurance cases. These products and
services are provided to insurers and large self-insured employers and include
hospitalization and outpatient surgery precertification and case management,
access to provider networks, specialized programs such as carpal tunnel and
back injury case management, and review of imaging (CT scans and MRI) services.
Employee and Member Assistance Programs. The Company's Institute for Human
Resources ("IHR") division offers clients employee assistance programs which
provide an assessment and referral service to a client's employees and family
members for work-related or personal problems which might otherwise interfere
with an employee's productivity. The Company also offers its employee
assistance programs in conjunction with its Healthmarc and HealthPro programs
and its 24-hour health care information line product known as Nurseline. IHR's
clients include health plans, government agencies or departments, self-insured
organizations and insurers. As of December 31, 1994, IHR's services were
available to approximately three million individuals, approximately 74% of whom
were individuals not enrolled in any of the Company's owned health plans.
Geriatric Care Management Services. The Companys also develops and provides
- ----------------------------------
products and services to HMOs and providers for cost control and the management
of health care for the elderly. LinkAge(registered trademark) (formerly marketed
as Geriatric Case Management System) identifies for hospitals high-cost, high-
risk inpatients upon admission and provides focused case management throughout
their hospital stay. The Company's EverCare(registered trademark) program
arranges for the provision of managed medical care services to institutionalized
elderly individuals in nursing homes through contracts with a physician-nurse
practitioner team. EverCare, in conjunction with UHL, is participating in a
demonstration project with HCFA to offer managed health care services to the
institutionalized elderly in nine separate locations throughout the country. The
Company's Long Term Care Group division provides consulting and administrative
services relating to long term care insurance to employers and insurance
carriers, including information services and underwriting services.
Behavioral Health Services. The specialty operations in the Company's
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Behavioral Health Services business unit include mental health and substance
abuse related services. UHC's UBS subsidiary provides a specialized provider
network and mental health and substance abuse benefit program services including
providing or arranging for behavioral health care/case management services and
network development services, primarily on a capitation basis, to certain of
UHC's owned or managed health plans, and to other health plans or PPOs and
insurance companies. UBS' services are provided by employed behavioral health
care professionals and by a network of contracted providers. As of December 31,
1994, UBS was providing its services to approximately three million individuals,
approximately 51% of whom were individuals not enrolled in any of the Company's
owned health plans.
Prescription Drug Benefit Program Services. Prior to its sale in May 1994,
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UHC's Diversified subsidiary administered UHC's prescription drug benefit
program services. Diversified's services included the establishment of a
pharmacy network and formulary, installation and operation of a pharmacy claims
processing system, and maintenance of a prescription information database.
Diversified also assisted its clients in managing pharmaceutical costs through
chargeback arrangements with major pharmaceutical manufacturers.
International Business. The Company has begun exploring opportunities to sell
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its products and services in foreign countries and anticipates utilizing various
arrangements such as joint ventures, as well as direct contracting.
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CENTER FOR HEALTHCARE POLICY AND EVALUATION
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The Center for HealthCare Policy and Evaluation (the "Center") is the
Company's quality-of-care and research unit. The Center's activities include
developing UHC's nationwide operations' commitment to measuring and reporting
performance; providing quality of care, patient surveying and cost-effectiveness
research and analysis; and participating in major national public policy
initiatives to positively influence the reform of health care delivery,
financing and access.
HealthCare Evaluation Services. The Company's HealthCare Evaluation
Services ("HCES") division, a part of the Center, performs services and research
relating to the growing data and analysis needs of the Company's health plans,
specialty managed care services businesses and an external client base. HCES
offers the following research services and software developed by the Center to
third-party payers, providers, employers and the government, and utilizes these
services and software in the management of the Company's health plans and
specialty managed care services:
Quality Screening and Management (QSM(registered trademark)). QSM is a
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comprehensive quality management program that assists managed care
organizations and other enrolled populations, such as Medicaid programs,
in the evaluation of health care quality. The QSM software incorporates
and reports measures of quality and access to care through performance
indicators such as disease incidence rates, occurrence of adverse events,
condition-specific processes and outcomes, and utilization of preventive
services.
ProSight(registered trademark). ProSight is an executive information
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system that allows users to manage health care costs and utilization
through simplified data analysis and reporting packages. A decision
support database facilitates additional customized analysis.
Physician Profiling. Physician Profiling is a desktop performance
--------------------
evaluation tool that supports ongoing management of physician networks by
managed care organizations. The system uses case data collection, peer-
based physician norms and comparative report software to describe physician
performance in the areas of cost, quality and utilization.
EPIS(trademark). EPIS is a specialized analytic software system which
allows
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clients to profile comparative data. The Company also utilizes EPIS as the
platform from which it updates and disseminates the latest expert-derived
clinical guidelines to its health plans and other clients.
MANAGEMENT INFORMATION SYSTEMS
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The Company's health plans and specialty managed care products use
computer-based management information systems for various purposes, including
claims processing, billing, utilization management, underwriting, marketing and
sales tracking, general accounting, medical cost trending, managed care
reporting and financial planning. These systems also support member, group and
provider service functions, including on-line access to membership verification,
claims and referral status and information regarding hospital admissions and
lengths of stay. In addition, these systems support extensive analysis of cost
and outcome data.
The Company's computer information systems which support its health plans
and specialty managed care services operations are continually being enhanced
and upgraded. System development efforts relating to increased efficiency,
capacity and flexibility are ongoing. The Company's computer processing
capabilities support multiple product delivery systems with attendant tracking
and processing for such systems, an integrated database of information for
increased reporting and research capabilities, and use automated entry and edit
capabilities to speed the capture and processing of information. The Company
generally uses a phased release strategy to provide new systems capabilities to
its various operating units. Over the past several years, the Company has
upgraded its mainframe computers, enhanced its existing software functionality
and migrated to various software database environments. This approach allows
the Company to preserve its investment in existing systems while, at the same
time, enabling it to exploit new technologies that help improve either the cost
effectiveness of the services provided, or allow for the
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introduction of new product capabilities.
Information System Products and Services. The Company provides certain
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components of its management information systems to nonaffiliated health plans,
self-funded employers and health care providers. As a third-party administrator,
UHC offers its management information systems, primarily its claims processing
and information reporting capabilities, to certain self-funded employers. The
Company believes that its technology-based products can lower clients'
administrative costs, improve information flow and facilitate decision making.
One of these information systems components is ProviderLink(registered
trademark), an EDI network and series of products designed as the foundation for
delivery of an electronic solution for health care payors, providers and
purchasers. In addition to enabling health care providers to electronically
submit referral authorizations and multi-payor claims, ProviderLink allows
provider clients immediate access to information on benefit coverage,
eligibility, referral and claim status and the ability to communicate through
electronic mail. EmployerLink, an EDI/electronic network information system that
links employers with their health plans. EmployerLink provides such employers
with electronic member enrollment, billing reconciliation, claims status and
electronic-mail capabilities.
Episodes(registered trademark), UHC's utilization and case management
software, is a comprehensive healthcare management system designed for clients
who need to better manage their health care dollars. The software automates the
client's evaluation of the accuracy and appropriateness of care using industry-
accepted criteria and standards. Episodes captures necessary case information in
a relational structure that is intended to mirror the way health care
professionals think about their caseloads.
MARKETING
- ---------
The Company's marketing strategy and implementation for its health plans
and alternative managed care products are defined and coordinated by UHC's
corporate marketing staff. Primary marketing responsibility for each of the
Company's health plans and specialty managed care products resides with a
marketing director and a direct sales force. In addition, the Company's health
plans and specialty managed care products are sold through independent insurance
agents and brokers. Marketing efforts are supported by ongoing market research
that identifies and grades prospective customers and establishes specific
enrollment goals by territory and employer. Marketing efforts are also
supported by public relations efforts and advertising programs that may employ
television, radio, newspapers, billboards, direct mail and telemarketing.
COMPETITION
- -----------
The managed health care industry evolved primarily as a result of health
care buyers' concerns regarding rising health care costs. The industry's goal
is to infuse greater cost effectiveness and accountability into the health care
system through the development of managed care products, including health plans,
PPOs, and specialized services such as mental health or pharmacy benefit
programs, while increasing the accessibility and quality of health care
services. The managed health care industry is highly competitive, both
nationally and in the Company's various market areas.
As HMO and PPO penetration of the health care market and the effects of
health care reforms increase nationwide, the Company expects that obtaining new
contracts for its products with large employer and government groups may become
more difficult and that competition for smaller employer groups will intensify.
In addition, employers may choose to self-insure the health care risk while
seeking benefit administration and utilization review services from third
parties to assist them in controlling and reporting health care costs. In such
an environment, the Company believes that having a broad line of health care
programs and products available will be important in being selected by employers
to manage the health care products or coverage offered to their employees.
The Company's health plans and specialty managed care coverage products
compete for group and individual membership with conventional health insurance
plans, Blue Cross/Blue Shield plans, other health plans, HMOs, PPOs, third party
administrators and health care companies, and employers or groups who elect to
self-insure. The company's ability to increase the number of persons covered by
its products
9
<PAGE>
or services or to increase its premiums and fees can be affected by the
Company's level of competition in any particular area. The Company believes
that the principal competitive factors affecting the Company, its health plans
and its specialty managed care products include price, the level and quality of
service provided or arranged for, provider network capabilities, the offering of
innovative products and marketplace reputation. The Company also faces
competition from hospitals, health care facilities and other health care
providers who have combined and formed their own networks to contract directly
with employer groups and other prospective customers for the delivery of health
care services.
EXPANSION OF OPERATIONS
- -----------------------
The Company continually seeks out and evaluates opportunities for future
growth and expansion. Such growth and expansion opportunities may include
acquisitions or dispositions of specialty managed care services or health plan
operations, and the internal development of new products and techniques for the
containment of health care costs, the measurement of the outcomes and efficiency
of health care delivered and the management of health care delivery systems.
GOVERNMENT REGULATION
- ---------------------
Government regulation of employee benefit plans, including health care
coverage, health plans and the Company's specialty managed care products, is a
changing area of law that varies from jurisdiction to jurisdiction and generally
gives responsible administrative agencies broad discretion. The Company
believes that it is in compliance in all material respects with the various
federal and state regulations applicable to its current operations. To maintain
such compliance, it may be necessary for the Company or a subsidiary to make
changes from time to time in its services, products, structure or marketing
methods. Additional governmental regulation or future interpretation of
existing regulations could increase the cost of the Company's compliance or
otherwise affect the Company's operations, products, profitability or business
prospects.
The Company is unable to predict what additional government regulations, if
any, affecting its business may be enacted in the future or how existing or
future regulations might be interpreted. A number of jurisdictions have
enacted small group insurance and rating reforms which generally limit the
ability of insurers and health plans to use risk selection as a method of
controlling costs for small group business. These laws may generally limit or
eliminate use of pre-existing conditions exclusions, experience rating and
industry class rating and may limit the amount of rate increases from year to
year. Under these laws, cost control through provider contracting and
managing care may become more important, and the Company believes its experience
in these areas will allow it to compete effectively.
Increasingly states are considering various health care reform measures and
are adopting laws or regulations, which may limit the Company's health plans'
and insurance operations' ability to control which providers are part of their
networks and may hinder their ability to effectively manage utilization and
cost. The Company is unable to predict what reforms, if any, may be enacted or
how those reforms would affect the Company's operations.
HMOs. All of the states in which the Company's health plans offer HMO products
- ----
have enacted statutes regulating the activities of those health plans. Most
states require periodic financial reports from HMOs licensed to operate in their
states and impose minimum capital or reserve requirements. Certain of the
Company's subsidiaries are required to retain for their own use cash generated
from their operations. In addition, certain of the Company's subsidiaries are
required by state regulatory agencies to maintain restricted cash reserves
represented by interest-bearing instruments which are held by trustees or state
regulatory agencies to ensure that adequate financial reserves are maintained.
Some state regulations enable agencies to review all contracts entered into by
HMOs, including management contracts, for reasonableness of fees charged and
other provisions.
The Company's health plans which have Medicare risk contracts are subject
to regulation by HCFA, a branch of the United States Department of Health and
Human Services. HCFA has the right to audit health plans operating under
Medicare risk contracts to determine each health plan's compliance with
10
<PAGE>
HCFA's contracts and regulations and the quality of care being rendered to the
health plan's members. To enter into Medicare risk contracts, a health plan
must either be federally qualified or be considered a Competitive Medical Plan
under HCFA's requirements. Health plans which offer a Medicare risk product
also must comply with requirements established by peer review organizations
("PROs"), which are organizations under contract with HCFA to monitor the
quality of health care received by Medicare beneficiaries. PRO requirements
relate to quality assurance and utilization review procedures. The Company's
health plans which have Medicare cost and HCPP contracts are subject to similar
regulatory requirements. In addition, these health plans are required to file
certain cost reimbursement reports with HCFA which are subject to audit and
revision.
The Company's health plans which have Medicaid contracts are subject to
both federal and state regulation regarding services to be provided to Medicaid
enrollees, payment for those services and other aspects of the Medicaid program.
Both Medicare and Medicaid have in force and/or have proposed regulations
relating to fraud and abuse, physician incentive plans and provider referrals
which may affect the Company's operations.
Many of the Company's health plans have contracts with the Federal
Employees Health Benefit Plan ("FEHBP"). These contracts are subject to
extensive regulation, including complex rules relating to the premiums charged.
FEHBP has the authority to retroactively audit the rates charged and frequently
seeks premium refunds and other sanctions against health plans participating in
the program. The Company's health plans which have contracted with FEHBP are
subject to such audits and may be requested to make such refunds.
Insurance Regulation. The Company's insurance subsidiaries are subject to
- --------------------
regulation by the Department of Insurance in each state in which the entity is
licensed. Regulatory authorities exercise extensive supervisory power over
insurance companies in regard to the licensing of insurance companies; the
amount of reserves which must be maintained; the approval of forms and insurance
policies used; the nature of, and limitation on, an insurance company's
investments; periodic examination of the operations of insurance companies; the
form and content of annual statements and other reports required to be filed on
the financial companies condition of insurance companies; and the establishment
of capital requirements for insurance companies. The Company's insurance
company subsidiaries are required to file periodic statutory financial
statements in each jurisdiction in which they are licensed. Additionally, such
companies are periodically examined by the insurance departments of the
jurisdiction in which they are licensed to do business.
Insurance Holding Company Regulations. Certain of the Company's health plans
- -------------------------------------
and each of the Company's insurance subsidiaries are subject to regulation under
state insurance holding company regulations. Such insurance holding company
laws and regulations generally require registration with the state Department of
Insurance and the filing of certain reports describing capital structure,
ownership, financial condition, certain intercompany transactions and general
business operations. Various notice and reporting requirements generally apply
to transactions between companies within an insurance holding company system,
depending on the size and nature of the transactions. Certain state insurance
holding company laws and regulations require prior regulatory approval or, in
certain circumstances, prior notice of, certain material intercompany transfers
of assets as well as certain transactions between the regulated companies, their
parent holding companies and affiliates, and acquisitions.
TPAs. Certain subsidiaries of the Company are also licensed as third-party
- ----
administrators ("TPAs") in states where such licensing is required for their
activities. TPA regulations, although differing greatly from state to state,
generally contain certain required administrative procedures, periodic reporting
obligations and minimum financial requirements.
PPOs. Certain of the Company's subsidiaries' operations may be subject to PPO
- -----
regulation in a particular state. PPO regulations generally contain certain
network, contracting, financial and reporting requirements which vary from state
to state.
Utilization Review Regulations. A number of states have enacted laws and/or
- ------------------------------
adopted regulations governing the provision of utilization review activities.
Generally, these laws and regulations require compliance with
11
<PAGE>
specific standards for the delivery of services, confidentiality, staffing, and
policies and procedures of private review entities, including the credentials
required of personnel. Some of these laws and regulations may affect certain
operations of the Company's business units.
MCOs. In recent years a number of states have enacted laws enabling self-
- ----
insured employers and/or insurance carriers to apply medical management and
other managed care techniques to the medical benefit portion of workers'
compensation, if such managed care is performed by a state certified managed
care organization ("MCO"). The Company, by itself or with its HMOs, has
generally sought MCO certification in the states where it is available and where
it markets managed care workers compensation products. MCO laws differ
significantly from state to state, but generally address network and utilization
review activities.
ERISA. The provision of goods and services to or through certain types of
- -----
employee health benefit plans is subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"). ERISA is a complex set of laws and regulations
that are subject to periodic interpretation by the United States Department of
Labor. ERISA places certain controls on how UHC's business units may do
business with employers covered by ERISA, particularly employers that maintain
self-funded plans. The Department of Labor is engaged in an ongoing ERISA
enforcement program which may result in additional constraints on how ERISA-
governed benefit plans conduct their activities. There recently have been
legislative attempts to limit ERISA's preemptive effect on state laws. If such
limitations were to be enacted, they might increase UHC's liability exposure
under state law-based suits relating to employee health benefits offered by
UHC's health plans and specialty businesses and may permit greater state
regulation of other aspects of those businesses' operations.
EMPLOYEES
- ---------
As of December 31, 1994, the Company employed approximately 9,600 persons;
approximately 150 of which were represented by a union. The Company believes
its employee relations are good.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
First Elected As
Name Age Position Executive Officer
- ---- --- -------- -----------------
<S> <C> <C> <C>
William W. McGuire, M.D. 46 Chairman, President, Chief Executive Officer 1988
and Director
James P. Bradley 43 Senior Vice President 1992
and Chief Information Officer
James A. Conto 39 Vice President, Acquisitions and Audit 1994
Brian S. Gould, M.D. 47 Senior Vice President, International Development 1990
David P. Koppe 38 Vice President, Treasurer and Chief Financial 1992
Officer
Sheila T. Leatherman 43 President, Center for Health Care Policy and
Evaluation 1993
William W. Pogue 48 Senior Vice President, Sales, Marketing and 1989
Development
Jeannine M. Rivet 46 Executive Vice President, Health Plan Operations 1992
Kevin H. Roche' 44 General Counsel and Secretary 1992
Kathy Walstead-Plumb 48 Senior Vice President, Group Service Administration 1992
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C>
Travers H. Wills 51 Senior Vice President, Specialty Operations 1992
</TABLE>
Executive Officers of the Company are elected annually by the Board of Directors
and serve until their successors are duly elected and qualified.
Dr. McGuire became a director of the Company in February 1989 and the
Chairman of the Board in May 1991. Dr. McGuire became an Executive Vice
President of UHC in November 1988, was appointed the Company's Chief Operating
Officer in May 1989, the Company's President in November 1989 and the Company's
Chief Executive Officer in February 1991.
Mr. Conto has been employed by the Company since 1985 and has served as its
Vice President, Acquisitions and Audit since 1991. From 1985 to 1987, he was
the Assistant Director of HMO Financial Research, from 1987 to 1990, he was the
Director of Internal Audit and from 1990 to 1991 he was the Company's Director
of Development.
Mr. Bradley has been employed by the Company since October 1989 and is
currently a Senior Vice President and Chief Information Officer. From 1987 to
1989, Mr. Bradley was a Senior Manager at Price Waterhouse, a world-wide public
accounting and professional services firm.
Dr. Gould became the Company's Senior Vice President, Specialty Operations
in August 1990 and UHC's Senior Vice President, International Development in
September 1993. Prior to joining UHC, Dr. Gould served as a Senior Vice
President from April 1988 to August 1990 for Blue Cross of California. Dr.
Gould also served as the Corporate Medical Director for Blue Cross of California
from November 1986 to August 1990 and as a Commissioner of the State of
California's Health Policy and Data Advisory Commission from 1985 through 1990.
Mr. Koppe became the Company's Chief Financial Officer in December 1994.
He has been employed by the Company since June 1983 and has served as the
Company's Vice President and Treasurer since May 1989. Mr. Koppe also served
as the Company's Controller from May 1989 until October 1994.
Ms. Leatherman became President of UHC's Center for Health Care Policy and
Evaluation in June 1992. From 1989 to 1992, Ms. Leatherman was UHC's Vice
President of Research and Development. Ms. Leatherman was Vice President,
Medical Affairs of Partners National Health Plans from 1987 to 1989.
Mr. Pogue became Senior Vice President, Sales, Marketing and Product
Development in October 1989. Mr. Pogue was previously with Lincoln National
Life Insurance Company of Fort Wayne, Indiana, for 20 years in various
capacities, most recently as Vice President of Sales.
Ms. Rivet became the Company's Executive Vice President, Operations in
October, 1994. She served as the Company's Senior Vice President, Health Plan
Operations from September 1993 to September 1994; and the Company's Vice
President of Health Service Operations from June 1990 to September 1993. From
1989 to 1990, Ms. Rivet was Vice President of Group Operations of The Prudential
Insurance Company of America.
Mr. Roche' became Secretary and General Counsel of the Company in May 1989.
From August 1987 to April 1989, Mr. Roche' was Associate General Counsel of
Partners National Health Plans.
Ms. Walstead-Plumb joined the Company as Vice President of Claims in
January 1986 and became Vice President of Group Service Administration in May
1990. Ms. Walstead-Plumb became a Senior Vice President of the Company in 1992.
Mr. Wills became Senior Vice President, Specialty Operations of the
Company in November 1992. From 1968 to 1992, Mr. Wills was employed by CIGNA
Corporation, a multi-line insurance company, in various capacities, most
recently as President of MCC Companies, a mental health/substance abuse
subsidiary of CIGNA.
13
<PAGE>
ITEM 2. PROPERTIES
-------------------
As of December 31, 1994, the Company leased approximately 1,045,000
aggregate square feet of space for administrative offices in the greater
Minneapolis-St. Paul, Minnesota area, and for computer facilities and claims
processing centers in International Falls and Duluth, Minnesota and San Antonio,
Texas. In connection with its operations outside of Minnesota and Texas, as of
December 31, 1994, the Company leased 1,588,000 aggregate square feet of office
space and space for computer facilities and claims processing centers in the
various areas in which its health plans or managed care services specialty
programs operate. The Company's leases for office space, computer facilities and
claims processing centers expire at various dates through 2000. As of December
31, 1994, the Company owned approximately 185,000 aggregate square feet of space
for administrative offices and its staff model clinic operations in Florida.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
The Company is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business. The Company is
periodically engaged in litigation concerning decisions made by its owned or
managed health plans and specialty managed care programs regarding benefit plan
coverage, and it may be subject to liability for adverse medical consequences,
particularly in its staff model health plans.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
--------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
The information contained under the heading "Investor Information" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1994, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
The information contained under the heading "Financial Highlights" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1994 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
-----------------------------------------------
The information contained under the heading "Financial Review" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1994 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The Company's Consolidated Financial Statements together with the Report of
Independent Public Accountants thereon appearing on pages 22 through 32 of the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1994 is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The information included under the headings "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held May 10, 1995, is incorporated herein by reference.
Pursuant to General Instruction G(3) to Form 10K and Instruction 3 to item
401(b) of Regulation S-K, information as to executive officers of the Company is
set forth in Part I of this Form 10-K under separate caption.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The information included under the heading "Executive Compensation" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held May 10, 1995, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
---------------------------------------------------------
AND MANAGEMENT
--------------
The Information included under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held May 10, 1995, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Information with respect to certain relationships and related transactions
appearing under the heading "Certain Relationships and Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held May 10, 1995, is incorporated herein by reference.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(a) 1. Financial Statements
--------------------
The following consolidated financial statements of the Company are included
in the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1994 and are incorporated herein by reference:
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Operations for the Three Years Ended December
31, 1994.
Consolidated Statements of Changes in Shareholders' Equity for the Three
Years Ended December 31, 1994.
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1994.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
(a) 2. Financial Statement Schedules
------------------------------
None
17
<PAGE>
(a) 3. Exhibits
--------
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3(a) Copy of the Company's Second Restated Articles of Incorporation.
3(b) Copy of the Company's Restated Bylaws, as amended. (Incorporated by
reference to Exhibit 3 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991).
*10(a) Employment Agreement dated as of January 1, 1993,
between United HealthCare Corpor. Corporation and William W.
McGuire, M.D. (Incorporated by reference to Exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).
*10(b) United Health Care Corporation 1985 Stock Option Plan, as
amended. (Incorporated by reference to Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).
*10(c) United HealthCare Corporation Restricted Stock Plan.
(Incorporated by reference to Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
*10(d) United HealthCare Corporation 1987 Supplemental Stock Option
Plan. (Incorporated by reference to Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).
*10(e) United HealthCare Corporation 1988 Stock Option Plan, as amended.
Incorporated by reference to Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992).
*10(f) United HealthCare Corporation 1990 Stock and Incentive Plan, as
amended. (Incorporated by reference to Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992).
*10(g) United HealthCare Corporation Amended and Restated 1991 Stock and
Incentive Plan (Incorporated by reference to Exhibit 99 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993).
*10(h) United HealthCare Corporation 1995 Executive Savings Plan.
*10(i) United HealthCare Corporation 1995 Management Incentive
Compensation Plan.
*10(j) Employment Agreement dated September 12, 1985, as amended,
between United HealthCare Corporation and Robert K. Ditmore
(Incorporated by reference to Exhibit 10(e) to the Company's
Registration Statement on Form S-1, File No. 33-1710 and Exhibit
28 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989).
*10(k) Employment Agreement, dated as of November 1, 1994, between
United HealthCare Corporation and Jeannine Rivet.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
*10(l) Employment Agreement dated October 9, 1990, between United
HealthCare Corporation and George B. Borkow. (Incorporated by
reference to Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990).
*10(m) Restated Employment Agreement dated as of May 27, 1994, between
United HealthCare Corporation and Travers H. Wills. (Incorporated
by reference to Exhibit 99.1 to the Company's Interim Report on
Form 8-K dated May 27, 1994).
*10(n) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and Kevin H. Roche.
*10(o) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and Kathy M. Walstead-Plumb.
*10(p) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and William W. Pogue.
*10(q) Employment Agreement dated as of December 1, 1994, between United
HealthCare Corporation and David P. Koppe.
*10(r) Employment Agreement dated as of November 1, 1994 between United
HealthCare Corporation and Sheila T. Leatherman.
*10(s) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and James A. Conto.
10(t) Agreement and Plan of Acquisition, dated January 19, 1994, among
United HealthCare Corporation, UHC Red Acquisition, Inc. and
Complete Health Services, Inc. (Incorporated by reference to
Exhibit 10(u) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
10(u) Agreement and Plan of Acquisition, dated February 15, 1994, among
United Health Care Corporation UHC Silver Acquisition, Inc. and
Ramsay-HMO, Inc. (Incorporated by reference to Exhibit 10(v) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
10(v) Stock Purchase Agreement, dated as of May 2, 1994, by and between
SmithKline Beecham Corporation and United HealthCare Corporation.
