<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
United HealthCare Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
UNITED HEALTHCARE CORPORATION
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
April 5, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
United HealthCare Corporation, to be held on May 8, 1996, at 2:30 p.m.,
Minneapolis time, at the Lutheran Brotherhood Building Auditorium, 625 Fourth
Avenue South, Minneapolis, Minnesota.
Information about the business of the meeting and the nominees for election
as members of the Board of Directors is set forth in the formal meeting notice
and the proxy statement on the following pages.
We hope you can attend the meeting. However, if you will not be able to join
us, we urge you to exercise your right as a shareholder and vote. The vote of
every shareholder is important, and your cooperation in completing, signing
and returning the enclosed proxy promptly will be appreciated.
Sincerely,
/s/ William W. McGuire
William W. McGuire, M.D.
Chairman, President and Chief
Executive Officer
<PAGE>
UNITED HEALTHCARE CORPORATION
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1996
TO THE SHAREHOLDERS OF UNITED HEALTHCARE CORPORATION:
The Annual Meeting of Shareholders of United HealthCare Corporation
("United" or the "Company") will be held on Wednesday, May 8, 1996, at the
Lutheran Brotherhood Building Auditorium, 625 Fourth Avenue South,
Minneapolis, Minnesota, at 2:30 p.m., Minneapolis time, for the following
purposes:
1. To elect three persons to the Company's Board of Directors.
2. To consider and vote upon a proposal to amend the United HealthCare
Corporation Amended and Restated 1991 Stock and Incentive Plan.
3. To consider and vote upon a proposal to amend the United HealthCare
Corporation 1993 Employee Stock Purchase Plan.
4. To consider and vote upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent public accountants for the Company
for the fiscal year ending December 31, 1996.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record of United Common Stock at the close of business
on March 11, 1996, will be entitled to receive notice of and to vote at the
meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
Kevin H. Roche
Secretary
April 5, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN
TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS
EXERCISED.
<PAGE>
UNITED HEALTHCARE CORPORATION
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 8, 1996
----------------
GENERAL MATTERS
This Proxy Statement is furnished in connection with the solicitation of the
enclosed proxy by the Board of Directors of United HealthCare Corporation
("United" or the "Company") for use at the Annual Meeting of Shareholders to
be held on May 8, 1996, at 2:30 p.m., Minneapolis time, at the Lutheran
Brotherhood Building Auditorium, 625 Fourth Avenue South, Minneapolis,
Minnesota (the "Annual Meeting"), and at any adjournment thereof, for the
purposes set forth in the Notice of Annual Meeting of Shareholders.
Shares of United Common Stock represented by proxies in the form solicited
will be voted in the manner directed by a shareholder. If no direction is
made, the proxy will be voted FOR the election of the nominees for director
named in this Proxy Statement and FOR the other proposals discussed herein. A
shareholder may revoke his or her proxy at any time before it is voted by
delivering to an officer of the Company a written notice of termination of the
proxy's authority, by filing with an officer of the Company another proxy
bearing a later date, or by appearing and voting at the meeting. This Proxy
Statement and the form of proxy enclosed are being mailed to shareholders
commencing on or about April 5, 1996.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed by the Company for the meeting and the
number of shareholders present in person or by proxy will determine whether or
not a quorum is present. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at
the meeting for purposes of determining a quorum and for purposes of
calculating the vote with respect to such matter, but shall not be deemed to
have been voted in favor of such matter. If a broker returns a "non-vote"
proxy, indicating a lack of authority to vote on such matter, then the shares
covered by such non-vote shall be deemed present at the Annual Meeting for
purposes of determining a quorum but shall not be deemed to be represented at
the Annual Meeting for purposes of calculating the vote with respect to such
matter. A shareholder giving the enclosed proxy may revoke it at any time
before the vote is cast at the Annual Meeting.
Only the holders of the Company's Common Stock whose names appear of record
on the Company's books at the close of business on March 11, 1996, will be
entitled to vote at the Annual Meeting. At the close of business on March 11,
1996, a total of 175,520,725 shares of United Common Stock were outstanding,
each share being entitled to one vote. The Company also has
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500,000 shares of 5.75% Convertible Preferred Stock issued and outstanding.
The holders of this stock have no general voting rights and are not entitled
to vote on the proposals presented at the Annual Meeting. The affirmative vote
of a majority of the shares of the Company's Common Stock represented at the
meeting in person or by proxy is necessary to effectuate all matters proposed
to the shareholders at the Annual Meeting. There is no right to cumulate
voting as to any matter.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone, telecopier,
or personal calls. The Company has engaged Morrow & Co., Inc. to assist in
proxy solicitation for an estimated fee of $7,500 plus out of pocket expenses.
A copy of the Company's Annual Report for the year ended December 31, 1995
is being furnished to each shareholder with this Proxy Statement.
MATTERS SUBMITTED TO VOTE
Following is a discussion of the matters to be presented at the meeting:
I. ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, Class
I, Class II, and Class III, as nearly equal in number as possible. Each class
serves three years with the terms of office of the respective classes expiring
in successive years. The term of office of directors in Class I expires at the
Annual Meeting.
On October 31, 1995, the Board of Directors increased the size of the Board
from 10 to 11 members and appointed Kennett L. Simmons to the Board. One of
the incumbent Class I directors, James L. Seiberlich, who was elected at the
Company's May 12, 1993 annual meeting, is retiring from the Board of Directors
effective at the Annual Meeting and accordingly will not stand for reelection
to a new term. In connection with Mr. Seiberlich's retirement, the Board of
Directors has taken action to reduce the size of the Board, effective at the
Annual Meeting, to 10 members. As a result, three directors are being
nominated for election to Class I at the Annual Meeting for a three year term
expiring at the annual meeting of shareholders to be held in 1999.
The persons named in the accompanying proxy will vote FOR the election of
the nominees described herein, unless authority to vote is withheld. The Board
of Directors has been informed that each of the nominees is willing to serve
as a director; however, if any nominee should decline or become unable to
serve as a director for any reason, the proxy may be voted for such other
person as the proxies shall, in their discretion, determine.
The following table sets forth certain information as of March 1, 1996,
concerning the nominees for election as directors of the Company and as to the
other directors whose terms of office will continue after the Annual Meeting:
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
NOMINEES FOR ELECTION AS DIRECTORS WHOSE TERMS EXPIRE IN 1999 (CLASS I)
<S> <C> <C>
Thomas H. Kean 60 Director
William G. Spears 57 Director
Gail R. Wilensky 52 Director
</TABLE>
2
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<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS II)
<S> <C> <C>
James A. Johnson 52 Director
Douglas W. Leatherdale 59 Director
Elizabeth J. McCormack 74 Director
DIRECTORS WHOSE TERMS EXPIRE IN 1998 (CLASS III)
William C. Ballard, Jr. 55 Director
Richard T. Burke 52 Director
William W. McGuire, M.D. 47 Chairman, President and Chief Executive Officer
Kennett L. Simmons 54 Director
</TABLE>
The Class I directors' terms expire in 1996. One of the current Class I
directors (Mr. Spears) was elected at the Company's May 12, 1993 annual
meeting to a term expiring in 1996. The other two Class I directors (Ms.
Wilensky and Mr. Kean) were appointed on May 25, 1993 and August 9, 1993,
respectively, as Class I directors for terms expiring in 1996, to fill
vacancies existing in the class. James Seiberlich, a current Class I Director,
is retiring from the Board of Directors and accordingly is not standing for
re-election.
The Class II directors' terms expire in 1997. The three Class II directors
were elected at the Company's May 11, 1994 annual meeting to terms expiring in
1997.
The Class III directors' terms expire in 1998. Three of the Class III
directors (Messrs. Ballard and Burke and Dr. McGuire) were elected at the
Company's May 10, 1995 annual meeting to terms expiring in 1998. Mr. Simmons,
the fourth Class III director, was elected to the Board of Directors by
resolution adopted at the October 31, 1995 meeting of the Board of Directors
to fill a vacancy.
Mr. Ballard became a member of the Company's Board of Directors in February
1993. Mr. Ballard retired in 1992 after 22 years as the Chief Financial
Officer and a director of Humana, Inc., a company that owned and operated
hospitals and managed care operations. Mr. Ballard is currently of counsel to
Greenebaum, Doll & McDonald, a law firm in Louisville, Kentucky and serves on
the Boards of Directors of LG&E Energy Corp., Mid-America Bancorp, Vencor,
Incorporated and American Safety Razor Company.
Mr. Burke has been a member of the Company's Board of Directors since the
Company's inception and was its Chief Executive Officer until February 1988.
Mr. Burke was Chief Executive Officer of Physicians Health Plan of Minnesota,
now part of Medica, a large Minnesota HMO managed by the Company, from 1977 to
August 1987. Mr. Burke is also a director of Education Alternatives, Inc. and
First Cash, Inc. Mr. Burke is currently retired from active business pursuits.
Mr. Johnson has been a member of United's Board of Directors since November
1993. Mr. Johnson is the Chairman of the Board and Chief Executive Officer of
Federal National Mortgage Association ("Fannie Mae"). Prior to joining Fannie
Mae in January 1990, Mr. Johnson was a managing director in corporate finance
for Lehman Brothers, an investment banking firm. In addition, from 1977 to
1981, he was an executive assistant to Vice President Walter Mondale, advising
the Vice President on domestic and foreign policy and political matters. Mr.
Johnson is a director of Fannie Mae, Kaufman and Broad Home Corporation and
Dayton Hudson Corporation.
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Mr. Kean has been a member of United's Board of Directors since August 1993.
Mr. Kean is currently the President of Drew University in New Jersey. Mr. Kean
served as the governor of the State of New Jersey from 1982 to 1990. Prior to
that, from 1968 to 1977, he served in the New Jersey State Assembly, including
two years in the position of Speaker. Mr. Kean is a director of Amerada Hess
Corporation, Aramark Corporation, Bell Atlantic Corporation, Beneficial
Corporation and Fiduciary Trust Company International.
Mr. Leatherdale became a director of the Company in 1983. Mr. Leatherdale
has been the Chairman, Chief Executive Officer, President and Chief Operating
Officer of the St. Paul Companies, Inc., an insurance, financial and general
business corporation, since May 1990. Mr. Leatherdale served as Executive Vice
President and Chief Financial Officer of The St. Paul Companies, Inc. from
November 1982 until February 1989 when he became its President and Chief
Operating Officer. Mr. Leatherdale is a director of The St. Paul Companies,
Inc., Northern States Power Company and The John Nuveen Company.
Ms. McCormack became a director of the Company in August 1991. Ms. McCormack
has been a philanthropic advisor to the Rockefeller family since 1976. Ms.
McCormack also serves as a Trustee of Alliance Money Market Funds and a
Supervisory Director of Arrow Ventures N.V., Willemstad, Curacao, N.A.
Dr. McGuire became a director of the Company in February 1989 and the
Chairman of its Board in May 1991. Dr. McGuire became an Executive Vice
President of United in November 1988, the Company's President in November 1989
and the Company's Chief Executive Officer in February 1991. Dr. McGuire also
served as the Company's Chief Operating Officer from May 1989 to June 1995.
Dr. McGuire is also a director of Nexagen, Inc.
Mr. Simmons became a Director of the Company in October 1995. Mr. Simmons
was the Chairman and Chief Executive Officer of The MetraHealth Companies,
Inc. ("MetraHealth") a privately held health care management company, from
July 1994 until October 1995 when that company was acquired by United. From
1991 to 1994, Mr. Simmons was self-employed. From 1987 to 1991 Mr. Simmons
held various executive positions with the Company, including Executive Vice
President for Operations, Chief Operating Officer and Chief Executive Officer.
Mr. Simmons was also a member of the Board of Directors of United from 1986 to
1991 and served as its Chairman from 1989 to 1991. Mr. Simmons is also a
director of Manor Care, Inc.
Mr. Spears became a director of the Company in February 1991. Mr. Spears has
been the Chairman of the Board of Spears, Benzak, Salomon & Farrell, Inc., an
investment counseling and management firm, since 1972. In April 1995, Spears,
Benzak, Salomon & Farrell became a wholly owned subsidiary of Key Corp. Mr.
Spears also serves as a director of Alcide Corporation and Osborn
Communications Corporation.
Ms. Wilensky has been a member of United's Board of Directors since May
1993. Ms. Wilensky is currently a Senior Fellow for Project HOPE, an
international health foundation. From 1992 to 1993 she served as the Deputy
Assistant to President George Bush for policy development, and from 1990 to
1992 she was the Administrator of the Health Care Financing Administration
directing the Medicaid and Medicare programs for the United States. Ms.
Wilensky also serves as a director of Advanced Tissue Sciences, Inc., Syncor
International, St. Jude Medical, Inc., Capstone Pharmacy Services, Inc. and
Coram HealthCare Corporation.
4
<PAGE>
Director Compensation
Directors who are not employees of the Company are paid an annual retainer
of $20,000, which is paid in equal quarterly installments, and a $1,500 fee
for attendance at each Board meeting. The Chairman of the Board has the
authority to set the amount of any additional fees paid to Board members
chairing a committee of the Board of Directors or for performing such other
substantial work as requested by the Board. The Chairman for the Audit
Committee and the Chairman of the Compensation and Stock Option Committee were
each paid a $5,000 fee for chairing such Committees for the year ended
December 31, 1995.
The Company also provides health care coverage to current and past directors
who are not eligible for coverage under another group health care benefit
program or Medicare. During 1995, the Company paid approximately $3,000 in
health care premiums with respect to Mr. Burke, and an aggregate of
approximately $5,000 to past directors.
