This excerpt taken from the UNH DEF 14A filed Apr 30, 2007.
Post-Employment Payments and Benefits
The employment agreements with our current named executive officers provide for severance payments in connection with their termination of employment under various circumstances, typically termination by the Company without cause or in some cases by the executive for a good reason. Accordingly, our current named executive officers are not entitled to any cash payments upon a change in control of the Company, unless the change in control also results in termination of employment by the Company without cause or by the executive officer for a good reason. As discussed elsewhere in this Compensation Discussion and Analysis, during 2006, we made a number of changes in our policies applicable to post-employment payments and benefits, including the elimination of enhanced cash severance payments that were previously payable upon termination by the Company without cause or in some cases by the executive for good reason in connection with a change in control of the Company and elimination of excise tax gross up payments payable in connection with a change in control. We also reduced the amount and circumstances under which severance payments and benefits would be provided to Mr. Hemsley under his CEO employment agreement.
In April 2004, Mr. Hemsley and the Company entered into a supplemental executive retirement pay (SERP) agreement that provides him a lump sum payment upon his retirement. Although the provision and amount of this SERP benefit to Mr. Hemsley were consistent with comparable arrangements of senior executives of peer group companies, in light of the value conferred to Mr. Hemsley from previously granted stock options, the Company and Mr. Hemsley agreed, pursuant to the terms of his November 7, 2006 CEO employment agreement, to cap the amount of the SERP lump sum payment at $10.7 million, the amount vested and accrued as of May 1, 2006. Although common in the market for senior executives, our other current named executive officers do not have SERP benefits and, with the exception of pre-existing supplemental executive retirement plan obligations that we may assume as a result of acquisitions, we do not provide such benefits.
Our stock option, SAR and other equity-based incentive award agreements typically provide that the awards will become fully vested and exercisable if the executives employment ends due to death or disability, or if a change in control of the Company occurs. We adopted acceleration of the vesting of equity awards upon a change in control in 1994 to offer our executives greater protection in the context of a corporate restructuring. Our equity-award agreements also generally provide for continued vesting and exercisability during any period in which an executive receives severance and for continued exercisability of an award for a limited period of time after termination of employment for other reasons. In addition, certain equity awards granted from 2002 to 2005 also provide for continued vesting and exercisability for up to five years after retirement.
The circumstances under which severance and other post-employment payments and benefits will be made or provided and the amount of such payments and benefits are described in greater detail under Potential Payments Upon Termination or Change-in-Control below. We have provided these post-employment payments and benefits and severance payment triggers because they have enabled
us to obtain specific post-employment non-competition, non-solicitation and non-disclosure obligations that we believe are of value to the Company and our shareholders.