(Incorporated by reference to Exhibit 2.1 to the Company's
Interim Report on Form 8-K dated May 27, 1994).
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
10(w) Agreement and Plan of Merger By and Among United HealthCare
Corporation, UHC Blue Acquisition, Inc., GenCare Health
Systems, Inc. and General American Life Insurance Company.
(Incorporated by reference to Exhibit 2 to Company's Schedule
13-D in connection with issuer GenCare Health Systems, Inc.,
filed September 21, 1994.)
10(x) United HealthCare Corporation Nonemployee Director Stock Option
Plan
11 Statement regarding computation of per share earnings.
13 Information contained under the heading "Investor Information",
"Financial Highlights", "Financial Review" and the Company's
Consolidated Financial Statements and Notes together with the
Report of Independent Public Accountants thereon in the Company's
Annual Report to Shareholders for the fiscal year ended December
31, 1994, as required by Rule 601 (b)(13)(ii). (E.D.G.A.R.
version only)
21 Subsidiaries of the Registrant.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
27 Financial Data Schedule. (E.D.G.A.R. version only)
</TABLE>
* Denotes compensation plans in which certain directors and named executive
officers participate and which are being filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K.
(b) Reports on Form 8-K
-------------------
The following reports on Form 8-K were filed during the fourth quarter of
1994 and through March 17, 1995:
The Company filed a Current Report on Form 8-K dated November 3, 1994.
The only item reported on this filing was Item 5 concerning the Company's
announcement of its financial results for the quarter ended September 30,
1994.
The Company filed a Current Report on Form 8-K dated January 3, 1995. The
only item reported on this filing was Item 2 concerning the Company's
acquisition of GenCare Health Systems, Inc. This filing was subsequently
amended to include under Item 7 the Audited Consolidated Financial
Statements of GenCare Health Systems, Inc. and Subsidiaries for the years
ended December 31, 1994, 1993 and 1992 and pro forma condensed combining
financial information for the year ended December 31, 1994.
The Company filed a Current Report on Form 8-K dated February 14, 1995.
The only item reported on this filing was Item 5 concerning the Company's
announcement of its financial results for the quarter and year ended
December 31, 1994.
(c) See Exhibits listed in Item 14 hereof and the Exhibits attached as a
separate section of this Report.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 1995
UNITED HEALTHCARE CORPORATION
By: /s/ William W. McGuire, M.D.
----------------------------
William W. McGuire, M.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By /s/ William W. McGuire, M.D. Dated: March 28, 1995
-----------------------------
William W. McGuire, M.D.
Director, Chief Executive Officer
(principal executive officer)
By /s/ David P. Koppe Dated: March 28, 1995
-----------------------------
David P. Koppe
Chief Financial Officer
(principal financial and accounting officer)
By * Dated: March 28, 1995
-----------------------------
William C. Ballard, Jr.
Director
By * Dated: March 28, 1995
-----------------------------
Richard T. Burke
Director
By * Dated: March 28, 1995
-----------------------------
Robert K. Ditmore
Director
By * Dated: March 28, 1995
-----------------------------
James A. Johnson
Director
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
By * Dated: March 28, 1995
-----------------------------
Thomas H. Kean
Director
By * Dated: March 28, 1995
-----------------------------
Douglas W. Leatherdale
Director
By * Dated: March 28, 1995
-----------------------------
Elizabeth J. McCormack
Director
By * Dated: March 28, 1995
-----------------------------
James L. Seiberlich
Director
By * Dated: March 28, 1995
-----------------------------
William G. Spears
Director
By * Dated: March 28, 1995
-----------------------------
Gail R. Wilensky
Director
By * Dated: March 28, 1995
-----------------------------
George B.Borkow
Director
*By /s/ William W. McGuire, M.D. Dated: March 28, 1995
-----------------------------
William W. McGuire, M.D.
As Attorney-in-Fact
</TABLE>
22
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
3(a) Copy of the Company's Second Restated Articles of Incorporation. 28
3(b) Copy of the Company's Restated Bylaws, as amended. (Incorporated by
reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1991). --
10(a) Employment Agreement dated as of January 1, 1993, between United
HealthCare Corporation and William W. McGuire, M.D. (Incorporated by
reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993). --
*10(b) United Health Care Corporation 1985 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993). --
*10(c) United HealthCare Corporation Restricted Stock Plan. (Incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993). --
*10(d) United HealthCare Corporation 1987 Supplemental Stock Option Plan.
(Incorporated by reference to Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993). --
*10(e) United HealthCare Corporation 1988 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992). --
*10(f) United HealthCare Corporation 1990 Stock and Incentive Plan, as
amended. (Incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992). --
*10(g) United HealthCare Corporation Amended and Restated 1991 Stock and
Incentive Plan (Incorporated by reference to Exhibit 99 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993). --
*10(h) United HealthCare Corporation 1995 Executive Savings Plan. 44
*10(i) United HealthCare Corporation 1995 Management Incentive Compensation
Plan. 64
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
10(j) Employment Agreement dated September 12, 1985, as amended, between
United HealthCare Corporation and Robert K. Ditmore (Incorporated by
reference to Exhibit 10(e) to the Company's Registration Statement on
Form S-1, File No. 33-1710 and Exhibit 28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1989). --
10(k) Employment Agreement, dated as of November 1, 1994, between United
HealthCare Corporation and Jeannine Rivet. 73
10(l) Employment Agreement dated October 9, 1990, between United HealthCare
Corporation and George B. Borkow. (Incorporated by reference to
Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990). --
10(m) Restated Employment Agreement dated as of May 27, 1994, between United
HealthCare Corporation and Travers H. Wills. (Incorporated by
reference to Exhibit 99.1 to the Company's Interim Report on Form 8-K
dated May 27, 1994). --
10(n) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and Kevin H. Roche. 80
10(o) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and Kathy M. Walstead-Plumb. 87
10(p) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and William W. Pogue. 94
10(q) Employment Agreement dated as of December 1, 1994, between United
HealthCare Corporation and David P. Koppe. 101
10(r) Employment Agreement dated as of November 1, 1994 between United
HealthCare Corporation and Sheila T. Leatherman. 108
10(s) Employment Agreement dated as of November 1, 1994, between United
HealthCare Corporation and James Conto. 115
10(t) Agreement and Plan of Acquisition, dated January 19, 1994, among
United HealthCare Corporation, UHC Red Acquisition, Inc. and Complete
Health Services, Inc. (Incorporated by reference to Exhibit 10(u) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1993). --
10(u) Agreement and Plan of Acquisition, dated February 15, 1994, among
United Health Care Corporation UHC Silver Acquisition, Inc. and
Ramsay-HMO, Inc. (Incorporated by reference to Exhibit 10(v) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993). --
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
10(v) Stock Purchase Agreement, dated as of May 2, 1994, by and between
SmithKline Beecham Corporation and United HealthCare Corporation.
(Incorporated by reference to Exhibit 2.1 to the Company's Interim
Report on Form 8-K dated May 27, 1994). --
10(w) Agreement and Plan of Merger By and Among United HealthCare
Corporation, UHC Blue Acquisition, Inc., GenCare Health Systems, Inc.
and General American Life Insurance Company. (Incorporated by
reference to Exhibit 2 to Company's Schedule 13-D in connection with
issuer GenCare Health Systems, Inc., filed September 21, 1994.) --
10(x) United HealthCare Corporation Nonemployee Director Stock Option Plan 122
11 Statement regarding computation of per share earnings.
13 Information contained under the heading "Investor Information",
"Financial Highlights", "Financial Review" and the Company's
Consolidated Financial Statements and Notes together with the Report
of Independent Public Accountants thereon in the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1994, as
required by Rule 601(b)(13)(ii). (E.D.G.A.R. version only) 127
21 Subsidiaries of the Registrant. 151
23 Consent of Independent Public Accountants. 153
24 Powers of Attorney 154
27 Financial Data Schedule. (E.D.G.A.R. version only) 165
</TABLE>
25
<PAGE>
SECOND RESTATED
ARTICLES OF INCORPORATION
OF
UNITED HEALTHCARE CORPORATION
1. The name of the corporation is United HealthCare Corporation, a
Minnesota corporation.
2. The document entitled "Second Restated Articles of Incorporation of
United HealthCare Corporation" marked Exhibit A and attached hereto,
contains the full text of amendments to the articles of incorporation of
United HealthCare Corporation.
3. The date of adoption of the amendment by the board of directors of such
corporation was February 10, 1994. The date of adoption of the
amendment by the shareholders of such corporation was May 11, 1994.
4. With the exception of the provisions contained under Article 3(a), the
amendment merely restates the existing articles as amended and correctly
sets forth without change the corresponding provisions of the articles
as previously restated. The shareholders of the Company adopted Article
3(a) as an amendment to the existing Articles of Incorporation at their
Annual Meeting of Shareholders for 1994 held on May 11, 1994.
5. The amendment restates the articles in their entirety and the restated
articles supersede the original articles and all amendments to them.
6. The amendment has been adopted pursuant to Chapter 302A of the Minnesota
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, the secretary of United
HealthCare Corporation, being duly authorized on behalf of the Corporation,
has executed this document this 13th day of May, 1994.
/s/ Kevin H. Roche'
-----------------------
Kevin H. Roche'
Secretary
<PAGE>
SECOND RESTATED
ARTICLES OF INCORPORATION
OF
UNITED HEALTHCARE CORPORATION
1. The name of this corporation shall be United HealthCare
Corporation.
2. The address of the registered office of this corporation is
9900 Bren Road East, Minnetonka, Hennepin County, Minnesota 55343.
3. (a) Authorized Classes of Stock. The total number of
shares of capital stock which this corporation is authorized to issue is
510,000,000 shares, including 500,000,000 shares of Common Stock, $.01 par
value, and 10,000,000 shares of Preferred Stock, $.001 par value. Shares
of each class of stock of the corporation may be issued for such
consideration and for such corporate purposes as the Board of Directors may
from time to time determine.
(b) Serial Preferred Stock. The Board of Directors of the
corporation is hereby authorized to issue from time to time one or more series
of the Preferred Stock and, with respect to each such series, to fix by
resolution of a majority of the whole Board of Directors the relative rights and
preference of each series. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, the determination or fixing
of the following:
(i) The number of shares constituting such series and the
designation of such series.
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other classes or
series of the corporation's capital stock, and whether such dividends
shall be cumulative or non-cumulative.
(iii) Whether the shares of such series shall be subject to
redemption by the corporation at the option of either the corporation
or the holder or both, or upon the happening of a specified event, and
the terms and conditions of such redemption.
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series.
<PAGE>
(v) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class, and
the terms of such conversion or exchange.
(vi) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock, including increases or decreases in the
number of shares of any series subsequent to the issue of shares of
that series.
(vii) The rights of the holders of the shares of such series
upon the voluntary/involuntary liquidation, dissolution or winding up
of the corporation.
(viii) Any right to vote with holders of shares of any series
or class.
(c) Common Stock. The holders of the Common Stock shall have and
possess all rights as stockholders of the corporation, except if such rights may
be limited by the preferences, rights, limitations, and restrictions of the
Preferred Stock.
(d) Pre-emptive Rights. No holders of shares of any class or
series of this corporation shall have any pre-emptive rights to subscribe for
any shares of any class or series of stock of this corporation, whether now or
hereafter authorized, or for any obligations convertible into shares of any
class or series of stock of this corporation, whether now or hereafter
authorized.
(e) Cumulative Voting. No holders of shares of any class or
series of this corporation shall have any right to cumulate votes for the
election of the Board of Directors.
(f) Shareholder Approval. Shares of any class or series of the
corporation may be issued to the holders of shares of another class or series of
the corporation, whether to effect a share dividend or split or otherwise,
without the authorization or approval of the holders of shares of any class or
series of the corporation, except as otherwise provided in the designation of
any series of Preferred Stock.
4. (a) The board of directors of this corporation shall be divided
into three classes, Class I, Class II and Class III, as nearly equal in number
as possible, with the term of office of Class I expiring at the annual meeting
of shareholders of this corporation in 1984, of Class II expiring at the annual
meeting of shareholders in 1985 and of Class III expiring at the annual meeting
of shareholders in 1986. At each annual meeting of shareholders, directors
chosen to succeed those whose terms then expire shall be elected for a term of
office expiring at the third succeeding annual meeting of shareholders after
their election.
(b) No director of this corporation shall be removed from office
with or without cause without (i) the affirmative vote of the holders of not
less than 66-2/3 percent of the outstanding shares of Common Stock of this
corporation, or (ii)
<PAGE>
the affirmative vote of 66-2/3 percent of the directors in office at the
time such vote is taken.
(c) This Article 4 may not be amended, altered, changed or
repealed without the affirmative vote of the holders of not less than 66-2/3
percent of the outstanding shares of Common Stock of this corporation.
5. (a) The affirmative vote of the holders of not less than 66-2/3
percent of the outstanding shares of capital stock of this corporation entitled
to vote generally in the election of directors shall be required for approval or
authorization of any Business Combination (as hereinafter defined) of this
corporation with any Related Person; provided, however, that the 67 percent
voting requirement shall not apply if:
(i) The Continuing Directors of this corporation (as hereinafter
defined) by a two-thirds vote (A) have expressly approved in advance
the acquisition of outstanding shares of Common Stock of this
corporation that caused the Related Person to become a Related Person,
or (B) have approved the Business Combination prior to the Related
Person involved in the Business Combination having become a Related
Person;
(ii) The Business Combination is solely between this corporation
and another corporation, one hundred percent of the capital stock of
which is owned, directly or indirectly, by this corporation; or
(iii) The Business Combination is a merger or consolidation and
the cash or fair market value as determined by this corporation's
board of directors, of the property, securities and other
consideration to be received per share by holders of the Common Stock
in the Business Combination is not less than the highest per share
price (with appropriate adjustments for recapitalizations and for
stock splits, stock dividends and like distributions, if any) paid by
the Related Person in acquiring any of its holdings of this
corporation's Common Stock.
(b) The term "Business Combination" shall mean (i) any merger or
consolidation of this corporation or a subsidiary thereof with or into a Related
Person, (ii) any sale, lease, exchange, transfer or other disposition, in one
transaction or a series of related transactions, of all or any Substantial Part
(as hereinafter defined) of the assets either of this corporation (including
without limitation any voting securities of a subsidiary thereof) or of a
subsidiary thereof, to a Related Person, (iii) any merger or consolidation of a
Related Person with or into this corporation or a subsidiary thereof, (iv) any
sale, lease, exchange, transfer or other disposition, in one transaction or a
series of related transactions, of all or any Substantial Part of the assets of
a Related Person to this corporation or a subsidiary thereof, (v) the issuance
of any securities of this corporation or a subsidiary thereof to a Related
Person, (vi) any reclassification of securities, recapitalization or other
transaction that would have the effect of increasing the voting power of a
Related Person and (vii) any agreement, contract or other
<PAGE>
arrangement providing for any of the transactions described in this
definition of Business Combination.
(c) The term "Related Persons" shall mean and include any
individual, corporation, partnership or other person or entity which, together
with its "Affiliates" and "Associates" (as defined by Rule 12b-2 under the
Securities Exchange Act of 1934), "Beneficially Owns" (as defined by Rule 13d-3
under the Securities Exchange Act of 1934) in the aggregate 20 percent or more
of the outstanding Common Stock of this corporation, and any Affiliate or
Associate of any such individual corporation, partnership or other person or
entity.
(d) The term "Substantial Part" shall mean more than 30 percent
of the fair market value of the total assets of the corporation in question, as
of the end of its most recent fiscal year ending prior to the time the
determination is being made.
(e) Without limitation, any shares of Common Stock of this
corporation that any Related Person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options or
otherwise, shall be deemed beneficially owned by the Related Person.
(f) For the purposes of subparagraph (3) of this Article Five the
term "other consideration to be received" shall include, without limitation,
Common Stock of this corporation retained by its existing stockholders in the
event of a Business Combination in which this corporation is the surviving
corporation.
(g) The term "Continuing Director" shall mean a director who was
a member of the board of directors of this corporation immediately prior to the
time that the Related Person involved in a Business Combination became a Related
Person.
(h) This Article 5 may not be amended, altered, changed or
repealed without the affirmative vote of the holders of not less than 66-2/3
percent of the outstanding shares of capital stock of this corporation entitled
to vote generally in the election of directors.
6. An action required or permitted to be taken at a meeting of
the Board of Directors of the corporation may be taken by a written action,
signed, or counterparts of a written action signed in the aggregate, by all
of the directors unless the action need not be approved by the shareholders
of the corporation, in which case the action may be taken by a written
action signed, or counterparts of a written action signed in the aggregate,
by the number of directors that would be required to take the same action
at a meeting of the Board of Directors of the corporation at which all of
the directors were present.
7. The provisions of Section 302A.671 of the Minnesota Statutes
shall not apply to this corporation.
<PAGE>
8. A director of this corporation shall not be personally
liable to the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under Sections
302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from
which the director derived an improper personal benefit; or (v) for any act
or omission occurring prior to the date when this Article 8 became
effective.
If the Minnesota Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Minnesota
Business Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions of this
Article 8 by the shareholders of the corporation shall not adversely affect
any right or protection of a director of the corporation existing at the
time of such repeal or modification.
Attached to these Restated Articles is a copy of the the Certificate of
Designation filed with the Minnesota Secretary of State on February 19,
1988 with respect to the resolution adopted by the Board of Directors on
November 11, 1987 establishing the Series A, Series B & Series C
Convertible Preferred Stock, which also continues in effect as part of the
Restated Articles.
<PAGE>
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES
OF
CONVERTIBLE PREFERRED STOCK
OF
UNITED HEALTHCARE CORPORATION
I, Kennett L. Simmons, being first duly sworn, do hereby certify
that I am the Vice Chairman and Chief Operating Officer of United
HealthCare Corporation (the "Corporation"), a Minnesota corporation, and
that the following resolution was adopted by the Board of Directors of the
Corporation at a meeting held on November 11, 1987:
RESOLVED, that pursuant to the authority granted to the Board of
Directors of the Corporation under Section 3 of the Restated Articles of
Incorporation of the Corporation, the Board of Directors hereby designates
three series of preferred stock, par value $.001 per share, of the
Corporation, to consist of an aggregate of 100,000 shares, and hereby fixes
and determines the powers, preferences, and rights of the shares of such
series and the qualifications, limitations, or restrictions thereof in
addition to those relating to all series of preferred stock as set forth in
Section 3 of the Restated Articles of Incorporation of the Corporation as
follows:
Section 1. Designation of Series of Preferred Stock.
- ---------- -----------------------------------------
Thirty-three thousand three hundred and thirty-four (33,334)
shares of the Preferred Stock, $.001 par value, authorized by the
Corporation's Articles of Incorporation are hereby designated "Series A
Preferred Stock," thirty-three thousand three hundred and thirty-three
(33,333) shares of the Preferred Stock authorized by the Corporation's
Articles of Incorporation are hereby designated "Series B Preferred Stock,"
and thirty-three thousand three hundred and thirty-three (33,333) shares of
the Preferred Stock authorized by the Corporation's Articles of
Incorporation are hereby designated "Series C Preferred Stock, each having
the powers, preferences, rights, qualifications, limitations and
restrictions specified herein. Except as set forth below, the powers,
preferences, rights, qualifications, limitations and restrictions of the
Series A Preferred Stock, the Series B Preferred Stock, and the Series C
Preferred Stock (which shall be collectively referred to as the "Preferred
Shares") shall be identical.
The Preferred Shares, together with the 300,000,000 authorized
shares of Common Stock, $.01 par value, of the Corporation (the "Common
Stock") and the balance of the Preferred Stock of the Corporation, are
sometimes hereinafter collectively referred to as the "Capital Stock."
Section 2. Voting Rights.
- ---------- --------------
<PAGE>
(a) General. Each holder of Preferred Shares shall have one
-------
vote on all matters submitted to the shareholders for each share of Common
Stock which such holder of Preferred Shares would be entitled to receive
upon the conversion of the Preferred Shares pursuant to the provisions of
section 5. In addition, each holder of Preferred Shares shall have the
special voting rights which are described in section 2(b). Except as
otherwise provided herein, and except as otherwise required by agreement or
law, the Preferred Shares and the shares of Common Stock of the Corporation
shall vote as a single class on all matters submitted to stockholders.
(b) Special Voting Rights. Without the affirmative vote of the
---------------------
holders (acting together as a class) of at least a majority of the
Preferred Shares at the time outstanding given in person or by proxy at any
annual meeting, or at such special meeting called for that purpose, or, if
permitted by law, in writing without a meeting, this Corporation shall not:
(i) authorize or issue any (A) additional Preferred Shares or (B) shares of
stock having priority over the Preferred Shares or ranking on a parity
therewith as to the payment of dividends or as to the payment or
distribution of assets upon the liquidation or dissolution, voluntary or
involuntary, of this Corporation; or (ii) alter or amend the rights or
preferences of Preferred Shares as stated in these Articles of
Incorporation.
Section 3. Dividends.
- ---------- ----------
(a) Dividends on the Preferred Shares shall not begin to accrue
until January 1, 1994. Dividends on the Series A Preferred Stock shall
accrue commencing on January 1, 1994 and shall be cumulative thereafter,
whether or not earned. After January 1, 1994, the holders of the Series A
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of the assets of the Corporation legally available
therefor, cash dividends at the rate of $5.213 per share until January 1,
1998 and thereafter at the rate of $6.95 per share, such dividends to be
payable quarterly not later than the last business day of each March, June,
September, and December. Dividends on the Series B Preferred Stock shall
begin to accrue on January 1, 1995 and shall be cumulative thereafter,
whether or not earned. After January 1, 1995, the holders of the Series B
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of the assets of the Corporation legally available
therefor, cash dividends at the rate of $5.213 per share until January 1,
1999 and thereafter, at the rate of $6.95 per share, such dividends to be
payable quarterly not later than the last business day of each March, June,
September, and December. Dividends on the Series C Preferred Stock shall
begin to accrue on January 1, 1996 and shall be cumulative thereafter,
whether or not earned. After January 1, 1996, the holders of the Series C
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of the assets of the Corporation legally available
therefor, cash dividends at the rate of $5.213 per share until January 1,
-2-
<PAGE>
1999 and thereafter, at the rate of $6.95 per share, such dividends to be
payable quarterly not later than the last business day of each March, June,
September, and December.
(b) In no event shall any dividend be paid or declared, nor
shall any distribution be made on the shares of Common Stock, nor shall any
shares of Common Stock be purchased, redeemed, or otherwise acquired by the
Corporation for value, unless all dividends on the Preferred Shares for all
past quarterly dividend periods and for the then current quarterly dividend
period shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment.
(c) In the event that any six quarterly cumulative dividends,
whether consecutive or not, upon the Preferred Shares shall be in arrears,
the holders of the Preferred Shares shall have the right, at the next
meeting of shareholders called for election of directors, to elect a
majority of the members of the Board of Directors out of the number fixed
by the by-laws, and the holders of the Preferred Shares shall continue to
have such right until all unpaid dividends upon the Preferred Shares shall
have been paid in full.
Section 4. Liquidation Right and Preference.
- ---------- ---------------------------------
In the event of the liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, or in the event of the
sale of all or substantially all of its assets to another corporation, the
holders of the Preferred Shares shall be entitled to receive in cash, out
of the assets of this Corporation, an amount equal to the Redemption Price
per share as provided in section 6 hereof, for each outstanding Preferred
Share, before any payment shall be made or any assets distributed to the
holders of shares of Common Stock or any other class of shares of this
Corporation ranking junior to the Preferred Shares. In the event of any
capital reorganization or reclassification of the capital stock of the
Corporation, or consolidation or merger of this Corporation with another
corporation, each holder of the Preferred Shares shall, at its option
exercisable by written notice to this Corporation within fifteen (15) days
after receipt from this Corporation of written notice of such transaction,
be entitled to receive, on a priority basis, cash, securities, or other
property payable or issuable in such transaction with a value of the
Redemption Price per share as provided in section 6 hereof, for each
outstanding Preferred Share, before any payment or distribution shall be
made to the holders of the shares of Common Stock. If, upon any
liquidation or dissolution of this Corporation or the sale by this
Corporation of all or substantially all of its assets or such
reorganization or consolidation or merger, the assets of the Corporation
are insufficient to pay the Redemption Price per share as provided in
section 6 hereof, the holders of such Preferred Shares shall share pro rata
in any such distribution in proportion to the full amounts to which they
would otherwise be respectively entitled. Following such payment to the
holders of the Preferred Shares upon such
-3-
<PAGE>
liquidation, dissolution, sale, reorganization, consolidation, or merger, the
holders of the shares of Common Stock shall then be entitled, to the exclusion
of the holders of the Preferred Shares, to share ratably in all the assets of
this Corporation thereafter remaining.
Section 5. Conversion Rights.
- ---------- ------------------
(a) Optional Conversion. Each Preferred Share shall be
-------------------
convertible at the option of the holder thereof into shares of Common Stock
of this Corporation in accordance with the provisions and subject to the
adjustments provided for in section 5(b), although each Preferred Share
called for redemption by this Corporation shall cease to be convertible on
and after the redemption date if provision shall have been made for its
payment. In order to exercise the conversion privilege, a holder of the
Preferred Shares shall surrender the certificate to the Corporation at its
principal office, duly endorsed to the Corporation and accompanied by
written notice to the Corporation that the holder elects to convert a
specified portion or all of such shares. Preferred Shares converted at the
option of the holder shall be deemed to have been converted on the day of
surrender of the certificate representing such shares for conversion in
accordance with the foregoing provisions, and at such time the rights of
the holder of such Preferred Shares, as such holder, shall cease and such
holder shall be treated for all purposes as the record holder of the shares
of Common Stock issuable upon conversion. As promptly as practicable on or
after the conversion date, the Corporation shall issue and mail or deliver
to such holder a certificate or certificates for the number of shares of
Common Stock issuable upon conversion, computed to the nearest one
hundredth of a full share, and a certificate or certificates for the
balance of the Preferred Shares surrendered, if any, not so converted into
shares of Common Stock.