Directors of the Company who are not otherwise employed by the Company
("eligible directors") receive grants of non-qualified stock options pursuant
to the 1995 Non-employee Director Stock Option Plan (the "1995 Plan"). The
1995 Plan provides that eligible directors who were not in office on the day
immediately following the Company's 1995 Annual Meeting will receive two types
of option grants: initial grants and annual grants. The initial grants (non-
qualified stock options for 9,000 shares of United Common Stock) are granted
automatically on the date the eligible director is first elected to the Board
of Directors and become exercisable over the following three year period at
the rate of 3,000 shares per year. The annual grants (non-qualified stock
options for 4,000 shares of United Common Stock) are granted automatically on
the first business day immediately following each annual meeting of the
Company's shareholders (the "Annual Option Grant Date"). The option price for
options granted under the 1995 Plan is defined as the closing sale price of
the Company's Common Stock on the date of the grant of the option, as reported
on the New York Stock Exchange, Inc.
Eligible directors who were in office on the day immediately following the
1995 annual meeting of shareholders received a grant of options to purchase
16,000 shares of United Common Stock on the 1995 Annual Option Grant Date.
They will also receive a grant of options to purchase 8,000 shares of United
Common Stock on the Annual Option Grant Date following the 1996 Annual Meeting
and an option to purchase 4,000 shares of United Common Stock on each Annual
Option Grant Date thereafter during the term of the 1995 Plan to the extent
they are an eligible director at that time.
During 1995, prior to the approval of the 1995 Plan by the shareholders,
directors whose anniversary date of their election to the Board preceded the
adoption of the 1995 Plan, received a grant of non-qualified stock options to
purchase 32,000 shares of Company Common Stock having a per share exercise
price equal to the fair market value on the date of grant.
Committees and Meetings of the Board of Directors.
During the year ended December 31, 1995, the Board of Directors held four
regular meetings and two special meetings. All incumbent directors attended at
least 75% of the meetings of the Board and committees of which they were
members. In addition to the meetings, the Board passed several resolutions
during 1995 by written consent.
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To assist in the discharge of its responsibilities, the Board of Directors
of the Company has established four standing committees: an Audit Committee, a
Compensation and Stock Option Committee, a Nominating Committee and an
Executive Committee.
The Audit Committee consists of Messrs. Leatherdale (Chairman) and Johnson,
Ms. Wilensky and Ms. McCormack. The Audit Committee held four regular meetings
and one special meeting in 1995. The Audit Committee reviews and makes
recommendations to the Board of Directors with respect to designated financial
and accounting matters.
The Compensation and Stock Option Committee consists of Messrs. Spears
(Chairman), Seiberlich, Kean and Ballard. The Compensation and Stock Option
Committee held four meetings, one special meeting and passed several
resolutions by written consent during 1995. The Compensation and Stock Option
Committee reviews and makes certain determinations with respect to designated
compensation and fringe benefit matters.
The Nominating Committee consists of Messrs. Ballard (Chairman), Spears,
Seiberlich, Leatherdale and Dr. McGuire. The Nominating Committee did not meet
in 1995. The Nominating Committee's duties include identifying and nominating
individuals to be proposed for election as directors at the annual meeting of
shareholders and to fill vacancies existing on the Board. The Committee will
consider candidates proposed by shareholders upon timely written notice to the
Secretary of the Company. To be timely, any such notice must be received at
the Company's principal executive offices not less than sixty days prior to
the date of such annual meeting and must set forth (i) the name, age, business
address, residence address and the principal occupation or employment of each
nominee proposed in such notice; (ii) the name and address of the shareholder
giving the notice as the same appears in the Company's stock register; (iii)
the number of shares of capital stock of the Company which are beneficially
owned by each such nominee and by such shareholder; and (iv) such other
information concerning each such nominee as would be required for soliciting
proxies for the election of such nominee. Such notice must also include a
signed consent of each such nominee to serve as a director of the Company, if
elected.
The Executive Committee, which consists of Messrs. Simmons, Spears, Ballard,
Leatherdale and Dr. McGuire, held one regular meeting and two special meetings
during 1995 and passed several resolutions during 1995 by written consent. The
Executive Committee is authorized to exercise all of the powers of the Board
when the Board is not in session.
II. PROPOSAL TO AMEND THE UNITED HEALTHCARE CORPORATION
AMENDED AND RESTATED 1991 STOCK AND INCENTIVE PLAN
Summary of the 1991 Plan
The following summary of the Amended and Restated 1991 Stock and Incentive
Plan (the "1991 Plan") is qualified in its entirety by reference to the full
text of the Plan, a copy of which will be available at the Annual Meeting or
may be obtained upon written request made to the Secretary of the Company.
The 1991 Plan authorizes the granting of all or any of the following types
of awards: (1) stock options; including both incentive stock options ("ISOs")
and non-qualified stock options; (2) performance awards; (3) SARs; and (4)
restricted stock. The 1991 Plan is administered by the
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Compensation and Stock Option Committee (the "Committee"), which has the
authority to establish rules for administering and interpreting the 1991 Plan,
subject to orders or resolutions of the Board that are consistent with the
express terms of the 1991 Plan. All full or part-time employees and
consultants and independent contractors of the Company are eligible to be
participants in the 1991 Plan.
Under the 1991 Plan the Committee and/or the Company's Chief Executive
Officer may grant, in each calendar year options and awards for shares of
Company Common Stock equal to the sum of (i) one and one-half percent of the
number of shares of the Company's Common Stock outstanding as of the December
31 immediately preceding the year in which options may be granted plus (ii)
options for such number of shares of Common Stock as were available for grant
in any preceding year and were not otherwise granted. The Committee may issue
such shares without any further amendment to the Plan increasing the number of
shares authorized for distribution.
If awards lapse, expire, terminate, or are canceled prior to the issuance of
shares, or if shares issued under an option are reacquired by the Company,
those shares will be available for new awards. The total number of shares
which may be awarded is subject to adjustment to reflect capital changes. The
vesting of any award granted under the 1991 Plan may be conditioned upon the
meeting of specified performance criteria. No award granted under the 1991
Plan may be assigned, transferred, pledged or otherwise encumbered by a
participant, other than by will, or by the laws of descent and distribution.
Each award is exercisable during the participant's lifetime only by the
participant, or if permissible under applicable law, by the participant's
guardian or legal representatives.
The exercise price per share of stock for each option granted pursuant to
the 1991 Plan is determined by the Committee but cannot, in the case of ISOs,
be less than 100% of the fair market value of the stock on the date of the
grant of such option. Options are exercised by giving written notice of the
exercise, along with payment of the exercise price and any applicable
withholding taxes, to the Company.
The term of each option is fixed by the Committee and the options can be
exercised at such time or times as determined by the Committee. Conditions of
exercise, including the effect of an employee's termination of employment in
various circumstances, is set forth in the agreements between the Company and
optionees evidencing option grants. No ISOs can be exercisable after the
expiration of ten years from the date the option is granted and no non-
qualified options can be exercisable after the expiration of fifteen years
from the date of grant. The fair market value of ISOs first exercisable in any
one year as to any participant may not exceed $100,000.
The grant of an option under the 1991 Plan will not result in taxable income
at the time of grant for the optionee or the Company. The optionee will not
have taxable income upon exercising an ISO (except that the alternative
minimum tax may apply), and the Company will receive no deduction when an ISO
is exercised. Upon exercising a non-qualified stock option, the optionee will
recognize ordinary income in the amount by which the fair market value exceeds
the option price; the Company will be entitled to a deduction for the same
amount. The tax treatment to an optionee of a disposition of shares acquired
through the exercise of an option is dependent upon the length of time the
shares have been held and on whether such shares were acquired by exercising
an ISO or a non-qualified stock option. Generally, there will be no tax
consequence to the Company in connection with the disposition of shares
acquired under an option except that the Company may be entitled to a
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deduction in the case of a disposition of shares under an ISO before the
applicable ISO holding periods have been satisfied.
Performance awards granted under the 1991 Plan may be payable in cash,
common shares (including restricted stock), other securities, other awards or
other property. The value of each award will be determined by the Committee
and will be payable to, or exercisable by, the holder of the performance
awards upon his or her achievement of the performance goals during the
performance periods established by the Committee.
SARs may be granted under the 1991 Plan, in the discretion of the Committee,
at the time of grant of an option or award under the 1991 Plan, or at any
other time. Any such SAR may be exercised subject to restrictions as set forth
in an agreement representing such SAR and approved by the Committee. The SAR
exercise amount may be paid in cash, shares of the Company's Common Stock, or
a combination thereof.
At the time of an award of restricted stock under the 1991 Plan, a
restricted period is established for each participant. During the restricted
period, the restricted stock may not be transferred, encumbered or sold unless
the Committee may otherwise determine. The participant, as owner of such
shares, will have the rights of a shareholder, including the right to receive
cash dividends and the right to vote. Recipients of restricted stock are not
required to provide consideration other than the rendering of services
determined by the Committee. Except as otherwise determined by the Committee,
the award will be forfeited unless the grantee remains in the continuous
employment of the Company for the entire restricted period. The Committee,
however, may at any time accelerate or waive all or any remaining restrictions
on an award.
Proposal
In February 1996, the Board of Directors approved amendments to the 1991
Plan subject to shareholder approval. These amendments relate to Sections
162(m) and 422 of the Internal Revenue Code (the "Code"). Section 162(m) of
the Code, enacted in 1993, generally disallows a tax deduction to publicly
held companies for compensation exceeding $1 million paid to a corporation's
Chief Executive Officer and four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. A large part of the Company's
executive officers' compensation which could exceed the $1 million limitation
is associated with stock options. The Company proposes to amend the 1991 Plan
by adding a new Section 19 as follows:
19. Option and Award Limitations under the Plan. No participant who is an
employee of the Company at the time of grant may be granted an option or
award, the value of which is based solely on an increase in the value of
the shares after the date of grant of such option or awards, for more than
1,000,000 shares, in the aggregate, in any one calendar year period
beginning with the period commencing on January 1, 1996 and ending December
31, 1996. The foregoing annual limitation specifically includes the grant
of any options or awards representing qualified performance-based
compensation within the meaning of Section 162(m) of the Code.
Limiting the amount of options that can be granted in any one year will allow
the Company to continue to deduct the compensation attributable to stock
options granted under the 1991 Plan in calculating its tax liability.
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Section 422 of the Code requires that the 1991 Plan state a definite limit
with respect to the number of shares subject to incentive stock options that
may be granted under the 1991 Plan because the 1991 Plan contains a formula
provision that allows the number of shares authorized under it to be increased
each year. Therefore, the Company proposes to amend Section 2 of the 1991 Plan
to add the following language setting such limit at 1,000,000 shares:
Notwithstanding the foregoing, the number of Shares that may be subject
to Incentive Stock Options granted under the Plan may not exceed 1,000,000;
subject to adjustment pursuant to Section 15.
Management's Recommendation
The Board of Directors recommends a vote FOR the proposal to amend the 1991
Plan. The affirmative vote of the holders of a majority of shares present in
person or by proxy and entitled to vote at the Annual Meeting is necessary to
approve the proposal. Unless otherwise instructed proxies will be voted in
favor of the amendment.
III. PROPOSAL TO AMEND THE UNITED HEALTHCARE CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
Summary of the 1993 Plan
The following summary is qualified in its entirety by reference to the full
text of the 1993 Employee Stock Purchase Plan (the "1993 Plan"), a copy of
which will be available at the Annual Meeting or may be obtained upon written
request made to the Secretary of the Company.
The 1993 Plan provides for the purchase by employees of the Company and its
subsidiaries of shares of United Common Stock. Employees are eligible to
participate in the 1993 Plan (i) if they are regular employees, regularly
scheduled to work at least 20 hours per week and (ii) have been employed at
least 60 days by the Company.
Participants in the 1993 Plan have after-tax payroll deductions for six-
month periods beginning in May and December of each year at a rate not
exceeding ten percent of compensation. Such amounts can be used at the end of
the six-month period to purchase shares of Company Common Stock at 85% of the
market price on the first or last day of the six-month period, whichever is
lower. Employee contributions are deposited in an interest bearing account
with a custodian bank until the shares are purchased. Participants may not
acquire more than 1,000 shares of Common Stock per purchase period.
Participants may elect to withdraw from participation in the 1993 Plan prior
to purchasing Common Stock and in such event would receive amounts contributed
prior to withdrawal, plus accrued interest.
Proposal
In February 1996, the Company's Board of Directors approved amendments to
the 1993 Plan subject to shareholder approval. The amendments provide for the
issuance of an additional 4,000,000 shares of Company Common Stock pursuant to
the terms of the 1993 Plan and grants the Committee the authority to designate
which of the Company's various subsidiaries may participate in the 1993 Plan.
9
<PAGE>
Due to the growth of the Company through various acquisitions, the number of
Company employees has greatly increased. The number of employees eligible for
participation in the 1993 Plan has also greatly increased. As of December 31,
1994, 8,446 employees were eligible to participate in the 1993 Plan compared
to 24,384 at December 31, 1995. The Company feels that the continued
participation of its employees in the 1993 Plan is an important component of
employee compensation and will benefit the Company by encouraging its
employees to become shareholders.
The 1993 Plan, which was originally adopted in 1993, currently provides for
the sale of 400,000 shares of Company Common Stock (taking into account the
Company's February 1994 2-for-1 stock split). As of March 1, 1996,
approximately 361,000 shares of Company Common Stock had been issued pursuant
to the 1993 Plan, leaving a balance of approximately 39,000 authorized but
unissued shares which may be sold under the 1993 Plan. The increase in the
number of shares reserved under the 1993 Plan will allow the Company to
continue to offer the 1993 Plan to its employees.
