This excerpt taken from the UNH DEF 14A filed Apr 30, 2007.
William W. McGuire, M.D.
The employment of Dr. McGuire, our former Chairman of the Board and CEO, ended on November 30, 2006. The Company has not entered into any agreement with Dr. McGuire with respect to his departure.
As discussed under Compensation Discussion and Analysis Compensation of Departed Named Executive Officers above, on November 29, 2006, the United States District Court for the District of Minnesota entered an Order preliminarily enjoining Dr. McGuire from exercising any Company stock options without Court approval and preliminarily enjoining the Company and Dr. McGuire from taking any further action pursuant to or having an effect on Dr. McGuires employment agreement, as amended, any stock option agreements, as amended, and other related agreements, in each case until 30 days after a final decision is reached by the Special Litigation Committee regarding Dr. McGuire. The Order also provides that while the preliminary injunction is in effect, the Company cannot make any payments to Dr. McGuire under these agreements, including any payments under Dr. McGuires supplemental executive retirement plan. See Compensation Discussion and Analysis Compensation of Departed Named Executive Officers above for a description of the Order.
The following discussion applies specifically to the Companys employment agreement with Dr. McGuire in connection with potential payments to Dr. McGuire upon termination of employment. As of the date of this proxy statement, the Special Litigation Committee has not reached a final decision as to Dr. McGuire. The Company has taken no position with respect to these provisions.
Termination for Any Reason. In connection with Dr. McGuires termination of employment on November 30, 2006, Dr. McGuire may receive, under the terms of his employment agreement, payments under his supplemental executive retirement plan as disclosed under the 2006 Pension Benefits table above. Dr. McGuire is not entitled to any cash severance payments upon termination of his employment for any reason.
Termination for Any Reason Other Than by the Company for Cause. Pursuant to an amendment to Dr. McGuires employment agreement adopted effective August 5, 2005, Dr. McGuires termination will be considered a termination of his employment by reason of retirement in good standing unless it is determined that his employment was terminated by the Company for Cause (as this term is defined in Dr. McGuires employment agreement; generally, Cause means a termination for willful and continued failure to perform his duties after written notice and a failure to remedy such deficiency, a violation of the Companys Code of Conduct that is materially detrimental to the Company and not remedied after written notice, conviction of a felony or any other willful and material breach of the employment agreement that is not remedied after written notice).
In addition, upon Dr. McGuires termination other than for Cause, the agreement provides that all of his stock options that were not vested at the time of termination would become vested and exercisable, and all of his options would remain exercisable for a period of 72 months after his termination of employment (subject to earlier termination upon expiration of the option in accordance with the terms of such option). The intrinsic value of the unvested options held by Dr. McGuire that would become vested upon such termination event would have been approximately $50 million as of
November 30, 2006. The intrinsic value of the options was calculated based on the difference between the closing price of the Companys stock on November 30, 2006 ($49.08) and the exercise price of the unvested stock options as of such date.
Dr. McGuires employment agreement also provides for certain post-termination benefits, including but not limited to payments for health and disability coverage. On May 1, 2006, the Board of Directors enacted a package of governance and compensation improvements, including the elimination of various types of executive benefits, such as some of those in Dr. McGuires employment agreement.
Termination for Cause. Notwithstanding the foregoing items, if Dr. McGuire is determined to have been terminated for Cause, he would not be entitled to the post-termination benefits described above. In addition, all of his outstanding unvested stock options would terminate. Dr. McGuire may, however, receive payment of the supplemental executive retirement plan amounts described under Termination for Any Reason above and under the 2006 Pension Benefits table.