(b) Conversion Price and Adjustments. The number of shares of
--------------------------------
Common Stock issuable in exchange for Preferred Shares upon conversion
shall be equal to the number of whole shares obtained by dividing the
Redemption Price as provided for in section 6 by the conversion price then
in effect (the "Conversion Price"). The Conversion Price shall initially
be $4.50, but shall be subject to adjustment from time to time as
hereinafter provided:
(i) In case this Corporation shall at any time subdivide or
split its outstanding shares of Common Stock into a greater number of
shares or declare any dividend payable in shares of Common Stock, the
Conversion Price in effect immediately prior to such subdivision, split, or
dividend shall be proportionately decreased, and conversely, in case the
outstanding shares of Common Stock of this Corporation shall be combined
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(ii) If and whenever this Corporation shall issue or sell
any of its shares of Common Stock for a consideration per share less than
-4-
<PAGE>
the Conversion Price then in effect, or shall issue any options, warrants,
convertible securities or other rights for the purchase of such shares at a
consideration per share of less than the Conversion Price then in effect
(other than shares of Common Stock issuable under options and warrants
outstanding on the date the Preferred Shares are originally issued or other
options or rights for the purchase of shares of Common Stock pursuant to
Stock Option, Stock Purchase, or Restricted Stock Plans of the Company in
effect on the date the Preferred Shares are originally issued), the
Conversion Price in effect immediately prior to such issuance or sale shall
be adjusted and shall be equal to (i) the Conversion Price then in effect,
multiplied by (ii) a fraction, the numerator of which shall be an amount
equal to the sum of (A) the number of this Corporation's shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by
the Conversion Price then in effect, and (B) the total consideration
payable to this Corporation upon such issuance or sale of such shares and
such purchase rights and upon the exercise of such purchase rights, and the
denominator of which shall be the amount determined by multiplying (aa) the
number of shares of Common Stock outstanding immediately after such
issuance or sale plus the number of the shares of Common Stock issuable
upon the exercise of any purchase rights thus issued, by (bb) the
Conversion Price then in effect. If any options or purchase rights that
are taken into account in any such adjustment of the Conversion Price
subsequently expire without exercise, the Conversion Price shall be
recomputed by deleting such options or purchase rights.
(iii) The anti-dilution provisions of this section 5(b) may be
waived by the affirmative vote of the holders (acting together as a class) of at
least fifty percent (50%) of the then outstanding Preferred Shares.
(iv) If the Corporation takes any other action, or if any other
event occurs, which does not come within the scope of the provisions of sections
5(b)(i), 5(b)(ii), or 5(b)(iii), but which should result in an adjustment in the
Conversion Price and/or the number of shares issuable upon conversion of the
Preferred Shares in order to fairly protect the conversion rights of the holders
of the Preferred Shares, an appropriate adjustment in such conversion rights
shall be made by the Corporation.
(v) In case any shares of Common Stock or options, warrants,
convertible securities, or other rights to purchase shares of Common Stock shall
be issued or sold for cash, the consideration received therefor shall be deemed
to be the amount received by the Corporation therefor, without deducting
therefrom any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Corporation in connection with such issuance or sale. In
case any shares of Common Stock or options, warrants, convertible securities, or
other rights to purchase shares of Common Stock shall be issued or sold for
consideration other than cash, the amount of the consideration other than
-5-
<PAGE>
cash received by the Corporation shall be deemed to be the fair value of such
consideration as determined by the Board of Directors of the Corporation,
without deducting therefrom any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection with
such issuance or sale.
(c) Notice of Conversion Price Adjustment. Upon any adjustment
-------------------------------------
of the Conversion Price, then and in each such case the Corporation shall
give written notice thereof, by first-class mail, postage prepaid,
addressed to the registered holders of the Preferred Shares at the
addresses of such holders as shown on the books of this Corporation, which
notice shall state the Conversion Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares receivable at
such price upon the conversion of the Preferred Shares, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(d) Rights to Preconversion Distributions. The holders of
-------------------------------------
Preferred Shares shall have the following rights to certain properties
received by the holders of shares of Common Stock:
(i) In case this Corporation shall declare a dividend or
distribution upon its shares of Common Stock payable (other than in cash
out of earnings or surplus or other than in shares of Common Stock), then
thereafter each holder of Preferred Shares upon the conversion thereof will
be entitled to receive the number of shares of Common Stock into which such
Preferred Shares shall be converted, and, in addition and without payment
therefor, the property which such holder would have received as a dividend
if continuously since the record date for any such dividend or distribution
such holder (A) had been the record holder of the number of shares of
Common Stock then received, and (B) had retained all dividends or
distributions in stock or securities payable in respect of such shares of
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such shares of
Common Stock.
(ii) Subject to the provisions of section 4 regarding
liquidation rights, if any capital reorganization or reclassification of
the capital stock of this Corporation, or consolidation or merger of this
Corporation with another corporation, or the sale of all or substantially
all of its assets to another corporation shall be effected in such a way
that holders of shares of Common Stock shall be entitled to receive stock,
securities, or assets with respect to or in exchange for shares of Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale, lawful and adequate provision shall be made
whereby the holders of Preferred Shares shall thereafter have the right to
receive, in lieu of the shares of Common Stock of this Corporation
immediately theretofore receivable upon the conversion of such Preferred
Shares, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a
-6-
<PAGE>
number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore receivable upon the conversion of such
Preferred Shares had such reorganization, reclassification, consolidation,
merger, or sale not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the holders of the
Preferred Shares to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price and of the number
of shares receivable upon the conversion of such Preferred Shares) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities, or assets thereafter receivable upon the conversion of such
Preferred Shares. This Corporation shall not effect any such consolidation,
merger, or sale, unless prior to the consummation thereof the surviving
corporation (if other than this Corporation), the corporation resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument executed and mailed to the registered holders of the
Preferred Shares at the last address of such holders appearing on the books of
the Corporation, the obligation to deliver to such holders such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to receive.
(e) Notice of Certain Events. In case any time:
------------------------
(i) this Corporation shall pay any dividend payable in
stock upon its shares of Common Stock or make any distribution (other than
regular cash dividends) to the holders of its shares of Common Stock; or
(ii) this Corporation shall offer for subscription pro rata
to the holders of its shares of Common Stock any additional shares of stock
of any class or other rights; or
(iii) there shall be any capital reorganization, reclassification
of the capital stock of this Corporation, or consolidation or merger of this
Corporation with, or sale of all or substantially all of its assets, to another
corporation; provided, however, that this provision shall not be applicable to
the merger or consolidation of this Corporation with or into another corporation
if, following such merger or consolidation, the shareholders of this Corporation
immediately prior to such merger or consolidation own at least 80% of the equity
of the combined entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then, in any one or more of
said cases, this Corporation shall give written notice, by first-class
mail, postage prepaid, addressed to the holders of the Preferred Shares at
the addresses of such holders as shown on the books of this Corporation, of
the date on which (A) the books of this Corporation shall close or a record
shall be taken for such dividend, distribution, or
-7-
<PAGE>
subscription rights, or (B) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of record of shares of Common Stock shall participate in such
dividend, distribution, or subscription rights, or shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least twenty (20) days prior to the action in question and not less
than twenty (20) days prior to the record date or the date on which this
Corporation's transfer books are closed in respect thereto.
(f) Definition of Common Shares. As used in this section 5 the
---------------------------
term "shares of Common Stock" shall mean and include this Corporation's
currently authorized shares of Common Stock, $.01 par value, and shall also
include any capital stock of any class of this Corporation hereafter
authorized which shall have the right to vote on all matters submitted to
the shareholders of this Corporation and shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution, or winding up of this
Corporation; provided that the shares receivable pursuant to conversion of
the Preferred Shares shall include shares designated as shares of Common
Stock of this Corporation as of the date of issuance of such Preferred
Shares, or, in case of any reclassification of the outstanding shares
thereof, the stock, securities, or assets provided for in section
(5)(d)(ii) above.
(g) The shares of Common Stock issued upon the conversion of the
Preferred Shares shall, upon issuance, be duly authorized and issued, fully
paid, and nonassessable shares of Common Stock of the Corporation. There
shall be at all times authorized, and reserved for the purpose of issue or
transfer upon conversion of the Preferred Shares, a sufficient number of
shares of Common Stock to provide such conversion of the Preferred Shares.
Section 6. Redemption Rights.
- --------- -----------------
The Preferred Shares are subject to redemption at the election of
the Corporation, in whole or in part, on or after the second anniversary of
the date of the original issuance of the Preferred Shares, or upon such
earlier date as the Corporation's net worth shall exceed $90,000,000 and
its annual net income shall exceed $17,000,000, at a redemption price (the
"Redemption Price") which shall equal the sum of $100 per share, plus
$1.625 per share for each fiscal quarter during which the Preferred Shares
to be redeemed are outstanding after January 1, 1988, up to a maximum of
$39.00 per share for Preferred Shares outstanding through the fourth fiscal
quarter of 1993, plus the amount of all accrued but unpaid dividends.
-8-
<PAGE>
The Corporation shall give notice by mail of redemption to the
holders of record of Preferred Shares at least thirty (30) days prior to
each of such dates of redemption. The notice (a) shall specify the date of
redemption and the number of shares to be redeemed from each holder
(subject to reduction due to conversion of Preferred Shares by such holder
before the date of redemption) and (b) shall be addressed to each holder at
such holder's address as shown on the records of this Corporation. On or
after the date fixed for redemption, each holder of Preferred Shares called
for redemption shall surrender the certificate or certificates evidencing
such shares to this Corporation at the place designated in such notice and
shall thereupon be entitled to receive payment. If less than all of the
shares represented by any such surrendered certificate or certificates are
redeemed, this Corporation shall issue a new certificate for the unredeemed
shares. All Preferred Shares which are in any manner redeemed or acquired
by this Corporation shall be retired and cancelled and none of such shares
shall be reissued.
Section 7. Approval of Certain Transactions.
- --------- --------------------------------
Unless Warburg, Pincus Capital Company, L.P. ("Warburg, Pincus")
shall consent to the following transactions, for as long as Warburg, Pincus
or an affiliate owns the Preferred Shares (but not the shares of Common
Stock issued upon conversion of the Preferred Shares) the Corporation will
(a) not issue additional shares of the Preferred Stock including the
Preferred Shares; (b) not issue shares of Common Stock in an amount greater
than 15 percent of the outstanding shares of Common Stock except pursuant
to (i) a bona fide public offering or (ii) an employee benefit plan of the
Corporation; (c) not repurchase shares of Common Stock or preferred stock
(except for the Preferred Shares); (d) not make or incur any loan or
capitalized lease obligation in excess of $10,000,000 or mortgage, pledge,
or otherwise grant a security interest in a material portion of the
Corporation's assets (except in connection with amendments to the
Corporation's existing revolving credit agreement or the replacement of
such credit agreement); (e) not enter into business lines outside of
managed health care and related businesses; or (f) not enter into any
material transactions with a holder of 5 percent or more of the outstanding
shares of the Corporation's Common Stock other than in the ordinary course
of business and on terms not less favorable than would result from an arms-
length transaction.
-9-
<PAGE>
IN WITNESS WHEREOF, The Corporation has caused this certificate
to be duly executed on its behalf by its undersigned President this 19th
day of February, 1988.
/s/ Kennett L. Simmons
-----------------------------
Kennett L. Simmons,
Vice Chairman and Chief
Operating Officer
United HealthCare Corporation
STATE OF MINNESOTA )
) SS
COUNTY OF HENNEPIN )
Subscribed and sworn to before me this 19th day of February,
1988.
/s/ Carla E. Colburn
--------------------
Notary Public
(Notarial Seal)
CARLA E. COLBURN
NOTARY PUBLIC-MINNESOTA
HENNEPIN COUNTY
MY COMMISSION EXPIRES JANUARY 12, 1992
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
FEB 19 1988
/s/ Joan Anderson Growe
Secretary of State
-10-
<PAGE>
IMPORTANT NOTICE
----------------
The attached materials contain important information about the 1995 United
HealthCare Corporation/SM/ Executive Savings Plan ("the Plan"). You should read
these materials as soon as possible in order to make the necessary elections
under the Plan.
Since eligibility for certain benefits under the Plan depends on your 1995
elections under the United HealthCare Corporation 401(k) Savings Plan, you
should read the attached materials before enrolling under the 401(k) Savings
------
Plan.
PLEASE NOTE: THE DEADLINE FOR ENROLLING IN PART I OF THE PLAN ("THE 401(K) KEEP
WHOLE" PART) IS DECEMBER 19, 1994.
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
PLAN DESCRIPTION
(RESTATED)
United HealthCare Corporation/SM/ ("Plan Sponsor") hereby establishes an
unfunded employee benefit plan primarily for the purpose of providing deferred
compensation for a select group of persons who qualify as eligible management or
highly compensated employees. The name of this benefit plan is the 1995 United
HealthCare Corporation Executive Savings Plan ("Plan").
The purpose of the Plan is to provide unfunded deferred compensation benefits,
as described in and under the terms and conditions set forth in this Plan
Description including the Explanation attached as Exhibit A to this Plan
Description.
This Plan is intended to be an unfunded plan maintained by Plan Sponsor under
the Employee Retirement Income Security Act of 1974 ("ERISA") primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees ("unfunded top hat plan").
The Plan's general effective date is January 1, 1995. This Plan supersedes any
current or prior plan, policy or program related to unfunded deferred
compensation. Any such current or prior plan, policy or program is terminated
as of the effective date of this Plan. Although the Plan Sponsor currently
intends to continue the benefits provided by this Plan, the Plan Sponsor
reserves the right, at any time and for any reason or no reason at all, to
change, amend, interpret, modify, withdraw or add benefits or terminate this
Plan, in whole or in part and in its sole discretion, without prior notice to or
approval by Plan participants and their beneficiaries. Any change or amendment
to or termination of the Plan, its benefits or its terms and conditions, in
whole or in part, shall be made solely in a written amendment (in the case of a
change or amendment) or in a written resolution (in the case of termination),
whether prospective or retroactive, to the Plan, approved by the Board of
Directors of the Plan Sponsor or their designee to whom such Board has delegated
in writing the foregoing authority. No person or entity has any authority to
make any oral changes or amendments to the Plan.
This Plan Description, including the Explanation attached as Exhibit A,
constitutes the entire Plan.
United HealthCare Corporation
- -----------------------------
(Plan Sponsor)
By: ------------------------
Name
------------------------
Title
Date:------------------------
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
EFFECTIVE JANUARY 1, 1995
EXPLANATION
FOR
ELIGIBLE EXECUTIVES
<PAGE>
EXHIBIT A
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
EFFECTIVE JANUARY 1, 1995
EXPLANATION
FOR
ELIGIBLE EXECUTIVES
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
EXPLANATION FOR ELIGIBLE EXECUTIVES
INTRODUCTION
This Explanation describes the terms and conditions of the 1995 United
HealthCare Corporation Executive Savings Plan ("Plan"). Read this document
carefully so that you will have a clear understanding of the Plan. If you have
any questions, you may call the Plan Administrator at (612) 936-1300.
Plan Sponsor and Plan Administrator have sole and exclusive discretion in
interpreting the benefits under the Plan and the other terms, conditions,
limitations and exclusions set out in the Plan Description and this Explanation,
in making factual determinations related to the Plan and its benefits, and in
construing any disputed or ambiguous terms. All determinations and
interpretations made by the Plan Sponsor and Plan Administrator are intended to
be conclusive and binding on all parties. Plan Sponsor and Plan Administrator
may, from time to time, delegate such discretionary authority to other persons
or entities providing services in regard to the Plan and such delegations may
include the right to redelegate such authority. Plan Sponsor reserves the
right, at any time and for any reason or no reason at all, to change, amend,
interpret, modify, withdraw or add benefits or terminate this Plan, in whole or
in part and in its sole discretion, without prior notice to or approval by Plan
participants and their beneficiaries. The legal documents governing the Plan
consist of only the Plan Description, along with this Explanation. Any change
or amendment to the Plan, its benefits or its terms and conditions, in whole or
in part, shall be made solely in a written amendment (in the case of a change or
amendment) or in a written resolution (in the case of termination), whether
prospective or retroactive, to the Plan, approved by the Board of Directors of
the Plan Sponsor or their designee to whom such Board has delegated in writing
the foregoing authority. No person or entity has any authority to make any oral
changes or amendments to the Plan.
The Plan Sponsor may, in its sole discretion, arrange for various persons or
entities to provide administrative services in regard to the Plan. The identity
of the service providers and the nature of the services provided may be changed
from time to time in the Plan Sponsor's sole discretion and without prior notice
to or approval by Plan participants. You must cooperate with those persons or
entities in the performance of their responsibilities.
ERISA
REQUIRED INFORMATION
Name of Plan: 1995 United HealthCare Corporation Executive Savings Plan
Name of Plan Sponsor and Named Fiduciary: United HealthCare Corporation. The
Plan Sponsor may also delegate or allocate fiduciary responsibilities to other
persons or entities.
Address and Telephone Number of Plan Sponsor and Named Fiduciary:
United HealthCare Corporation
9900 Bren Road East
P.O. Box 1459
Minneapolis, Minnesota 55440-1459
Employer Identification Number (EIN): 41-1321939
1
<PAGE>
IRS Plan Number: 003
Effective Date of Plan: January 1, 1995.
Type of Plan: Unfunded Plan of Deferred Compensation for a Select Group of
Management or Highly Compensated Employees
Name, business address, and business telephone number of Plan Administrator:
United HealthCare Corporation
9900 Bren Road East
P.O. Box 1459
Minneapolis, Minnesota 55440-1459
(612) 936-1300
Type of Administration of the Plan: The Plan Sponsor administers the Plan. The
Plan Sponsor may, from time to time in its sole discretion, contract with
outside parties to arrange for the provision of administrative services. The
named fiduciary of Plan is United HealthCare Corporation, the Plan Sponsor.
Person designated as agent for service of legal process: General Counsel,
United HealthCare Corporation. Service of process may also be made upon the
Plan Administrator.
Source of contributions under the Plan: There are no contributions to the Plan
and the Plan has no assets. All benefits under the Plan are paid from the
general assets of the Plan Sponsor.
Date of the end of the year for purposes of maintaining Plan's fiscal records:
The plan year shall be a twelve month period ending December 31st.
Benefits under the Plan are furnished in accordance with the Plan Description,
including this Explanation issued by the Plan Sponsor.
Participants' rights under the Employee Retirement Income Security Act of 1974
(ERISA) and the procedures to be followed in regard to denied claims or other
complaints relating to the Plan are set forth in the body of this Explanation.
CLAIMS SUBMISSION
If you believe you are entitled to deferred compensation benefits under this
Plan which have not been paid, you may make a claim by submitting a written
request for the deferred compensation benefits. The request should be addressed
to the Human Resources Department of United HealthCare Corporation at:
United HealthCare Corporation
ATTN: Human Resources Department
9900 Bren Road East
P.O. Box 1459
Minneapolis, Minnesota 55440-1459
The request should include all information relevant to your claim for deferred
compensation benefits.
2
<PAGE>
CLAIMS DENIAL
Notice of a decision to deny a claim for deferred compensation benefits (in
whole or in part) shall be furnished to the claimant within 90 days following
the receipt of the claim or within 90 days following the expiration of the
initial 90 day period in a case where there are special circumstances requiring
extension of time for processing the claim. If special circumstances require an
extension of time for processing the claim, written notice of the extension
shall be furnished to the claimant prior to the expiration of the initial 90 day
period. The notice of extension shall indicate the special circumstances
requiring the extension and the date by which the notice of decision with
respect to the claim is expected to be furnished. If a claim is denied (in
whole or in part), notice shall be provided to the claimant in writing and shall
set forth: 1) the reason or reasons for the denial; 2) reference to the
provisions of the Plan on which the denial is based; 3) a description of any
additional material or information necessary for the claimant to perfect the
claim, if the claim was denied because the claimant failed to provide all
necessary information, and an explanation of why such material or information is
necessary; and 4) an explanation of the claim review procedure. If written
notice of the denial is not furnished to the claimant within 90 days (or if an
extension was required, 180 days) from the date the claim was received, the
claim shall be deemed denied and the claimant shall then be permitted to proceed
with the procedure set forth below.
REVIEW OF DENIED CLAIMS AND COMPLAINT PROCEDURE
If you or any person claiming through you wishes to have a denied claim
reviewed, a written request must be sent to the Plan Administrator (addressed to
the Human Resources Department) within 60 days from the date you received the
notice of denial of the claim or within 60 days from the date the claim was
deemed denied.
If you or any person claiming through you has any other complaint or dispute
relating to the Plan, including any dispute with the Plan Sponsor, the Plan
Administrator, any fiduciary of the Plan or any person or entities providing
services in regard to the Plan, written notice describing the complaint or
dispute in detail must be sent to the Plan Administrator (addressed to the Human
Resources Department) within 60 days of the event which gave rise to the
complaint or dispute.
Any complaint or dispute related to the terms and conditions of the Plan,
including requests for review of denied claims, shall be resolved in accordance
with the procedure set forth by the Plan Sponsor and outlined below.
1. The complainant may contact the Plan Administrator in an attempt to resolve
the complaint in an informal manner.
2. If the complainant is not satisfied with any attempts at informal
resolution, the complainant must submit a written request for review of a
denied claim or written notice of the complaint or dispute to the Plan
Administrator (addressed to the Human Resources Department) in accordance
with the time frames set out above. The complainant may submit supporting
documentation or information to be considered and can request a hearing.
The complainant must submit any requested additional information or
documents. A hearing may be held, at the Plan Administrator's or its
designee's discretion, in accordance with the procedures developed by the
Plan Sponsor for such hearings.
3. A written notice of the final decision will usually be sent to the
complainant within 60 days of receipt of the written request for review of
a denied claim or notice of a complaint or dispute. However, if special
circumstances require an extension of time to reach a final decision,
written notice of the final decision will be sent as soon as possible
following expiration of the initial 60 day period, but no later than 120
days following receipt of the request for review of a denied claim or
notice of a complaint or dispute. If special circumstances require such an
extension of time, written notice of the extension shall be furnished to
the complainant prior to the expiration of the initial 60 day period. The
written notice of the final decision will give specific reason(s) for the
decision and references to the provisions of the Plan on which the decision
is based. If the final written decision is not furnished to the
complainant
3
<PAGE>
within 60 days (or if an extension was required, 120 days) from the date of
receipt of request for review of a denied claim or notice of a complaint or
dispute, the request for review or the complaint or dispute shall be deemed
rejected and denied on review. The written notice of the final decision
will give specific reasons for the decision and references to the
provisions of the Plan on which the decision is based.
4. If the complainant wishes to seek further review of the decision or the
complaint or dispute, he or she shall submit it to binding arbitration
pursuant to the rules of the American Arbitration Association. This is the
only right a complainant has for further consideration. The matter must be
submitted to binding arbitration within one year of receipt of notice of
the final decision or within one year of the date the claim, complaint or
dispute was deemed rejected and denied on review. The arbitrators shall
have no power to award any punitive or exemplary damages or to vary or
ignore the provisions of the Plan and shall be bound by controlling law.
STATEMENT OF EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974
RIGHTS
The Employee Retirement Income Security Act of 1974 (ERISA) guarantees certain
rights and protections to participants of employee benefit plans. Federal law
and regulations require that a "Statement of ERISA Rights" be included in this
Explanation of the United HealthCare Corporation Executive Savings Plan.
You may examine, without charge, all Plan documents, including any insurance
contracts, collective bargaining agreements, annual reports, summary plan
descriptions and other documents filed with the Department of Labor. You can
examine copies of these documents in the Plan Administrator's office, or you can
ask your supervisor where copies of the documents are available.
If you want a personal copy of Plan documents or related material, you should
send a written request to the Plan Administrator. You will be charged only the
actual cost of these copies.
You are entitled to receive a summary of the Plan's annual financial report in
the event this is a funded plan. The Plan Administrator is required by law to
furnish each participant with a copy of this summary annual report.
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the employee benefit plan.
These individuals, called "fiduciaries," have an obligation to administer the
Plan prudently and to act in the interest of Plan participants and
beneficiaries. The named fiduciary for this Plan is the Plan Sponsor. No one
may discriminate against you in any way to prevent you from receiving benefits
or exercising your rights under ERISA.
When you become eligible for payments from the Plan, you should follow the
appropriate steps for filing a claim. In case of claim denial, in whole or in
part, you must receive a written explanation of the reason for the denial. You
have the right to have your claim reviewed and reconsidered.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court, subject to any binding
arbitration requirements contained in the Explanation. In such a case, the
court may require the Plan Administrator to provide you the materials and pay
you up to $100.00 per day until you receive your materials, unless the materials
were not sent because of reasons beyond the control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file a suit in a state of federal court, subject to any binding
arbitration requirements contained in the Explanation. In the event this is a
funded plan and if it should happen that Plan fiduciaries misuse the Plan's
money, or if you are discriminated against for asserting your rights, you may
seek assistance from the U.S. Department of Labor, or you may file suit in a
federal court, subject to any binding arbitration requirements contained in the
Explanation. The court will decide
4
<PAGE>
who should pay costs and legal fees. For example, if you are successful, the
court may order the person you sued to pay those costs and fees. If you lose or
if the court finds your suit to be frivolous, you may be ordered to pay these
costs and fees.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, contact the nearest Area Office of the U.S. Labor Management
Services Administration, Department of Labor.
PURPOSE
The Plan has been designed to help eligible executives save for the future in
spite of increasingly restrictive tax legislation which has limited employee
deferrals into qualified plans such as the United HealthCare Corporation 401(k)
Savings Plan. Another purpose of the Plan is to provide executives with a means
to defer the receipt of unearned compensation to a later date if it is more tax
advantageous for them.
IMPORTANT INFORMATION
The Plan is a non-qualified top hat plan which means that it is an unfunded,
non-qualified plan of deferred compensation for executives. It is not subject
to the same restrictions placed upon qualified plans. For example, salary you
defer under the Plan is not subject to the annual 401(k) dollar limit imposed
under the tax laws on salary deferral contributions to a qualified 401(k) plan,
and the compensation that can be used for deferrals under this Plan is not
limited to $150,000. However, because of federal regulations governing
unfunded, non-qualified plans of deferred compensation for executives, UHC
cannot guarantee the payment of amounts under the Plan or set aside funds or
- ------
contributions in a trust or other account. The Plan constitutes a mere promise
by UHC to make benefit payments in the future. Nor does the Plan operate to
create any trust or segregation of assets by UHC. It is the intention of UHC
that the Plan be unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act (ERISA). It is UHC's further intent
that the Plan constitute an unfunded "top hat" plan under ERISA.
All benefits payable under the Plan will be paid from the general assets of UHC.