The Company proposes to amend Section 13.01 of the Plan as follows:
Section 13.01. The Common Stock to be issued and sold under the Plan may
be authorized but unissued shares, or the Company may go into the market
and purchase shares for sale under the Plan. Except as provided in Section
12.01, the aggregate number of shares of authorized but unissued Common
Stock to be sold under the Plan shall not exceed 4,400,000.
Additionally, due to the Company's expansion into international activities
and the possibility of conflicts between the current 1993 Plan eligibility
standards and foreign taxation and securities laws, the Company proposes to
amend the 1993 Plan to allow the Compensation and Stock Option Committee of
the Board of Directors to designate certain of the Company's subsidiaries as
Participating Affiliates (as such term is defined in the 1993 Plan). The
designation of Participating Affiliates will allow the Committee to
appropriately administer the participation of Company employees who are
foreign citizens and thereby reduce the Company's potential liability for tax
and securities law violations outside of the United States.
Management's Recommendation
The Board of Directors recommends a vote FOR the proposal to amend the 1993
Plan. The affirmative vote of the holders of a majority of shares present in
person or by proxy and entitled to vote at the Annual Meeting is necessary to
approve the proposal. Unless otherwise instructed proxies will be voted in
favor of the amendment.
IV. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for the Company for the fiscal year ending December 31,
1996. A proposal to ratify this appointment will be presented at the Annual
Meeting. Arthur Andersen LLP has examined the Company's financial statements
since 1981. Representatives of Arthur Andersen LLP are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions
from shareholders. If the appointment is not ratified by the shareholders, the
Board of Directors is not obligated to appoint other independent public
accountants, but the Board of Directors will give consideration to such
unfavorable vote.
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<PAGE>
Management's Recommendation
The Board of Directors recommends a vote FOR this proposal. Proxies will be
voted in favor of ratifying this appointment unless otherwise specified.
EXECUTIVE COMPENSATION
Cash and Other Compensation
The following table provides certain summary information relating to cash
and other forms of compensation paid to, or accrued by the Company on behalf
of, the Company's Chief Executive Officer ("CEO"), Dr. McGuire, and each of
the four other most highly compensated executive officers of United (Messrs.
Wills, Wise, Carlson and Koppe) as of December 31, 1995 for the years ended
December 31, 1993, 1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------------- ------------------
All
Name and Securities Other
Principal Other Annual Underlying Compen-
Position at Salary Compen- Options/ sation
12/31/95 Year ($) Bonus ($) sation($)(1) SARs(#)(2) ($)(3)
----------- ---- ------- --------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
William W. McGuire, M.D. 1995 875,000 875,000 95,375(4) 150,000 62,285
Chief Executive Officer 1994 717,308 1,969,423(5) -- 249,312 43,995
1993 575,000 1,121,250 -- 390,000 50,740
Travers H. Wills 1995 312,500 312,500 -- 130,000 11,971
Chief Operating Officer 1994 270,769 974,202(5) -- 99,725 33,760
1993 201,154 226,380 -- 50,000 --
Allen F. Wise 1995 112,500(6) 427,500 -- -- 3,750
Executive Vice President, 1994 -- -- -- -- --
Administrative Services 1993 -- -- -- -- --
James G. Carlson 1995 100,000(6) 380,000 -- -- --
Executive Vice President, 1994 -- -- -- -- --
Field Operations 1993 -- -- -- -- --
David P. Koppe(7) 1995 253,846 174,000 -- 80,000 10,615
Chief Financial Officer 1994 147,462 600,000(5) -- 69,000 3,752
1993 130,158 72,890 -- 50,000 6,038
</TABLE>
- - --------
(1) Except as noted in the table, perquisites and other personal benefits did
not exceed the lesser of either $50,000 or 10% of the total annual salary
and bonus for the named executive officer.
(2) None of the named individuals has been granted stock appreciation rights
(SARs).
(3) Consists of Company contributions made pursuant to the Company's 401(k)
Savings Plans and Executive Savings Plan.
(4) Other annual compensation for Dr. McGuire includes Company provided
transportation of $57,541.
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<PAGE>
(5) In connection with their performance related to the negotiation and
execution of the May 1994 sale of the Company's pharmaceutical benefits
management subsidiary, Diversified Pharmaceutical Services, Inc., Dr.
McGuire and Mr. Wills each received a one time bonus of $750,000 and Mr.
Koppe received a one time bonus of $500,000 which are included in the
amounts disclosed.
(6) Mr. Wise and Mr. Carlson became employees and executive officers of the
Company in October 1995 upon completion of the acquisition of MetraHealth.
(7) Mr. Koppe was named Chief Financial Officer of the Company in December
1994.
Stock Options and Stock Appreciation Rights
The following table sets forth information relating to stock awards to the
executive officers named in the Summary Compensation Table under the Company's
stock option and incentive plans during the year ended December 31, 1995. No
SARs were granted to these individuals in 1995.
OPTION/SAR GRANTS IN 1995
<TABLE>
<CAPTION>
Individual Grants
---------------------------
Potential
Realizable Value at
Assumed Annual
Number of % of Total Rates of Stock
Securities Options/SARs Exercise Price Appreciation
Underlying Granted to of Base for Option Term
Options/SARs Employees Price Expiration -------------------
Name Granted (#)(1) 1995 ($/share) Date 5%($) 10%($)
---- -------------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William W. McGuire,
M.D.................... 150,000(2) 3.4% $36.00 05/08/2005 3,396,031 8,606,209
Travers H. Wills........ 70,000(2) 1.6% 36.00 05/08/2005 1,584,814 4,016,231
60,000(2) 1.4% 46.25 09/15/2005 1,745,183 4,422,635
David P. Koppe.......... 40,000(2) 0.9% 36.00 05/08/2005 905,608 2,294,989
40,000(2) 0.9% 46.25 09/15/2005 1,163,455 2,948,424
</TABLE>
- - --------
(1) All options granted in 1995 expire ten years following the date of grant,
subject to earlier termination upon certain events related to termination
of employment.
(2) Options are 100% exercisable following the ninth anniversary date of the
grant. Pursuant to the terms of the plan under which these options were
granted, the Compensation and Stock Option Committee has the authority to
establish earlier exercise dates for all or a portion of these options
prior to their expiration based on the optionee's performance.
12
<PAGE>
Option/SAR Exercises and Holdings
With respect to the executive officers named in the Summary Compensation
Table, the following table contains information relating to the exercise of
options during 1995 and unexercised options held as of December 31, 1995. None
of the named individuals exercised SARs during 1995 or held SARs as of
December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND OPTION/SAR VALUES AT 12/31/95
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying in-
Unexercised the-Money
Options/SARs Options/SARs
Shares Value at 12/31/95 (#) at 12/31/95 ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable
---- ------------ ---------- --------------------- ---------------------
<S> <C> <C> <C> <C>
William W. McGuire,
M.D.................... 200,000 11,024,220 927,462/653,850 50,557,705/23,584,965
Travers H. Wills........ 60,000 1,951,875 71,945/347,780 2,601,613/10,890,200
Allen F. Wise........... -- -- 20,058/83,616 1,115,125/3,732,049
James G. Carlson........ -- -- 0/102,904 0/3,893,336
David P. Koppe.......... 21,040 895,136 16,440/170,240 490,465/4,924,215
</TABLE>
- - --------
(1) Calculated as market price per share at time of exercise less the per
share exercise price times the number of shares purchased.
13
<PAGE>
Performance Graph
The following graph compares the cumulative total shareholder return on the
Company's common stock with the cumulative total shareholder return of the
Standard & Poor's 500 stock index and an index of a group of peer companies
selected by the Company, for a five year period ended December 31, 1995. The
comparison assumes the investment of $100 on December 31, 1990 in each index
and that dividends were reinvested when paid. The companies included in the
peer group are FHP International Corporation, Foundation Health Corporation,
HealthCare COMPARE Corp., Pacificare Health Systems, Inc., U.S. Healthcare,
Inc. and Value Health, Inc. The Company is not included in the peer group
index. In calculating the annual cumulative total shareholder return of the
peer group index, the shareholder returns of the peer group companies are
weighted according to the stock market capitalizations of the companies.
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Measurement Period UNITED HEALTHCARE S&P
(Fiscal Year Covered) CORPORATION PEER GROUP 500 INDEX
- - ------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Measurement Pt-
12/31/90 $ 100.00 $100.00 $100.00
FYE 12/31/91 $ 320.64 $218.82 $130.47
FYE 12/31/92 $ 489.74 $315.27 $140.41
FYE 12/31/93 $ 653.73 $349.56 $154.56
FYE 12/31/94 $ 778.14 $387.32 $156.60
FYE 12/31/95 $1,128.06 $444.27 $214.86
</TABLE>
14
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors has delegated to the Compensation and Stock Option
Committee (the "Committee") the authority to make certain decisions with
respect to the compensation of the Company's Chief Executive Officer, as well
as various aspects of other compensation and fringe benefit matters applicable
to all of the Company's employees including executive officers. In addition,
the Committee administers the Company's stock option and stock based incentive
plans. During the Company's fiscal year ended December 31, 1995, the Committee
consisted of James L. Seiberlich, William G. Spears, William C. Ballard, and
Thomas H. Kean; none of whom was or is a Company employee.
Compensation Policies for Executive Officers. Through its executive
compensation policies, the Company seeks to attract, retain and motivate
highly qualified executives who will contribute to the Company's continued
success. To achieve these goals, the Company emphasizes cash compensation and
stock programs that are tied to Company performance. Specifically, the
Company's stock programs provide key employees the opportunity to acquire a
significant ownership interest in the Company through various stock option,
restricted share and stock purchase plans. The Committee also believes that
the availability of comprehensive and competitive executive-level benefits is
important to its goal of retaining high quality leadership and motivating
executive performance consistent with shareholder interest. Accordingly, the
Company makes available to its executive officers a broad range of benefit
programs, which are also available to employees generally, including life and
disability insurance, a 401(k) savings plan, an employee stock ownership plan
and other benefit programs. Along with other highly compensated employees of
the Company, executive officers are also eligible to participate in the
Company's non-qualified compensation deferral plans which consist of a
component under which the Company matches a portion of the amount of employee
deferred compensation up to a certain percent and a component under which the
employee may defer compensation without a Company match. Compensation paid to
the Company's executive officers is also determined, in part by reference to
employment agreements between the Company and such officers to the extent such
agreements have been executed. The employment agreements applicable to the
executive officers named in the Summary Cash Compensation Table are described
elsewhere in this Proxy Statement.
The Committee recognizes that the industry in which the Company operates is
both highly competitive and undergoing significant change, with the result
that there is substantial demand for qualified, experienced executive
personnel. For these reasons, the Committee believes the Company's
compensation arrangements must remain competitive with those offered by other
companies of similar size and scope of operations, including some but not all
of the companies comprising the peer group used in the Performance Graph. One
aim of the Company's executive compensation policies is to make it possible
for Company executives to earn cash compensation equalling or exceeding that
which the executive would earn at a competitor. The Committee believes,
however, that the higher level of compensation should be paid only when
performance warrants. For these reasons, the Company's executive cash
compensation consists of fixed base salary and bonus compensation. The base
salary ranges for the executive officers are reviewed periodically by the
Committee and may be increased (or decreased) to reflect changes in the
responsibilities allocated to a particular position, changes in the base
salaries paid to executives at other companies of similar size and operating
complexity, changes in the size and scope of the Company's operations, or the
effect of inflation. Increases to an executive's base salary are based upon
the executive's personal
15
<PAGE>
contribution to corporate performance, increases in his or her
responsibilities, salaries paid to executives at other companies of similar
size and operating complexity and the rate of inflation.
The other, and potentially more significant, part of executive cash
compensation consists of incentive payments under the Company's Management
Incentive Program. Under the Management Incentive Program, an executive's
annual incentive compensation payment generally depends on three performance
factors: the overall performance of the Company; the overall performance of
the business unit or corporate division in which the executive serves; and the
executive's individual performance. The performance objectives for the Company
and the business unit or corporate division derive from the Company's
operating budget and targets for the upcoming year, along with projections for
growth and strategic objectives. They take into account the Company's goal of
remaining a rapidly growing, highly respected leader in health care
management. They include specific goals as to revenues, earnings, selling,
general and administrative costs, medical loss ratio, membership, stock price
and performance in relation to competitors. Individual executive performance
is measured against an annual incentive target which represents a percentage
of base salary that the executive can earn as bonus compensation if
performance warrants. This percentage ranges from 35% to 100% of an
executive's base salary. The incentive target is set at a higher percentage
for more senior officers, with the result that the more senior executive
officers have a higher percentage of their potential total compensation
subject to the Company's results and their individual performance.
After the end of the Company's fiscal year, the Committee determines, based
on the Company's overall performance discussed above, the overall Company
rating, or Company factor, which is a multiplier in the range of 0.0 to 2.0.
The Committee also reviews, and either approves or revises, management's
recommendation regarding the total dollar amount to be placed into the Company
incentive pool for payment of incentive amounts to Company executives.
Following the Committee's determinations, the Company's top management
determines the rating or factor to be given to each business unit and
corporate division. The factor given a particular unit or division ranges from
0.0 to 2.0 and is based on the performance of such business unit or corporate
division with respect to its pre-set goals and objectives. The portion of the
Company incentive pool available to each business unit and corporate division
is then determined by multiplying the total dollar amount of the incentive
targets for executives in a particular unit or division by a factor which is a
combination of the Company and business unit or corporate division factors.
The Chief Executive Officer evaluates the individual performance of each
executive officer and allocates the available incentive compensation amounts
among the participating executives in each business unit or corporate
division. For 1995, the Company factor was .95, and business unit and
corporate bonus pools ranged from 65% to 120% of target. The aggregate amount
of 1995 bonuses paid to the 857 participants in the program, excluding the
Company's Chief Executive Officer, was $8.6 million.