Therefore, the Plan does not give participants or their beneficiaries any rights
or security interests in any asset of UHC, other than as general unsecured
creditors. For example, if UHC were to become insolvent or bankrupt, there is
no guarantee that salary you deferred under the Plan would be paid or returned
to you in the form of the Plan benefits. Any asset held by UHC is to remain as
a general, unpledged asset of UHC which would be subject to the claims of UHC's
general creditors, including claims of participants.
Participation in the Plan results in the deferral of income (i.e., salary) and
associated taxes to a future point in time. It also reduces your current take-
home pay. Because of this, your own special tax and financial needs, as well as
future changes in tax rates and laws, should be taken into consideration when
deciding whether or not to participate in the Plan. Please note that UHC cannot
predict future federal/state tax rates, nor provide tax/financial advice to you.
Accordingly, you should obtain the advice of a competent tax advisor and
- ------------------------------------------------------------------------
financial advisor in deciding whether or not to participate in the Plan.
- -----------------------------------------------------------------------
WHO IS ELIGIBLE?
The Plan has three eligibility requirements. First, in order to be eligible for
the Plan overall, you must be an executive employee of UHC who is determined by
UHC also to be a member of a select group of management or highly compensated
employees for the upcoming 1995 calendar year. UHC will distribute to eligible
executives a list of the class or class(es) of executives eligible for the Plan
for each particular year. The 1995 list is attached to this Explanation as
Attachment A. You must have completed at least two (2) months of continuous UHC
employment in an eligible class in order to enroll under the Plan.
5
<PAGE>
Second, in order to be eligible for Part I of the Plan, you must participate in
the United HealthCare Corporation 401(k) Savings Plan ("UHC 401(k) Savings
Plan") and you must reach one of the two Internal Revenue Service (IRS) limits
---
on plan benefits. The fist IRS limit requires that the UHC 410(k) Savings Plan
take into account only $150,000 of Recognized Compensation in determining plan
benefits for the Plan Year. The second IRS limit places a cap on the dollar
amount of elective deferrals you may make under the UHC 410(k) Savings Plan. In
order to participate in Part I of the Plan, you must reach either the $150,000
compensation limit or the 1995 IRS annual dollar limit for elective deferrals.
The IRS' annual limit changes slightly each calendar year for cost of living
adjustments. The 1994 IRS annual limit was $9240 (the historical IRS annual
limits for the past seven years are: 1993 = $8994, 1992 = $8728, 1991 = $8475,
1990 = $7979, 1989 = $7627, 1988 = $7313, 1987 = $7000). Actual 401(k)
deferrals must reach the 1995 IRS annual limit during 1995 in order to be
eligible for Part I of the Plan.
Third, enrollment under either Part II or Part III of the Plan cannot be earlier
than the first day of the calendar quarter following satisfaction of the
eligibility requirements.
HOW DOES THE PLAN WORK?
There are three separate and distinct parts to the Plan. Eligible executives
may enroll in one or more parts of the Plan, depending upon their eligibility.
Part I
- ------
Part I, the "401(k) Keep Whole" part, is intended to duplicate the concepts
behind a 401(k)-type plan as much as possible for executives who reach
either one or both of the IRS 401(k) limits: First, the limit on the
dollar amount you may contribute under the UHC 401(k) Savings Plan; and
second, the limit on the amount of your compensation that may be taken into
account for the purpose of providing benefits under the UHC 401(k) Savings
Plan.
Employee Contributions. Under the tax laws, salary deferral contributions
to UHC's 401(k) Savings Plan for 1995 will automatically stop when you have
earned $150,000 of Recognized Compensation or when your elective deferrals
have reached the 1995 IRS 401(k) dollar limit. However, if you participate
in Part I of the Plan, your salary deferral contributions can continue, but
they will be credited to your the Plan Part I account. Under Part I, you
may defer between 2% and 15% of your cash compensation, including cash
bonuses. The percentage of compensation that you may defer shall be (i)
measured as of the same pay period in which your Recognized Compensation
---------------
under the UHC 401(k) Savings Plan reaches $150,000 or your deferrals under
the UHC 401(k) Savings Plan actually equal the 1995 IRS 401(k) dollar limit
if the compensation or dollar limit is reached on account of payment to you
of the UHC Management Incentive Bonus ("MIB") or a similar bonus which
UHC's Board of Directors, Compensation Committee or their designee declares
as being equivalent to MIB; (ii) measured from the first pay period after
----------------------
your Recognized Compensation reaches $150,000 or your deferrals under the
UHC 401(k) Savings Plan actually equal the 1995 IRS 401(k) dollar limit if
the 401(k) limit is reach on account of payment to you of regular, cash
wages (other than those described in (i)); or (iii) if later, measured as
of the due date for returning your Part I Enrollment Form. Actual
adjustments to your pay may take up to two pay periods. However, only
compensation which is not yet earned or otherwise made available to you
shall be eligible for deferral under Part I.
Employer Contributions. The first 6% of your salary deferred under Part I
will be "matched" by UHC at 50% for each dollar deferred.
Crediting of Accounts. Under Part I, deferral elections and any "matched"
amounts will be credited to a bookkeeping account on your behalf. This
bookkeeping account will also be credited with "interest" at the same rate
as the UHC 401(k) Savings Plan's fixed income fund during the calendar
quarter. The
6
<PAGE>
bookkeeping account is used merely for accounting purposes since no monies
or amounts will be deposited into any account or otherwise segregated from
UHC's general assets.
Regular Distributions. Upon termination of your employment (or, if
earlier, the date of your death), the cumulative value of your Part I
deferrals, matched amounts and interest credits shall become distributable
to you (or, in the case of death, your designated beneficiary) in a lump
sum cash payment or in three (3), five (5) or ten (10) year annual cash
installments as elected on your Part I enrollment form. Actual
distribution to you (or your designated beneficiary in the event of your
death) will be made or commenced as soon as administratively feasible
following the last day of the calendar quarter after the date your
employment with UHC is terminated (or, if earlier, the date of your death)
and your final regular paycheck is received. If distributions are in the
form of installments, subsequent installment payments shall be made
annually in accordance with the participant's distribution election on
his/her Part I enrollment form and as of the anniversary date of the first
installment payment. The amount of each installment payment shall be based
on the participant's Part I account balance as of the last day of the
calendar year preceding the year for which an installment payment is
scheduled to be made divided by the remaining number of installment
payments to be made (including the installment being determined).
Accelerated Distributions. Under certain circumstances, accelerated
distributions on account of severe and unforeseeable financial hardship are
available. However, the UHC Employee Benefits Committee or their
independent designee will independently decide whether to accelerate
distribution in the event of severe and unforeseeable financial hardship
and then only the amount necessary to satisfy such hardship shall be
accelerated as a distribution.
Taxation of Distributions. Distributions to you (or your beneficiary)
under the Plan would be taxable upon receipt since previous deferrals,
matched amounts and interest credits were not subject to taxation at the
time they were made. Since the Plan is a non-qualified plan, distributions
would not be eligible for the special tax treatment otherwise available to
distributions from qualified plans (e.g., 5 or 10 year averaging treatment
and tax-deferred "rollover" treatment would not be available). Similarly,
distributions under the Plan would not be subject to the 10% penalty
---
otherwise associated with early distributions from qualified plans before
age 59 1/2.
Part II
- -------
This part of the Plan is a straight salary deferral option for your future
1995 unearned, cash compensation.
Employee Contributions. You may elect to defer the receipt of future
unearned, 1995 cash compensation, including bonus payments, to a future
date. The percentage of compensation you can defer under Part II is
measured from the first pay period following the date your completed Part
II enrollment form is received and processed by the UHC Corporate Benefits
Department. Actual adjustments to your pay may take up to two pay periods.
Only compensation which is not yet earned or otherwise made available shall
be eligible for deferral under Part II.
At the time of enrollment, you must pre-select your length of deferral
time. You may defer payment of these amounts until February first (1st) of
a pre-selected year in the future or, if earlier, until termination of your
employment. However, in no case will deferrals for less than three months
of time be allowed. Accordingly, your Part II deferral election must be
made before November 1 of any given year if you want to elect a February
the succeeding year. If your employment is terminated before expiration of
your pre-selected February 1st deferral time, amounts deferred under Part
II will automatically become payable upon termination of employment.
7
<PAGE>
Under current tax laws, you will not be taxed on these deferred amounts
until you receive them. However, because participation in Part II of the
Plan defers the payment of salary to you, including associated taxes, you
should consult with your tax advisor and financial advisor before you
decide whether or not (or to what degree) you should participate in Part II
of the Plan. Keep in mind that your decision to participate in the Plan
depends upon your current and projected tax and financial needs, as well as
current/future tax rates and laws -- neither of which are known to or
predictable by UHC.
Employer Contributions. UHC does not match Part II deferrals.
Crediting of Accounts. Part II deferrals will be credited to a separate
bookkeeping account on your behalf. This bookkeeping account is used
merely for accounting purposes since no monies or amounts will be deposited
into any account or otherwise segregated from UHC's general assets. This
bookkeeping account will also be credited with "interest" at the same rate
as the UHC 401(k) Savings Plan's fixed income fund during the calendar
quarter.
Regular Distributions. Upon the earlier of: termination of your
employment, the date of your death or the applicable February 1st payment
date, if any, pre-selected on your Part II enrollment form, the cumulative
value of your Part II deferrals and interest credits shall become
distributable to you (or, in the case of death, your designated
beneficiary). The form of the distribution (i.e., lump sum or
installments) depends on whether or not you pre-selected a February 1st
payment date on your Part II enrollment form. If you pre-selected a
February 1st payment date, you (or your designated beneficiary in the case
of death) will receive a lump sum cash payment of the cumulative value of
your Part II deferrals and interest credits as soon as administratively
feasible following the earlier of (i) the applicable February 1st payment
date or (ii) the last day of the calendar quarter after the date your
employment is terminated and your final regular paycheck is received. If
you did not pre-select a February 1st payment date on your Part II
enrollment form, distribution may be made in either a lump sum cash payment
or in three (3), five (5) or ten (10) year cash installments as elected on
your Part II enrollment form. Actual distribution to you (or your
designated beneficiary in the event of your death) will be made or
commenced as soon as administratively feasible following the last day of
the calendar quarter after the date your employment with UHC is terminated
(or, if earlier, the date of your death) and your final regular paycheck is
received. If distributions are in the form of installments, subsequent
installment payments shall be made annually in accordance with the
participant's distribution election and as of the anniversary date of the
first installment payment. The amount of each installment payment shall be
based on the participant's Part II account balance as of the last day of
the calendar year preceding the year for which an installment payment is
scheduled to be made divided by the remaining number of installment
payments to be made (including the installment being determined).
Accelerated Distributions. Under certain circumstances, accelerated
distributions on account of severe and unforeseeable financial hardship are
available. However, the UHC Employee Benefits Committee or their
independent designee will independently decide whether to accelerate
distribution in the event of severe and unforeseeable financial hardship
and then only the amount necessary to satisfy such hardship shall be
accelerated as a distribution.
Taxation of Distributions. Distributions to you (or your beneficiary)
under the Plan would be taxable upon receipt since previous deferrals and
interest credits were not subject to taxation. Because the Plan is a non-
qualified plan, distributions would not be eligible for the special tax
treatment otherwise available to distributions from qualified plans (e.g.,
5 or 10 year averaging treatment and tax-deferred "rollover" treatment
would not be available). Similarly, distributions under the Plan would not
---
be subject to the 10% penalty otherwise associated with early distributions
from qualified plans before age 59 1/2.
8
<PAGE>
Part III
- --------
This part of the Plan is a limited bonus deferral option that is available
only for those UHC executives eligible for special bonus amounts which are
also declared by UHC's Board of Directors, Compensation Committee or their
designee as being eligible for deferral under Part III of this Plan. Those
executives eligible to make deferrals of special bonuses under Part III
will be notified in writing in advance of their eligibility under this
part. Part III enrollment and election forms will be distributed to you
only once you become eligible for a special bonus that is eligible for
deferral under Part III. Eligible executives will receive a separate Part
III enrollment and election form for each special bonus which they may
become eligible for.
Employee Contributions. You may elect to defer the receipt of your
unearned, special bonus to a future date. Part III applies only to your
eligible special bonus amount. Only eligible special bonuses which are not
yet earned or otherwise made available shall be eligible for deferral under
Part III.
At the time of enrollment, you must pre-select your length of deferral
time. You may defer payment of these amounts until February first (1st) of
a pre-selected year in the future or, if earlier, until termination of your
employment. However, in no case will deferrals for less than three months
of time be allowed. Accordingly, your Part III deferral election must be
made before November 1 of any given year if you want to elect a February
the succeeding year. If your employment is terminated before expiration of
your pre-selected February 1st deferral time, amounts deferred under Part
III will automatically become payable upon termination of employment.
Under current tax laws, you will not be taxed on these deferred amounts
until you receive them. However, because participation in Part III of the
Plan defers the payment of salary to you, including associated taxes, you
should consult with your tax advisor and financial advisor before you
decide whether or not (or to what degree) you should participate in Part
III of the Plan. Keep in mind that your decision to participate in the
Plan depends upon your current and projected tax and financial needs, as
well as current/future tax rates and laws -- neither of which are known to
or predictable by UHC.
Employer Contributions. UHC does not match Part III deferrals.
Crediting of Accounts. Part III deferrals will be credited to a separate
bookkeeping account on your behalf. This bookkeeping account is used
merely for accounting purposes since no monies or amounts will be deposited
into any account or otherwise segregated from UHC's general assets. This
bookkeeping account will also be credited with "interest" at the same rate
as the UHC 401(k) Savings Plan's fixed income fund during the calendar
quarter.
Regular Distributions. Upon the earlier of: termination of your
employment, the date of your death or the applicable February 1st payment
date, if any, pre-selected on your Part III enrollment form, the cumulative
value of your Part III deferrals and interest credits shall become
distributable to you (or, in the case of death, your designated
beneficiary). The form of the distribution (i.e., lump sum or
installments) depends on whether or not you pre-selected a February 1st
payment date on your Part III enrollment form. If you pre-selected a
February 1st payment date, you (or your designated beneficiary in the case
of death) will receive a lump sum cash payment of the cumulative value of
your Part III deferrals and interest credits as soon as administratively
feasible following the earlier of (i) the applicable February 1st payment
date or (ii) the last day of the calendar quarter after the date your
employment is terminated and your final regular paycheck is received. If
you did not pre-select a February 1st payment date on your Part III
enrollment form, distribution may be made in either a lump sum cash payment
or in three (3), five (5) or ten (10) year cash installments as elected on
your Part III enrollment form. Actual distribution to you (or your
designated beneficiary in the event of your death) will be made or
commenced as soon as administratively feasible following the last day of
the calendar
9
<PAGE>
quarter after the date your employment with UHC is terminated (or, if
earlier, the date of your death) and your final regular paycheck is
received. If distributions are in the form of installments, subsequent
installment payments shall be made annually in accordance with the
participant's distribution election and as of the anniversary date of the
first installment payment. The amount of each installment payment shall be
based on the participant's Part III account balance as of the last day of
the calendar year preceding the year for which an installment payment is
scheduled to be made divided by the remaining number of installment
payments to be made (including the installment being determined).
Accelerated Distributions. Under certain circumstances, accelerated
distributions on account of severe and unforeseeable financial hardship are
available. However, the UHC Employee Benefits Committee or their
independent designee will independently decide whether to accelerate
distribution in the event of severe and unforeseeable financial hardship
and then only the amount necessary to satisfy such hardship shall be
accelerated as a distribution.
Taxation of Distributions. Distributions to you (or your beneficiary)
under the Plan would be taxable upon receipt since previous deferrals and
interest credits were not subject to taxation. Because the Plan is a non-
qualified plan, distributions would not be eligible for the special tax
treatment otherwise available to distributions from qualified plans (e.g.,
5 or 10 year averaging treatment and tax-deferred "rollover" treatment
would not be available). Similarly, distributions under the Plan would not
---
be subject to the 10% penalty otherwise associated with early distributions
from qualified plans before age 59 1/2.
IN WHAT ORDER ARE MY DEFERRAL ELECTIONS MADE?
Deferral elections will be applied against your compensation and/or bonus in the
following sequence:
401k Plan Deferral Election (if applicable)
Part III - Executive Savings Plan
Part I - Executive Savings Plan
Part II - Executive Savings Plan
Although your deferral elections are applied in the above sequence, the actual
deferral percentage is calculated using your entire compensation and/or bonus
amount and is applied only against that portion, if any, of your compensation
and/or bonus which remains following application of the preceding deferral
election(s).
WHEN MAY I MAKE MY DEFERRAL ELECTION?
Each eligible executive may make only one election per calendar year under Part
I and Part II of the Plan. Deferral elections under Part I and Part II are
valid only for the calendar year in which they are made. Only eligible
executives who have been informed that they are (or may be) eligible for a
special bonus eligible for deferral under Part III of the Plan may make an
election under Part III. Part III enrollment and election forms are distributed
only once you become eligible for Part III. You will receive a separate Part
III enrollment and election form for each special bonus which is eligible under
Part III. Deferral elections under Part III are valid only for the special
bonus to which they relate.
Eligible executives may make a deferral election under Part II any time during
1995, however, any such election shall only apply to future compensation.
Eligible executives must make a deferral election under Part III within the
written time frames set forth on the Part III enrollment and election form. In
order to make a Part I election for 1995, you must complete and return your Part
I enrollment form to the UHC Corporate Benefits Department no later than
December 19, 1994 (even if you won't become a participant in the UHC 401(k)
Savings Plan until sometime during 1995 or if you intend to change your UHC
401(k) Savings Plan elections during 1995). If you fail to return your Part I
---------------------------------
enrollment form by December 19, 1994, you will not be eligible for the 50%
- --------------------------------------------------------------------------
company match under Part I for 1995. Since Part I elections take effect only in
- -----------------------------------
the event you would
10
<PAGE>
actually reach the IRS 401(k) limit for 1995, you should sign-up for Part I if
you want to continue the tax benefits of salary deferral and company match
under the Plan for 1995.
HOW DO I ENROLL?
If you would like to sign-up for one or more parts of the Plan, simply complete
the applicable Enrollment Form and return it to the Corporate Benefits
Department at mail route MN12-S167, unless a different mail route is indicated
on your enrollment and election form. Keep in mind that Part I elections for
1995 must be made before December 19, 1994 and take effect only if your
Recognized Compensation reaches $150,000 or your elective deferrals reach the
1995 401(k) dollar limit during 1995.
MAY I CHANGE MY DEFERRAL ELECTION DURING THE YEAR?
No, once an election is made it is irrevocable. However, you may elect to
prospectively decrease your deferral (percentage) rate to zero (0) under Part I
and/or Part II and thus stop future payroll deductions at any time. If you
wish to stop payroll deductions during the year, simply contact your local
Corporate Benefits representative to obtain a copy of the appropriate
Cancellation Form.
MAY I CHANGE MY LENGTH OF DEFERRAL TIME OR DISTRIBUTION OPTIONS
AFTER MY 1995 DEFERRAL ELECTION BEGINS?
No, under current tax laws, the length of deferral time and the distribution
option (e.g., lump sum or installments) must be irrevocably elected before your
deferral election begins and cannot be later changed, except as provided below
for severe and unforeseeable financial hardship.
MAY I RECEIVE PAYMENTS BEFORE MY EMPLOYMENT IS TERMINATED
(OR, IF EARLIER, BEFORE EXPIRATION
OF THE DEFERRAL TIME PRE-SELECTED UNDER PART II or III)?
No, unless you qualify for accelerated distribution on account of severe and
unforeseeable financial hardship. The UHC Employee Benefits Committee or their
independent designee will independently decide whether to accelerate
distribution for severe and unforeseeable financial hardship and then only the
amount necessary to satisfy such hardship shall be accelerated as a
distribution.
EFFECT OF REEMPLOYMENT
If a participant is reemployed by UHC or its affiliate before actual
distribution or after distribution has commenced, such reemployment shall not
affect the regularly scheduled distribution of amounts under this Plan.
EFFECT OF DEATH PRIOR TO FULL DISTRIBUTION
If a participant dies before actual distribution or after distribution has
commenced, the undistributed portion of the participant's accounts under this
Plan shall be distributed to the participant's designated beneficiaries (or, as
provided below, automatic beneficiaries) in the same manner as if the
participant had terminated employment. If the participant had elected payment
to be made in the form of installments, such installments shall commence or
continue, as the case may be, to the participant's designated beneficiaries, at
the same frequency of distribution as initially elected by the participant.
DESIGNATION OF BENEFICIARIES
Each participant in this Plan may designate, upon forms furnished by and filed
with UHC, a primary beneficiary or secondary beneficiary to receive the
participant's Part I, Part II and/or Part III account balance in the event
11
<PAGE>
of the participant's death. The participant may elect different or same
beneficiaries for Part I, Part II and Part III of the Plan. The participant may
change or revoke any such designation from time to time without notice to or
consent from any beneficiary or spouse. No such designation, change or
revocation shall be effective unless executed by the participant and received by
UHC during the participant's lifetime. If a beneficiary survives the
participant but dies before receipt of all payments due him or her under the
Plan, such remaining payments shall be payable to that beneficiary's estate and
not to any other beneficiary. If a participant (1) fails to designate a
beneficiary, (2) designates a beneficiary and thereafter revokes such
designation without naming another beneficiary, or (3) designates one or more
beneficiaries and all such designated beneficiaries fail to survive the
participant, then such participant's Part I, Part II and Part III account
balance shall be payable to the first class of the following classes of
automatic beneficiaries with a member of such class surviving the participant
and (except in the case of surviving issue) in equal shares if more than one
member in such a class survives the participant:
participant's surviving spouse
participant's surviving issue per stirpes and not per capita
participant's surviving parents
participant's surviving brothers and sisters
representative of participant's estate
The automatic beneficiaries above shall become fixed at the time of the
participant's death.
ANTI-ASSIGNMENT
Each participant's rights to benefit payments under the Plan are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of participant or his/her
beneficiary.
NOTICE
All notices, whether to the Plan Administrator from you or to you from the Plan
Administrator, must be written and sent through first class mail.
RELATION TO EMPLOYMENT
Nothing in this Plan shall be interpreted or deemed to be a contract of
employment or to give an employee any rights in the assets of UHC.
GOVERNING LAW
To the extent not preempted by ERISA, the laws of the state of Minnesota shall
govern this Plan.
AMENDMENT AND TERMINATION
The Plan Sponsor reserves the right to change, amend, interpret, modify,
withdraw or add benefits or terminate the Plan, in its sole discretion, at any
time and for any reason whatsoever without prior notice to or approval by the
Plan participants. Any change or amendment to the Plan, its benefits or its
terms and conditions may be made solely in a written amendment to the Plan,
approved by the Board of Directors of the Plan Sponsor or their designee. Any
termination of the Plan shall be accomplished by a written resolution approved
by the Board of Directors of the Plan Sponsor or their designee. No person or
entity has any authority to make any oral changes or amendments to the Plan.
Upon termination of the Plan, participants will be paid the cumulative value of
their deferral contributions plus any matching and interest credits in a lump
sum as soon as possible following termination of the Plan.
12
<PAGE>
ATTACHMENT A
1995 UNITED HEALTHCARE CORPORATION EXECUTIVE SAVINGS PLAN
1995 ELIGIBLE EXECUTIVE CLASSES FOR PART I AND PART II:
- UHC Executive Class (Grade Ex 01-07)
- UHC Medical Director Class (Grade M 01-04)
- UHC Psychiatrist Class (Grade PO)
- UHC Regional Vice Presidents of Sales Class
- UHC Medical Class (Grade CD, 01-03)
- UHC Clinical Medical Class, full-time (Grade CM, 01-04)
Note: only full-time physicians in the Clinical Medical Class who are
designated to earn at least $100,000 annual base salary as determined
in the October immediately preceding the Plan Year.
1995 ELIGIBLE EXECUTIVE CLASS FOR PART III:
Executives who are eligible for Part I and Part II and who are also declared
---
eligible
for Part III by UHC's Board of Directors, Compensation Committee or their
Designee
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
PART I ENROLLMENT & ELECTION FORM
I, the undersigned executive employee of United HealthCare Corporation/SM/
("UHC"), hereby make the following election to defer the receipt of some, or
all, of my 1995 unearned compensation under the UHC Executive Savings Plan
("Plan") which is an unfunded, non-qualified plan of deferred compensation for a
select group of executive employees at UHC. Such election shall apply to my
unearned compensation for the 1995 calendar year. All deferrals are taken
through payroll deduction with respect to compensation which is not yet earned
by or otherwise made available to me. I understand that this deferral election
is irrevocable except that I may elect to stop future payroll deductions at any
time. I understand that all deferral elections and my rights as a participant
are subject to the provisions of the official Plan documents.
PART I. Deferral in Excess of 401(k) Limit: For my deferral elections made in
- ------ ----------------------------------
accordance with Part I of the Plan (the "401(k) Keep Whole" Part), I hereby
elect to defer %* of my 1995 unearned compensation (up to a maximum of
-------
15%). I understand that the percentage of compensation deferred shall be
measured as of (i) the same pay period in which my Recognized Compensation under
the UHC 401(k) Savings Plan reaches $150,000 or my 1995 deferrals under the UHC
401(k) Savings Plan actually equal the 1995 IRS 401(k) dollar limit if either of
these limits are reached on account of payment to me of the UHC Management
Incentive Bonus; (ii) the first pay period following the date my Recognized
Compensation under the UHC 401(k) Savings Plan reaches $150,000 or my elections
under the UHC 401(k) Savings Plan equal the 1995 IRS 401(k) dollar limit if
either of these limits are reached on account of payment to me of regular wages;
or (iii) if later, the due date for returning my completed Part I Enrollment
Form. I request that my Part I account balance be paid as follows: (Check
"[x]" Only One)
[_] lump sum cash payment
[_] series of three (3) year cash installments
[_] series of five (5) year cash installments
[_] series of ten (10) year cash installments
Actual distribution will be made or commenced as soon as administratively
feasible following the last day of the calendar quarter after your employment
is terminated and your final paycheck is received.
*Your actual deferral may not equal the percentage elected due to availability
of salary to apply deferrals against.
Designation of Beneficiaries: I hereby designate the following person as my
----------------------------
primary beneficiary and the following person as my secondary beneficiary
under Part I of the Plan. This designation revokes any prior designation of
beneficiaries I may have under Part I of this Plan.
Primary Beneficiary.** All of my Part I account balance upon my death shall
-------------------
be paid to the following person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
---------------------------------------------------------------------------
Secondary Beneficiary.** If my primary beneficiary does not survive me, then
---------------------
all of my Part I account balance upon my death shall be paid to the following
person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
---------------------------------------------------------------------------
** If a beneficiary survives me but dies before receipt of all payments due
him or her under the Plan, such remaining payments shall be payable to that
beneficiary's estate and not to any other beneficiary.
I understand that UHC does not guarantee the payment of amounts under the Plan.
I further understand that the Plan does not operate to create any trust or
segregation of assets by UHC; nor does it give me any right or security interest
in any asset of UHC. I also understand that I am considered an unsecured
creditor of UHC with respect to elections under the Plan and that any benefits
payable under the Plan shall be distributed from the general assets of UHC. I
further understand that UHC has reserved the right to amend or terminate the
Plan at any time and for any reason.
You must complete and return this form to the UHC Corporate Benefits Department
at mail route MN12-S167 by December 19, 1994 in order to be eligible for the 50%
company match on the first 6% of compensation you defer under Part I for 1995.
- ---------------------------------- ---------------------------------------
Name (Please Print) Signature Date
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
PART II ENROLLMENT & ELECTION FORM
I, the undersigned executive employee of United HealthCare Corporation/SM/
("UHC"), hereby make the following election to defer the receipt of some, or
all, of my 1995 unearned compensation under the UHC Executive Savings Plan
("Plan") which is an unfunded, non-qualified plan of deferred compensation for a
select group of executive employees at UHC. Such election shall apply to my
unearned compensation for the 1995 calendar year. All deferrals are taken
through payroll deduction with respect to compensation which is not yet earned
by or otherwise made available to me. I understand that my deferral election is
irrevocable except that I may elect to stop future payroll deductions at any
time. I understand that all deferral elections and my rights as a participant
are subject to the provisions of the official Plan documents.
PART II. Discretionary Deferral: For my deferral election made in accordance
- -------- ----------------------
with Part II of the Plan, I hereby elect to defer % * of my 1995 unearned
------
compensation until: (Check "[x]" Only One)
[_] February 1, 19 . (Note: this period must exceed the date of my
--
election by at least 3 months.) I understand that if my employment is
terminated before expiration of my deferral time, my cumulative
deferrals plus interest credits will become distributable to me. Actual
distribution will be made in a lump sum cash payment as soon as
administratively feasible following the earlier of the applicable
February 1st or the last day of the calendar quarter after my
employment with UHC is terminated and my final regular paycheck is
received.
[_] the last day of the calendar quarter after my employment with UHC is
terminated (or, if earlier, the date of my death) and my final regular
paycheck is received. I further request that payments of my Part II
account balance be made or commenced as follows: (Check "[x]" Only
One)
[_] lump sum cash payment
[_] series of three (3) year cash installments
[_] series of five (5) year cash installments
[_] series of ten (10) year cash installments
I understand that the percentage of compensation deferred shall be measured
from the first pay period following the date my completed enrollment form
is received and processed by the UHC Corporate Benefits Department. *Your
actual deferral may not equal the percentage elected due to availability of
salary to apply deferrals against.
Designation of Beneficiaries: I hereby designate the following person as
----------------------------
my primary beneficiary and the following person as my secondary beneficiary
under Part II of the Plan. This designation revokes any prior designation
of beneficiaries I may have under Part II of this Plan.
Primary Beneficiary.** All of my Part II account balance upon my death
-------------------
shall be paid to the following person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
-------------------------------------------------------------------------
Secondary Beneficiary.** If my primary beneficiary does not survive me,
---------------------
then all of my Part II account balance upon my death shall be paid to the
following person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
-------------------------------------------------------------------------
** If a beneficiary survives me but dies before receipt of all payments due
him or her under the Plan, such remaining payments shall be payable to that
beneficiary's estate and not to any other beneficiary.
I understand that UHC does not guarantee the payment of amounts under the Plan.
I further understand that the Plan does not operate to create any trust or
segregation of assets by UHC; nor does it give me any right or security interest
in any asset of UHC. I also understand that I am considered an unsecured
creditor of UHC with respect to elections under the Plan and that any benefits
payable under the Plan shall be distributed from the general assets of UHC. I
further understand that UHC has reserved the right to amend or terminate this
Plan at any time and for any reason.
NOTE: UHC does not provide "matching" contributions for Part II deferrals.
- ------------------------------------- ------------------------------------
Name (Please Print) Signature Date
<PAGE>
1995 UNITED HEALTHCARE CORPORATION/SM/ EXECUTIVE SAVINGS PLAN
PART III ENROLLMENT & ELECTION FORM
FEBRUARY 1995 SPECIAL BONUS
I, the undersigned executive employee of United HealthCare Corporation/SM/
("UHC"), hereby make the following election to defer the receipt of some, or
all, of my 1995 unearned, special bonus under the UHC Executive Savings Plan
("Plan") which is an unfunded, non-qualified plan of deferred compensation for a
select group of executive employees at UHC. Such election shall apply only to my
unearned, eligible special bonus for the 1995 calendar year. All deferrals are
taken through payroll deduction with respect to compensation which is not yet
earned by or otherwise made available to me. I understand that my deferral
election is irrevocable. I understand that all deferral elections and my rights
as a participant are subject to the provisions of the official Plan documents.
PART III. Discretionary Limited Deferral: For my deferral election made in
- --------- ------------------------------
accordance with Part III of the Plan, I hereby elect to defer % * of my
------
1995 unearned, special bonus until: (Check "[x]" Only One)
[_] February 1, 19 . (Note: this period must exceed the date of my
----
election by at least 3 months.) I understand that if my employment is
terminated before expiration of my deferral time, my cumulative
deferrals plus interest credits will become distributable to me.
Actual distribution will be made in a lump sum cash payment as soon
as administratively feasible following the earlier of the applicable
February 1st or the last day of the calendar quarter after my
employment with UHC is terminated (or, if earlier, the date of my
death) and my final regular paycheck is received.
[_] the last day of the calendar quarter after my employment with UHC is
terminated (or, if earlier, the date of my death) and my final regular
paycheck is received. I further request that payments of my Part III
account balance be made or commenced as follows: (Check "[x]" Only
One)
[_] lump sum cash payment
[_] series of three (3) year cash installments
[_] series of five (5) year cash installments
[_] series of ten (10) year cash installments
*Your actual deferral may not equal the percentage you elected due to
availability of salary to apply deferrals against.
Designation of Beneficiaries: I hereby designate the following person as
----------------------------
my primary beneficiary and the following person as my secondary beneficiary
under Part III of the Plan. This designation revokes any prior designation
of beneficiaries I may have under Part III of this Plan.
Primary Beneficiary.* All of my Part III account balance upon my death
-------------------
shall be paid to the following person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
--------------------------------------------------------------------------
Secondary Beneficiary.** If my primary beneficiary does not survive me,
---------------------
then all of my Part III account balance upon my death shall be paid to the
following person who survives me:
Name Address Social Security # Relationship to Me
---- ------- ----------------- ------------------
--------------------------------------------------------------------------
**If a beneficiary survives me but dies before receipt of all payments due
him or her under the Plan, such remaining payments shall be payable to that
beneficiary's estate and not to any other beneficiary.
I understand that UHC does not guarantee the payment of amounts under the Plan.
I further understand that the Plan does not operate to create any trust or
segregation of assets by UHC; nor does it give me any right or security interest
in any asset of UHC. I also understand that I am considered an unsecured
creditor of UHC with respect to elections under the Plan and that any benefits
payable under the Plan shall be distributed from the general assets of UHC. I
further understand that UHC has reserved the right to amend or terminate this
Plan at any time and for any reason.
NOTE: UHC does not provide "matching" contributions for Part III deferrals
- -------------------------------------- -----------------------------------
Name (Please Print) Signature Date
PART III ENROLLMENT FORM MUST BE RETURNED TO BOB BACKES, MAIL ROUTE MN08-8317
- --------------------------------------------------------------------------------
BY NOVEMBER 11, 1995.
- --------------------
<PAGE>
1995
MANAGEMENT
INCENTIVE
PLAN
- ------------------------------------------------------------------------------
[LOGO]
United HealthCare Corporation/SM/
<PAGE>
1995 MANAGEMENT INCENTIVE PLAN - A MESSAGE FROM BILL MCGUIRE
- ------------------------------------------------------------------------------
UHC is widely regarded as the managed care industry leader, and we are emulated
by many other companies. 1995 will represent a time when our company will
have to perform to higher levels of performance in order to maintain this
leadership position. Overall, we continue to believe that our company will
continue to provide tremendous opportunities for many years to come.
Our endeavors in 1995 and beyond will see us continuing to stress operational
execution, excellence in service and thus domination of markets in which
UHC's SBUs compete. Specific goals include continuing our strong financial
performance, improving our responsiveness through improved organizational
structures and processes, continuing our dominance in the Health Plan markets
we compete in, continuing Specialty Company growth through new products
and services, and finally, successful merger and acquisition activity.
Particular focus on improvements in SG&A, medical cost trends and, overall
the principles of appropriate health care is needed.
The information presented in this brochure describes UHC's 1995 Management
Incentive Plan. Incentive programs and performance management are inherent
to our corporate culture. We want our managers to strive for excellence
and continuous improvement and to be rewarded for their performance. This
plan offers you that opportunity.
Let's continue to strive for standards of excellence that will maintain
our leadership position in the health care industry and ensure superior
results.
/s/ William W. McGuire
William W. McGuire, M.D.
Chief Executive Officer, President and Chairman
1
<PAGE>
1995
MANAGEMENT
INCENTIVE
PLAN
HOW DOES IT WORK?
- ---------------------------------------------------------------------------
Your management incentive award will depend on three major areas of
performance:
1) The overall performance of UHC which will be based on performance against
its strategic initiatives, deployment of capital and resources, market
valuation, merger and acquisition activity, public image and recognition,
as well as financial goals in the following categories: earnings, revenue,
SG&A, medical loss ratio, growth and membership. The UHC company performance,
by design, affects every manager's incentive to some degree.
2) The overall performance of your business unit, support unit or corporate
division. If you're part of a UHC business unit, your goals will be developed
jointly by your SBU leader, CEO or Specialty Company President and the person
to whom he or she reports. If you're part of a UHC business support or
corporate division, your goals will be established by the appropriate Vice
President and the person to whom he or she reports.
3) Your individual performance which will be based on your overall performance
in your position and against established goals and objectives.
DOES MY MANAGEMENT INCENTIVE OPPORTUNITY
DEPEND ON ALL THREE PERFORMANCE MEASURES?
- ---------------------------------------------------------------------------
Yes. All three performance measures are used to determine the incentive
pool and incentive awards. We believe that our collective success must grow
out of a synergy of effort. We won't have an opportunity to be successful
unless we're all working together toward a common goal.
2
<PAGE>
HOW ARE INCENTIVE PAYMENTS DETERMINED?
- -----------------------------------------------------------------------------
STEP 1 - ESTABLISHMENT OF TOTAL INCENTIVE POOL
- ----------------------------------------------
At the end of UHC's fiscal year, the Compensation and Stock Option Committee of
the Board of Directors will determine overall UHC company performance and the
total amount available in the company incentive pool. This determination is
based on the overall performance of UHC as described earlier. The total company
incentive pool represents UHC's total performance on its strategic initiatives,
merger and acquisition activity, and the collective results of all UHC
operations. It is not the average result of UHC operations but the overarching
performance of the entire company.
The Compensation and Stock Option Committee approves an incentive pool amount
based on an assessment ranging from 50% of total incentive targets to 200%
of total incentive targets. No pool amount of less than 50% will be
established.
STEP 2 - ESTABLISHMENT OF BUSINESS UNIT AND CORPORATE DIVISION POOLS
- --------------------------------------------------------------------
Following a determination of the total amount available in the UHC incentive
pool, top management of UHC determines the performance of the business unit,
SBU support areas and UHC corporate division as well as the incentive pool
available to them based on the performance of the unit or division. Business
support areas will be evaluated based on the primary business areas they
support and their specific unit performance. The business unit, business
support division or corporate division pool is established by creating a
pool of available dollars from 50% of target to 200% of targets.
STEP 3 - ESTABLISHMENT OF INDIVIDUAL INCENTIVE PAYMENTS
- -------------------------------------------------------
Once business unit support divisions and UHC corporate division incentive
pools are established, the respective Health Plan CEOs, Specialty Business
CEOs/Presidents and Corporate Vice Presidents will determine individual
incentive payments for their eligible managers. Health Plan CEOs, Corporate
Vice Presidents or Specialty Business CEOs/Presidents' incentives are
determined by the person to whom they report.
Individual incentive payments range from 50% of incentive target to 200%
of incentive target. No incentive payments of less than 50% will be made.
Employees on formal disciplinary action are not eligible for an incentive
payment.
3
<PAGE>
1995
MANAGEMENT
INCENTIVE
PLAN
WHO IS ELIGIBLE FOR A MANAGEMENT INCENTIVE?
- -----------------------------------------------------------------------------
The Vice President of Human Resources and Administrative Services will
determine which employees are eligible for MIP taking into account the
following general criteria:
1. Employees must be grade 12 or above.
2. The position manages staff.
3. The position is responsible in an ongoing manner (not program or
project) for managing department or division financial resources
and/or budget.
4. The position is directly accountable for key division or business
unit objectives.
WHAT IS MY INCENTIVE TARGET?
- -----------------------------------------------------------------------------
Your incentive target is defined as a percent of your base earnings that
you were paid during the current fiscal year. The incentive target percents
are based on grade level and overall position responsibility.
WHAT IF I'M A MANAGER FOR ONLY PART OF THE YEAR?
- -----------------------------------------------------------------------------
If you are not a manager for the full year but hired or promoted during
the year, your eligibility for management incentive participation will be
prorated for the number of days you are a manager. Managers hired or promoted
in the fourth quarter of 1995 are not eligible to participate in the 1995
plan. If you change positions during the year to a non-manager position,
you are not eligible for a management incentive for that year.
WHAT HAPPENS IF I GET PROMOTED TO A POSITION THAT
CARRIES A HIGHER MANAGEMENT INCENTIVE POTENTIAL?
- -----------------------------------------------------------------------------
Any incentive paid to you would be based on a combination of your existing
and new incentive targets. The targets would be weighted according to the
number of days you held each position.
WHAT HAPPENS IF I AM ON LEAVE FOR PART OF THE YEAR?
- -----------------------------------------------------------------------------
No pay that you receive while on leave will be included as base earnings
for purposes of calculating the management incentive payment.
4
<PAGE>
HOW DO MANAGEMENT INCENTIVE PAYMENTS AFFECT MY 401(k) PLAN
AND ESOP CONTRIBUTIONS?
- -----------------------------------------------------------------------------
Management incentive payments are considered compensation under the 401(k)
and Employee Stock Ownership (ESOP) Plans. Management incentive payments
are not eligible for the Employee Stock Purchase Plan (ESPP).
WHEN ARE MANAGEMENT INCENTIVE PAYMENTS MADE?
- -----------------------------------------------------------------------------
Management Incentive Plan payments are generally made following the close
of the corporate and operating unit books for the 1995 operating year which
we generally anticipate to occur on or before April 1st of the following
year.
WHAT IF I TERMINATE MY UHC EMPLOYMENT BEFORE MANAGEMENT
INCENTIVE PAYMENTS ARE MADE?
- -----------------------------------------------------------------------------
In order to be eligible for a management incentive payment, you must be
an active employee at the time such payments are made.
HOW DO I FIND OUT WHAT MY MANAGEMENT INCENTIVE TARGET IS?
- -----------------------------------------------------------------------------
The person to whom you report will personally meet with you to present your
management incentive targets and discuss corporate, business unit or corporate
division goals, and collaborate with you on your individual goals.
If you have any questions about the Management Incentive Plan, contact your
supervisor or the head of your operating unit.
THERE IS NO GUARANTEE THAT ANY MANAGEMENT INCENTIVE PLAN PAYOUTS WILL BE
MADE. THE RECEIPT OF MANAGEMENT INCENTIVE PLAN PAYOUTS IS CONTINGENT UPON
MEETING ESTABLISHED PERFORMANCE MEASURES AND CRITERIA AND BEING AN ACTIVE
EMPLOYEE ON THE DATE OF PAYMENT. UHC MAY DETERMINE THAT IT NEEDS TO AMEND,
TERMINATE OR MODIFY THE TERMS OF THIS MANAGEMENT INCENTIVE PLAN AND IT RESERVES
THE RIGHT TO DO SO AT ANY TIME WITHOUT NOTICE. ANY CHANGES MUST BE MADE
IN A WRITTEN AMENDMENT MADE SOLELY BY THE VICE-PRESIDENT OF HUMAN RESOURCES.
UHC HAS THE SOLE, EXCLUSIVE AND BINDING DISCRETIONARY AUTHORITY IN INTERPRETING
THE TERMS & CONDITIONS OF THIS MANAGEMENT INCENTIVE PLAN, IN MAKING LEGAL
AND FACTUAL DETERMINATIONS AND CONSTRUING AMBIGUOUS OR DISPUTED TERMS. UHC
MAY DELEGATE SUCH DISCRETION TO OTHER PERSONS OR ENTITIES AND SUCH DELEGATION
MAY INCLUDE THE RIGHT TO REDELEGATE SUCH DISCRETIONARY AUTHORITY. IN ADDITION,
NOTHING CONTAINED IN THIS MANAGEMENT INCENTIVE PLAN SHALL BE DEEMED TO CONFLICT
WITH UHC'S RIGHT TO TERMINATE AT WILL AS SET FORTH IN THE EMPLOYEE HANDBOOK.
THIS MANAGEMENT INCENTIVE PLAN IS NOT AND SHALL NOT BE DEEMED TO BE AN
ENFORCEABLE CONTRACT OR AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF ERISA.
5
<PAGE>
EXAMPLES
- -----------------------------------------------------------------------------
EXAMPLE 1 - BUSINESS UNIT MANAGER (E.G., HEALTH PLAN)
-----------------------------------------------------
STEP 1: Overall Company Pool = 120% of targets
STEP 2: Business Pool = 130% of targets for that business
6 eligible managers Incentive Targets
2 at 15% at $50,000 Base Salary $15,000
2 at 10% at $45,000 Base Salary $ 9,000
2 at 5% at $38,000 Base Salary $ 3,800
------- ------------------- -------
Total Incentive Target equals $27,800
POOL IS CALCULATED: 1 - 40 (Unit Pool) X $27,800 (Incentive Target) =
Incentive Pool of $39,000
STEP 3: Business Unit Senior Manager evaluates individual performance of
each manager and determines incentive payments for each manager.
Management incentive payments can range from 0%, or 50% to 200%
of targets. The amount of the pool for this Senior Manager to
distribute is $39,000; total payments cannot exceed the pool total.
- ------------------------------------------------------------------------------
EXAMPLE 2 - UHC CORPORATE DIVISION
(E.G., CORPORATE FINANCE - TREASURY DEPARTMENT)
-----------------------------------------------
STEP 1: Company Pool = 100% of target
STEP 2: Corporate Division Rating = 90% of target
6 eligible managers Incentive Targets
2 at 15% at $50,000 Base Salary $15,000
2 at 10% at $45,000 Base Salary $ 9,000
2 at 5% at $38,000 Base Salary $ 3,800
------- ------------------- -------
Total Incentive Target equals $27,800
POOL IS CALCULATED: .90 (Overall Rating) X $27,800 (Incentive Target) =
Incentive Pool of $26,000
STEP 3: Corporate Division Head evaluates individual performance of
each manager and determines incentive payment for each manager.
Management incentive payments can range from 0%, or 50% to 200%
of targets. The amount of the pool for this Division Head is $26,000;
total payments cannot exceed the pool total.
6
<PAGE>
EXAMPLES
- -----------------------------------------------------------------------------
EXAMPLE 3 - BUSINESS SUPPORT UNIT MANAGER
-----------------------------------------
(E.G., HEALTH SERVICES)
-----------------------
STEP 1: Company Pool = 110%
STEP 2A: Primary Business Units
Supported Average Pool (Health Plans) = 120%
STEP 2B: Support Unit Pool = 120%
4 eligible managers Incentive Targets
1 at 15% at $60,000 Base Salary $ 9,000
2 at 10% at $45,000 Base Salary $ 9,000
1 at 5% at $40,000 Base Salary $ 2,000
------- ------------------- -------
Total Incentive Target equals $20,000
POOL IS CALCULATED: 120% (Overall Rating) x $20,000 (Incentive Target) =
Incentive Pool of $24,000
STEP 3: Business Support Unit Senior Manager evaluates individual performance
of each manager and determines incentive payments for each manager.
Management incentive payments can range from 0%, or 50% to 200%
of targets. The amount of the pool for this Senior Manager to
distribute is $24,000; total payments cannot exceed the pool total.
7
<PAGE>
M30053A 3/95
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between Jeannine Rivet ("Employee") and
United HealthCare Corporation, ("United") for the purpose of setting forth
certain terms and conditions of Employee's employment by United and to protect
United's knowledge, expertise, customer relationships and the confidential
information United 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 Employee and United or any
subsidiary or affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $188,480 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue until October 31, 1996, unless earlier
terminated as set forth in Section 3B. It is the parties' intent to
negotiate an extension to or renewal of this Agreement prior to the end of
its term.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 15 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ___________________________
___________________________
___________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ Jeannine M. Rivet
---------------------- ---------------------------
Employee
Date 11/21/94 Date 11/21/94
-------------------- ---------------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between Kevin Roche' ("Employee") and United
HealthCare Corporation, ("United") for the purpose of setting forth certain
terms and conditions of Employee's employment by United and to protect United's
knowledge, expertise, customer relationships and the confidential information
United 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 Employee and United or any subsidiary or
affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $150,000 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 12 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ______________________________
______________________________
______________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ Kevin H. Roche'
---------------------- ----------------------
Employee
Date 11/15/94 Date 10/26/94
-------------------- -----------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between Kathy Walstead-Plumb ("Employee") and
United HealthCare Corporation, ("United") for the purpose of setting forth
certain terms and conditions of Employee's employment by United and to protect
United's knowledge, expertise, customer relationships and the confidential
information United 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 Employee and United or any
subsidiary or affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with her position or as are reasonably assigned to Employee by her
supervisor from time-to-time. Employee agrees to devote substantially all
of her business time and energy to the performance of her duties in a
diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall be paid a base annual salary in the amount
-----------
of $161,200 payable bi-weekly, less all applicable withholdings and
deductions.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue through October 31, 1995, unless
earlier terminated as set forth in Section 3B.
B. Termination of Agreement and/or Employment.
------------------------------------------
<PAGE>
1. This Agreement may be terminated at any time by the mutual written
agreement of the parties.
2. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate her employment by giving written notice of
termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For a period equal to the lesser of (a) the period which would have
remained under the terms of this Agreement had it not been terminated
or (b) the period determined in accordance with United's Severance Pay
Plan if her position had been eliminated, following the effective date
of the termination of Employee's employment ("Severance Period"),
Employee shall receive biweekly payments equal to 1/26 of (a)
Employee's annualized base salary at the effective date of
termination, less all applicable withholdings or deductions required
by law or Employee's elections under any employee benefit plans which
Employee continues to participate in under Section 3C2, plus (b) 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 Employee for the two most recent calendar
years or other periods generally used by United to determine such
bonus or incentive compensation, or if Employee has been eligible for
such bonus or incentive compensation payments for less than two such
periods, the last such payment paid or payable to Employee ((a) and
(b) are collectively referred to as the "Severance Compensation").
Employee shall use reasonable efforts to find appropriate employment
or work as an independent contractor not inconsistent with Section 4D
and a biweekly payment shall be reduced by any compensation which
Employee receives or reasonably could have received in that biweekly
period as a result of employment or work as an independent contractor
elsewhere. Employee shall promptly disclose to United any such
compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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 her employment Employee
------------------------
will develop, become aware of and accumulate expertise, knowledge and
information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ___________________________
___________________________
___________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ Kathy Walstead-Plumb
----------------------- ------------------------
Employee
Date 11/15/94 Date 10-31-94
--------------------- -------------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between William Pogue ("Employee") and United
HealthCare Corporation, ("United") for the purpose of setting forth certain
terms and conditions of Employee's employment by United and to protect United's
knowledge, expertise, customer relationships and the confidential information
United 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 Employee and United or any subsidiary or
affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $188,480 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 12 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: __________________________
__________________________
__________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ William Pogue
---------------------- ----------------------
Employee
Date 11/15/94 Date 10/24/94
--------------------- -----------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between David Koppe ("Employee") and United
HealthCare Corporation, ("United") for the purpose of setting forth certain
terms and conditions of Employee's employment by United and to protect United's
knowledge, expertise, customer relationships and the confidential information
United 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 Employee and United or any subsidiary or
affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $225,000 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on December 1, 1994 (the
----
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 12 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ___________________________
___________________________
___________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ David Koppe
---------------------- -------------------------
Employee
Date 1/18/95 Date 1/17/95
-------------------- ---------------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between Sheila Leatherman ("Employee") and
United HealthCare Corporation, ("United") for the purpose of setting forth
certain terms and conditions of Employee's employment by United and to protect
United's knowledge, expertise, customer relationships and the confidential
information United 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 Employee and United or any
subsidiary or affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $162,000 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 12 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Except as described in the three documents which are Attachments A-1
through 3 to this Agreement with respect to QSM, Employee assigns all
rights to all such inventions and works of authorship to United.
Employee shall give United any the assistance it reasonably requires
in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in
4
<PAGE>
either original or duplicate form, except as is needed in the ordinary
course of conducting business for United.
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10
5
<PAGE>
days after it receives written notice of the termination of employment.
Employee 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 Employee
receives or reasonably could have received in that biweekly period as a
result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ___________________________
___________________________
___________________________
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 Employee and
United 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
6
<PAGE>
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. Employee acknowledges and agrees that
-------------------------
he/she has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ Sheila Leatherman
---------------------- -----------------------
Employee
Date 11/15/94 Date 11/4/94
--------------------- -------------------
7
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made by and between James Conto ("Employee") and United
HealthCare Corporation, ("United") for the purpose of setting forth certain
terms and conditions of Employee's employment by United and to protect United's
knowledge, expertise, customer relationships and the confidential information
United 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 Employee and United or any subsidiary or
affiliate of United.
1. Employment and Duties.
---------------------
A. Employment. United hereby directly or through its subsidiaries employs
----------
Employee. Employee 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 United's policies and procedures in regard to
its employees.