Messrs. Carlson and Wise received a 1995 bonus under the former MetraHealth
management incentive plan rather than under the Company's Management Incentive
Program described above. Each employee covered by the MetraHealth plan had an
eligibility level which was set as a percentage of the individual's base
salary. The former MetraHealth board of directors set goals for MetraHealth's
1995 performance in the areas of net income, net revenue and administrative
expenses. The total incentive pool varied proportionately in relation to the
results actually achieved, from a threshold of 75% of the target to a maximum
of 150%. Individual awards depended on the funding of the MetraHealth total
incentive pool based on actual results compared to targets, the
16
<PAGE>
individual's eligibility percent and judgments about the individual's
performance. Under the MetraHealth plan, the aggregate amount of 1995 bonuses
paid to the 2,842 participants was $26.8 million. This aggregate bonus pool
amount was predetermined at the time of the Company's acquisition of
MetraHealth, and the Committee took no part in assessing MetraHealth company
or individual performance with respect to the determination as to any specific
payment amounts. The amount of the MetraHealth bonus pool was fully expensed
by MetraHealth prior to United's acquisition of MetraHealth.
The Committee believes that it is also important to provide executive
officers with a longer term interest in the Company's performance through
various stock ownership programs, including stock option, restricted share
grant, stock purchase and other programs. The Committee also recognizes that
the increase in the Company's stock price in recent years has been a
significant source of compensation to employees and believes this factor has
contributed to employee productivity and loyalty. Historically, the emphasis
has been on more typical non-qualified and incentive stock option grants with
vesting periods of three to five years, although some restricted share and
accelerated option vesting grants have also been made. Beginning in late 1992
and continuing through 1995, the majority of the options granted to executives
had nine year vesting schedules under which no shares would be exercisable
until the ninth anniversary of the grant date unless the Committee established
an earlier exercise date for all or a portion of such grant based on a review
of the executive's performance with general reference to one or more of the
Company performance, business unit performance and individual performance
factors and goals under the Management Incentive Plan described above. Over
the past three years, the amount of shares subject to unexercised employee
options has averaged approximately 6% to 8% of outstanding shares at year end.
The Committee believes greater emphasis should be placed on stock option
programs as a means of compensating employees and further expects that the
number of shares and the percentage of outstanding shares subject to employee
options will increase. The Committee also currently believes that the
aggregate number of shares subject to unexercised stock options and restricted
stock grants with unlapsed restrictions outstanding at any time should be
targeted at approximately 10% of the Company's total issued and outstanding
shares of common stock at the close of the preceding calendar year. In
determining the amount of options or restricted share awards to grant to
executive officers, the Committee considers various factors, including the
executive's responsibilities and potential for directly contributing to the
Company's performance, base salary amount, the practicality of tying vesting
of options to individual or Company performance standards, and the total
number of options previously granted to the executive.
Chief Executive Officer's 1995 Compensation. Dr. McGuire's compensation is
determined pursuant to the principles noted above and by the terms of his
employment agreement with the Company. As the Company's Chief Executive
Officer, a significant amount of Dr. McGuire's cash compensation varies with
overall Company performance.
Dr. McGuire's 1995 base salary of $875,000 was established by the Committee
effective as of January 1, 1995. With respect to the determination of any
increases in Dr. McGuire's annual base salary amount from year to year, in
addition to any of the increases required by Dr. McGuire's employment
agreement, the Committee attempts to determine an amount that is competitive
within the health care industry for similarly situated chief executives as
well as with the compensation paid executives of other companies not
necessarily within the health care industry but of comparable size and
operating complexity. Based on the advice it received in 1992 and 1995, when
the Committee
17
<PAGE>
utilized the services of an independent compensation consulting firm to assist
in the development of the Chief Executive Officer's compensation packages, the
Committee believes Dr. McGuire's base salary is consistent with that for chief
executive officers of other comparable companies. Effective as of January 1,
1996, as a result of the Committee's review of Dr. McGuire's performance on
behalf of the Company since January 1, 1995, and the negotiation of a new
employment agreement for Dr. McGuire, the Committee approved increasing Dr.
McGuire's base salary to $1,100,000. Dr. McGuire's employment agreement is
described in this proxy statement under the section titled Executive
Employment Agreements.
To determine Dr. McGuire's cash bonus compensation, the Committee, using the
Company factor discussed above as its basis, sets a factor of 0.0 to 2.0 by
which the Chief Executive Officer's incentive target (100% of his base salary)
is multiplied to determine his annual incentive payment. For 1995, the
Committee multiplied a Company factor determined separately by the Committee
with respect solely to Dr. McGuire's 1995 performance, of 1.0 times Dr.
McGuire's 1995 earnings for an annual incentive payment of $875,000. The
Committee, in establishing this amount, considered the terms of Dr. McGuire's
employment contract with the Company relating to incentive compensation
amounts and the Company's and Dr. McGuire's performance during 1995.
The Committee considered the Company's overall financial performance during
this period, including reporting a 51% increase in its revenues, and a 22%
increase in earnings from operations in 1995 compared to 1994 (excluding 1995
restructuring charges and 1994 merger costs) and the 21% growth in same store
enrolled health plan members during the year. The Committee also recognized in
its compensation deliberations that the marketplace had responded favorably to
the Company's performance and that shareholders have realized a total return
of approximately 45% over the past year. The Committee also considered Dr.
McGuire's accomplishments during 1995, such as the negotiation and completion
of several successful acquisitions, and in particular the acquisition of
MetraHealth and the effective ongoing integration and operation of previously
acquired entities, and Dr. McGuire's continued successful representation of
the Company to public markets. The Committee subjectively assessed Dr.
McGuire's contribution to the Company's accomplishments on the basis of the
leadership and direction he provided. Based on these and other subjective
factors the Committee concluded Dr. McGuire had contributed greatly to the
successful performance that the Company had enjoyed and that the incentive
payment appropriately reflects his contributions in light of the Company's
performance and that of other comparable companies.
The Committee believes it is important to link a significant portion of Dr.
McGuire's potential compensation to future Company performance. As part of his
overall compensation package, Dr. McGuire receives grants of stock options and
restricted stock awards from time to time. On May 8, 1995, Dr. McGuire was
granted non-qualified stock options to purchase 150,000 shares of Company
Common Stock. Such options are 100% exercisable following the ninth
anniversary date of the grant. However, the Committee has the authority to
establish an earlier exercise date for all or a portion of these options based
upon Dr. McGuire's performance on behalf of the Company but has not yet
established any such earlier exercise date. In addition, during 1995, the
Committee established 1995 exercise dates for options granted to Dr. McGuire
in prior years representing the right to purchase a total of 80,262 shares of
Company common stock. In establishing these earlier exercise dates, the
Committee considered the Company's overall performance during 1995 and
subjectively reviewed Dr. McGuire's performance in connection with the
Company's performance.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly held companies for
18
<PAGE>
compensation exceeding $1 million paid to the corporation's Chief Executive
Officer and four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company's stock option programs have been
structured in a manner that appears to comply with the statute's requirements
and as a result, performance-based compensation associated with stock options
is not expected to be subject to the deduction limit. The majority of the
Company's executive officers' compensation which could exceed the $1 million
limitation is associated with such stock options. The proposed amendment to
the Company's Amended and Restated 1991 Stock and Incentive Plan limiting the
amount of non-qualified stock options that can be granted in any year will
allow the Company to deduct the compensation attributable to such grants made
under the plan in calculating its tax liability. See PROPOSAL TO AMEND THE
UNITED HEALTHCARE CORPORATION AMENDED AND RESTATED 1991 STOCK AND INCENTIVE
PLAN. Accordingly, the Company does not expect this deduction limitation to
have a material effect on its operations or financial condition and does not
currently anticipate taking any further action with respect to its
compensation programs to avoid paying compensation which exceeds the $1
million limitation and for which the Company therefore loses the corresponding
tax deduction.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE UNITED
HEALTHCARE CORPORATION BOARD OF DIRECTORS.
William C. Ballard
Thomas H. Kean
James L. Seiberlich
William G. Spears
Executive Employment Agreements
The Company has various forms of executive agreements with each of the
executive officers named in the Summary Compensation Table.
William W. McGuire, M.D. Dr. McGuire entered into an employment agreement
with United effective as of January 1, 1993, (the "1993 Agreement"). Dr.
McGuire has executed a new employment agreement, effective as of January 1,
1996 (the "1996 Agreement"), which replaced the 1993 Agreement. Under the 1993
Agreement, Dr. McGuire was entitled to receive a minimum base salary of
$575,000, which was to be increased by a minimum of $100,000 on each of
January 1, 1994 and January 1, 1995. Dr. McGuire was also eligible to
participate in United's incentive bonus plan at prescribed levels and in other
employee benefit programs. In addition, the Company provided and paid for and
Dr. McGuire owned, a term life insurance policy on Dr. McGuire in the amount
of $2 million. In the event Dr. McGuire's employment under the 1993 Agreement
had been terminated by United without Cause or by Dr. McGuire with Good Reason
(as such terms were defined in the 1993 Agreement), United would have
continued to pay Dr. McGuire, for a period of three years following the
termination, the greater of (i) a minimum base salary of $775,000 plus an
annual cash bonus equalling the same percentage of such minimum base annual
salary as the most recent annual cash bonus received by him bore to his then-
effective minimum base annual salary, or (ii) his then-current annualized cash
compensation, plus an amount equal to the most recent cash bonus actually
received by him at his termination. In certain instances, Dr. McGuire could
have elected to receive a single lump sum payment, discounted to the present
value, instead of the amounts described in the preceding sentence. Any stock
options, SARs or restricted stock awards granted to Dr. McGuire prior
19
<PAGE>
to such termination would have become 100% vested at termination. In addition,
following Dr. McGuire's termination, United had agreed to pay a reasonable
amount for out-placement and job search services on behalf of Dr. McGuire.
The 1996 Agreement has an initial term of three years during which Dr.
McGuire is to serve as United's Chief Executive Officer and President. The
1996 Agreement will be automatically extended for an additional one year
period at the end of each year of the initial term unless notice of intent not
to renew is given by either the Company or Dr. McGuire. During the term of his
employment under the 1996 Agreement, Dr. McGuire will receive a minimum base
salary of $1,100,000, which will be increased by a minimum of $100,000
annually. Dr. McGuire is also eligible to participate in United's incentive
bonus plan at prescribed levels and its other employee benefit programs
including health care coverage benefits for him and his family. The 1996
Agreement provides that Dr. McGuire will receive annually non-qualified stock
options to purchase a minimum of 250,000 shares of the Company's Common Stock
at a exercise price equal to the fair market value of the shares of the
Company's Common Stock on the date of grant, subject to certain adjustments.
These options will vest over a period of four years at the rate of 25 percent
per year subject to additional vesting provisions upon the occurrence of
specified future events. In addition, the Company will provide and pay for and
Dr. McGuire will own, a term life insurance policy on Dr. McGuire in an amount
three times his current base salary as well as an individual supplemental long
term "own occupation" disability insurance policy. The 1996 Agreement also
requires the Company to provide Dr. McGuire with a supplemental retirement
benefit in an amount equal to a percentage of his final average highest three-
year cash compensation, ranging from 37.50% in 1996 to 65% if he retires at
age 65.
The 1996 Agreement provides severance benefits in the event Dr. McGuire's
employment by the Company terminates under certain circumstances. In the event
of termination by the Company without Cause or by Dr. McGuire with Good Reason
(as such terms are defined in the 1996 Agreement), the Company will continue
to pay Dr. McGuire, for a period of 36 months following the termination, the
greater of (i) the minimum base salary of $1,100,000 plus an annual cash bonus
equalling the same percentage of such minimum base annual salary as the most
recent annual cash bonus received by him bore to his then-effective minimum
base annual salary, or (ii) his then-current actual annualized base salary,
plus an amount equal to the most recent cash bonus actually received by him at
his termination. In certain instances, Dr. McGuire may elect to receive a
single lump sum payment, discounted to the present value, instead of the
amounts described in the preceding sentence. Any stock options, SARs or
restricted stock awards granted to Dr. McGuire prior to such termination will
be 100% vested at termination. In addition, following Dr. McGuire's
termination, United has agreed to pay a reasonable amount for out-placement
and job search services on behalf of Dr. McGuire. In the event Dr. McGuire
terminates his employment with the Company without Good Reason prior to the
end of the term of the agreement, for the period following the effective date
of the termination to the end of the initial term of the 1996 Agreement or the
end of any extension of such term, Dr. McGuire will receive a severance
benefit payable in accordance with the Company's normal payroll practices
equal to the greater of the minimum base annual salary of $1,100,000 plus an
annual cash bonus equaling the same percentage of such minimum base annual
salary as the most recent annual cash bonus received by him bore to his then-
effective minimum base annual salary or his then-current actual annualized
base salary plus the most recent annual cash bonus actually received by him.
If Dr. McGuire's employment with the Company is terminated due to his death
or permanent disability prior to the end of the term of the agreement, his
beneficiaries will receive a benefit payable in accordance with the Company's
normal payroll practices equal to the greater of the minimum base
20
<PAGE>
annual salary of $1,100,000 plus an annual cash bonus equaling the same
percentage of such minimum base annual salary as the most recent annual cash
bonus received by him bore to his then-effective minimum base annual salary or
his then-current actual annualized base salary plus the most recent annual
cash bonus actually received by him for the remaining term of the 1996
Agreement.
Dr. McGuire has also agreed to non-competition, non-solicitation and
confidentiality arrangements covering the term of the 1996 Agreement and
certain periods following the termination of his employment.
Travers H. Wills. Mr. Wills entered into an employment agreement with the
Company, effective May 27, 1994, having an initial term ending on December 31,
1996 with automatic annual renewals thereafter unless the agreement is
terminated under certain circumstances. During the term of his employment
agreement, Mr. Wills will receive a minimum annual salary of $275,000. In
addition, he is eligible to participate in the Company's incentive
compensation plans, its stock option and grant plans and other employee
benefit plans. In the event, during the term of this Agreement, the Company
terminates Mr. Wills' employment without Cause or a Change in Employment (as
such terms are defined in the Agreement) occurs which Mr. Wills elects to
treat as a termination of employment, the Company will continue, for an 18
month period, to pay Mr. Wills' annualized base salary and an amount equal to
any bonus or incentive compensation paid or payable for the most recent
calendar year or other period generally used by the Company to determine such
bonus or incentive payments. Any stock options, SARs or restricted stock
awards granted to Mr. Wills prior to such termination without Cause or a
Change in Employment, will continue to vest during the 18 month period in
which the Company is making payments to Mr. Wills. In addition, following Mr.
Wills' termination, the Company has agreed to pay a reasonable amount for out-
placement and job search services on behalf of Mr. Wills. As part of this
agreement, Mr. Wills agreed to non-competition and non-solicitation
arrangements during the term of the agreement and for certain periods
following the termination of his employment.
Alan F. Wise. Mr. Wise entered into an employment agreement with the
Company, effective October 2, 1995, which remains in effect until December 31,
1998 unless and until it is earlier terminated. During the term of his
employment agreement, Mr. Wise will receive an annualized base salary of not
less than $450,000. In addition, he is eligible to participate in the
Company's incentive compensation plans, its stock option and grant plans and
other employee benefit plans. According to the terms of the agreement, on
October 2, 1995, Mr. Wise was paid a special bonus of $900,000 and will be
paid an additional $900,000 on April 2, 1996 if he is still employed by the
Company at that time. At the time of the MetraHealth acquisition, the Company
received a capital contribution in an amount representing a portion of such
special bonuses from certain of the former MetraHealth shareholders.
If, during the term of the agreement the Company terminates Mr. Wise's
employment without Cause (as such term is defined in the agreement) or Mr.
Wise terminates his employment for Good Reason (as such term is defined in the
Agreement) on or before November 7, 1996, Mr. Wise will receive severance pay
paid biweekly over a two year period equal to two years of both base salary
and management incentive plan payments, plus a pro-rated management incentive
plan payment for the fraction of the management incentive plan payment period
ending on his termination of employment and any management incentive plan
payments remaining unpaid from the preceding year pursuant to the terms of the
management incentive plan. If, during the term of the agreement, the Company
terminates Mr. Wise's employment without Cause or Mr. Wise terminates his
employment for Good Reason after November 7, 1996, Mr. Wise will receive
severance pay paid
21
<PAGE>
biweekly over a one year period equal to one year of both base salary and
management incentive plan payments, plus a prorated management incentive plan
payment for the fraction of the management incentive plan payment period
ending on his termination of employment and any management incentive plan
payments remaining unpaid from the preceding year pursuant to the terms of the
management incentive plan. Mr. Wise will also continue to receive group health
plan coverage for himself and his dependents (or comparable reimbursement for
the cost of such coverage) during the time he is entitled to receive the
above-described severance benefits. Also, any unvested stock options or grants
that have a pre-established vesting schedule will continue to vest according
to the schedule for a period of two years from the last day of Mr. Wise's
employment. The amount of severance benefits under the agreement will be
reduced by 80% of any compensation earned by Mr. Wise from another employer
during the period in which he receives severance benefits.
If Mr. Wise becomes disabled during the term of the agreement, he is
entitled to receive continued base salary at the annual rate in effect on the
date of disability during the remaining term while he remains disabled. He
will also receive a prorated management incentive payment for the fraction of
the management incentive payment measuring period ending on the date of his
disability, plus any management incentive payment remaining unpaid from the
preceding year. These payments will be reduced by amounts he receives from
Company paid-for disability insurance, compensation from other employment,
workers compensation, Social Security or governmental programs relating to
disability. If Mr. Wise dies during the term of the agreement, the Company
will pay to his personal representative his base salary for the month in which
his death occurs, plus a prorated management incentive payment for the
fraction of the management incentive payment measuring period ending on the
date of his death, plus any management incentive payment remaining unpaid from
any preceding year.
As part of his agreement, Mr. Wise agreed to non-competition and non-
solicitation arrangements during the term of the Agreement and for certain
periods following the termination of his employment.
James G. Carlson. Mr. Carlson entered into an employment agreement with the
Company, effective October 2, 1995, which remains in effect until December 31,
1998 unless and until it is earlier terminated. During the term of his
employment agreement, Mr. Carlson will receive an annualized base salary of
not less than $400,000. In addition, he is eligible to participate in the
Company's incentive compensation plans, its stock option and grant plans and
other employee benefit plans.
If, during the term of the agreement, the Company terminates Mr. Carlson's
employment without Cause (as such term is defined in his Agreement) or Mr.
Carlson terminates his employment for Good Reason (as such term is defined in
his Agreement), Mr. Carlson will receive severance pay paid biweekly over a
one year period equal to one year of both base salary and management incentive
plan payments, plus a prorated management incentive plan payment for the
fraction of the management incentive plan payment period ending on his
termination of employment and any management incentive plan payments remaining
unpaid from the preceding year pursuant to the terms of the management
incentive plan. Mr. Carlson will also continue to receive group health plan
coverage for himself and his dependents (or comparable reimbursement for the
cost of such coverage) during the time he is entitled to receive the above-
described severance benefits. Also, any unvested stock options or grants that
have a pre-established vesting schedule will continue to vest according to the
schedule for a period of two years from the last day of Mr. Carlson's
employment. The amount of severance benefits under the agreement will be
reduced by 80% of any compensation earned by Mr. Carlson from another employer
during the period in which he receives severance benefits.
22
<PAGE>
Mr. Carlson's agreement contains provisions similar to those in Mr. Wise's
agreement with respect to his death or disability and non-competition and non-
solicitation arrangements.
David P. Koppe. Mr. Koppe entered into an employment agreement with the
Company, effective December 1, 1994 which remains in effect unless and until
it is terminated under certain circumstances. During the term of his
employment agreement, Mr. Koppe will receive a minimum annual salary of
$225,000. In addition, he is eligible to participate in the Company's
incentive compensation plans, its stock option and grant plans and other
employee benefit plans. In the event, during the term of this Agreement, the
Company terminates Mr. Koppe's employment without Cause or a Change in
Employment (as such terms are defined in the Agreement) occurs which Mr. Koppe
elects to treat as a termination of employment, the Company will continue, for
a 12 month period, to pay Mr. Koppe's annualized base salary and an amount
equal to one half of the total of any bonus or incentive compensation paid or
payable for the two most recent calendar years or other period generally used
by the Company to determine such bonus or incentive payments. Any stock
options, SARs or restricted stock awards granted to Mr. Koppe prior to such
termination without Cause or due to a Change in Employment, will continue to
vest during the 12 month period in which the Company is making payments to Mr.
Koppe. In addition, following Mr. Koppe's termination, the Company has agreed
to pay a reasonable amount for out-placement and job search services on behalf
of Mr. Koppe. As part of this agreement, Mr. Koppe agreed to non-competition
and non-solicitation arrangements during the term of the agreement and certain
periods following termination or expiration of the agreement.
Severance Arrangements and Change-in-Control Provisions.
Pursuant to the Company's Severance Pay Plan which is applicable to all
regular Company employees, certain of the executive officers may be eligible
to receive payments as severance pay following their termination in certain
events. However, any payments to an executive officer in connection with a
change-in-control as defined in and pursuant to an employment agreement with
the Company shall replace and be in lieu of payment and/or benefits under any
Company severance program, including the Company's Severance Pay Plan. The
amounts of severance payments under the Company's Severance Pay Plan following
termination are dependent upon the executive officer's length of service,
grade level within the Company and the execution of a Company-approved
release. Any amounts paid to Messrs. Carlson and Wise pursuant to their above-
described employment agreements are in lieu of severance benefits under any
severance plan or program maintained by the Company.
Under the terms of the Company's Amended and Restated 1991 Stock and
Incentive Plan, in the case of change-in-control of the Company certain of the
outstanding stock options granted under that plan will become exercisable in
full. Change-in-control is defined for this purpose as the sale of all or
substantially all of the Company's 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 Company's Board of Directors.
Compensation Committee Interlocks and Insider Participation
Messrs. Ballard, Kean, Seiberlich and Spears served as the members of the
Compensation and Stock Option Committee during 1995.
23
<PAGE>
Mr. Ballard, a member of the Compensation and Stock Option Committee since
February 1993, served as the Chairman of the Board and was a shareholder of
Healthcare Recoveries, Inc. ("HRI"), an independent contractor providing
subrogation and recovery services to the Company and its owned and managed
health plans and other companies during 1995 until August 28, 1995. For the
period of January 1, 1995 until August 28, 1995, the Company paid
approximately $2.3 million to HRI for such services. Mr. Ballard was also a
director and a former shareholder of HealthSpring, Inc., ("HealthSpring") a
developer of primary care physician practices in which the Company had a
minority interest and which has contracted to provide services to a subsidiary
of United. During 1995, the Company paid approximately $493,000 to
HealthSpring for such services prior to March 9, 1995, the date the Company
and Mr. Ballard sold their interests in HealthSpring to MetraHealth and Mr.
Ballard resigned from the HealthSpring board. The Company reacquired an
interest in HealthSpring as an indirect wholly owned subsidiary when
MetraHealth merged into a subsidiary of the Company on October 2, 1995.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1996, information about the
ownership of Common Stock of the Company by each shareholder who is known by
the Company to own beneficially more than 5% of the outstanding Common Stock
of the Company. Except as otherwise indicated, the shareholders listed in the
table have sole voting and investment powers with respect to the shares
indicated.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class (1)
------------------- ----------------------- ------------
<S> <C> <C>
The Capital Group Companies, Inc. 11,555,800(2) 6.22
333 South Hope Street
Los Angeles, CA 90071
Metropolitan Life Insurance Company 11,256,353(3) 6.06
One Madison Avenue
New York, NY 10010-3690
The Equitable Companies, Incorporated 11,081,016(4) 5.97
787 Seventh Avenue
New York, NY 10019
</TABLE>
- - --------
(1) Percent of class calculation is based on 175,464,232 of shares of the
Company's Common Stock outstanding as of March 1, 1996, plus 10,105,706
shares representing Common Stock issuable with respect to the outstanding
shares of the 5.75% Series A Convertible Preferred Stock of the Company.
(2) With respect to the information reported relating to The Capital Group
Companies, Inc. ("Capital"), the Company has relied upon the information
supplied by such company in a Schedule 13G filing received by the Company
on or about February 20, 1996. Certain operating subsidiaries of Capital
exercised investment discretion over various institutional accounts which
held as of December 29, 1995, 11,555,800 shares of the Company's Common
Stock. Capital Guardian Trust Company, a bank, and one of such operating
companies, exercised investment discretion over 1,761,600 of said shares.
Capital Research and Management Company, a registered investment adviser,
and Capital International Limited and Capital International, S.A., other
operating subsidiaries, had investment discretion with respect to
9,510,000; 223,700 and 60,500 shares, respectively, of the above shares.
24
<PAGE>
(3) Includes approximately 9,494,552 shares of Company Common Stock issuable
with respect to shares of the Company's 5.75% Series A Convertible
Preferred Stock held by Metropolitan Life Insurance Company. With respect
to the information relating to Metropolitan Life Insurance Company, the
Company has relied upon the information supplied by such company in a
Schedule 13G filing received by United on or about February 13, 1996.
(4) With respect to the information reported relating to The Equitable
Insurance Companies, Incorporated ("Equitable"), the Company has relied
upon the information supplied by such company in a Schedule 13G filing
received by the Company on or about February 20, 1996. Equitable's 13G
filing was made jointly on behalf of (i) five French mutual insurance
companies, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle,
Alpha Assurances I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle and Uni
Europe Assurance Mutuelle, as a group, (ii) AXA, and (iii) Equitable, and
includes 8,063,882 shares over which one or more of these entities is
deemed to have sole voting power, 274,710 shares over which one or more of
these entities is deemed to have shared voting power, and 11,081,016
shares over which one or more of these entities is deemed to have sole
dispositive power.
The following table sets forth as of March 1, 1996, information about the
beneficial ownership of Common Stock of the Company by each director, each
executive officer named in the Summary Compensation Table, and by all
directors and all executive officers as a group. Except as otherwise
indicated, the shareholders listed in the following table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
Name of Beneficial Owner Amount and Nature Percent of
or Identity of Group of Beneficial Ownership Class (1)
------------------------ ----------------------- ----------
<S> <C> <C>
William C. Ballard 83,200(2) *
Richard T. Burke 1,035,168(3) *
James A. Johnson 57,000(4) *
Thomas H. Kean 50,000(5) *
Douglas W. Leatherdale 324,420(6) *
Elizabeth J. McCormack 82,000(7) *
William W. McGuire, M.D. 1,207,239(8) *
James L. Seiberlich 338,000(9) *
Kennett L. Simmons 80,232(10) *
William G. Spears 115,612(11) *
Gail R. Wilensky 48,000(12) *
James G. Carlson 14,040(13) *
David P. Koppe 56,112(14) *
Travers H. Wills 83,977(15) *
Allen F. Wise 20,058(16) *
All executive officers and directors
as a group (21 persons) 3,931,210(17) 2.23%
========= ====
</TABLE>
- - --------
*Less than 1%
(1) Percentage is calculated based on the number of shares of the Company's
Common Stock outstanding as of March 1, 1996.