B. Duties. Employee shall perform such duties as are commonly associated
------
with his/her position or as are reasonably assigned to Employee by his/her
supervisor from time-to-time. Employee agrees to devote substantially all
of his/her business time and energy to the performance of his/her duties in
a diligent and proper manner.
2. Compensation.
------------
A. Base Salary. Employee shall initially be paid a base annual salary in
-----------
the amount of $127,500 payable bi-weekly, less all applicable withholdings
and deductions. Employee shall receive a periodic performance review from
his/her supervisor and consideration for an increase of such base salary.
B. Bonus and Stock Plans. Employee shall be eligible to participate in
---------------------
United'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.
C. Employee Benefits. The Employee shall be eligible to participate in
-----------------
United'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.
D. Vacation; Illness. Employee shall be entitled to paid vacation and
-----------------
sick leave each year in accordance with United's then-current policies.
3. Term and Termination.
--------------------
A. Term. The term of this Agreement shall begin on November 1, 1994 (the
----
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
<PAGE>
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. United may terminate Employee's employment or terminate this
Agreement by giving written notice of termination which is received by
Employee at least 30 days before the effective date of termination of
employment or of this Agreement, as the case may be.
3. Employee may terminate his/her employment by giving written notice
of termination of employment which is received by United 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 Employee's employment or on the date of
Employee's death, retirement or permanent and total disability which
renders Employee incapable of performing Employee's duties. United
has the sole discretion to determine whether employee is permanently
or totally disabled with the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in Control
---------------------------------
occurs and within one year after the effective date of the Change in
Control (i) Employee's employment with United is terminated by United
pursuant to Section 3B2 and without Cause or (ii) a Change in Employment
occurs which Employee elects to treat as a termination of Employee's
employment under Section 3B2 ((i) and (ii) are collectively referred to as
the "Severance Events"), then:
1. For 12 months following the effective date of the termination of
Employee's employment ("Severance Period"), Employee shall receive
biweekly payments equal to 1/26 of (a) Employee's annualized base
salary at the effective date of termination, less all applicable
withholdings or deductions required by law or Employee's elections
under any employee benefit plans which Employee continues to
participate in under Section 3C2, plus (b) 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
Employee for the two most recent calendar years or other periods
generally used by United to determine such bonus or incentive
compensation, or if Employee has been eligible for such bonus or
incentive compensation payments for less than two such periods, the
last such payment paid or payable to Employee ((a) and (b) are
collectively referred to as the "Severance Compensation"). Employee
shall use reasonable efforts to find appropriate employment or work as
an independent contractor not inconsistent with Section 4D and a
biweekly payment shall be reduced by any compensation which Employee
receives or reasonably could have received in that biweekly period as
a result of employment or work as an independent contractor elsewhere.
Employee shall promptly disclose to United any such compensation.
2
<PAGE>
2. As of the effective date of termination of employment, Employee
shall cease to be eligible for all benefit plans maintained by United,
except as required by federal or state continuation of coverage laws.
If Employee elects continuation of coverage under one or more benefit
plans subject to such continuation requirements, United shall, for the
Severance Period, pay on behalf of Employee an amount equal to
United's employer contribution for similarly situated active
employees' coverages under such benefit plans. During the Severance
Period Employee'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 United shall pay to an outplacement
firm selected by United an amount deemed reasonable by United for
outplacement and job search services for Employee.
4. Any unvested stock options or grants awarded Employee under any of
United's stock option or grant plans shall continue to vest during the
Severance Period in accordance with those options' or grants' pre-
established or usual vesting schedule.
The payments and benefits to Employee under this Section 3C shall be the
sole liability of United to Employee 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 United under any other severance plan or program and such
payments and benefits may be conditioned by United upon receipt of a
release of claims from Employee. Solely for purposes of stock options and
grants, the date of termination of employment shall be the last day of the
Severance Period.
D. Definitions and Procedure.
-------------------------
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Employee to follow the reasonable directions of
United's Board of Directors or Employee's supervisor or to perform any
duties reasonably required by United, (b) a failure to adequately meet
reasonable performance expectations, (c) material violations of
United's Code of Conduct or (d) the commission of any criminal act or
act of fraud or dishonesty by Employee in connection with Employee's
employment by United. In the event that United terminates Employee's
employment under subsections (a) or (b) of this Cause definition,
United shall specify in the notice of termination the basis for Cause.
If the Cause described in the notice is cured to United's reasonable
satisfaction prior to the end of the 30 day notice period, the notice
of termination of employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall be
deemed to have occurred (a) if (i) Employee's duties are materially
adversely changed without Employee's prior consent or (ii) Employee's
salary or benefits are reduced other than as a general reduction of
salaries and benefits by United or (iii) the location of performance
of most of Employee's duties is moved from
3
<PAGE>
the general geographic location in which Employee performed such
duties prior to the move or (iv) without terminating Employee's
employment this Agreement is terminated by United pursuant to Section
3B2, and (b) if in each case under subsections (a) (i), (ii), (iii)
and (iv), in the period beginning 60 days before the time the Change
in Employment occurs, Cause does not exist or if Cause does exist
United has not given Employee written notice that Cause exists.
Employee may elect to treat a Change in Employment as a termination of
employment by United. To do so Employee shall send written notice of
such election to United within 60 days after the date Employee
receives notice from United or otherwise is definitively informed of
the events constituting the Change in Employment. No Change in
Employment shall be deemed to have occurred if Employee fails to send
the notice of election within the 60 day period. Employee's failure
to treat a particular Change in Employment as a termination of
employment shall not preclude Employee 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 receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or any
merger, reorganization, or exchange or tender offer which, in each
case, will result in a change in the power to elect 50% or more of the
members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete Provisions.
------------------------------------------------------------------------
A. United's Property.
-----------------
1. Employee shall promptly disclose to United in writing all
inventions, discoveries and works of authorship, whether or not
patentable or copyrightable, which are conceived, made, discovered,
written or created by Employee alone or jointly with another person,
group or entity, whether during the normal hours of employment at
United or on Employee's own time, during the term of this Agreement.
Employee assigns all rights to all such inventions and works of
authorship to United. Employee shall give United any the assistance
it reasonably requires in order for United 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 was used and
which was developed entirely on the Employee's own time and which (1)
does not relate to the business of United or to United's anticipated
research or development, or (2) does not result from any work
performed by the Employee for United.
2. Employee shall not remove any records, documents, or any other
tangible items (excluding Employee's personal property) from the
premises of United in either original or duplicate form, except as is
needed in the ordinary course of conducting business for United.
4
<PAGE>
3. Employee shall immediately deliver to United, upon termination of
employment with United, or at any other time upon United's request,
any property, records, documents, and other tangible items (excluding
Employee's personal property) in Employee'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/her employment
------------------------
Employee will develop, become aware of and accumulate expertise, knowledge
and information regarding United's organization, strategies, business and
operations and United's past, current or potential customers and suppliers.
United 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 Employee shall not use such Confidential Information
or disclose it to other persons or entities except as is necessary for the
performance of Employee's duties for United or as has been expressly
permitted in writing by United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
----------------
period for which Employee is receiving payments under Section 3C of this
Agreement, (iii) any period following the termination or expiration of this
Agreement during which Employee remains employed by United and (iv) for a
period of one year after the last day of the latest of any period described
in (i), (ii) or (iii), Employee shall not (y) directly or indirectly
attempt to hire away any then-current employee of United or a subsidiary of
United or to persuade any such employee to leave employment with United, 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 (including any subsidiary or
affiliated company in which United 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 Employee is receiving payments under Section 3C of this
Agreement, and (iii) any period following the termination or expiration of
this Agreement during which Employee remains employed by United, Employee
shall not, without United'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 (including any subsidiary
or affiliated company in which United has a more than 20% equity interest)
is engaged. In the event that Employee elects to terminate Employee's
employment pursuant to Section 3B3, United may elect to have the provisions
of this Section 4D be in effect for six months following the effective date
of such resignation if during that six month period United pays Employee
biweekly payments equal to 1/26 of the Severance Compensation. United must
send written notice of such election within 10 days after it receives
written notice of the termination of employment. Employee 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
5
<PAGE>
reduced by any compensation which Employee receives or reasonably could
have received in that biweekly period as a result of employment or work as
an independent contractor elsewhere. Employee shall promptly disclose to
United 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 United in its sole discretion may assign this Agreement
to an entity controlled by United at the time of the assignment. If United
subsequently loses or gives up control of the entity to which this
Agreement is assigned, such entity shall become United for all purposes
under this Agreement, beginning on the date on which United loses or gives
up control of the entity. Any successor to United shall be deemed to be
United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Employee: ___________________________
___________________________
___________________________
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 Employee and
United 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.
6
<PAGE>
F. Adequacy of Consideration. Employee acknowledges and agrees that he/she
-------------------------
has received adequate consideration from United to enter into this
Agreement.
G. Dispute Resolution and Remedies. Any dispute arising between the
-------------------------------
parties relating to this Agreement or to Employee's employment by United
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 Employee's failure to comply with
the Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/ William W. McGuire /s/ James Conto
---------------------- ----------------------
Employee
Date 11/15/94 Date 10/31/94
-------------------- ------------------
7
<PAGE>
UNITED HEALTHCARE CORPORATION
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. Purpose.
This plan shall be known as the "United HealthCare Corporation
Nonemployee Director Stock Option Plan" and is hereinafter referred to as the
"Plan." The purpose of the Plan is to promote the interests of United
HealthCare Corporation, a Minnesota corporation (the "Company"), by enhancing
its ability to attract and retain the services of experienced and knowledgeable
independent directors and by providing additional incentive for these directors
to increase their interest in the Company's long-term success and progress.
Section 2. Administration.
The Plan shall be administered by a committee (the "Committee") of
three or more persons appointed by the Board of Directors of the Company.
Grants of stock options under the Plan and the amount and nature of the awards
to be granted shall be automatic as described in Section 6. However, all
questions of interpretation of the Plan or of any options issued under it shall
be determined by the Committee and such determination shall be final and binding
upon all persons having an interest in the Plan.
Section 3. Participation in the Plan.
Each director of the Company shall be eligible to participate in the
Plan unless such director is an employee of the Company or any subsidiary of the
Company.
Section 4. Stock Subject to the Plan.
Subject to the provisions of Section 10 hereof, the stock to be
subject to options under the Plan shall be authorized but unissued shares of the
Company's common stock, par value $.01 per share (the "Common Stock"). Subject
to adjustment as provided in Section 10 hereof, the maximum number of shares
with respect to which options may be exercised under this Plan shall be 350,000
shares. If an option under the Plan expires, or for any reason is terminated,
any shares that have not been purchased upon exercise of the option prior to the
expiration or termination date shall again be available for options thereafter
granted during the term of the Plan.
Section 5. Nonqualified Stock Options.
<PAGE>
All options granted under the Plan shall be nonqualified stock options
that do not qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended.
Section 6. Terms and Conditions of Options.
Each option granted under this plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(a) Annual Option Grants. Each eligible director of the Company in
---------------------
office on the first business day immediately following each annual meeting of
the Company's shareholders (the "Annual Option Grant Date") held during the term
of the Plan shall be granted automatically on the Annual Option Grant Date an
option to purchase 4,000 shares of Common Stock, provided that no director shall
be granted an option with respect to an Annual Option Grant Date if such
director has been granted an option under Section 6(b) hereof within 12 months
of such Annual Option Grant Date, and except that, in lieu thereof, each
eligible director of the Company who is in office on the Annual Option Grant
Date immediately following the 1995 annual meeting of shareholders (the "1995
Annual Meeting"), shall be granted automatically (i) an option to purchase
16,000 shares of Common Stock on the Annual Option Grant Date following the 1995
Annual Meeting, (ii) an option to purchase 8,000 shares of Common Stock on the
Annual Option Grant Date following the 1996 annual meeting of shareholders, and
(iii) an option to purchase 4,000 shares of Common Stock on each Annual Option
Grant Date thereafter. Each option granted pursuant to this Section 6(a) shall
have an exercise price as determined pursuant to Section 7 hereof.
(b) Initial Option Grants. Each eligible director of the Company that
----------------------
is elected to the Board of Directors after the Annual Option Grant Date
following the 1995 Annual Meeting shall be granted automatically on the date
that the director is elected to the Board of Directors an option to purchase
9,000 shares of Common Stock. Notwithstanding Section 6(e), the options granted
pursuant to this Section 6(b) shall not be exercisable for a period of one year
after the date on which they were granted, but thereafter will become
exercisable as to one-third of the sharesv covered by the option on each
anniversary date of the option grant. Each option granted pursuant to this
Section 6(d) shall have an exercise price as determined pursuant to Section 7
hereof.
(c) Options Non-Transferable. No option granted under the Plan shall
-------------------------
be transferable by the optionee otherwise than by will or by the laws of descent
and distribution as provided
- 2 -
<PAGE>
in Section 6(f) hereof. During the lifetime of the optionee, the options shall
be exercisable only by such optionee. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during such
optionee's lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
(d) Period of Options. Options shall terminate upon the expiration of
------------------
10 years from the date on which they were granted.
(e) Exercise of Options.
--------------------
(i) Options granted under the Plan shall not be exercisable for a
period of six months after the date on which they were granted, but thereafter
will be exercisable in full at any time or from time to time during the term of
the option, provided that options granted under the Plan may become fully
exercisable upon a director's resignation from the Board of Directors or death
of the optionee.
(ii) The exercise of any option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Common Stock pursuant to such exercise will not violate
any federal or state securities or other laws. An optionee desiring to exercise
an option may be required by the Company, as a condition of the effectiveness of
any exercise of an option granted hereunder, to agree in writing that all Common
Stock to be acquired pursuant to such exercise shall be held for his or her own
account without a view to any distribution thereof, that the certificates for
such shares shall bear an appropriate legend to that effect and that such shares
will not be transferred or disposed of except in compliance with applicable
federal and state securities laws.
(iii) An optionee electing to exercise an option shall give
written notice to the Company of such election and of the number of shares
subject to such exercise. The full purchase price of such shares shall be
tendered with such notice of exercise. Payment shall be made to the Company in
cash (including check, bank draft or money order).
(f) Effect of Death. If the optionee shall die prior to the time the
----------------
option is fully exercised, such option may be exercised at any time within one
year after his or her death by the personal representatives or administrators of
the optionee or by any person or persons to whom the option is
- 3 -
<PAGE>
transferred by will or the applicable laws of descent and distribution, to
the extent of the full number of shares the optionee was entitled to
purchase under the option on the date of death and subject to the condition
that no option shall be exercisable after the expiration of the term of the
option.
Section 7. Option Exercise Price.
The option exercise price per share for the shares covered by each option
shall be equal to the "fair market value" of a share of Common Stock as of the
date on which the option is granted. For the purposes of the Plan, the fair
market value of the Common Stock on a given date shall be the closing price of
the Common Stock on such date on the New York Stock Exchange, Inc. (the "NYSE")
Composite Tape, if the Common Stock is then being traded on the NYSE. If on the
date as of which the fair market value is being determined the Common Stock is
not publicly traded, the Committee shall make a good faith attempt to determine
such fair market value and, in connection therewith, shall take such actions and
consider such factors as it deems necessary or advisable.
Section 8. Time for Granting Options.
Unless the Plan shall have been discontinued as provided in Section 12
hereof, the Plan shall terminate upon the expiration of 10 years from the date
upon which it takes effect as provided in Section 11 hereof. No option may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee, alter or impair any rights or obligations under any
option theretofore granted.
Section 9. Limitation of Rights.
(a) No Right to Continue as a Director. Neither the Plan, nor the
granting
-----------------------------------
of an option nor any other action taken pursuant to the Plan, shall
constitute, or be evidence of, any agreement or understanding, express or
implied, that the Company will retain a director for any period of time, or
at any particular rate of compensation.
(b) No Shareholder Rights for Options. An optionee shall have no rights as
----------------------------------
a shareholder with respect to the shares covered by options until the date of
the issuance to such optionee of a stock certificate therefor, and no
adjustment will be made for cash dividends or other rights for which the
record date is prior to the date such certificate is issued.
Section 10. Adjustments to Common Stock.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock
- 4 -
<PAGE>
dividend (of whatever amount), stock split or other change in the corporate
structure, appropriate adjustments in the Plan and outstanding options shall be
made. In the event of any such changes, adjustments shall include, where
appropriate, changes in the aggregate number of shares subject to the Plan, the
number of shares subject to outstanding options and the option exercise prices
thereof in order to prevent dilution or enlargement of option rights.
Section 11. Effective Date of the Plan.
The Plan shall take effect immediately upon its approval by the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and voted at a duly held meeting of shareholders of the Company.
Section 12. Amendment of the Plan.
The Board may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that without approval of the shareholders
of the Company no revision or amendment shall be made that (a) absent such
shareholder approval, would cause Rule 16b-3, as promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor rule or regulation thereto, to become
unavailable with respect to the Plan, or (b) requires the approval of the
Company's shareholders under any rules or regulations of the NYSE that are
applicable to the Company. The Board shall not alter or impair any option
theretofore granted under the Plan without the consent of the holder of the
option.
Section 13. Governing Law.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Minnesota and construed
accordingly.
Section 14. Compliance with Exchange Act.
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
such provision or action shall be deemed null and void to the extent permitted
by law and deemed advisable by the Committee.
- 5 -
<PAGE>
EXHIBIT 11
UNITED HEALTHCARE CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
NET EARNINGS BEFORE
EXTRAORDINARY GAIN $288,139 (2) $212,078 $130,591
EXTRAORDINARY GAIN
ON SALE OF SUBSIDIARY 1,377,075 0 0
---------- -------- --------
NET EARNINGS $1,665,214 $212,078 $130,591
========== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Weighted average number of 170,711 166,927 160,931
common shares outstanding
Additional equivalent shares
issuable from assumed exercise of
common stock options 4,498 4,812 5,160
---------- -------- --------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (1) 175,209 171,739 166,091
========== ======== ========
NET EARNINGS PER SHARE
BEFORE EXTRAORDINARY GAIN (1) $1.64 (2) $1.23 $0.79
EXTRAORDINARY GAIN PER SHARE (1) 7.86 0 0
---------- -------- --------
NET EARNINGS PER SHARE (1) $9.50 $1.23 $0.79
========== ======== ========
</TABLE>
(1) Number of shares and per share amounts have been restated to reflect the
the February 23, 1994, two-for-one stock split.
(2) Includes merger costs incurred in connection with the Company's May 1994
acquisitions of Complete Health Services, Inc. and Ramsay-HMO, Inc. These
cost were $35.9 million ($22.3 million after income taxes) and reduced net
earnings per share before extraordinary gain by $0.13. Excluding the
effects of these merger cost, net earnings before extraordinary gain would
have been $310.4 million ($1.77 per share.)
<PAGE>
Financial Highlights
<TABLE>
<CAPTION> For the Years Ended December 31,
------------------------------------------------------------------------
1994 1993 1992 l991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Operating Results
Revenues $3,768,882 $3,115,202 $2,200,636 $1,416,120 $1,056,019
Earnings from Operations $ 506,047 $ 336,351 $ 207,306 $ 142,724 $ 79,548
Net Earnings Before
Extraordinary Gain $ 288,139/1/ $ 212,078 $ 130,591 $ 89,398 $ 47,142
Extraordinary Gain on Sale of
Subsidiary, net 1,377,075 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Earnings $1,665,214 $ 212,078 $ 130,591 $ 89,398 $ 47,142
- -----------------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share
Earnings Before
Extraordinary Gain $ 1.64/1/ $ 1.23 $ 0.79 $ 0.60 $ 0.38
Extraordinary Gain 7.86 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Primary $ 9.50 $ 1.23 $ 0.79 $ 0.60 $ 0.38
- -----------------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 9.50 $ 1.23 $ 0.79 $ 0.60 $ 0.34
Dividends Per Share 0.030 $ 0.015 $ 0.0075 $ 0.0075 $ 0.0075
Weighted Average Number of
Common Shares Outstanding
Primary 175,209 171,739 166,091 148,105 124,898
Fully Diluted 175,209 171,739 166,091 148,105 138,022
Consolidated Financial Position (at year end)
Cash and Investments $2,769,390 $1,169,433 $ 923,576 $ 516,174 $ 258,071
Total Assets $3,489,479 $1,787,354 $1,321,174 $ 801,473 $ 434,555
Long-term Obligations $ 24,275 $ 39,099 $ 24,132 $ 41,649 $ 39,123
Shareholders' Equity $2,795,456 $1,085,410 $ 822,903 $ 426,796 $ 169,460
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial Highlights should be read in conjunction with Financial Review and
Consolidated Financial Statements and notes thereto included in this Annual
Report.
The information in the above table has been restated for all periods presented
to include the results of Complete Health Services, Inc. (Complete Health) and
Ramsay-HMO, Inc. (Ramsay), in accordance with pooling of interests accounting.
Complete Health and Ramsay were acquired by the Company on May 31, 1994.
The number of shares and per share amounts in the above table also have been
restated to reflect the February 23, 1994, two-for-one stock split.
- -------------------------------------------------------------------------------
/1/ Includes merger costs incurred in connection with the Company's May 1994
acquisitions of Complete Health and Ramsay. These costs were $35.9 million
($22.3 million after income taxes) and reduced net earnings per share before
extraordinary gain by $0.13. Excluding the effects of these merger costs,
net earnings before extraordinary gain would have been $310.4 million
($1.77 per share).
1
<PAGE>
Financial Review
The Company's financial position and results of operations changed dramatically
during 1994 as a result of three significant transactions. On May 31, 1994,
the Company acquired Complete Health Services, Inc. (Complete Health), a
company which owned or managed health plans serving 272,000 members in
seven Southeastern states at the time of acquisition. Also on May 31, 1994, in
a separate transaction, the Company acquired Ramsay-HMO, Inc. (Ramsay), a
company which owned and operated a predominately staff model health plan
serving 177,000 members in South and Central Florida at the time of
acquisition. Each of these acquisitions involved the exchange of Company
common stock for all the issued and outstanding stock of the acquired company
and was accounted for as a pooling of interests. Accordingly, the financial
information, enrollment data and related comparisons presented in this
discussion have been restated to include the results of Complete Health and
Ramsay for all periods presented.
On May 27, 1994, the Company sold Diversified Pharmaceutical Services, Inc.
(Diversified), then a wholly owned subsidiary, to SmithKline Beecham
Corporation for $2.30 billion in cash. In connection with this transaction,
the Company recognized an extraordinary gain after transaction costs and
income tax effects of $1.38 billion, or $7.86 per share. The results of
Diversified subsequent to the sale are not included in the financial
information presented in this discussion.
This Financial Review should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Consolidated Operating Results
The Company again achieved record revenues and earnings for the year ended
December 31, 1994. Revenues in 1994 of $3.77 billion exceeded 1993 revenues of
$3.12 billion by 21%. The growth in revenues was driven primarily by enrollment
gains and premium rate increases within the Company's owned and managed health
plans and new sales in its specialty managed care services operations.
Revenues in 1993 exceeded 1992 revenues of $2.20 billion by $914.6 million, or
42%. The Company's January 1993 purchase of a health plan in Dayton, Ohio,
accounted for $264.6 million, or 29%, of the increase in 1993 revenues compared
to 1992. The remaining revenue growth was again a result of enrollment gains and
premium rate increases in the owned and managed health plans and sales growth in
the specialty operations.
The Company's medical cost management and selling, general and administrative
cost containment efforts during 1993 and 1994 resulted in decreasing operating
expenses relative to its overall revenue base. Total operating expenses as a
percentage of revenues decreased from 90.6% in 1992 to 89.2% in 1993 and 86.6%
in 1994.
2
<PAGE>
Through the combination of these factors, earnings from operations grew from
$207.3 million in 1992 to $336.4 million in 1993, an increase of 62%, and then
to $506.0 million in 1994, an increase of 50% over 1993. The Company's operating
margin improved from 9.4% in 1992 to 10.8% in 1993 and 13.4% in 1994.
In connection with the Complete Health and Ramsay acquisitions, the Company
recorded nonrecurring, non-operating merger costs of $35.9 million. These costs
consisted principally of professional fees and other direct costs associated
with the acquisitions. In 1993, merger costs of $14.9 million incurred in
connection with the Company's August 1993 acquisition of HMO America, Inc. were
roughly offset by the gain recognized on the sale of the Company's Iowa health
plan in July 1993.
Investment income, included as a component of the Company's revenues, was
$118.0 million in 1994, $62.8 million in 1993 and $49.2 million in 1992.
Investment income increased each year due primarily to the investment of cash
generated from operations and, in 1994, the investment of the net proceeds from
the Diversified sale. Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards No.115, "Accounting for Certain Investments in
Debt and Equity Securities." The adoption of this statement was not significant
to the Company's overall financial position and had no effect on the Company's
results of operations.
The Company's provision for income taxes represents the tax effects of its
current operations based on the Federal statutory tax rate, adjusted primarily
for the effects of tax-exempt investment income and state income taxes. The
effective income tax rate was 38% in 1994, 36% in 1993 and 35% in 1992.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No.109, "Accounting for Income Taxes." The cumulative effect of the
Company's adoption of this statement and the impact on its results of operations
was not significant.
The Company's net earnings from operations were $310.4 million in 1994, $212.1
million in 1993 and $130.6 million in 1992, which equated on a per share basis
to $1.77, $1.23 and $0.79, respectively. After considering the nonrecurring,
non-operating merger costs, net earnings in 1994 were $288.1 million, or $1.64
per share, before the effects of the Diversified gain. Including the Diversified
extraordinary gain, net earnings in 1994 were $1.67 billion, or $9.50 per share.
Line of Business Reporting
The Company operates in a single industry segment, managed health care. The
general management and various aspects of the Company's operations, including
information systems, transaction processing and certain administrative functions
and procedures, are interrelated. The following table presents financial
information reflecting the Company's operations by two primary lines of
business: (i) owned health plans and (ii) managed health plans and specialty
managed care services. This information is provided to facilitate a more
meaningful discussion of the Company's results of operations.