(2) Includes 80,000 shares purchasable under stock options exercisable within
sixty (60) days.
25
<PAGE>
(3) Includes 176,000 shares purchasable under stock options exercisable
within sixty (60) days by Mr. Burke and 10,242 shares purchasable under
stock options exercisable within sixty (60) days by Mr. Burke's spouse.
Also includes approximately 110 shares held by the Trustee of the
Company's ESOP for Mr. Burke's spouse's account with respect to which Mr.
Burke's spouse has sole voting power and no investment power, and 216
shares held directly by Mr. Burke's spouse.
(4) Includes 48,000 shares purchasable under stock options exercisable within
sixty (60) days.
(5) Includes 1,000 shares held by Mr. Kean for the benefit of his minor child
and 48,000 shares purchasable under stock options exercisable within
sixty (60) days.
(6) Includes a total of 1,420 shares held by each of Mr. Leatherdale's two
dependent children (700 and 720 shares individually) as well as 279,000
shares purchasable under stock options exercisable within sixty (60)
days.
(7) Includes 80,000 shares purchasable under stock options exercisable within
sixty (60) days.
(8) Includes 1,005,462 shares purchasable under stock options exercisable
within sixty (60) days. Also includes approximately 745 shares held by
the Trustee of the Company's ESOP for Dr. McGuire's account with respect
to which Dr. McGuire has sole voting power and no investment power.
(9) Includes 336,000 shares purchasable under stock options exercisable
within sixty (60) days.
(10) Includes 80,232 shares purchasable under stock options exercisable within
sixty (60) days.
(11) Includes 112,000 shares purchasable under stock options exercisable
within sixty (60) days.
(12) Includes 48,000 shares purchasable under stock options exercisable within
sixty (60) days.
(13) Includes 14,040 shares purchasable under stock options which are
exercisable within sixty (60) days and represent the conversion of
MetraHealth stock options into options for Company Common Stock.
(14) Includes 28,040 shares purchasable under stock options exercisable within
sixty (60) days. Also includes approximately 745 shares held by the
Trustee of the Company's ESOP for Mr. Koppe's account with respect to
which Mr. Koppe has sole voting power and no investment power.
(15) Includes 83,945 shares purchasable under stock options exercisable within
sixty (60) days. Also includes approximately 32 shares held by the
Trustee of the Company's ESOP for Mr. Wills' account with respect to
which Mr. Wills has sole voting power and no investment power.
(16) Includes 20,058 shares purchasable under stock options which are
exercisable within sixty (60) days and represent the conversion of
MetraHealth stock options into options for Company Common Stock.
(17) Includes 2,711,876 shares purchasable under stock options exercisable
within sixty (60) days. Also includes approximately 3,029 shares held by
the Trustee of the Company's ESOP for the accounts of executive officers
of the Company, their spouses or Mr. Burke's spouse, with respect to
which such persons have sole voting power and no investment power and the
indirect holdings included in footnotes (3), (5) and (6) above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of United's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Executive officers, directors and
greater than ten percent (10%) beneficial owners are required by SEC
regulations to furnish United with copies of all Section 16(a) forms they
file.
26
<PAGE>
Based solely on a review of the copies of such forms furnished to the
Corporation and written representations from the executive officers and
directors, the Corporation believes that all Section 16(a) filing requirements
applicable to its executive officers and directors were complied with during
its fiscal year 1995. Mr. Leatherdale, a director of the Company filed a Form
4 for June 1994 on January 25, 1996. The transactions reported on that Form 4
related to two separate purchases of Company stock made by two of his stepsons
for whom he reports transactions, on June 8, 1994, for 20 shares and 40 shares
at a purchase price of $47.875 per share. Mr. Leatherdale disclaims beneficial
ownership of these shares.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
During the Company's fiscal year ended December 31, 1995, the Company paid
approximately $1 million in insurance premiums to the St. Paul Companies,
Inc., of which Mr. Leatherdale is the Chief Executive Officer.
During the Company's fiscal year ended December 31, 1995, the Company paid
approximately $93,500 in salary and incentive payments to Mr. Burke's spouse,
an employee of the Company since July 1990.
Mr. Ballard, a director of the Company since February 1993, was a
shareholder and the Chairman of the Board of Healthcare Recoveries, Inc.
("HRI"), an independent contractor providing subrogation and recovery services
to the Company and its owned and managed health plans. The Company paid
approximately $2.3 million in fees to HRI during the period from January 1,
1995 until August 28, 1995 when HRI was sold to a third party.
During the Company's fiscal year ended December 31, 1995, prior to the sale
of its interest on March 9, 1995, the Company paid approximately $493,000 to
HealthSpring, Inc., a privately held developer of primary care physician
practices in which the Company had a minority interest and which has
contracted to provide services to a subsidiary of United. Mr. Ballard is a
former director and shareholder of HealthSpring.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which may
come before the meeting. However, if any matters other than those referred to
above should properly come before the meeting calling for a vote of the
shareholders, it is the intention of the persons named in the enclosed proxy
to vote such proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the next Annual Meeting
must be received at the Company's principal executive offices, 300 Opus
Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, not later than
December 5, 1996.
BY ORDER OF THE BOARD OF DIRECTORS,
Kevin H. Roche
Secretary
Dated: April 5, 1996
27
<PAGE>
UNITED HEALTHCARE CORPORATION
AMENDED AND RESTATED
1991 STOCK AND INCENTIVE PLAN
1. Purpose of Plan.
---------------
This Plan shall be known as the "United HealthCare Corporation 1991 Stock
and Incentive Plan" and is hereinafter referred to as the "Plan". The purpose
of the Plan is to aid in maintaining and developing personnel capable of
contributing to the future success of United HealthCare Corporation, a Minnesota
corporation (the "Company"), to offer such personnel additional incentives to
put forth maximum efforts for the success of the business, and to afford them an
opportunity to acquire a proprietary interest in the Company through stock
options and other awards as provided herein. Options granted under this Plan
may be either incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code), or options which do not qualify as Incentive Stock Options. Awards
granted under this Plan shall be SARs, restricted stock or performance awards as
hereinafter described.
2. Stock Subject to Plan.
---------------------
Subject to the adjustments authorized by Section 15 hereof and the
provisions of the remaining subsection of this Section 2, the stock to be
subject to options or other awards under the Plan shall be the Company's
authorized common shares, par value $.01 per share (the "Shares"). Such shares
may be either authorized but unissued shares, or issued shares which have been
reacquired by the Company. Subject to adjustment as provided in Section 15
hereof, the number of shares on which options may be exercised or other awards
issued under this Plan shall be 3,000,000 shares plus a number of shares equal
to the sum of (i) one and one-half percent of the number of shares of the
Company's Common Stock outstanding as of the December 31 immediately preceding
the year in which such options may be granted plus (ii) options for such number
of shares of Common Stock as were available for grant in any preceding year and
were not otherwise granted. If awards lapse, expire, terminate or are canceled
prior to the issuance of shares, or if shares issued under an option are
reacquired by the Company pursuant to this Plan, those shares will be available
for new awards.
3. Administration of Plan.
----------------------
(a) The Plan shall be administered by a committee (the "Committee") of
three or more directors of the Company, none of whom shall be officers or
employees of the Company and all of whom shall be "disinterested persons" with
respect to the Plan within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, and any successor rule. The members of the Committee
shall be appointed by and serve at the pleasure of the Board of Directors.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Shares covered by each option, (ii) to determine the
employees to whom and the time or times at which such options and awards shall
be granted and the number of shares to be subject to each, (iii) to determine
the form of payment to be made upon the exercise of an SAR or in connection with
performance awards, either cash, Common Shares of the Company or a combination
thereof, (iv) to determine the terms of exercise of each option and award, (v)
to accelerate the time at which all or any part of an option or award may be
exercised, (vi) to amend or modify the terms of any option or award with the
consent of the holder of the optionee or grantee, (vii) to interpret the Plan,
(viii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (ix) to determine the terms and provisions of each option or award
agreement under the Plan (any of which agreements need not be identical),
including the designation of those options intended to be Incentive Stock
A-1
<PAGE>
Options, (x) to delegate such of its authority granted herein as it deems is in
the best interests of the Company, and (xi) to make all other determinations
necessary or advisable for the administration of the Plan, subject to the
exclusive authority of the Board of Directors under Section 16 herein to amend
or terminate the Plan. The Committee's determinations on the foregoing matters,
unless otherwise disapproved by the Board of Directors of the Company, shall be
final and conclusive; provided, however, that the Committee's determinations
with respect to the matters set forth in clauses (ii) and (iii) above, unless
delegated as provided in subsection 3(C) below, shall be final and conclusive
without any right of disapproval by the Board of Directors of the Company.
(c) The Chief Executive Officer of the Company shall have the authority, as
granted by the Committee pursuant to clause (x) of the preceding subsection, to
grant, pursuant to the Plan, options or other awards to eligible persons who are
not considered by the Company as its officers or directors for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended. The Chief
Executive Officer of the Company shall provide information as to any grants made
pursuant to this subsection to the Committee at its next meeting.
(d) The Committee shall select one of its members as its Chairperson and
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.
4. Eligibility.
------------
Incentive Stock Options may be granted under this Plan only to any full or
part-time employee (which term as used herein includes, but is not limited to,
officers and directors who are also employees) of the Company and of its present
and future subsidiary corporations within the meaning of Section 424(f) of the
Code (herein called "subsidiaries"). Full or part-time employees, consultants or
independent contractors to the Company or one of its subsidiaries shall be
eligible to receive awards and options which do not qualify as Incentive Stock
Options. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant. A person
who has been granted an option or award under this Plan may be granted
additional options or awards under the Plan if the Committee shall so determine;
provided, however, that for Incentive Stock Options granted after December 31,
1986, to the extent the aggregate fair market value (determined at the time the
Incentive Stock Option is granted) of the Common Shares with respect to which
all Incentive Stock Options are exercisable for the first time by an employee
during any calendar year (under all plans described in subsection (d) of Section
422 of the Code of his or her employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as options which
do not qualify as Incentive Stock Options. Nothing in the Plan or in any
agreement thereunder shall confer on any employee any right to continue in the
employ of the Company or any of its subsidiaries or affect in any way the right
of the Company or any of its subsidiaries to terminate his or her employment at
any time.
5. Price.
-----
The option price for all Incentive Stock Options granted under the Plan
shall be determined by the Committee but shall not be less than 100% of the fair
market value of the Common Shares at the date of grant of such option. The
option price for options granted under the Plan which do not qualify as
Incentive
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Stock Options and, if applicable, the price for all awards shall also be
determined by the Committee. For purposes of the preceding sentence and for all
other valuation purposes under the Plan, the fair market value of the Common
Shares shall be as reasonably determined by the Committee, but shall not be less
than the closing price of the stock on the date for which fair market value is
being determined, as reported on any national securities exchange on which the
Common Shares are then traded. If on the date of grant of any option or award
hereunder the Common Shares are not traded on an established securities market,
the Committee shall make a good faith attempt to satisfy the requirements of
this Section 5 and in connection therewith shall take such action as it deems
necessary or advisable.
6. Term.
----
Each option and award and all rights and obligations thereunder shall
expire on the date determined by the Committee and specified in the option or
award agreement. The Committee shall be under no duty to provide terms of like
duration for options or awards granted under the Plan, but the term of an
Incentive Stock Option may not extend more than ten (10) years from the date of
grant of such option and the term of options granted under the Plan which do not
qualify as Incentive Stock Options may not extend more than fifteen (15) years
from the date of grant of such option.
7. Exercise of Option or Award.
---------------------------
(a) The Committee shall have full and complete authority to determine
whether the option or award will be exercisable in full at any time or from time
to time during the term thereof, or to provide for the exercise thereof in such
installments, upon the occurrence of such events, such as termination of
employment for any reason, and at such times during the term of the option or
award as the Committee may determine and specify in the option or award
agreement.
(b) The exercise of any option or award granted hereunder shall be
effective only at such time as the sale of Common Shares pursuant to such
exercise will not violate any state or federal securities or other laws. To the
extent required in order to comply with Rule 16b-3 of the Securities Exchange
Act of 1934, as amended, in the case of an option or award granted to a person
considered by the Company as one of its officers or directors for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended, the terms of the
option or award will require that such shares are not disposed of by such
officer or director for a period of at least six months from the date of grant.
(c) An optionee or grantee electing to exercise an option or award shall
give written notice to the Company of such election and of the number of shares
subject to such exercise. The Company will verify the appropriateness of the
election and determine the compensation and related withholding tax amounts. The
exercise amount and applicable taxes must be tendered by the employee prior to
the issuance of shares pursuant to the exercise. Payment shall be made to the
Company in cash (including wire transfer, bank check, certified check, personal
check, or money order), or, at the discretion of the Committee and as specified
by the Committee, (i) by delivering certificates for the Company's Common Shares
already owned by the optionee or grantee having a fair market value as of the
date of grant equal to the full purchase price of the shares, together with any
applicable withholding taxes, or (ii) a combination of cash and such shares;
provided, however, that an optionee shall not be entitled to tender shares of
the Company's Common Stock pursuant to successive, substantially simultaneous
exercises of options granted under this or any other stock option plan of the
Company. The fair market value of such tendered shares shall be determined as
provided in Section 5 herein. Until such person has been issued the shares
subject to such exercise, he or she shall possess no rights as a shareholder
with respect to such shares.