Owned health plan operations include health plans in which the Company has a
majority ownership interest and the Company's related insurance operations. This
line of business is characterized by operations in which the Company assumes
underwriting risk in return for premium revenue. The second line of business,
managed health plan and specialty managed care services operations, provides
administrative and other management services to health plans in which the
Company has less than a majority ownership interest, if any, and also includes
the results of the Company's specialty managed care services operations. This
line of business is characterized by operations in which the Company receives
fees for the provision of service, primarily administrative in nature, and
generally accepts no financial responsibility for health care costs, except in
the case of its subsidiary United Behavioral Systems (UBS) and the formerly-
owned Diversified. Through UBS, the Company does accept some health care cost
responsibility for the provision of mental health and substance abuse services
and thus recognizes premium revenue and medical services expense. Diversified
began to accept health care cost responsibility for the managed delivery of
pharmaceutical benefit programs for some of its customers (primarily health
plans owned by the Company) during 1993. Except for directly identifiable
expenses, the Company's general and administrative expenses are allocated
between the two lines of business, primarily on the basis of enrollment,
revenues, information systems or other resource usage.
The Company's 1994 acquisitions of Complete Health and Ramsay are included in
the owned health plan line of business for all periods presented. Diversified
has been included in the managed and specialty line of business through the May
1994 date of sale. As a result of these transactions, the managed health plans
and specialty managed care services line of business will comprise a smaller
portion of the Company's total revenues and operating income in future periods.
3
<PAGE>
Line of Business Financial Information
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Percent Percent
Amount or Percent Increase Amount or Percent Increase Amount or Percent
Percent of Total (Decrease) Percent of Total (Decrease) Percent of Total
- -----------------------------------------------------------------------------------------------------------------------------------
Results of Operations (for year ended December 31) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues/1/
Owned Health Plans $3,358,546 89.1% 21% $2,777,514/3/ 89.2% 43%/3/ $1,941,175 88.2%
Managed Health Plan and Specialty
Managed Care Services 456,109/4/ 12.1 7/4/ 425,992 13.7 71 248,803 11.3
Corporate and Eliminations/2/ (45,773) (1.2 -- (88,304) (2.9) -- 10,658 0.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total Revenues $3,768,882 100.0% 21% $3,115,202 100.0% 42% $2,200,636 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income/1/
Owned Health Plans $ 352,061 69.6% 50% $ 234,415/3/ 69.7% 73%/3/ $ 135,622 65.5%
Managed Health Plan and Specialty
Managed Care Services 71,994/4/ 14.2 (5)/4/ 76,050 22.6 45 52,318 25.2
Corporate and Eliminations/2/ 81,992 16.2 -- 25,886 7.7 -- 19,366 9.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total Operating Income $ 506,047 100.0% 50% $ 336,351 100.0% 62% $ 207,306 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Margin
Owned Health Plans 10.5% 8.4% 7.0%
Managed Health Plan and Specialty
Managed Care Services 15.8%/4/ 17.9% 21.0%
Total Operating Margin 13.4% 10.8% 9.4%
Operating Ratios
Medical Costs to Premium Revenues
(Owned Health Plans only) 79.3% 81.4% 82.0%
SG&A Expenses to Total Revenues 14.7% 15.8% 17.3%
Enrollment (at year end)
Owned Health Plans
Commercial 1,791 18% 1,521/3/ 36%/3/ 1,116
Medicaid 285 19 239 10 217
Medicare 109 11 98 18 83
- -----------------------------------------------------------------------------------------------------------------------------------
Total Owned Health Plans 2,185 18% 1,858 31% 1,416
- -----------------------------------------------------------------------------------------------------------------------------------
Managed Health Plans
Commercial 940 10% 852 9% 780
Medicaid 47 2 46 (8) 50
Medicare 77 (3) 79 (4) 82
- -----------------------------------------------------------------------------------------------------------------------------------
Total Managed Health Plans 1,064 9% 977 7% 912
- -----------------------------------------------------------------------------------------------------------------------------------
Total Health Plans 3,249 15% 2,835 22% 2,328
- -----------------------------------------------------------------------------------------------------------------------------------
Specialty Managed Care Services
United Resource Networks 15,633 21% 12,885 47% 8,789
United Behavioral Systems 2,962 25 2,373 31 1,818
Institute for Human Resources 2,585 24 2,078 43 1,449
Healthmarc 2,144 15 1,863 12 1,670
- -----------------------------------------------------------------------------------------------------------------------------------
23,324 21% 19,199 40% 13,726
Diversified Pharmaceutical Services -- 14,399 7,048
- -----------------------------------------------------------------------------------------------------------------------------------
Total Specialty Managed
Care Services 23,324 33,598 20,774
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Revenues and operating income for each line of business include its
respective investment interest income. Interest earned on cash available
for general corporate use is included in "corporate and eliminations."
Investment income included in each line of business was $34.7 million and
$83.3 million in 1994, $29.8 million and $33.0 million in 1993, and
$24.0 million and $25.2 million in 1992 for owned health plans and
corporate, respectively.
/2/ "Corporate and eliminations" includes revenue eliminations between lines of
business and amounts not deemed to be related to a line of business,
including interest earned on cash available for general corporate use,
research and development costs and certain other corporate expenses.
/3/ On January 29, 1993, the Company purchased Western Ohio Health Care
Corporation with enrollment of 182,600 at the time of acquisition.
/4/ Excludes the post disposition results of Diversified Pharmaceutical
Services, which was sold May 27, 1994.
4
<PAGE>
Owned Health Plans
Revenues generated by the Company's owned health plans increased by $581.0
million, or 21%, in 1994 compared to 1993. This increase reflects enrollment
growth of 18% and an average premium rate increase on renewing commercial groups
of 4% in 1994 and, to a lesser extent, the January 1993 purchase of the
Company's health plan in Dayton, Ohio, and the July 1993 sale of the Company's
Iowa health plan. Excluding the effects of the Ohio purchase and the Iowa sale,
the increase in 1994 revenues over 1993 was 23%.
Revenues from this line of business in 1993 increased by $836.3 million, or
43%, compared to 1992, reflecting enrollment growth of 31% (20% excluding the
Dayton, Ohio, and Iowa health plans) and an average premium rate on renewing
commercial groups of 9% during 1993. The purchase of the Dayton, Ohio, health
plan accounted for $264.6 million, or 32%, of the increase in owned health plan
revenues in 1993. Excluding the effects of the Ohio and Iowa transactions, the
increase in 1993 revenues over 1992 was 31%.
Owned health plan commercial premiums are established by the Company based on
its anticipated health care costs. The Company has been able to effectively
manage health care costs and decrease the rate at which its health care costs
have grown. Following this strategy, the Company expects commercial premium rate
increases in 1995 to decline slightly from those realized in 1994 in
anticipation of a declining medical cost trend.
The combination of the Company's pricing strategy and continued medical cost
management efforts are reflected in the owned health plans' medical loss ratio
(medical costs as a percent of premium revenues). The medical loss ratio
improved from 82.0% in 1992 to 81.4% in 1993 and 79.3% in 1994. The declining
loss ratio and lower selling, general and administrative expenses as a percent
of revenues resulted in operating income in this line of business of $352.1
million in 1994 compared to $234.4million in 1993 and $135.6 million in 1992.
The owned health plan operating margin increased to 10.5% in 1994 from 8.4% in
1993 and 7.0% in 1992.
Managed Health Plan and
Specialty Managed Care Services
As reported, revenues generated by the Company's managed health plans and
specialty managed care services operations increased $30.1 million, or 7%, in
1994 compared to 1993. These results were significantly impacted by the effects
of the sale of Diversified in May 1994 and a change in the terms of the
Company's management agreement with the Minneapolis, Minnesota, based Medica
health plan in August 1994. The results of Diversified's operations have been
included in this line of business only through the May 1994 date of sale. Under
the new Medica agreement, the Company transferred cost responsibility for
certain management contract expenses and employees to Medica. The Company's
selling, general and administrative expenses decreased accordingly, matched with
a corresponding decrease in management services revenues. Excluding the effects
of these transactions, revenues generated in this line of business increased 34%
in 1994 compared to 1993.
After excluding the effects of the Diversified sale and the change in the
Medica agreement, the principal factors behind the growth in revenues during
1994 were enrollment gains and premium rate increases in the managed health
plans and strong enrollment growth in the specialty managed care services
operations. The Company's revenues from its managed health plans are typically
based on a percentage of the plans' premium revenues. During 1994, the managed
health plans experienced enrollment growth of 9% and an average premium rate
increase on renewing commercial groups of 4%. In addition, lives served by the
Company's specialty managed care services operations (excluding Diversified's
enrollment) increased by 21% in 1994 compared to 1993.
The Diversified sale resulted in lower operating income in this line of
business in 1994 compared to 1993. As reported, operating income generated
from the managed health plan and specialty managed care services operations
decreased $4.1 million, or 5%. After excluding the effects of Diversified,
operating income increased 37% in 1994, reflecting the growth in revenues
during the year coupled with lower selling, general and administrative
expenses as a percent of revenues in this line of business.
5
<PAGE>
Revenues generated by the managed health plan and specialty managed care
services operations increased $177.2 million, or 71%, in 1993 compared to 1992.
Enrollment growth and premium rate increases in the managed health plans and
strong enrollment gains in the specialty managed care services operations again
contributed to the revenue increases. The managed health plans experienced
enrollment growth of 7% and an average premium rate increase on renewing
commercial groups of 8% during 1993. Lives served by the specialty managed care
services operations increased by 62% in 1993 compared to 1992. Also contributing
to the growth in 1993 revenues was the introduction of a new pharmaceutical
benefit management product by Diversified. In the second quarter of 1993, the
Company began to market a product whereby Diversified would accept health care
cost responsibility for the managed delivery of pharmaceutical benefit programs.
Most of the Company's owned health plans converted to this new product during
1993, which accounted for 45% of the increase in managed health plan and
specialty managed care services revenues in 1993 compared to 1992 and
contributed to higher eliminations within the corporate and eliminations section
of the line of business reporting.
Managed health plan and specialty managed care services operating income
increased $23.7 million, or 45%, in 1993 compared to 1992. However, operating
margin decreased from 21.0% in 1992 to 17.9% in 1993 due primarily to the impact
of the new Diversified product introduced in 1993. This Diversified product had
significantly higher revenues and operating income on both a per-life-served
basis and in total dollars than its previous product, which provided
administrative services only. As a result, the managed health plan and specialty
managed care services operations experienced a lower operating margin in 1993
compared to 1992 as the increased revenues on a per-life-served basis was
proportionately higher than the increased operating income on a per-life-served
basis.
Inflation
Although the general rate of inflation has remained relatively stable and
health care cost inflation has declined in recent years, the total health care
cost inflation rate still exceeds the general inflation rate. The Company uses
various strategies to mitigate the negative effects of health care cost
inflation, including setting commercial premiums based on its anticipated health
care costs, risk-sharing arrangements with the Company's various health care
providers and other health care cost containment measures. Specifically, the
Company's health plans attempt to control medical and hospital costs through
contractual arrangements with independent providers of health care services.
Cost-effective delivery of health care services by such health care providers is
achieved by the reduction of unnecessary hospitalizations, appropriate use of
specialty referral services and emphasizing preventive health services. While
the Company believes its current strategies to mitigate health care cost
inflation will continue to be successful, there is no assurance that those
efforts will be as effective as they have been in the past.
Government Regulation
Government regulation of employee benefit plans, including health care coverage,
health plans and the Company's specialty managed care products, is a changing
area of law that varies from jurisdiction to jurisdiction and generally gives
responsible administrative agencies broad discretion. The Company believes that
it is in compliance in all material respects with the various federal and state
regulations applicable to its current operations. To maintain such compliance,
it may be necessary for the Company or a subsidiary to make changes from time to
time in its services, products, structure or marketing methods. Additional
governmental regulation or future interpretation of existing regulations could
increase the cost of the Company's compliance or otherwise affect the Company's
operations, products, profitability or business prospects. The Company is unable
to predict what additional government regulations, if any, affecting its
business may be enacted in the future or how existing or future regulations
might be interpreted.
6
<PAGE>
Financial Condition and Liquidity
The Company's cash and investments increased from $1.17 billion at December 31,
1993, to $2.77 billion at December 31, 1994. The increase of $1.60 billion
during 1994 reflects the investment of the proceeds from the sale of Diversified
of $2.30 billion and cash generated from operations of $326.3 million, partially
offset by the payment of income taxes and transaction costs of $836.3 million
related to the Diversified sale and the investment of $89.7 million in property
and equipment and software development.
The Company generally invests a large portion of its cash resources in high-
quality, long-term instruments. At December 31, 1994, the Company had working
capital of $1.24 billion, a current ratio of 2.9, as a substantial portion of
the Diversified proceeds remained invested in short-term instruments while the
Company evaluated longer-term investment opportunities. The Company intends to
apply the proceeds from the Diversified sale to expand its operations through
internal development of new products and programs and, to the extent reasonable
opportunities are available, to acquire other companies in the health care
management industry. The Company intends to invest the Diversified proceeds in
accordance with its investment strategy until utilized for such purposes. The
Company had a working capital deficit at December 31, 1993, of $44.8 million, a
current ratio of 0.9, which is reflective of its longer-term investment
strategy.
Under applicable state regulations, certain of the Company's subsidiaries are
required to retain cash generated from their operations. After giving effect to
these restrictions, the Company had approximately $1.98 billion in cash and
investments available for general corporate use at December 31, 1994.
Subsequently, the Company used $520.0 million of its available cash resources to
acquire GenCare Health Systems (GenCare) on January 3, 1995. GenCare is a health
plan based in St. Louis, Missouri, which served approximately 230,000 members at
the time of acquisition.
The fair value of the Company's cash and investments at December 31, 1994,
exceeded amortized cost by approximately $44 million, after income tax effects.
Given the extent of the Company's available cash resources and its current
capital requirements and commitments, the Company presently intends to manage
its investment portfolio in a manner which would not result in the realization
of significant investment losses.
The Company believes its available cash resources will be sufficient to meet
its current operating requirements and internal development initiatives. There
currently are no material definitive commitments for future use of the Company's
available cash resources; however, management continually evaluates
opportunities to expand its health plan operations and specialty managed care
services, which may include additional acquisitions and internal development of
new products or programs. A portion of these resources will be retained by the
Company to maintain its strong financial position.
7
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1994 1993/1/ 1992/1/
- -------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Premium $3,376,238 $2,782,399 $1,943,619
Management Services 274,616 270,027 207,804
Investment Income and Other 118,028 62,776 49,213
- --------------------------------------------------------------------------------------------------------
Total Revenues 3,768,882 3,115,202 2,200,636
- --------------------------------------------------------------------------------------------------------
Operating Expenses
Medical Costs 2,643,107 2,236,588 1,578,297
Selling, General and Administrative Costs 555,649 491,635 380,787
Depreciation and Amortization 64,079 50,628 34,246
- --------------------------------------------------------------------------------------------------------
Total Operating Expenses 3,262,835 2,778,851 1,993,330
- --------------------------------------------------------------------------------------------------------
Earnings from Operations 506,047 336,351 207,306
Interest Expense (2,163) (3,046) (2,972)
Merger Costs (35,940) (14,860) --
Gain on Sale of Subsidiary -- 14,982 --
- --------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes, Minority Interests and
Extraordinary Gain 467,944 333,427 204,334
Provision for Income Taxes (177,822) (119,379) (72,060)
Minority Interests in Net Earnings of Consolidated Subsidiaries (1,983) (1,970) (1,683)
- --------------------------------------------------------------------------------------------------------
Net Earnings Before Extraordinary Gain 288,139 212,078 130,591
Extraordinary Gain on Sale of Subsidiary,
net of income taxes of $808,758 1,377,075 -- --
- --------------------------------------------------------------------------------------------------------
Net Earnings $1,665,214 $ 212,078 $ 130,591
- --------------------------------------------------------------------------------------------------------
Net Earnings Per Share Before Extraordinary Gain $ 1.64 $ 1.23 $ 0.79
Extraordinary Gain Per Share 7.86 -- --
- --------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 9.50 $ 1.23 $ 0.79
- --------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 175,209 171,739 166,091
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
/1/ As restated. See Note 1.
8
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993/1/
- ------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $1,519,049 $ 228,260
Short-term investments 135,287 172,610
Accounts receivable, net of allowance of $12,433 and $8,126 167,369 169,075
Other 86,510 44,023
- ------------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,908,215 613,968
Long-term Investments 1,115,054 768,563
Property and Equipment, net of accumulated depreciation of $110,834 and $88,886 162,597 126,742
Intangible Assets, net of accumulated amortization of $55,164 and $54,107 303,613 278,081
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $3,489,479 $1,787,354
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Medical costs payable $ 443,559 $ 459,201
Accounts payable 66,938 76,662
Accrued expenses 83,087 52,027
Unearned premiums 70,718 70,844
- ------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 664,302 658,734
Long-term Obligations 24,275 39,099
Minority Interests 5,446 4,111
Commitments and Contingencies (Note 6) -- --
- ------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, $.001 par value -- 10,000,000 shares authorized;
no shares outstanding, and 9,900,000 shares available for issuance -- --
Common stock, $.01 par value -- 500,000,000 shares authorized;
172,831,000 and 169,100,000 issued and outstanding 1,728 1,691
Additional paid-in capital 752,472 659,359
Retained earnings 2,085,056 424,468
Deferred compensation (35) (108)
Net unrealized holding losses on investments available for sale, net of income tax effects (43,765) --
- ------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 2,795,456 1,085,410
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $3,489,479 $1,787,354
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
/1/ As restated. See Note 1.
9
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Net Unrealized
Holding Losses
Common Stock Additional on Investments
-------------------- Paid-In Retained Deferred Available for
Shares Amount Capital Earnings Compensation Sale Total
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991/1/ 151,326 $1,513 $340,850 $ 84,995 $(562) $ -- $ 426,796
Issuance of Common Stock
Public offering 11,541 116 231,848 -- -- -- 231,964
Stock issued pursuant to stock
plans and related tax benefits 3,206 32 34,407 -- (117) -- 34,322
Amortization -- -- -- -- 308 -- 308
Cash Dividend ($0.0075 per share) -- -- -- (1,078) -- -- (1,078)
Net Earnings -- -- -- 130,591 -- -- 130,591
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992/1/ 166,073 1,661 607,105 214,508 (371) -- 822,903
Issuance of Common Stock Pursuant to
Stock Plans and Related Tax Benefits 3,027 30 52,254 -- 26 -- 52,310
Amortization -- -- -- -- 237 -- 237
Cash Dividend ($0.015 per share) -- -- (2,118) -- -- (2,118)
Net Earnings -- -- -- 212,078 -- -- 212,078
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993/1/ 169,100 1,691 659,359 424,468 (108) -- 1,085,410
Issuance of Common Stock Pursuant to
Stock Plans and Related Tax Benefits 3,731 37 93,113 -- -- -- 93,150
Change in Net Unrealized Holding
Losses on Investments Available
for Sale, net of income tax effects -- -- -- -- -- (43,765) (43,765)
Amortization -- -- -- -- 73 -- 73
Cash Dividend ($0.03 per share) -- -- -- (4,626) -- -- (4,626)
Net Earnings -- -- -- 1,665,214 -- -- 1,665,214
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 172,831 $1,728 $752,472 $2,085,056 $ (35) $(43,765) $2,795,456
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
/1/ As restated. See Note 1.
10
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1994 1993/1/ 1992/1/
- ------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net Earnings $ 1,665,214 $ 212,078 $ 130,591
Non Cash Items
Depreciation and amortization 64,079 50,628 34,246
Gain on sale of subsidiaries, net (1,377,075) (14,982) --
Other (4,267) (1,444) 6,290
Net Change in Other Operating Items, net of effects
from acquisitions and sale of subsidiaries
Accounts receivable and other current assets (24,486) (45,493) (13,998)
Medical costs payable (17,931) 91,391 68,579
Accounts payable (44,418) 4,884 11,109
Accrued expenses 65,851 45,070 5,347
Unearned premiums (710) 7,886 17,414
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities 326,257 350,018 259,578
- ------------------------------------------------------------------------------------------------------------
Investing Activities
Cash Received from Sale of Subsidiaries, net of cash
surrendered and other effects 2,298,819 18,412 --
Cash Paid for Income Taxes and Transaction Costs Related
to Sale of Diversified (836,253) -- --
Cash Paid for Acquisitions, net of cash assumed and other effects (51,442) (102,177) (70,147)
Net Purchases of Property and Equipment (79,609) (68,086) (37,145)
Purchases of Investments Available for Sale (1,334,654) -- --
Maturities/Sales of Investments Available for Sale 956,808 -- --
Purchases of Investments Held to Maturity (20,205) -- --
Maturities of Investments Held to Maturity 8,005 -- --
Purchases of Long-term Investments -- (964,314) (970,935)
Maturities/Sales of Long-term Investments/2/ -- 607,170 558,682
Net Maturities of Short-term Investments/2/ -- 109,284 110,393
Other (2,373) (12,519) (19,492)
- ------------------------------------------------------------------------------------------------------------
Cash Flows from (Used for) Investing Activities 939,096 (412,230) (428,644)
- -------------------------------------------------------------------------------------------------------------
Financing Activities
Net Proceeds from Public Offering of Common Stock -- -- 231,964
Net Proceeds from Stock Option Exercises 48,609 22,024 15,539
Payment of Long-term Obligations (18,547) (10,464) (12,708)
Dividends Paid (4,626) (2,118) (1,078)
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities 25,436 9,442 233,717
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 1,290,789 (52,770) 64,651
Cash and Cash Equivalents, Beginning of Period 228,260 281,030 216,379
- ------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $ 1,519,049 $ 228,260 $ 281,030
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
/1/ As restated. See Note 1.
/2/ Does not include the reclassification of the current maturities of long-
term investments to short-term investments of $126.6 million and $107.6
million in 1993 and 1992, respectively, which are non cash transactions.
Also does not include the reclassification of $11.0 million and $11.6
million of long-term investments to restricted investments in 1993 and 1992,
respectively.
11
<PAGE>
Notes to Consolidated Financial Statements
1 Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of United HealthCare
Corporation (the Company) and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Basis of Presentation
As discussed further in Note 2, in two separate transactions, the Company
acquired Complete Health Services, Inc. (Complete Health), and Ramsay-HMO Inc.
(Ramsay) on May 31, 1994. Each of these acquisitions was accounted for as a
pooling of interests and, accordingly, the Company's consolidated financial
statements and notes thereto have been restated to include the results of
Complete Health and Ramsay for all periods presented.
Cash and Cash Equivalents and Investments
Cash and cash equivalents are highly liquid investments with an original
maturity of three months or less. The fair value of cash and cash equivalents
approximates carrying value because of the short maturity of the instruments.
Investments with a maturity of less than one year are classified as short-term.
At December 31, 1994, approximately $765.0 million of the Company's cash and
investments was restricted under various state regulations which require certain
of the Company's subsidiaries to retain cash generated from their operations. In
addition, investments of $21.9 million at December 31, 1994, were held by
trustees or state regulatory agencies to ensure adequate financial reserves
exist as required by state regulatory agencies. Investment income earned on
these investments accrues to the Company.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No.115). The cumulative effect of adopting this
statement was not significant.
Following the criteria set forth in SFAS No. 115, the Company classifies
investments held by trustees or agencies pursuant to state regulatory
requirements as held to maturity based on the Company's ability and intent to
hold these investments to maturity. Such investments are presented at amortized
cost. All other investments are classified as available for sale and are
reported at fair value based on quoted market prices, with unrealized gains and
losses excluded from earnings and reported as a separate component of
shareholders' equity, net of income tax effects. For purposes of calculating
realized gains and losses on the sale of investments available for sale, the
amortized cost of each investment sold is used. The Company has no trading
securities.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful life of the respective assets.
Intangible Assets
Intangible assets consist principally of costs in excess of net assets of
businesses acquired which are amortized on a straight-line basis over 40 years.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its costs in excess of net assets of businesses acquired.
Also included in intangible assets are costs incurred in connection with the
development of computer software applications to support the management services
provided by the Company. These costs are amortized using the straight-line
method over their estimated useful lives or five years, whichever is shorter.
Revenue Recognition
Premium revenues from the Company's majority owned subsidiaries are recognized
in the period in which enrolled members are entitled to receive health care
services. Premiums received prior to such period are recorded as unearned
premiums. Management services revenues are recognized in the period the related
services are performed.
Medical Costs
Medical costs includes claims paid, claims in process and pending, and
unreported claims and charges by physicians, hospitals and other health care
providers for services rendered to enrolled members during the period. Medical
cost adjustments to prior period estimates are reflected in the current period.
Income Taxes
Deferred income tax assets and liabilities are recognized for the differences
between financial and income tax reporting basis of assets and liabilities based
on enacted tax rates and laws. The deferred income tax provision or benefit
generally reflects the net change in deferred income tax assets and liabilities
during the year. The current income tax provision reflects the tax consequences
of revenues and expenses currently taxable or deductible on the Company's
various income tax returns for the year reported.
12
<PAGE>
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes." The cumulative
effect of adopting this statement and its impact on the Company's consolidated
results of operations was not significant.
Net Earnings Per Share
Net earnings per share is determined using the weighted average number of common
shares outstanding during the period, adjusted for the dilutive effect of
outstanding stock options.
As discussed in Note 4, net earnings per share for all periods presented have
been restated to reflect the February 23, 1994, two-for-one stock split.
Reclassifications
Certain 1992 and 1993 amounts in the consolidated financial statements have been
reclassified to conform with the 1994 presentation. These reclassifications had
no effect on net earnings or shareholders' equity as previously reported.
2 Acquisitions and Dispositions
Acquisitions
On January 3, 1995, the Company completed its acquisition of GenCare Health
Systems, Inc. (GenCare), a health plan based in St. Louis, Missouri, which
served 230,000 members at the time of acquisition. The total purchase price of
the acquisition was $515.4 million in cash. The acquisition will be accounted
for using the purchase method of accounting. Accordingly, the purchase price
will be allocated to assets and liabilities based on their estimated fair values
at the date of acquisition. The purchase price and costs associated with the
acquisition will exceed the estimated fair value of net assets acquired by
$490.0 million and will be amortized on a straight-line basis over 40 years.
On May 31, 1994, the Company's acquisition of Complete Health was completed.
Complete Health, based in Birmingham, Alabama, owned or operated health plans in
Alabama, Louisiana, Tennessee, Arkansas, Georgia, Mississippi and Florida which
served 272,000 members at the time of acquisition. In connection with the
transaction, the Company issued 5,038,000 shares of common stock in exchange for
all the outstanding common and preferred shares of Complete Health.
Also on May 31, 1994, the Company's acquisition of Ramsay was completed.
Ramsay, based in Coral Gables, Florida, owned and operated a predominantly staff
model health plan serving 177,000 members in South and Central Florida at the
time of acquisition. In connection with the transaction, the Company issued
11,176,000 shares of common stock in exchange for all the outstanding common
shares of Ramsay.
In connection with the Complete Health and Ramsay acquisitions, the Company
incurred nonrecurring, non-operating merger costs of $35.9 million ($22.3
million or $0.13 per share after income taxes). Each acquisition was accounted
for as a pooling of interests and, accordingly, the Company's consolidated
financial statements and notes thereto have been restated to include the results
of Complete Health and Ramsay for all periods presented.
Separate and combined results of the Company, Complete Health and Ramsay for
the periods prior to consummation of the merger were as follows:
<TABLE>
<CAPTION>
January 1, 1994 Year Ended December 31,
through -----------------------
May 31, 1994 1993 1992
- -------------------------------------------------------------
(in thousands)
- -------------------------------------------------------------
<S> <C> <C> <C>
Total Revenues
The Company $1,203,945 $2,527,325 $1,759,865
Complete Health 145,803 268,806 205,306
Ramsay 178,160 319,071 235,465
- -------------------------------------------------------------
Combined $1,527,908 $3,115,202 $2,200,636
- -------------------------------------------------------------
Net Earnings (Loss)
The Company $1,487,003/1/ $ 194,574 $ 125,657
Complete Health 2,342 2,774 (4,123)
Ramsay 8,344 14,730 9,057
- -------------------------------------------------------------
Combined $1,497,689 $ 212,078 $ 130,591
- -------------------------------------------------------------
</TABLE>
/1/ Includes an extraordinary net gain of $1.38 billion related to the Company's
May 1994 sale of Diversified Pharmaceutical Services, Inc. Non-operating
merger costs of $22.3 million after income taxes were recorded in June 1994.
On August 31, 1993, the Company acquired HMO America, Inc. (HMOA), the parent
company of a health plan in Chicago, Illinois, which served 290,000 members at
the time of acquisition. In connection with the transaction, the Company issued
13,128,000 shares of common stock in exchange for all the outstanding common and
preferred shares of HMOA and incurred nonrecurring, non-operating merger costs
of $14.9 million. The acquisition was accounted for as a pooling of interests
and, accordingly, the Company's consolidated financial statements and notes
thereto include the results of HMOA for all periods presented.
Effective January 29, 1993, the Company acquired all of the issued and
outstanding common stock of Western Ohio Health Care Corporation, a health plan
in Dayton, Ohio, which served 182,600 members at the time of acquisition. The
total purchase price of the acquisition was $100.1 million in cash. The
acquisition was accounted for using the purchase method of accounting and
resulted in cost in excess of net assets acquired of $76.3 million.
Effective January 2, 1992, the Company acquired all of the issued and
outstanding common stock of Physicians Health Plan Corporation, the parent
company of a health plan in
13
<PAGE>
Columbus, Ohio, which served 154,000 members at the time of the acquisition.
The total purchase price of the acquisition was $89.0 million in cash. The
acquisition was accounted for using the purchase method of accounting and
resulted in cost in excess of net assets acquired of $54.0 million.
Dispositions
On May 27, 1994, the Company completed the sale of 100% of the outstanding
common stock of Diversified Pharmaceutical Services, Inc. (Diversified), then a
wholly owned subsidiary of the Company, to SmithKline Beecham Corporation
(SmithKline), the U.S. operating subsidiary of London-based SmithKline Beecham
plc., a pharmaceutical manufacturer. In connection with the sale, the Company
received $2.30 billion in cash and recognized a $1.38 billion extraordinary gain
after transaction costs and income taxes. Under a six-year management services
agreement, SmithKline will pay the Company a management fee for certain
administrative and management services to be provided by the Company to
Diversified and for exclusive rights among pharmaceutical and medical diagnostic
companies to access certain data utilized in Diversified's ongoing business.
During the same six-year period, Diversified and SmithKline also will provide
the Company, subject to competitive cost and quality considerations, the
Diversified drug benefit management services that the Company requires in its
health plan and other operations. At the end of the six-year period, the parties
will consider continuation of the contract.
Had the Diversified sale occurred on January 1, 1993, combined unaudited pro
forma results for the years ended December 31, 1994 and 1993, excluding the
extraordinary gain on such sale, would have been: revenues -- $3.74 billion and
$3.08 billion; net earnings -- $275.5 million and $192.5 million; net earnings
per share -- $1.57 and $1.12. These pro forma results include the estimated
effects on the Company's operations of the management services agreement between
the Company and SmithKline but do not take into consideration any reinvestment
of the net proceeds from the sale. These pro forma results also include non-
operating merger costs related to the Complete Health and Ramsay acquisitions.
On July 30, 1993, the Company completed the sale of its 26,800 member United
HealthCare of Iowa, Inc. subsidiary, for which it received $19.8 million. As a
result of the transaction, a one time, non-operating gain of $15.0 million was
recognized in 1993.
3 Cash and Investments
As of December 31, 1994, the amortized cost, gross unrealized holding gains and
losses and fair value of the Company's cash and investments were as follows (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $1,519,049 $ -- $ -- $1,519,049
- -----------------------------------------------------------------------------------------
Investments Available for Sale
U.S. Government and Agency 393,776 19 (48,923) 344,872
State and State Agency 414,079 158 (10,404) 403,833
Municipalities and Local Agency 408,433 262 (9,932) 398,763
Corporate Bonds 48,320 14 (1,787) 46,547
Other 34,404 1 (1) 34,404
- -----------------------------------------------------------------------------------------
Total Investments Available for Sale 1,299,012 454 (71,047) 1,228,419
- -----------------------------------------------------------------------------------------
Investments Held to Maturity
U.S. Government and Agency 11,876 14 (413) 11,477
State and State Agency 4,801 1 (121) 4,681
Municipalities and Local Agency 1,262 43 -- 1,305
Corporate Bonds 2,573 -- -- 2,573
Other 1,410 -- -- 1,410
- -----------------------------------------------------------------------------------------
Total Investments Held to Maturity 21,922 58 (534) 21,446
- -----------------------------------------------------------------------------------------
Total Cash and Investment $2,839,983 $512 $(71,581) $2,768,914
- -----------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
As of December 31, 1994, the contractual maturities of the Company's cash and
investments were as follows:
Years to Maturity
<TABLE>
<CAPTION>
Less Than One to Over Five to Over Ten
One Year Five Years Ten Years Years
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At Amortized Cost:
Cash and Cash Equivalents $1,519,049 $ -- $ -- $ --
Investments Available for Sale 138,626 963,916 113,801 82,669
Investments Held to Maturity 8,359 11,015 2,467 81
- -----------------------------------------------------------------------------------------------------
Total Cash and Investments $1,666,034 $974,931 $116,268 $82,750
- -----------------------------------------------------------------------------------------------------
At Fair Value:
Cash and Cash Equivalents $1,519,049 $ -- $ -- $ --
Investments Available for Sale 135,286 939,564 101,662 51,907
Investments Held to Maturity 8,361 10,653 2,376 56
- -----------------------------------------------------------------------------------------------------
Total Cash and Investments $1,662,696 $950,217 $104,038 $51,963
- -----------------------------------------------------------------------------------------------------
</TABLE>
Mortgage backed securities which do not have a single maturity date have
been presented in the above tables based on their estimated maturity dates.
4 Shareholders' Equity
Dividends
On February 13, 1995, the Company's Board of Directors approved an annual
dividend for 1995 of $0.03 per share to holders of the Company's common stock.
This dividend will be paid on April 15, 1995, to shareholders of record at the
close of business on April 1, 1995.
Stock Split
On February 10, 1994, the Company's Board of Directors approved a two-for-one
stock split in the form of a stock dividend for all shares of the Company's
common stock outstanding as of February 23, 1994. All share and per share data
have been restated for all periods presented to reflect the stock split.
Stock Grants and Options
The Company has stock and incentive plans (Stock Plans) for the benefit of all
eligible employees of the Company and its subsidiaries. As of December 31, 1994,
the Stock Plans allow for the future granting of up to 3,024,000 shares as
incentive or non-qualified stock options, stock appreciation rights, restricted
stock awards and performance awards to employees and consultants of the Company.
Additionally, as of December 31, 1994, the Stock Plans allow for the future
granting of up to 144,000 non-qualified stock options to individuals on the
Company's Board of Directors who are not otherwise employed by the Company.
The Company had 9,600 shares of restricted stock outstanding at December 31,
1994, and none were granted during 1994.
Stock Option Transactions
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
(shares in thousands)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning of year 12,692 10,292 11,339
Granted 3,390 5,462 2,134
Exercised (3,509) (2,615) (2,905)
Forfeited (772) (447) (276)
- ------------------------------------------------------------------------------
Outstanding, end of year 11,801 12,692 10,292
- ------------------------------------------------------------------------------
Exercisable 3,554 4,361 3,680
Price Range:
Exercisable Shares $0.88--49.50 $0.61--28.44 $0.30--22.66
Exercised Shares $0.61--38.63 $0.30--15.53 $ 0.30--4.78
- -----------------------------------------------------------------------------
</TABLE>
The Company recorded $44.5 million, $30.3 million and $18.8 million in 1994,
1993 and 1992, respectively, to additional paid-in capital to reflect the tax
benefit received by the Company upon the exercise of nonqualified stock options
and the vesting of restricted stock.
Employee Stock Ownership Plan
The Company has an unleveraged Employee Stock Ownership Plan (ESOP) for the
benefit of all eligible employees of the Company and its subsidiaries. Company
contributions to the ESOP are made at the discretion of the Board of Directors.
Contributions of $2.0 million, $1.0 million and $0.75 million for the years
ended December 31, 1994, 1993 and 1992, respectively, have been made to the
ESOP.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (ESPP) enables employees of the
Company to subscribe for shares of common stock on semiannual offering dates at
a purchase price which is the lesser of 85% of the fair market value of the
shares on the first day or the last day of the semiannual period. Employee
contri-
15
<PAGE>
butions to the ESPP were $5.8 million, $3.3 million and $2.0 million for
1994, 1993 and 1992, respectively. Pursuant to the ESPP, 145,000, 67,000 and
48,000 shares were issued to employees during 1994, 1993 and 1992 respectively.
As of December 31, 1994, 255,000 shares are available for future issuances.
5 Income Taxes
Components of the Provision for Income Taxes
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------
(in thousands)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $166,893 $106,575 $61,811
State 22,495 19,469 8,790
- ----------------------------------------------------------------------------------
Total Current 189,388 126,044 70,601
Deferred (11,566) (6,665) 1,459
- ----------------------------------------------------------------------------------
Total Provision $177,822 $119,379 $72,060
- ----------------------------------------------------------------------------------
</TABLE>
Reconciliation of Statutory to
Effective Income Tax Rate
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35% 35% 34%
State income taxes, net of
federal benefit 3 4 4
Tax-exempt investment income (2) (2) (2)
Other, net 2 (1) (1)
- -------------------------------------------------------------------------------
Effective Income Tax Rate 38% 36% 35%
- -------------------------------------------------------------------------------
</TABLE>
Components of Deferred Income Tax
Assets and Liabilities
<TABLE>
<CAPTION>
December 31,
----------------------------------
1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C>
Deferred Income Tax Assets:
Unrealized loss on investments
available for sale $ 26,825 $ --
Medical costs payable 15,790 13,891
Integration expenses 9,159 832
Bad debt allowance 4,093 3,815
Loss reserve discounting 2,619 2,720
Federal tax carryforwards 2,291 1,817
Deferred compensation 1,710 938
Accrued expenses 1,701 1,817
Self insurance 833 1,284
Unearned premiums 759 1,397
Depreciation 209 --
Other 5,957 5,532
- ----------------------------------------------------------------------------------
Total Deferred Income Tax Assets 71,946 34,043
- ----------------------------------------------------------------------------------
Valuation Allowance (2,291) (1,817)
- ----------------------------------------------------------------------------------
Deferred Income Tax Liabilities:
Development costs (9,426) (8,110)
Depreciation -- (1,698)
- ----------------------------------------------------------------------------------
Total Deferred Income Tax Liabilities (9,426) (9,808)
- ----------------------------------------------------------------------------------
Net Deferred Income Taxes $ 60,229 $22,418
- ----------------------------------------------------------------------------------
</TABLE>
Deferred income tax assets, net of the valuation allowance, are included in
other current assets and deferred income tax liabilities are included in other
long-term obligations in the accompanying consolidated balance sheets. The
change in net deferred income taxes is primarily the result of the deferred
income tax benefit for the year ended December 31, 1994, and the income tax
effects of net unrealized holding losses on investments available for sale.
Income taxes paid were $935.0 million ($801.7 million attributable to the sale
of Diversified), $90.8 million and $57.8 million in 1994, 1993 and 1992,
respectively.
At December 31, 1994, the Company had federal net operating loss carryforwards
for financial reporting and tax purposes of approximately $6.1 million and $3.3
million, respectively, expiring through 2002. Realization of the tax benefit
from all carryforwards is dependent upon certain limitations under the Internal
Revenue Code of 1986, as amended. The realization of the tax benefit from all
carryforwards also is dependent upon future consolidated earnings as well as
separate company earnings from the subsidiaries which generated the losses. The
Company has established a valuation allowance for the tax benefit of these
carryforwards to reduce the deferred income tax assets to the amount that is
more likely than not to be realized.
The Company's consolidated income tax returns for fiscal years 1993, 1992 and
1991 are currently under examination by the Internal Revenue Service. The
Company believes any adjustments which may result from this examination would
not have a significant impact on its consolidated operating results or financial
position.
6 Commitments and Contingencies
Leases
The Company leases facilities, computer hardware and other equipment under long-
term operating leases which are noncancellable and expire on various dates
through 2003. Rent expense under all operating leases was $41.4 million, $33.0
million and $28.0 million for 1994, 1993 and 1992, respectively.
16
<PAGE>
At December 31, 1994, future minimum annual lease payments under all
noncancellable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Operating
Leases
- ------------------------------
<S> <C>
1995 $29,870
1996 22,755
1997 18,258
1998 13,452
1999 8,790
Thereafter 5,061
</TABLE>
Legal Proceedings
The Company is involved in legal actions which arise in the ordinary course of
its business. Although the outcomes of any such legal actions cannot be
predicted, in the opinion of management, the resolution of these actions will
not have a material adverse effect upon the consolidated financial position or
results of operations of the Company.
7 Quarterly Financial Data (unaudited)
The following is a summary of unaudited quarterly results of operations (in
thousands, except per share data) for the years ended December 31, 1994 and
1993:
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------
March 31 June 30 September 30 December 31
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Revenues $903,556 $ 939,465 $956,834 $969,027
Operating Expenses 788,847 816,812 825,370 831,806
Net Earnings Before Extraordinary Gain 70,398 52,656/1/ 80,842 84,243
Extraordinary Gain on Sale of Subsidiary, net -- 1,377,075 -- --
Net Earnings 70,398 1,429,731 80,842 84,243
Net Earnings Per Share
Earnings Before Extraordinary Gain 0.40 0.30/1/ 0.46 0.48
Extraordinary Gain -- 7.85 -- --
Net Earnings Per Share 0.40 8.15 0.46 0.48
Weighted Average Number of Common Shares Outstanding 174,507 175,490 176,038 176,573
- ----------------------------------------------------------------------------------------------------------------
1993
Revenues $717,030 $ 771,432 $799,140 $827,600
Operating Expenses 641,568 691,391 712,570 733,322
Net Earnings 47,156 50,510 54,825 59,587
Net Earnings Per Share 0.28 0.29 0.32 0.34
Weighted Average Number of Common Shares Outstanding 171,242 171,666 171,878 173,254
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes merger costs incurred in connection with the Company's May 1994,
acquisitions of Complete Health and Ramsay. These costs were $35.9 million
($22.3 million after income taxes), and reduced net earnings per share
before extraordinary gain by $0.13. Excluding the effects of these merger
costs, net earnings before extraordinary gain would have been $74.9 million
($0.43 per share).
17
<PAGE>
Report of Independent
Public Accountants
To the Shareholders and Directors of
United Healthcare Corporation:
We have audited the accompanying consolidated balance sheets of United
HealthCare Corporation (a Minnesota Corporation) and Subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the 1993 or 1992
financial statements of Complete Health Services, Inc. or Ramsay-HMO, Inc.,
companies acquired during 1994, or the 1992 financial statements of HMO America,
Inc., a company acquired during 1993, in transactions accounted for as poolings
of interests, as discussed in Note 2. Such statements are included in the
consolidated financial statements of United HealthCare Corporation and reflect
total assets and total revenues of 16.3 percent and 18.9 percent in 1993, and
16.4 percent and 20.0 percent in 1992, respectively, of the related consolidated
totals. The aforementioned financial statements were audited by other auditors
whose reports have been furnished to us and our opinion, insofar as it relates
to amounts included for those entities, is based soley upon the reports of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of United HealthCare Corporation and Subsidiaries as of
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Minneapolis, Minnesota
February 14, 1995
18
<PAGE>
Investor Information
Corporate Headquarters
United HealthCare Corporation
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
(612) 936-1300
Independent Public Accountants
Arthur Andersen LLP
Minneapolis, Minnesota
Corporate Counsel
Dorsey & Whitney
Minneapolis, Minnesota
Trustee, Transfer Agent & Registrar
Norwest Bank Minnesota, N.A.
Minneapolis, Minnesota
Form 10-K
The company has filed an annual report with the Securities and Exchange
Commission on Form 10-K. Shareholders may obtain a copy of this report, without
charge, by writing:
Investor Relations
United HealthCare Corporation
P.O. Box 1459, Route MN12-S246
Minneapolis, Minnesota 55440-1459
Annual Meeting
The annual meeting of shareholders will be held at the Lutheran Brotherhood
Building, 625 Fourth Avenue South, Minneapolis, Minnesota, on Wednesday, May 10,
1995, at 1 p.m.
Stock Listing
United HealthCare's common stock is traded on the New York Stock Exchange under
the symbol UNH.
The following table shows the range of high and low sales prices for the
Company's common stock as reported on the New York Stock Exchange Composite Tape
for the calendar periods indicated through February 28, 1995. These quotations
represent prices between dealers and do not include retail markups, markdowns or
commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
High Low
- -------------------------------------------------------------------------------------------
1994
<S> <C> <C>
First Quarter $47.50 $36.188
Second Quarter 50.75 37.25
Third Quarter 54.625 41.75
Fourth Quarter 55.25 40.625
First Quarter 1995
(through February 28, 1995) 49.88 41.75
- -------------------------------------------------------------------------------------------
1993
First Quarter $34.00 $20.00
Second Quarter 32.625 22.81
Third Quarter 35.31 26.00
Fourth Quarter 39.31 32.25
- -------------------------------------------------------------------------------------------
</TABLE>
As of February 28, 1995, the Company had 4,606 shareholders of record.
Dividend Policy
The company's dividend policy, established by its board of directors in August
1990, requires the board to review the company's audited consolidated financial
statements following the end of each fiscal year and make a determination as to
the advisability of declaring a dividend on the corporation's outstanding shares
of common stock.
Giving effect to the Company's two-for-one stock split in February 1994,
shareholders of record on April 1, 1993, received an annual dividend for 1993 of
$0.015 per share and shareholders of record on April 1, 1994, received an annual
dividend for 1994 of $0.03 per share. On February 13, 1995, the Company's board
of directors approved an annual dividend for 1995 of $0.03 per share to holders
of the Company's common stock. This dividend will be paid to shareholders of
record at the close of business on April 3, 1995.
19
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF REGISTRANT
--------------------------
<TABLE>
<CAPTION>
Subsidiaries of United HealthCare Corporation
- --------------------------------------------- State of
Incorporation
Name or Organization
- ---- ---------------
<S> <C>
UHC Management Company, Inc./1/ Minnesota
United Health and Life Insurance Company/2/ Minnesota
United Behavioral Systems, Inc./3/ Minnesota
UHC TPA, Inc. Minnesota
United Behavioral Systems, Inc. Iowa
Physicians of Georgia, Inc. Georgia
United HealthCare of Georgia, Inc./4/ Georgia
United HealthCare of Utah/5/ Utah
Midwest Physicians Health Programs, Inc. Delaware
Physicians Health Plan of Greater St. Louis, Inc. Delaware
Physicians Health Plan of the Midwest, Inc. Delaware
PrimeCare Health Plan, Inc. Wisconsin
United HealthCare of Ohio, Inc./6/ Ohio
United Health and Life Insurance Company of Ohio/7/ Ohio
United Health Plans of New England, Inc./8/ Rhode Island
Share Health Plan of Illinois, Inc. Illinois
United HealthCare of the Midlands, Inc./9/ Nebraska
Share Health Care, Inc. Nebraska
HMO America, Inc. Nevada
Chicago HMO Ltd. Delaware
United Health and Life Insurance Company of Illinois Illinois
FOCUS Healthcare Management, Inc. Tennessee
Ramsay-HMO, Inc. Delaware
Ramsay Life and Health Insurance Company Florida
Complete Health Services, Inc. Alabama
Employers Insurance Service Group, Inc. Florida
CAC Management, Inc. Florida
C A C-Ramsay Health Plans, Inc. Florida
CAC Properties, Inc. Florida
United HealthCare Plans of Florida, Inc./10/ Florida
Complete Health, Inc. Alabama
Alabama Health Network, Inc. Alabama
Complete Health of Arkansas, Inc. Arkansas
Complete Health of Georgia, Inc. Georgia
Complete Health of Mississippi, Inc. Mississippi
Complete Health of Tennessee, Inc. Tennessee
Dental Benefits Management, Inc. Alabama
Complete Health Partners, Inc. Alabama
Complete Health of Alabama, Inc. Alabama
Community Health Network of Louisiana, Inc. Louisiana
Louisiana Health Partners, Inc. Louisiana
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Complete Health Louisiana, Inc. Louisiana
Louisiana Health Management Company Louisiana
Complete Health Services, Inc. Alabama
</TABLE>
- --------------------------------------------------------------------------------
1. Previously doing business as "Charter Med, Incorporated", "Charter
HealthCare, Inc.", Charter Med, Inc. of Minnesota" and "Charter Med,
Incorporated of Minnesota." Also doing business as "Healthmarc",
"EverCare", "Employee Performance Design", "HealthCare Evaluation Services",
"Managed Care for the Aged", "United HealthCare", "United HealthCare
Corporation", "United HealthCare Management Company, Inc.", "United
HealthCare Management", "UMC Management Company, Inc.", "Personal Decision
Services", "UHC Management and Administrators", "United Resource Networks",
"Health Pro", "Institute for Human Resources", "The Long Term Care Group"
and "Health Professionals Review", "United HealthCare of Illinois, Inc." and
"UHC of Illinois, Inc."
2. Formerly "Life of Mid-America Insurance Company". Also doing business as
"UHC Insurance Company".
3. Formerly "United Clinics of Counseling, Inc." Also doing business as
"United Behavioral Clinics" and "Positive Focus Professional Counseling
Associates".
4. Formerly "Health 1st, Inc".
5. Formerly "Physicians Health Plan of Utah".
6. Formerly "Physicians Health Plan of Ohio, Inc."; also doing business as "PHP
Benefit Systems" and "Western Ohio Health Care Corporation".
7. Formerly "Benefit Systems Life Insurance Company".
8. Also doing business as "Ocean State Physicians Health Plan".
9. Formerly "Share Health Plan of Nebraska, Inc."
10. Formerly "C.A.C. Health Plan, Inc."
2
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 14, 1995, incorporated by reference in this
Form 10-K, into the Company's previously filed Registration Statement Nos.
33-3558, 2-95342, 33-22310, 33-21813, 33-27208, 33-30869, 33-35365, 33-39060,
33-45263, 33-50282, 33-65994, 33-67918, 33-68158, 33-68300, 33-75846, 33-79632,
33-79634, 33-79636 and 33-79638.
Arthur Andersen LLP
Minneapolis, Minnesota,
March 28, 1995
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 23rd day
of March, 1995, by the following person.
/s/ Thomas H. Kean
- ------------------
Thomas H. Kean
1
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 20th day
of February, 1995, by the following person.
/s/ George B. Borkow
- --------------------
George B. Borkow
2
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 16th day
of February, 1995, by the following person.
/s/ Douglas W. Leatherdale
- --------------------------
Douglas W. Leatherdale
3
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 21st day
of February, 1995, by the following person.
/s/ William C. Ballard, Jr.
- ---------------------------
William C. Ballard, Jr.
4
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 21st day
of February, 1995, by the following person.
/s/ Elizabeth J. McCormack
- --------------------------
Elizabeth J. McCormack
5
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 15th day
of February, 1995, by the following person.
/s/ Richard T. Burke
- --------------------
Richard T. Burke
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 1st day
of March, 1995, by the following person.
/s/ James L. Seiberlich
- -----------------------
James L. Seiberlich
7
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 21st day
of February, 1995, by the following person.
/s/ Robert K. Ditmore
- ---------------------
Robert K. Ditmore
8
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 23rd day
of February, 1995, by the following person.
/s/ William G. Spears
- ---------------------
William G. Spears
9
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 22nd day
of February, 1995, by the following person.
/s/ James A. Johnson
- --------------------
James A. Johnson
10
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints each of William W. McGuire, M.D. and Kevin H. Roche,
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of United
HealthCare Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each such attorney-
in-fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
or her substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 6th day
of March, 1995, by the following person.
/s/ Gail R. Wilensky
- --------------------
Gail R. Wilensky
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,519,049
<SECURITIES> 1,250,341
<RECEIVABLES> 179,802
<ALLOWANCES> 12,433
<INVENTORY> 2,641
<CURRENT-ASSETS> 1,908,215
<PP&E> 273,431
<DEPRECIATION> 110,834
<TOTAL-ASSETS> 3,489,479
<CURRENT-LIABILITIES> 664,302
<BONDS> 0
<COMMON> 1,728
0
0
<OTHER-SE> (43,765)
<TOTAL-LIABILITY-AND-EQUITY> 3,489,479
<SALES> 3,650,834
<TOTAL-REVENUES> 3,768,882
<CGS> 3,198,756
<TOTAL-COSTS> 3,262,835
<OTHER-EXPENSES> 35,940
<LOSS-PROVISION> 1,740
<INTEREST-EXPENSE> 2,163
<INCOME-PRETAX> 467,944
<INCOME-TAX> 177,822
<INCOME-CONTINUING> 288,139
<DISCONTINUED> 0
<EXTRAORDINARY> 1,377,075
<CHANGES> 0
<NET-INCOME> 1,665,214
<EPS-PRIMARY> 9.50
<EPS-DILUTED> 9.50
</TABLE>