8. Alternative Stock Appreciation Rights.
--------------------------------------
(a) Grant. At the time of grant of an option or award under the Plan (or at
any other time), the
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Committee, in its discretion, may grant a Stock Appreciation Right ("SAR")
evidenced by an agreement in such form as the Committee shall from time to time
approve. Any such SAR may be subject to restrictions on the exercise thereof as
may be set forth in the agreement representing such SAR, which agreement shall
comply with and be subject to the following terms and conditions and any
additional terms and conditions established by the Committee that are consistent
with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the Company of a
written notice which shall state that the holder thereof elects to exercise his
or her SAR as to the number of shares specified in the notice and which shall
further state what portion, if any, of the SAR exercise amount (hereinafter
defined) the holder thereof requests be paid to him or her in cash and what
portion, if any, is to be paid in Common Shares of the Company. The Committee
promptly shall cause to be paid to such holder the SAR exercise amount, less any
applicable withholding taxes, either in cash, in Common Shares of the Company,
or in any combination of cash and shares as the Committee may determine. Such
determination may be either in accordance with the request made by the holder of
the SAR or in the sole and absolute discretion of the Committee. The SAR
exercise amount is the excess of the fair market value of one share of the
Company's Common Shares on the date of exercise over the per share exercise
price in respect of which the SAR was granted, multiplied by the number of
shares as to which the SAR is exercised. For the purposes, hereof, the fair
market value of the Company's shares shall be determined as provided in Section
5 herein.
9. Restricted Stock Awards.
-----------------------
Awards of Common Shares subject to forfeiture and transfer restrictions may
be granted by the Committee. Any restricted stock award shall be evidenced by an
agreement in such form as the Committee shall from time to time approve, which
agreement shall comply with and be subject to the following terms and conditions
and any additional terms and conditions established by the Committee that are
consistent with the terms of the Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock award made
under the Plan shall be for such number of Common Shares as shall be determined
by the Committee and set forth in the agreement containing the terms of such
restricted stock award. Such agreement shall set forth a period of time during
which the grantee must remain in the continuous employment of the Company in
order for the forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered by the
restricted stock award. The agreement may also, in the discretion of the
Committee, set forth performance or other conditions that will subject the
Common Shares to forfeiture and transfer restrictions. The Committee may, at its
discretion, waive all or any part of the restrictions applicable to any or all
outstanding restricted stock awards, provided that, in the case of restricted
stock awards made to a person considered by the Company as an officer or
director for purposes of Section 16 of the Securities Act of 1934, as amended,
the terms of such restricted stock agreement will provide that the stock so
awarded may not be disposed of for a period of at least six months from the date
the award was made.
(b) Delivery of Common Shares and Restrictions. At the time of a restricted
stock award, a certificate representing the number of Common Shares awarded
thereunder shall be registered in the name of the grantee. Such certificate
shall be held by the Company or any custodian appointed by the Company for the
account of the grantee subject to the terms and conditions of the Plan, and
shall bear such a legend setting forth the restrictions imposed thereon as the
Committee, in its discretion, may determine. The grantee shall have all rights
of a shareholder with respect to the Common Shares, including the right to
receive dividends and the right to vote such shares, subject to the following
restrictions: (i) the grantee shall not be entitled to delivery of the stock
certificate until the expiration of the restricted period and the fulfillment of
any other restrictive conditions set forth in the restricted stock agreement
with respect to such Common Shares; (ii) none of the Common Shares may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of during such restricted period or until after the
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fulfillment of any such other restrictive conditions; and (iii) except as
otherwise determined by the Committee, all of the shares shall be forfeited and
all rights of the grantee to such shares shall terminate, without further
obligation on the part of the Company, unless the grantee remains in the
continuous employment of the Company for the entire restricted period in
relation to which such Common Shares were granted and unless any other
restrictive conditions relating to the restricted stock award are met. Any
Common Shares, any other securities of the Company and any other property
(except for cash dividends) distributed with respect to the Common Shares
subject to restricted stock awards shall be subject to the same restrictions,
terms and conditions as such restricted Common Shares.
(c) Termination of Restrictions. At the end of the restricted period and
provided that any other restrictive conditions of the restricted stock award are
met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Common Shares subject thereto.
Upon payment by the grantee to the Company of any withholding tax required to be
paid, a stock certificate for the appropriate number of Common Shares, free of
the restrictions and the restricted stock legend, shall be delivered to the
grantee or his or her beneficiary or estate, as the case may be.
10. Performance Awards.
------------------
The Committee is further authorized to grant performance awards. Subject to
the terms of this Plan and any applicable award agreement, a performance award
granted under the Plan (i) may be denominated or payable in cash, Common Shares
(including, without limitation, restricted stock), other securities, other
awards, or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee, in its discretion, and payable to, or
exercisable by, the holder of the performance awards, in whole or in part, upon
achievement of such performance goals during such performance periods as the
Committee, in its discretion, shall establish. Subject to the terms of this Plan
and any applicable award agreement, the performance goals to be achieved during
any performance period, the length of any performance period, the amount of any
performance award granted, and the amount of any payment or transfer to be made
by the grantee and by the Company under any performance award shall be
determined by the Committee.
11. Income Tax Withholding and Tax Bonuses.
--------------------------------------
(a) In order to comply with all applicable federal, state or local income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal, state or local payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of an optionee or grantee under the Plan, are withheld or
collected from such optionee or grantee prior to his or her receipt of Common
Shares pursuant to the exercise of an option or the satisfaction of the
conditions of any other award. In order to assist an optionee or grantee in
paying all federal and state taxes to be withheld or collected upon exercise of
an option or award which does not qualify as an Incentive Stock Option
hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, shall permit the optionee or
grantee to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the shares otherwise to be delivered upon exercise of such
option or award with a fair market value, determined in accordance with Section
5 herein, equal to such taxes or (ii) delivering to the Company Common Shares
other than the shares issuable upon exercise of such option or award with a fair
market value, determined in accordance with Section 5, equal to such taxes. The
election must be made on or before the date that the amount of tax to be
withheld is determined.
(b) The Committee shall have the authority, at the time of grant of an
option under the Plan or at any time thereafter, to approve tax bonuses to
designated optionees or grantees to be paid upon their exercise of options or
awards granted hereunder. The amount of any such payments shall be determined by
the Committee but shall not exceed one hundred percent (100%) of the excess of
the fair market value
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of the shares received upon exercise of an option or award over the price paid
therefor. The Committee shall have full authority in its absolute discretion to
determine the amount of any such tax bonus and the terms and conditions
affecting the vesting and payment thereof.
12. Additional Restrictions.
-----------------------
The Committee shall have full and complete authority to determine whether
all or any part of the Common Shares of the Company acquired upon exercise of
any of the options or awards granted under the Plan shall be subject to
restrictions on the transferability thereof or any other restrictions affecting
in any manner the optionee's or grantee's rights with respect thereto, but any
such restriction shall be contained in the agreement relating to such options or
awards.
13. Ten Percent Shareholder Rule.
----------------------------
Notwithstanding any other provision in the Plan, if at the time an option
is otherwise to be granted pursuant to the Plan the optionee owns directly or
indirectly (within the meaning of Section 424(d) of the Code) Common Shares of
the Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or its parent or subsidiary
corporations (within the meaning of Section 422(b)(5) of the Code), then any
Incentive Stock Option to be granted to such optionee pursuant to the Plan shall
satisfy the requirements of Section 422(c)(5) of the Code, and the option price
shall be not less than 110% of the fair market value of the Common Shares of the
Company determined as described herein, and such option by its terms shall not
be exercisable after the expiration of five (5) years from the date such option
is granted.
14. Nontransferability.
------------------
No option or award granted under the Plan shall be transferable by an
optionee or grantee, otherwise than by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Except as otherwise provided in an option or award agreement, during
the lifetime of an optionee or grantee, the option or award shall be exercisable
only by such optionee or grantee.
15. Dilution or Other Adjustments.
-----------------------------
If there shall be any change in the Common Shares through merger,
consolidation, reorganization, recapitalization, dividend in the form of stock
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding options and awards shall be
made by the Committee. 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 and the price per share subject to outstanding
options and awards and the amount payable upon exercise of outstanding awards,
in order to prevent dilution or enlargement of option or award rights.
16. Amendment or Discontinuance of Plan.
-----------------------------------
The Board of Directors may amend or discontinue the Plan at any time.
Subject to the provisions of Section 15 no amendment of the Plan, however, shall
without shareholder approval: (a) increase the number of shares authorized under
the Plan as provided in Section 2 herein, (b) decrease the minimum price
provided in Section 5 herein, (c) extend the maximum term under Section 6, or
(d) modify the eligibility requirements for participation in the Plan. The
Committee, or the Company's Chief Executive Officer as authorized by the
Committee, may grant, each year, options and awards for the number of shares
authorized by Section 2 herein without further amendment to the Plan increasing
the number of shares authorized for
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distribution. The Board of Directors shall not alter or impair any option or
award theretofore granted under the Plan without the consent of the holder of
the option or award.
17. Time of Granting.
----------------
Nothing contained in the Plan or in any resolution adopted or to be adopted
by the Board of Directors or by the shareholders of the Company, and no action
taken by the Committee, the Chief Executive Officer or the Board of Directors
(other than the execution and delivery of an option or award agreement), shall
constitute the granting of an option or award hereunder.
18. Effective Date and Termination of Plan.
--------------------------------------
(a) The Plan was approved by the Board of Directors on February 15, 1993,
and shall be approved by the shareholders of the Company within twelve (12)
months thereof.
(b) Unless the Plan shall have been discontinued as provided in Section 16
hereof, the Plan shall terminate on February 14, 2003. No option or award may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee or grantee, alter or impair any rights or
obligations under any option or award theretofore granted.
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UNITED HEALTHCARE CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE
Section 1.01. The purpose of the United HealthCare Corporation 1993 Employee
Stock Purchase Plan (the "1993 Plan") is to enhance employee commitment to the
goals of the Company, by providing a means of achieving stock ownership on
advantageous terms to eligible employees of the Company.
ARTICLE II
DEFINITIONS
Section 2.01. For purposes of the Plan the following terms shall be defined as
follows:
(a) "Board of Directors" means the Board of Directors of United HealthCare
Corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock, par value $.01 per share, of
United HealthCare Corporation.
(d) "Committee" means the Compensation and Stock Option Committee of the
Company's Board of Directors, or such successor committee as is made up of three
or more directors of the Company, none of whom shall be officers or employees of
the Company and all of whom shall be "disinterested persons" with respect to the
Plan within the meaning of Rule 16(b)-3 under the Securities Exchange Act of
1934, as amended, and any successor rule.
(e) "Company" means United HealthCare Corporation and its present and
future subsidiary corporations within the meaning of Section 424(f) of the Code.
(f) "Compensation" means the Eligible Employee's annualized rate of salary
in effect at any time during the term of the Plan, exclusive of all overtime
earnings, shift differentials, bonus payments and all other forms of
remuneration not required by the Eligible Employee's employment relationship.
(g) "Eligible Employees" means all regular employees of the Company except
(i) employees customarily employed less than twenty (20) hours weekly; (ii) any
employee who has not been an employee of the Company for at least sixty (60)
consecutive days immediately prior to the first day of a Purchase Period,
provided that an approved leave of absence shall not be deemed to terminate the
employee's continuous employment
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with the Company; and (iii) employees who, immediately after a right to purchase
is granted, would be deemed for purposes of Section 423(b)(3) of the Code to own
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of the shares of the Company or any other corporation which
constitutes a subsidiary corporation within the meaning of Section 2.01 (d)
hereof.
(h) "Initial Purchase Period" means the 29-week period from November 8,
1993 to June 1, 1994, during the term of this Plan and during which time payroll
deductions will be made from the compensation of Eligible Employees who become
Participants in the Plan.
(i) "Participant" means an Eligible Employee who has elected to participate
in the Plan in the manner set forth in the Plan.
(j) "Plan" means the United HealthCare Corporation 1993 Employee Stock
Purchase Plan.
(k) "Plan Quarter" means each of the following three-month periods: (i)
December 2 to March 1, (ii) March 2 to June 1, (iii) June 2 to September 1, and
(iv) September 2 to December 1.
(l) "Purchase Period" means the Initial Purchase Period, or alternatively,
the 26-week period from December 2 to June 1 or the 26-week period from June 2
to December 1 following the Initial Purchase Period and during the term of this
Plan and during which time payroll deductions will be made from the Compensation
of Eligible Employees who become Participants in the Plan.
(m) "Stock Purchase Account" means the individual account established by
the Company for each Participant to which payroll deductions, and interest
earned thereon, are credited.
ARTICLE III
ELIGIBLE EMPLOYEES; ELECTION TO PARTICIPATE
Section 3.01. Each employee of the Company shall become eligible to participate
in the Plan commencing with the first day of Purchase Period on which, or the
next Purchase Period following the date on which, he or she becomes an Eligible
Employee. Subject to the provisions of Article VII, an Eligible Employee shall
continue to be eligible to participate in the Plan so long as he or she remains
an Eligible Employee as defined in Section 2.01 (f) throughout the applicable
Purchase Period.
Section 3.02. An Eligible Employee may elect to participate in the Plan by
completing and submitting the appropriate enrollment form authorizing regular
payroll deductions from the employee's Compensation beginning with the
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first payroll period ending on or after the eligibility date determined in
accordance with Section 3.01 and continuing until the employee withdraws from
the Plan, modifies his or her authorization and designation, or terminates his
or her employment with the Company.
ARTICLE IV
PAYROLL DEDUCTIONS; STOCK PURCHASE ACCOUNT
Section 4.01. A Participant may elect payroll deductions from his or her
Compensation in amounts not less than one percent (1%) or more than ten percent
(10%) of his or her Compensation. A Participant may increase or reduce his or
her payroll deductions for a subsequent Purchase Period, or reduce his or her
payroll deductions for a current Purchase Period, by completing and submitting
the appropriate form. Participants may only make increases or reductions in
payroll deduction amounts during the period designated by the Company for such
actions in May for the immediately following June 2 to December 1 Purchase
Period or in November for the immediately following December 2 to June 1
Purchase Period. A Participant may discontinue contributions and the
corresponding payroll deduction amounts at any time during a Purchase Period by
completing and submitting the appropriate form within the applicable time frame.
Section 4.02. Payroll deductions shall be credited to the Participant's Stock
Purchase Account. A Participant may not make any separate cash payment into his
or her Stock Purchase Account.
Section 4.03. Funds held in a Participant's Stock Purchase Account will accrue
interest at a rate negotiated between the Company and the bank at which the
Stock Purchase Accounts are maintained. The rate of interest may be a floating
or variable rate.
ARTICLE V
PURCHASE PRICE
Section 5.01. Each Participant shall have the right to purchase on the last day
of the applicable Purchase Period that number of whole shares of Common Stock as
could be purchased at a price equal to the price specified in Section 5.02 on
such date, with the funds then present in the Participant's Stock Purchase
Account on the last day of such Purchase Period; provided, however, that no
Participant shall be allowed to purchase more than 1,000 shares in any one
Purchase Period. No Participant shall be allowed to purchase Common Stock under
the Plan (and under all other employee stock purchase plans, if any, of the
Company) at a rate which exceeds $25,000 in fair market value of Common Stock
(determined at the beginning of each Purchase Period) in any calendar year.
If Participants elect during any given Purchase Period
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to purchase shares of Common Stock which would result in aggregate elections to
purchase more than the number of shares of Common Stock then available under the
Plan, the Committee will allocate the remaining shares of Common Stock available
under the Plan, on a pro rata basis, in accordance with the elections previously
filed by each Participant.
Section 5.02. The purchase price shall be the lesser of (i) 85% of the fair
market value of the Common Stock on the first day of the applicable Purchase
Period; or (ii) 85% of the fair market value of the Common Stock on the last day
of the applicable Purchase Period, in each case rounded up to the next higher
full cent. The fair market value on any day shall be (i) the last sale price if
the Common Stock is then quoted on the NASDAQ National Market System; (ii) the
closing price as reported for composite transactions if the Common Stock is then
traded on a national securities exchange; or (iii) the average of the closing
representative bid and asked prices if the Common Stock is then reported on
NASDAQ, in each case on the date as of which fair market value is being
determined. If the Common Stock is not traded, quoted or reported on any of the
above exchanges or reporting systems on such date, the Committee shall make a
good faith attempt to establish the fair market value of the Common Stock and in
connection therewith shall take such action as it deems necessary or advisable.
If the first day or last day of any Purchase Period is a Saturday, Sunday or
holiday on which NASDAQ or the applicable national securities is exchange is
closed, the fair market value shall be determined as of the immediately
preceding Friday or other day on which NASDAQ or the applicable national
securities exchange was open.
ARTICLE VI
PURCHASE; TERMINATION
Section 6.01. On the last day of each Purchase Period, the funds in each
Participant's Stock Purchase Account shall be used to purchase the largest
number of whole shares of Common Stock purchasable with such funds (not to
exceed 1,000 shares in each such Purchase Period) unless the Participant elects
to have the funds in his or her Stock Purchase Account returned to him or her.
Each Participant shall have the right to elect to have the funds in his or her
Stock Purchase Account as of the last day of each Purchase Period returned to
him or her rather than being used to purchase shares of Common Stock by
completing and submitting the appropriate form within the time frame specified
by the Company unless he or she has waived such right.
Section 6.02. Any funds remaining in a Participant's Stock Purchase Account
after each such purchase shall be refunded to him or her as soon as practicable
after the end of the applicable Purchase Period.
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ARTICLE VII
WITHDRAWAL FROM THE PLAN
Section 7.01. A Participant may elect to discontinue making contributions to the
Plan by directing the Company to stop payroll deductions at any time by
completing and submitting the appropriate form. If the Participant has directed
that payroll deductions be discontinued, any sums previously deducted will be
retained in Participant's Stock Purchase Account until the last day of the
applicable Purchase Period and will be used to purchase shares of Common Stock
pursuant to the Plan or, at the Participant's direction returned to the
Participant. A Participant who stops payroll deductions during a Purchase Period
may not subsequently resume payroll deductions for that Purchase Period. In
order to resume payroll deductions for a subsequent Purchase Period, a
Participant must complete and submit the appropriate form within the time frame
specified by the Company. A Participant may elect to discontinue his or her
participation in the Plan and withdraw all of the funds in his or her Stock
Purchase Account following the end of any Plan Quarter by completing and
submitting the appropriate form within the applicable time period. Once a
Participant makes such an election to withdraw from the Plan, he or she shall
not be eligible to resume participation in the Plan until the next succeeding
Purchase Period and may do so by completing and submitting the appropriate form.
Section 7.02. If (a) the employment of a Participant is terminated prior to the
last day of a Purchase Period, or (b) a Participant's status as an Eligible
Employee terminates prior to the last day of a Purchase Period, the Company
shall refund in cash all funds in Participant's Stock Purchase Account as of the
date of such termination. This refund will be made following the end of the Plan
Quarter during which the employment or Eligible Employee status of the
Participant is terminated.
ARTICLE VIII
TRANSFERABILITY
Section 8.01. A Participant's rights hereunder are exercisable during his or her
lifetime only by him or her and may not be assigned, transferred, pledged or
hypothecated (whether by operation of law or otherwise) in any manner, other
than by will or the laws of descent and distributions or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, and shall not be
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecatlon or other disposition or levy of attachment or
similar process upon the right to purchase shall be null and void and without
effect.
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Section 8.02. The funds accumulated in a Stock Purchase Account may not be
assigned, transferred, pledged or hypothecated in any way, and any attempted
assignment transfer, pledge, hypothecation or other disposition of the funds
accumulated in the Stock Purchase Account shall be null and void and without
effect.
ARTICLE IX
SHARE CERTIFICATES
Section 9.01. As soon as practicable after each Purchase Period the Company will
cause to be delivered to the Participant a certificate representing the Common
Stock purchased with respect to such Purchase Period.
Section 9.02. The Company shall not be required to issue or deliver any
certificate representing Common Stock purchased hereunder prior to registration
under the Securities Act of 1933, as amended, or registration, or qualification
under any state law if such registration is required.
Section 9.03. A Participant shall have no interest in, and will not be entitled
to any of the rights or privileges of a stockholder of the Company with respect
to the Common Stock purchased by him or her pursuant to the Plan, including the
right to receive any dividends which may be declared by the Company, until such
time as he or she has actually paid the purchase price for the shares and a
share certificate representing the same is issued.
Section 9.04. The certificates representing Common Stock issued under the Plan
shall be registered in the name of the Participant purchasing such shares.
ARTICLE X
AMENDMENT; TERMINATION OF PLAN
Section 10.01. The Board of Directors of the Company may at anytime terminate or
amend the Plan except that no amendment shall be made without prior approval of
the shareholders which would (i) authorize an increase in the number of shares
which may be purchased under the Plan, except as provided in Section 12.01; (ii)
permit the issuance of Common Stock before payment therefor in full; (iii)
increase the rate of payroll deductions above ten percent (10%) of Compensation;
(iv) reduce the price per share at which Common Stock may be purchased; (v)
withdraw administration of the Plan from the Committee; or (vi) change the
definition of subsidiaries eligible to participate in the Plan.
Section 10.02. The Plan may be terminated (i) on the day when no further shares
of Common Stock remain under the Plan; or (ii) at any time in the discretion of
the Board of Directors after 30 days' notice has been given to Eligible
Employees. Upon
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termination of the Plan, the applicable Purchase Period shall be deemed closed,
and shares of Common Stock will be issued to Participants in accordance with
Section 5.01.
ARTICLE XI
ADMINISTRATION
Section 11.01. The Plan shall be administered by the Committee which is
authorized to interpret and construe any provision of the Plan, to establish
deadlines and procedures by which the various administrative forms must be
received in order to be effective and to adopt such other rules and regulations
for administering the Plan as it may deem appropriate. In administering the
Plan, it may be necessary, from time to time, to change or waive requirements of
the Plan to conform with the law, to meet special circumstances not anticipated
or covered in the Plan, or to carry on successful operations of the Plan.
Therefore, the Company reserves the right, exercisable by the Committee, to make
variations in the provisions of the Plan for such purposes. The Committee will
determine any questions arising in the administration, interpretations and
application of the Plan, and all determinations will be conclusive and binding
on all parties.
ARTICLE XII
STOCK DIVIDEND OR RECLASSIFICATION; MERGER OR
CONSOLIDATION
Section 12.01. If a record date for a stock dividend, stock-split or for a
reclassification by way of split-up or reduction in the number of shares of
Common Stock shall occur during a Purchase Period, appropriate adjustments in
the number of shares of Common Stock and purchase prices shall be made to give
effect thereto on an equitable basis. Similarly, on the payment of any stock
dividend, stock-split or reclassification by way of split-up or reduction in the
number of shares, the total number of shares authorized by Section 13.01 to be
sold under the Plan shall be adjusted accordingly.
Section 12.02. If the Company is merged into or consolidated with one or more
corporations during a Purchase Period, appropriate adjustments shall be made to
give effect thereto on an equitable basis in terms of issuance of shares of the
corporation surviving the merger or of the consolidated corporation, as the case
may be.
ARTICLE XIII
SHARES TO BE SOLD
Section 13.01. The Common Stock to be issued and sold under the Plan may be
authorized but unissued shares, or the Company may go into the market and
purchase shares for sale under
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the Plan. Except as provided in Section 12.01, the aggregate number of shares of
authorized but unissued Common Stock to be sold under the Plan shall not exceed
200,000.
ARTICLE XIV
NOTICES; CONSTRUCTION
Section 14.01. Notices under the Plan shall be addressed as follows:
United HealthCare Corporation
Attention: Human Resources Department
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
Section 14.02. The Company intends that the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Code and, therefore, the Plan shall be
construed in a manner consistent therewith. All Participants in the Plan shall
have the same rights and privileges consistent with the terms of the Plan.
ARTICLE XV
GOVERNMENTAL REGULATIONS AND LISTING
Section 15.01. All rights granted to Participants under this Plan are expressly
subject to all applicable laws, regulations and the approval of all governmental
authorities required for the authorization, issuance, sale or transfer of the
shares of Common Stock reserved for the Plan. This includes, without limitation,
a current registration statement of the Company under the Securities Act of
1933, as amended, covering the shares of Common Stock that may be purchased
under the Plan. If a registration statement is not effective on the last day of
a Purchase Period, the Purchase Period shall be extended until the first
business day after the effective date of a registration statement, or post-
effective amendment.
ARTICLE XVI
MISCELLANEOUS
Section 16.01. This Plan shall be submitted for approval by the shareholders of
United HealthCare Corporation on May 12, 1993. If not so approved, this Plan
will terminate, all rights to purchase Common Stock will be cancelled and will
be of no further force or effect, and the Company will forthwith refund to all
Participants, in cash, all sums credited to their respective Stock Purchase
Accounts in accordance with Article IV.
Section 16.02. This Plan will not be deemed to constitute a contract of
employment between the Company and any Eligible Employee, nor will it interfere
with the right of the
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Company to terminate any Eligible Employee and treat him or her without regard
to the effect that termination might have upon him or her under the Plan.
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_______________________________________________________________________________
P R O X Y
UNITED HEALTHCARE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints William W. McGuire and Kevin H. Roche as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each or either of them to represent and to vote, as designated below, all of
the shares of Common Stock of United HealthCare Corporation held of record by
the undersigned on March 11, 1996, at the Annual Meeting of Shareholders to be
held on May 8, 1996 or any adjournment thereof.
1. ELECTION OF DIRECTORS
Nominees: Thomas H. Kean, William G. Spears, Gail R. Wilensky
FOR all nominees WITHHOLD AUTHORITY to vote for all nominees
listed above listed above [_]
except as noted
herein [_]
To withhold authority to vote for any individual nominee, print that
nominee's name on the line below:
-----------------------------------------------------
- - --------------------------------------------------------------------------------
2. PROPOSAL relating to adoption of amendments to the United HealthCare
Corporation Amended and Restated 1991 Stock and Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
- - --------------------------------------------------------------------------------
3. PROPOSAL relating to adoption of amendments to the United HealthCare
Corporation 1993 Employee Stock Purchase Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
- - --------------------------------------------------------------------------------
4. PROPOSAL to ratify appointment of independent public accountants.
FOR [_] AGAINST [_] ABSTAIN [_]
- - --------------------------------------------------------------------------------
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
(Continued and to be SIGNED AND DATED on Reverse Side)
________________________________________________________________________________
________________________________________________________________________________
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, REGISTERED SHARES WILL BE VOTED FOR ALL DIRECTORS NAMED IN ITEM 1 AND
FOR PROPOSALS 2, 3 AND 4.
SHARES HELD IN THE UNITED HEALTHCARE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
(ESOP SHARES) WILL BE VOTED ACCORDING TO YOUR INSTRUCTIONS. HOWEVER, IF
INSTRUCTIONS ARE NOT RECEIVED, OR IF THIS CARD IS NOT PROPERLY EXECUTED, THE
ESOP SHARES WILL NOT BE DEEMED TO BE REPRESENTED FOR PURPOSES OF CALCULATING
THE VOTE.
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
ESOP Shares
Registered Shares
___________________________________
Signature
___________________________________
Signature if held jointly
Dated: _____________________ , 1996
_____________________________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
_____________________________________________________________________________
________________________________________________________________________________
